Live Your Dream
Minnesota Loan Programs
What’s the difference between a Grant and a 0% Loan?
Grants are funds typically from government organizations that do not need to be paid back. 0% loans do not accrue interest like typical loans and may reach certain terms where the remainder of the debt is forgiven otherwise just due upon sale or end of the mortgage term.
MNH Start Up Program (DPL)
Minnesota Housing’s Start Up Program is a 0% interest loan for qualified individuals* with no monthly payments and a balloon payment due upon sale or end of the mortgage term up to $18,000 which may assist closing costs or down payment.
First Generation Program
The First Generation Program is a first come first serve deferred forgivable loan program for individuals (or their parents) who have never owned a home or lost it due to foreclosure. You may receive up to $35,000 which is forgivable after 20 years or 50% forgivable after 10 years. The unforgiven balance is due upon sale or end of the mortgage term.* This program may be combined with Start Up and other MNH programs.
Credit
What is Credit?
Effectively credit is your ability to obtain items before full payment. Credit is the single the most important piece in your ability to purchase property. It doesn’t have to be great, but the higher the better. For underwriting purposes (mortgage evaluations) your credit is the lowest coupling of the median score from 3 Major Credit Bureaus: Experian, TransUnion, and Equifax; and an evaluation on your DTI (Debt-to-Income Ratio).
How does a Credit Score Work?
Your credit score is also known as your FICO Score. FICO stands for Fair Isaac Cooperation, a company that develops scoring models and data analytical services. Your FICO is measured in points on a range from 300-850.
Your FICO Score is compiled of 5 categories:
Payment History (35%): Your track record of on time payments.
Credit Utilization (30%): How much available credit you are using.
Credit Length (15%): How long you have had cards, loans, etc.
Credit Mix (10%): A variety of revolving debt (cards) with student loans, mortgage, car loans, etc.
Inquiries (10%): Loan and card applications.
What is a DTI?
Your DTI is your Debt-to-Income Ratio. Lenders use a combination of your FICO Score and your DTI to assess your creditworthiness for underwriting purposes. Essentially, mortgage lenders like to see a healthy amount of debts that you can actually afford. The DTI formula is simple: (Monthly Debt / Monthly Income) x 100 = DTI (%). The lower the percentage the lower the risk of any faults and the increased chance of higher mortgage preapproval.
How to Increase your Credit:
DOs:
Have late payments on cards, bills, loans
Finance vehicles, furniture, appliances or take out any additional loans during or directly before the home buying process
Make excessive inquiries
Use too much of credit limit
Carry balances
Only minimum payments
Cash advances
DON’Ts:
No late payments
Utilization rate under 30%
Pay down debts
Don’t close cards
Limit inquiries
Monitor reports and correct errors
Have as much credit length as possible
Update income
Can I get a Mortgage Loan with No Credit?
Yes, it is possible to get approved for a mortgage loan without a FICO Score, this is known as manual underwriting. Manual Underwriting is the traditional way mortgage loans were originally approved using an analysis on income and payments.
You’ll typically need at least 4 of these to get preapproved:
Housing payments such as rent
12 months of bank account statements with an increasing balance
Utility bills
Insurance payments
Phone bills
Tuition payments
Medical bill payments
*Low FICO is better than no FICO. None of this is financial advice. Speak to one of our trusted mortgage professionals for advice on your personal finances before making any changes or preparations to your credit or debts.
Mortgages
What is a Mortgage?
Believe it or not a mortgage is not what you think. There is a difference between a mortgage and mortgage loan. A mortgage is an agreement that you give to the lender which stipulates who get’s ownership if you fail to make payments. In exchange for a mortgage agreement you receive a loan (which we commonly refer to as the mortgage) which gives us the ability to buy the property we have the agreement on. The title and deed on the property give us ownership, but the mortgage says if we fail to pay back the loan we can forfeit our ownership. We give the bank a mortgage and in exchange they give us a loan.
Common Types of Mortgages
Conventional
Most Buyers
Ideal For:
Credit:
690-720*
690 FICO acceptable for MN Housing assitance.*
Down Payment:
DTI:
<50%
3-20%
30 year fixed interest rate conventional loans are the most common type of mortgage loans. Ideal for your average home buyer who has good credit and will cash out equity with the sale of a home or has the majority of a down payment saved up. Offers with conventional loans tend to look stronger than other loans.
