home financing

what are closing costs

The True Explanation of Closing Costs

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Closing costs are often misunderstood. New home buyers often have a lot of questions like:

  • Where do they come from?
  • Who receives the money?
  • Who pays them — seller or buyer?
  • Is there really a no closing cost loan?

Investopedia tells us that,

“Closing costs occur when the title of the property is transferred from the seller to the buyer. The total dollar amount of closing costs depends on where the property is being sold and the value of the property being transferred. Homebuyers typically pay between 2% to 5% of the purchase price but closing costs may be paid by either the seller or the buyer.”

That’s somewhat helpful, but let’s look at a number of these costs, address them, and then ascertain who might pay them. Also, remember that our cost estimates are truly only estimates. You could find even wider fee ranges than we show below:

Appraisal fee ($300-$700)

Lenders will not offer you a loan until an independent third party has valued your property. If the appraisal comes in lower than the property purchase price, the bank will usually not lend the money. During the 2008 financial crisis, many blamed appraisers for artificially inflating real estate values as they were sometimes kicked back fees by banks or agents. This is highly illegal, however, and lenders today carefully vet each individual home appraisal. The buyer usually pays for the appraisal.

Home inspection ($300-$500)

According to NewsDay:

“A good home inspection can uncover repair and/or condition issues not readily apparent to the buyer. If the inspection turns up issues, the buyer can attempt to renegotiate the deal, and if the inspections was performed within the sales contract time limits, a troublesome inspection report can allow the buyer to back out of the sales contract. Buyers usually pay for this and it’s worth it.”

Application fee (varies)

Some lenders charge this but sometimes buyers can ask for a waiver.

Attorney’s fee (varies)

This can be a catch-all charge since many lenders have in-house lawyers. You can try to negotiate this out or convince the seller to pay for it.

Prepaid interest (based on loan amount)

Mortgage interest is typically paid in arrears. This means that you pay for interest accrued in March on April first. Interest accrues from the minute the loan closes, and your first payment usually isn’t due for about a month. Therefore, at closing, you are charged for the interest that is due from the closing date until your first payment. The buyer pays this. 

Origination fee (about 0.5% of loan amount)

This is simply a way for lenders to make more money by charging a small percentage of the loan to in effect make the loan to you. A half percent can be a lot of money–$2500 on a $500,000 loan, so try to get your lender to waive this.

Discount points (One point costs 1% of the loan amount)

We like Bank of America’s explanation:

“Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000). Essentially, you pay some interest up front in exchange for a lower interest rate over the life of your loan.”

If you don’t want to buy down the interest rate, you won’t incur this cost.

Mortgage broker fee (0.50% to 2.75%)

Buyers sometimes use a mortgage broker because these agencies can shop the loan to multiple lenders. Only one application is needed, and the broker’s staff will babysit the transaction all the way to closing. Mortgage brokers will tell you upfront what the cost of their services will be. This is definitely buyer-paid.

Mortgage insurance application fee (varies)

Private mortgage insurance is required for some loans and loan amounts, but we don’t like this fee and urge you to ask whomever is demanding to waive it.

Property taxes (two months’ worth at least)

Most lenders will not allow your property taxes to go unpaid, so they take upfront money from you and put it in escrow so that they have control of tax payments. You have to advance them money at closing to start your escrow fund. Usually no way out of this one.

Homeowners insurance (depends on home value and location)

This is another item that lenders do not want to see unpaid, so you’ll have to escrow this money also.

Title Policy

There can be two necessary title polices—one for the seller and one for the buyer. You can negotiate who will pay for what.

There are other closing costs that you may discover, and prudent buyers will mentally set aside three percent of the total sales price for closing costs. If you are buying during a down economy in a buyer’s market, you can ask the seller to pay many of these costs and you may be successful.

If you are in a seller’s market, you can sometimes get your lender to add these costs on the back end of the loan. Either way, when your title company presents you that all-important page that lists all of the closing costs along with the net-to-seller proceeds, make sure you carefully scrutinize that list.

How Do Late Payments Impact Your Credit Score?

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Whether you’re looking to purchase a house on a contract for deed, acquire a loan for college, or put down a car payment, your credit score is an essential part of the process. Credit scores are created based on a wide variety of criteria, and items such as late payments can reflect negatively on your score for years. 

Knowledge is half the battle when it comes to maintaining a high credit score, so read on to learn how late payments affect your credit and what you can do about it.

What is Your Credit Score?

To understand the importance of paying your bills on time and why late payments hurt so much, we first need to look at your credit score. Credit scores are compiled by three major credit reporting bureaus: Equifax, Experian, and TransUnion. 

They keep a record of every purchase and payment you’ve ever made. They’ll also know how many lines of credit, outstanding loans, and the debt you have to your name. So, what exactly is your credit score, and what does it mean? 

Stated by a credit repair Austin expert, the bottom line, your credit score determines how likely you are to pay creditors back on time. When you need a loan for any reason, loan officers will file with a credit reporting company for your credit report. 

Generally, the lower your credit score, the more hesitant a loan company will be to offer you the loan you want at the low-interest rate you desire. Higher credit scores always gain better loans at the best interest rates possible. 

A low credit score means you are less likely to obtain the full amount of your loan or, if you do, you’ll be paying a high-interest rate.

How Do Late Payments Impact Your Credit Score?

The single biggest factor that determines your credit score is your ability to pay back loans on time. Your credit score is the bottom line for creditors in determining how much of a loan they’ll be willing to give you, and how much of a risk you pose to their company. 

