Minnesota Mortgage Blog - MN Mortgage and Real Estate News

Here in the Minneapolis / Saint Paul, Minnesota area, and the rest of he country, home owners and future home buyers have been hearing quite a bit of talk from newspapers, television and the Internet on the "Mortgage Accelerator" programs. Have you heard of them? They can go by the name "mortgage accelerator" or "all-in-one" mortgage, "MMA" (money  merge account), and "Home Ownership Accelerator".

These products are simply a new financial tool for homeowners to pay off their mortgage and leverage their own income (the bank of YOU). There are an increasing number of mortgage companies offering these products and it is important to me that you have a good knowledge of how it works from your Minnesota Mortgage source!

You may be thinking...pay off my mortgage? For our parents, the answer was always YES. Do it as fast as you can. For the past 10-years, the standard answer has been "NO"!  We now are obsessed with the mentality of ‘leverage’, and trained to use record low mortgage rates to our advantage as cheap money to be invested elsewhere. We have gone from consumers who only buy what we can afford, to financing everything in hope for a bigger payoff.

But the fact is that the only real result of this has been that we are no longer a nation of savers. Today, baby boomer's are approaching retirement with less than we need banked. So, how will we fund our retirement? 85% of homeowners are counting on home equity to support their retirement plans! Not a bad plan, except that price appreciation is easing and interest rates are rising. So, retirement is looming, most notably for Baby Boomer's, and the crazy price appreciation we are counting on has come to a screaching halt!

So, we need a fresh solution. If we can’t count on appreciation to build equity, we need to pay down our mortgage debt more aggressively to build equity. The best solution is to ‘retire’ your home loan debt before you retire so that you don’t have to use some of your hard-earned retirement money to make mortgage payments or worse, sell the house and downsize.

Retiring without a mortgage allows for a lot more options:

• You can stay in your own home for a while
• You can downsize and have a sizable chunk of equity to invest
• You can travel more to see family and the world

Are they real, and do they work? Well, yes, they are real and they work. They all use the same basic concept. There are quite a few programs that I have heard about and researched, but only is the clear winner to help your accomplish this retirement objective. The product is called the "Home Ownership Accelerator". The competing programs can work, but the reason this one is the best is that is wraps everything into one simple easy to use (shall I say idiot proof) program.

It allows you to do something for yourself, putting your own money to work more aggressively:

• Saves thousands in interest
• Pays off your mortgage in about half the time
• Does not force you to change your spending habits to accomplish your goal

We need to take control of our future financial planning NOW to make sure we live a comfortable retirement. More and more tools are available to help us get there. This new product, the Home Ownership Accelerator, is an exciting addition to that tool box.

Take a test drive of this mortgage program to see for free how it would work for you.  Then contact us, your Minnesota Mortgage professionals for a FREE, No Cost, No Obligation complimentary consultation.

IMPORTANT MESSAGE FOR HOMEOWNERS -- WASHINGTON UPDATE

As part of the economic stimulus package being negotiated by House Democrats and the Treasury Department, Fannie and Freddie loan limits will increased for one year up to $730,000.   The increase will be adjusted for local markets at 125% of local median home price.  The move will significantly improve liquidity and pricing in the jumbo market.   The agreement also includes raising the FHA loan limits to the same amount.  We are trying to confirm whether the other provisions of FHA reform will be included (such as lowering downpayment requirements).   But at a minimum, the loan limits will be increased.

This represents an agreement in principle and must still go through the legislative process.  My best guess is that will happen sometime after the State of the Union next week, likely progressing into early February.

This is the most significant action to date proposed by the federal government to stabilize the housing market and should allow for many people to refinance into a new mortgage loan at todays low interestt rates.

FHA loans can help first-time buyers

So, you want to buy a home? If you have little or no money for a down payment, weak or no credit, an FHA loan could be what you need to buy a house.

The Federal Housing Administration, a part of the Department of Housing and Urban Development, was created 70 years ago to help first-time buyers, especially low-to-moderate income families and minorities, get the home financing they need.