FHA
First Homes*
Ideal For:
Credit:
620-660*
DTI:
<57%
660 FICO required for MN Housing assistance.*
Down Payment:
3.5%
FHA loans or Federal Housing Administration loans are geared towards first time home buyers as they’re insured by HUD and have lower down payment amounts, lower credit required and lower closing costs. You may put down as little as 3.5% on properties 1-4 units. Less than 20% down for FHA or conventional loans will require PMI (Private Mortgage Insurance) an additional monthly payment of (0.5-1.25% of the mortgage annually) to protect the lender.
VA
Ideal For:
Credit:
Veterans
+640
Down Payment:
DTI:
<41%
0%
VA loans are a product of the Veteran’s Benefits Administration for Veterans. VA helps veterans, servicemembers, and qualifying spouses. VA loans are 0% down with no PMI, have limited closing costs, lower rates and may be used multiple times. If you are a veteran or surviving spouse you should look into your VA benefits at va.gov.
USDA
Ideal For:
Credit:
Agriculture
+660
Down Payment:
DTI:
<40%
0%
USDA loans are backed by the United States Department of Agriculture for rural areas. They offer competitive interest rates and require as little as 0% down on qualifying areas and properties. Visit USDA to see more information on who and what properties qualify.
FAQ’s
What are Points?
Points give you the ability to buy down your rate. they are a form of prepaid interest you have the ability to pay upfront in exchange for a lower interest rate and lower monthly payments. 1 point equals 1% of your loan amount:
ex. $3,000 = 0.01(1%) on a $300,000 mortgage loan
What is a Refinance?
A mortgage refinance is when you replace your current mortgage loan with a new one for favorable terms such as a lower interest rate, smaller monthly payment, or to pull equity out of a property. Refinances give you the ability to purchase your dream home as soon as it hits in a hot market and also lock it in at a lower interest rate and monthly payment later down the road after the market cools down.
How do Interest Rates Work?
Nobody can predict what rates will do, but the key influences are: the economy, financial market, and the Federal Reserve. Mortgage backed securities make up a large portion of the bond market, specifically the U.S. 10 Year Treasury. When stocks fall the bond market does well and rates go down; when the bond market performs poorly rates increase to match competitive stock yields. Inflation and employment are also important inverse indicators, as they rise rates tend to fall. Most importantly, the Federal Reserve (the Fed), is the U.S. Central Bank. Banks borrow their money from the Fed at a determined rate. The Fed looks at economic growth, employment, inflation, etc. to determine the rate to the banks which influences our rates from the bank. These factors tend to influence mortgage rates.
What is Title vs Deed?
Title and different may can be confusing, but really aren’t. The deed says who owns a property while the title explains how they own it. I may own a house (deed), but maybe it’s under my business LLC instead of my name (title). The deed is a physical contract while title is simply a concept of ownership explained on the deed. You cannot own a home without both.
Home Buying Process
Here are your 10 simple steps to buying with Bode Realty.
1. Consultation
We’ll learn about you and then we’ll share about our business and what we do and see if we’re a good match. We want to answer and questions you have, clarify concerns and cover expectations moving forward.
2. Pre-approval
Step 2 get pre-approved. We have preferred lenders we enjoy working with and we trust our clients with. After our consultation we can connect you with some of our lenders we believe would be the right fit for you.
3. Eduaction
Whether you’re a first time home buyer or a seasoned veteran believe in educating all of our clients constantly. New laws and policies go into effect, the market shifts, etc. We stay on top of the the news, data, and numbers so you don’t have to.
4. Pre-search
Before we start looking we want to set parameters like your budget, wants vs needs, determining location, ideal bedrooms, bathrooms, layout, etc. so that we don’t veer off course and find out what you’re really looking for.
5. Search
Once we have our parameters set we’ll work the search and start scheduling showings. We’ll put properties in your inbox as soon as they hit the market.
6. Offers
Once we find a home you’re in love with we’ll put in an offer. We curate our offers to stand out and look the most appealing to sellers.
7. Negotiation
After the offer is accepted we have the power and utilizing our expertise in negotiation and professional education from Harvard Law School we’ll be your number one advocate. We have a strong reputation of getting our clients what they want when they want it.
8. Inspection
While we’re negotiating two things will take place, the first is the inspection and report. A certified inspector will verify the condition of the property and provide us a report so we can make any damage or potential risks known.
9. Appraisal
After inspection the property will be appraised by a professional appraiser who will look at the property and comps. to determine it’s actual value, this is important for the lender.
10. Closing
After our offer is accepted and we’ve settled negotiations and been appraised we’ll close on the property and put the keys to your new home in your hands.
Interested in working with us?
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