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President Obama Reflects on Steve Furlong’s Question

 

President Obama discusses the future of Fannie Mae and Freddie Mac. Steve Furlong had his question directly answered by the President!

See the full webcast here:
http://www.whitehouse.gov/photos-and-video/video/2013/08/07/president-obama-answers-your-housing-questions-zillow

The question was: “President Obama: If Congress is successful in scaling Fannie Mae and Freddie Mac down, what model fills the gap?”

His answer was that less government involvement in the mortgage securitization process is needed. He is searching for effective ways to spur private investment in mortgage securities, but to gradually make any changes so as not to harm the delicate recovery of the housing market.

Our take on this is one of optimism for improved financing options and flexibility as the current market is restrictive for many clients in being able to obtain financing. We are up for any challenge in helping to guide families home and work with every client until the end result is achieved – home ownership!

Glossary of Real Estate Terms

Welcome to our Real Estate Glossary. We hope that these definitions will help you to better understand the home buying and selling process.

Adjustable-rate mortgage (ARM): a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as a variable-rate mortgage.

Amortization: loan payment by equal installments of principal and interest, calculated to pay off the debt at the end of a fixed period.

Annual percentage rate (APR): the interest rate reflecting the cost of a mortgage as a yearly rate. It allows homebuyers to compare different types of mortgages based on the annual cost for each loan.

Appraisal: a document giving an estimate of a property’s fair market value; generally required by a lender before loan approval.

Assessment: a local tax levied against a property for a specific purpose, such as a sewer or street lights.

Balloon (payment) mortgage: usually a short-term fixed-rate loan which involves small payments for a certain period of time; after that time period elapses, the balance is due or is refinanced by the borrower.

Cap: a consumer safeguard on an adjustable-rate mortgage that limits how much a monthly payment or interest rate can increase or decrease.

Certificate of eligibility: document given to qualified veterans entitling them to Veteran’s Administration guaranteed loans. Obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880 (request for Certificate of Eligibility).

Certificate of reasonable value (CRV): appraisal issued by the Veteran Administration showing a property’s current market value.

Closing: the meeting between the buyer, seller, and lender or their agents where the property and funds legally change hands.

Commitment: agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paper work or compliance with stated conditions.

Construction loan: short term interim loan to pay for the construction of buildings or homes. Usually written to provide periodic disbursements to the builder as progress is made.

Contract sale or deed: contract between buyer and seller of real estate to convey title after certain conditions have been met.

Conventional loan: a private sector loan, one that is not guaranteed or insured by the U.S. government.

Credit report: documents an individual’s credit history, listing all past and present debts and the timeliness of their repayment.

Debt-to-income ratio: the ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debt is divided by their gross monthly income.

Deed of trust: in many states, a document used instead of a mortgage to secure the payment of a note.

Default: failure to make the monthly payments on a mortgage.

Delinquency: failure to make payments on time. This can lead to foreclosure.

Down payment: the portion of a home’s purchase price paid in cash and not part of the mortgage loan.

Earnest money: money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Equal Credit Opportunity Act (ECOA): a federal law requiring lenders to make credit equally available without discrimination by race, color, religion, national origin, age, sex, marital status, or income from public assistance programs.

Equity: an owner’s financial interest in a property; calculated by subtracting the amount still owed on the mortgage from the fair market value of the property.

Escrow: an account held by the lender into which the homebuyer pays money for tax or insurance payments.

FHA: the Federal Housing Administration provides mortgage insurance to lenders to cover most losses when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

FHA loan: loan insured by the FHA open to all qualified home purchasers. While there are limits, they are generous enough to handle moderately priced homes almost anywhere in the country.

FHA mortgage insurance: a policy paid at closing to insure the loan with FHA.

Fixed-rate mortgage: mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed.

Foreclosure: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

Hazard insurance: form of insurance in which the insurance company protects the insured from specified losses, such as fire or windstorm.

Lien: a legal claim against property that must be resolved before the property is sold.

Loan-to-value (LTV) ratio: a percentage calculated by dividing the amount borrowed by the sales price or appraised value of the home to be purchased.

Lock-in: guarantees a specific interest rate if the loan is closed within a specific time.

Market value: the highest price that a buyer would pay and the lowest price a seller would accept on a property.

Mortgage insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; usually required with a down payment of less than 20%.

Mortgage modification: an option that allows a borrower to refinance and/or extend the term of the mortgage loan thus reduce the monthly payments.

Origination fee: fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually a percentage of the loan’s amount.

Points: prepaid interest charged at closing by the lender. Each point equals 1 percent of the loan (e.g., 2 points on a $100,000 mortgage would be $2,000).

Prepayment: permits the borrower to make payments in advance of their due date, thus saving money on interest.

Prepayment penalty: charges for the early repayment of debt.

Principal: the borrowed amount, less interest or additional fees.

Private mortgage insurance (PMI): insurance paid by the borrower. This may be required by the lender when the down payment is less than 20%.

Realtor: a real estate agent or broker affiliated with the National Association of Realtors and its local and state associations.

Recording fees: money paid to the lender for recording a home sale with the local authorities, thereby making it part of public records.