Since the federal government guarantees repayment, the lender knows it will not lose money on the deal. That allows the bank or mortgage company to offer competitive rates on a loan that's easier to qualify for than some conventional loans.

You can get an FHA-backed loan from many lenders. Most small brokers can’t offer them, and many lenders have only recently jumped on the FHA wagon as sub-prime loans have basically gone away, so be sure to contact someone with plenty of FHA experience (like us!) when inquiring about FHA.

FHA loans aren't as popular as the once were, primarily for four reasons:

• Because the limits on how much you can borrow didn't keep up with soaring home prices. (check your areas loan limit)

• The explosion of loan products that were easier to offer customers

• The explosion of small brokers unable to offer FHA loans put people into loans they could offer

• FHA loans are more complicated for the Loan Officer, so many never took the time to learn them.

As a result, the FHA loan numbers are way down from years past, but with a wave of foreclosures making alternatives such as sub-prime loans and 100% financing more difficult to obtain, FHA is growing in popularity again, and every first-time buyer should at least consider an FHA loan. Your parents probably got an FHA loan to buy their first home!

You don't need a big down payment and your lender can help you get it
An FHA mortgage current requires only 3% down -- that's $30 for every $1,000 you borrow. Don't have it. No problem. It can be a gift from a relative, friend or an organization that provides financial assistance. At the time of writing this, pending legislation is attempting to lower the down payment to just 1.5% down - so be sure to inquire with your mortgage professional about current guidelines.

Your credit doesn't have to be perfect (but you can’t be horrible!)
On conventional loans, think square peg into square hole. FHA is more liberal, and while they look at credit scores, your score isn’t as important. No credit score at all? No problem.

Your overall picture is more important to FHA. FHA cares about your record of paying your bills, and paying them on time, for at least the past two years. It will overlook minor lapses on your credit history if there's a well documented reasonable excuse such as losing a job or serious illness. But your bill-paying prowess is a critical factor for every application. In the end, the FHA does have rules that determine who gets a mortgage and who doesn't, but again, think more liberal, and more willing to work with you.

There are things the FHA will not overlook. If you've:

• Declared bankruptcy, you must wait two years from the date of discharge and have re-established good credit before you can apply.
• Lost a home through foreclosure, you must wait three years and have a clean credit history during that time.

FHA doesn’t lend trouble: The maximum house payment FHA allows (Your debt-to-income ratio) may be considerably lower for an FHA loan than a conventional loan. That sounds bad, but is actually good.

Add your total mortgage payment (principal, interest, taxes, hazard insurance, mortgage insurance and homeowner's dues, if they apply) to regular monthly obligations, such as credit card debt, auto loans, student loans or court-ordered payments like child support or alimony. (Utilities, food, clothing and so forth are not factored in). Then you divide this total by your monthly income, which is the before-tax income of those making the payments.

You can qualify for an FHA loan if your monthly debt payments are no more than 43% of your income. Most conventional loans can get loan approval significantly higher (as much as 64.99%), which allows you to buy a lot more home than you probably should. This is a giant factor in the mortgage meltdown. People bought more house than they should have!

There are many different types of mortgages to choose from: FHA offers the typical 30-year fixed-rate loans and short-term adjustable loans, but doesn’t offer high risk loans like interest-only mortgages.

Competitive rates. The interest rate will depend on your credit history, with the best rates given to those with the best record of paying their bills and earning a steady income.

But in general, you can expect an FHA loan to be very competitive to any other loan you might qualify for. An FHA loan is almost guaranteed to be cheaper than a sub-prime loan, which had been very popular the past ten years. That's why it's critical to seek an FHA loan before accepting such a high-cost mortgage.

Limits on how much you can borrow
FHA has one drawback, and that is the maximum amount you're allowed to borrow depends on where you live. It's easy to check the maximum loan amounts in your area.

They are working on increasing the maximum loan limits in the future, so be sure to check before you assume.

The Bottom Line: FHA loans have helped thousands of people buy their first homes. Could one help you? Contact an FHA professional like us for a free no cost, no obligation analysis of your situation, you could be a homeowner a month from now!

More info: www.JoeMetzler.com