Keith and Kinsey's Real Estate Update


Choosing a Lender
January 9, 2013, 11:37 am
Filed under: Real Estate | Tags: , , , , , ,

Your lender will be one of the most important people involved in your real estate transaction choosing them wisely is important. Just like agents, not all people within one organization operate the same. One loan officer at your bank may be horrible to work with and another may be great.

I always suggest people start looking for a lender one of two ways:

  • Ask you real estate agent who they recommend? Realtors have worked with many different lenders, and they know who has done a good job in the past and who hasn’t.
  • Ask your friends who they recommend? Your friends, family, or coworkers who have been through the buying process may have worked with somebody they really liked (or didn’t like).

So, how do you know if this lender will be good to work with? Here’s a few things to look for and pay attention to when talking to a lender:

  • Responsiveness is a key necessity in a lender. I’ve worked with lenders who wouldn’t respond to their clients questions for 4 or 5 days. This makes the buyer feel extremely insecure and freaked out through the home buying process. Find someone who responds at least within 24 hours when you call or email them.
  • Knowledge is another must have trait of a good lender. There’s a million different loan programs out there, but after talking through your situation, your lender should be able to give you guidance on what loan program best meets your needs.
  • Honesty is extremely important too. Of course it’s tough to tell if somebody is being honest with you in the first conversation you have with them. Although, your lender should be able to give you general guidelines about closing costs, fees, and rates. If you ask them questions about these things and you start to get the used car salesman vibe, run away. No offense to car salesmen, but you know what I mean.
  • Deadlines within your real estate contract must be met by your lender. So, you want somebody that is prompt and organized to meet these deadlines. Usually if they fit all of the characteristics above, they’ll come through with your deadlines. Of course, there can be snags in underwriting that aren’t your lenders fault, but a good lender will advise of those potential snags ahead of time.
  • Local lenders tend to be better to work with. It usually feels like somebody cares more about what you need, when you can actually sit down face to face. People get loans all the time without ever meeting their lender, but it’s good to know you have the option. It’s much nicer not dealing with a national call center.

Lastly, there’s the question of should you go with a broker or a bank lender. There is definitely a place for both.

  • Bank (and credit union) lenders are usually great to work with for somebody who is in a strong financial position to buy, and they often have the best fees and rates. Shop around for the best rates and fees.
  • Mortgage Brokers on the other hand are great at figuring out how to get the deal done if somebody is border line on a loan. They have a full arsenal of loan options available to them, and can sometimes make loans work that bank lenders can’t. Their fees and rates can sometimes be a bit higher, but if you’re not willing to shop around, they do the shopping for you potentially saving time and money.

In summary, there’s a lot to think about when choosing a lender, but take your time, ask for referrals and make a good choice.  If you are in the Madison area, there are some great lenders that we recommend on our web page.

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Investment Property Financing – Latest Requirements

This is a Guest Post by Ryan Huemmer, the lender we use on our own rental properties.

As an owner of investment properties, I get no greater joy than helping someone purchase their first investment property.  I’ve worked with AnchorBank for almost 8 years and the world of investment property financing has changed dramatically.  With larger down payment requirements, higher interest rates and fees, limits to the number of properties financed and minimum cash reserve requirements.  It’s best before you contact Keith & Kinsey about buying an investment property, you need to consult with a mortgage lender…….hopefully me.  Ryan Huemmer, 221-6533 or rhuemmer@anchorbank.com 

Fannie Mae only finances 1-4 unit investment properties.  The down payment requirement varies based on the number of units.  When buying a 2-4 unit property a 25% down payment is required.  In addition to standard closing cost Fannie Mae has its own fees.  The Investment Fee is 1.75% (fee times the loan amount) and the Multiple-Unit Fee is 1.00% so you would have to pay a 2.75% fee to buy the property.  That fee can also be converted to an interest rate increase instead.  (1.00% equals a 0.25% rate increase)  The maximum fee conversion allowed is 2.00%.  So you can get market rate with a 2.75% fee or market rate plus 0.50% with a 0.75% fee.

A borrower who owns 1 to 4 financed properties has a 2 month PITI reserve is required for each property.  A borrower with five to ten financed properties will require 6 month reserve for each property and the required down payment is 30%.  Fannie Mae will not finance more than 10 properties and properties in LLC’s.

There is really so much to know about buying an investment property so I was only able to touch on the key guidelines.  With record low mortgage rates, no interest being paid on deposit accounts, extreme volatility in the stock market and home prices down; why not invest your money in real estate.  Whether it is for additional tax deductions, monthly cash flow or just to have someone else grow your equity position in a property……..I believe in investment properties.

Added note, by Keith… These requirements that Ryan mentions are for non-owner occupied investment properties. Financing for an owner occupied rental property can be much easier. So, if you are a first time home buyer considering income property ownership, think about buying an multi-unit property and living in one unit. I started with living in one half of a duplex that I purchased, and it worked out great.



Should I Refinance My Mortgage?
August 16, 2012, 10:29 pm
Filed under: Real Estate | Tags: , , , , , , , , ,

With unbelievably low interest rates lots of people are considering refinancing. Refinancing is a great way to reduce your monthly expenses and minimize the amount of interest you pay over the long term. So, how do you determine refinancing makes sense for you?

First, figure out what the interest rate is on your current mortgage, and check to see what rate you could refinance to. If your current rate is 5% and today’s going rate is 3.55% there’s a good chance it would be worth refinancing. Check on online mortgage calculator to see what your new payment would be if you did refinance. Don’t forget to factor in taxes and PMI if those are part of your current monthly mortgage payment.

Once you know your new payment vs your current payment you’ll know how much you would be saving per month. Now factor in closing costs. The best way to do this is to call a couple lenders and ask what you should expect for closing costs if you refinance through them. Then you can divide the closing cost by your monthly savings amount and this will give you the number of months it will take you to break even.

For example:

Monthly savings = $142

Closing costs = $1900

Break-even point = $1900/$142 = 13.4 months

In this example, if you planned to keep your property for more than 13.4 months it may make sense to refinance. Although, one other factor you should consider is the length of time you have been paying on the property. If you are already 10 years into a 30 year mortgage, the monthly savings likely aren’t worth the extended term. In this case, you should give a shorter mortgage term serious consideration. If you can cut your remaining 20 years down to 15 years for the same monthly payment, it would be well worth it.

Yet another factor in refinancing is adjustable rate mortgages. In my opinion, there’s a good chance rates will be a good bit higher 5 years from now. So, if you are currently in an adjustable rate mortgage, consider taking the security of a fixed rate while rates are low.

Keep in mind, there are lots of requirements in order to get a loan. Many lenders require 10% equity, great credit, and good job history. For those that don’t meet these requirements, or are underwater, there may be still be some options. Check into the HARP program or if you have an FHA loan, the FHA streamline refinance would be a great option.

The bottom line is, if you haven’t looked into refinancing in the last few years, do some research and call a lender to see what your options are.