Refinancing: paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).

RESPA: Real Estate Settlement Procedures Act allows consumers to review information on known or estimated settlement cost once after application and once prior to or at a closing. The law requires lenders to furnish the information after application only.

Second mortgage: a mortgage made subsequent to another mortgage and subordinate to the first mortgage.

Survey: a measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any buildings.

Title: a document that gives evidence of an individual’s ownership of land.

Title insurance: a policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often bome by the purchaser and/or seller.

Title search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

Truth-in-lending: a federal law requiring disclosure of the annual percentage rate charged to home buyers shortly after they apply for the loan.

VA loan: a long-term, low- or no-down payment loan to veterans guaranteed by the Department of Veterans Affairs.

Verification of employment (VOE): a document signed by the borrower’s employer verifying his/her position and salary.

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Real Estate Professional Roles

List of Real Estate Roles

Mortgage Specialist

This finance professional prequalifies you for the mortgage. He/she reviews your income and ability to afford a home, credit history, and the subject property to insure the loan meets current guidelines. He/she can discuss the financial advantages of home ownership vs renting. May be helpful in helping you create a budget, discuss down payment options, reviewing mortgage guidelines and programs if you ask. Be sure to check for an NMLS certification indicating that the individual has been reviewed by the State of MN for licensing.

Title Agent

Insures ownership of the property is legally transferred and without defect. This person reviews any liens that may be on the property, delivers documents to the county to record ownership and the mortgage (if applicable) and administers the closing of the purchase and mortgage.

Realtor

A Realtor helps you in locating and negotiating the purchase of your new home. He/she is essential in not only locating the right home for you, but creating strategies in the offer process, getting the most for your money, and coordinating the transaction on your behalf. It is important to work with a Realtor that comes with a recommendation and is reputable.

Property Insurance Agent

The Insurance Agent provides protection of your home and belongings for your family. The Agent will review the property appraisal, discuss with you the personal belongings that need to be insured and comprise a policy that covers you where you need it. A great Agent will review the entire policy with you, let you know what is not covered and will provide options for additional insurance. Property insurance is not only required when you have a mortgage, but is essential for the security of your home and your financial stability.

Appraiser

A property appraiser determines the value of the property for lending purposes and helps to insure that you are paying a fair price. The appraised value represents the local market by reviewing similar properties that have sold recently. The appraisal process today is an anonymous one, meaning the appraiser is independent and has no influence from the Realtor or Mortgage Specialist, insuring that you are getting a truly independent estimate of market value.

Inspector

It is a great idea to have the home inspected within the allowed time on the purchase agreement, typically 10 days from the date on the agreement. An inspection determines the condition of the plumbing, heating, cooling and electrical systems and the structural integrity of the property. They are licensed and trained to look for defects and point them out to you, the buyer, to insure that the property you are buying is of good condition.

County Assessor

Bloomington is in Hennepin County, who is responsible for administering property taxes. In order to reduce the tax on your home, you will need to homestead your property with the Assessor. You can do this, along with access other valuable services, at the Bloomington Assessors Office at 1800 W. Old Shakopee Road.

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How to Fix Your Credit

  1. Identify what the negative items are that reporting in your credit file. You can review all of your credit information here:www.annualcreditreport.com. AnnualCreditReport.com is the official site to help consumers to obtain their free credit report. It is a free service as long as you do not request your credit score. The individual credit scores usually cost around $7 each. The catch ‚ only one review per year is free. Once you know what the negative items are, you can begin correcting them. Review everything in detail, and if something is reporting inaccurately, request a dispute right on this web page. If you have outstanding collections/judgments/past due accounts, be sure to get them paid as soon as possible.
  2. Create some positive trade lines on your credit. A trade line is an account that reports to the credit bureaus. Typically, a utility bill or cell phone account is not considered a trade line, but an auto loan, student loan and credit cards are considered trade lines. Make sure that you have some positive trade lines of varying types reporting on your credit. If not, open one or two. A great way to get a loan or credit card when your credit is lacking or in rough shape is via a secured loan or secured credit card. US Bank has a great program for this, go and see my banker Emily Ervin in the Bloomington branch.
  3. Save documentation! If you pay something in full, get a paid in full letter from the creditor. Start a file on all the receipts you receive, as well as payments that you make.
  4. Follow up. If you review all three credit bureaus at one time, you cannot review them again for 12 months. Instead, review one report of the three, one at a time. I will review my report every 4 months by only reviewing Transunion, Experian and Equifax one at a time.
  5. Check with a professional. Credit experts and mortgage lenders can help you review your official report. If you can correct some things on your own, do that first before contacting a lender or credit expert. A great credit repair company here locally is ACS Credit, and you can reach Tim at (952) 746-3322 or tim@acscreditrepair.com.

Lenders usually take a positive view of individuals with a range of credit accounts – car loan, credit cards, mortgage, etc. – that have a record of timely payments. However, a high debt to credit ratio on certain types of revolving (credit card) accounts and installment loans will typically have a negative impact.

www.experian.com
www.transunion.com
www.equifax.com