Loans are always risky, so loan companies use credit scores to ensure they’re making the wisest lending decisions possible.

When you miss a payment on your credit card, auto loan, mortgage, or other loan-device, the three reporting companies will be notified. Your late payment will then get placed into the scoring system that makes up your score.

Payment history accounts for 35% of your credit score, so missing even one payment can hurt your total score. The entire point of a credit score is to determine how reliable you are in paying back loans. Other factors impact your score but, outside of how much credit you’re using, the other factors contribute much less weight to your score.

Since payment history impacts such a large portion of your score, you could potentially drop 100 points due to a single late payment. It stays on your record for seven years, though its impact does lessen over time. 

It will, however, take quite a while to rebuild your score after significant damage.

What is Considered Late?

Nearly everyone has forgotten a bill from time to time. Two days past its due date, you suddenly remember you forgot to pay the water company and panic. You call, find out that you can pay right then and there, they slap a $20 late fee onto your regular bill, and you’re done. A sigh of relief. 

But did that late payment get recorded by the credit companies that keep track of your score? The straight answer is no. 

Late payments only get reported to the three credit reporting bureaus when they are a minimum of thirty days past due. The bill that you paid two days late will only affect your wallet, not your credit score. The car payment that you couldn’t make until forty-five days after it was due, however, will definitely show up on your score.

Do “Good Faith” Payments Help?

If you know you’ve got a bill incoming that you can’t pay in full on time, will it do you any good to pay half of the bill as a good faith statement? Unfortunately, no. 

A payment that is over thirty days late will be marked as delinquent by the credit reporting agencies, whether you’re late on $300 or .30¢. Good faith payments, while they might help you pay down your debt, will not help your credit score.

Not only do “good faith” payments not help, but the longer your bill goes unpaid, the more damage is done to your credit score. A 30-day late payment could drop your score as much as 90 to 100 points, even for someone who has never missed a payment.

How to Repair Damages

If you’ve missed a payment for a month or two, the damage has been done. There are action steps you can put into place, however, to help you get back on track.

  • Pay off debt as soon as possible. Save up and pay down your credit.
  • Get back to on-time consistent payments. The more you pay on time, the less damage your one-time late payment will do.
  • Set up auto-pay so you’ll never miss another payment.
  • If you know you’re going to be late, contact your credit agency and ask about working out a payment plan and adjusting the monthly amount owed.
  • Monitor your credit report. Keep up to date on payment history, penalties, and improvements in your credit score. Many companies that help you monitor your score will also provide tips and tricks to help you improve it.

Research your options. Talk with a professional and see what debt can be written off.

What Is Your Next Step?

If you’re reading this article, you’ve probably made a late payment and realize your score has been affected. While a late payment will most certainly impact your score, it’s not permanent, and it will improve over time. 

By paying your bills consistently and keeping track of your credit score, you’ll be able to get your score back up. What step will you take to improve your score?

Contract for Deed

[2019 UPDATES] Contract For Deed: The Ultimate Guide

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Contract for Deed Home Financing in 2019

Contract for deed home financing is a great option for those individuals struggling to get a traditional loan from the bank. Now, let’s get into the details.

Conventional financing, in 2019, as we all know, is the preferred home loan vehicle. This refers to a standard mortgage loan from a licensed lending institution, and typically can be a15 or 30 year loan with a down-payment that ranges from 3 percent to 20 percent. The higher your credit score, the better deal you will get.

Even before you find your dream home, you should obtain mortgage pre-approval from your lending institution. While pre-approval does not guarantee that everything will go smoothly, it does provide you with significant negotiating power when dealing with sellers.

Applying For Conventional Financing

Your parents probably had to spend an afternoon at a banker’s office when they applied for their first home loan. Now, you can do this by phone or online, although you will eventually have to sign closing documents in person. Some important things to do and factors to be aware of are:

  • Know your credit score.
  • You can easily see this number at Credit Karma, and the service is free.
  • Determine what factors make you less attractive.
  • High student loan balances, maxed out credit cards, judgments, liens, unpaid taxes and underreported income can hurt you.
  • Analyze your actual credit report and correct errors. The FTC reports that one of every five credit reports contains inaccuracies.
  • Optimize your credit status by paying down card balances to below 30 percent; do not make any large credit purchases while attempting to secure home financing.

Understanding What You Can Afford

Banks have certain debt to income ratios that they do strictly enforce. The Consumer Financial Protection Bureau (CFPB) explains:

“Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income.  This number is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.”

To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.  For example, if you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts, your monthly debt payments are $2000. ($1500 + $100 + $400 = $2,000.) If your gross monthly income is $6000, then your debt-to-income ratio is 33 percent. ($2000 is 33% of $6000.)

Evidence from studies of mortgage loans suggest that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43 percent debt-to-income ratio is important because, in most cases, that is the highest ratio a borrower can have and still get a qualified mortgage.

Housing Affordability

Finding Your Home

You can spend all day trolling Trulia and Redfin, but many times you can be missing out on homes for sale that only Realtors can easily access. Remember, sellers pay real estate commissions—you don’t—so avail yourself of this free service and find a good Realtor.

Finding Your Home With Contract For Deed

Working With A Contract for Deed Realtor

The Realtor/client relationship is a two-way street. If you are a type A personality and want all of your texts answered within two minutes, make sure your Realtor is as hyper as you are. Conversely, don’t expect your Realtor to work miracles with incomplete or false information. For example, don’t inflate your income and/or minimize your debts at your first meeting. In the credit world, there are no secrets, so be upfront with you Realtor.

Turned Down For Traditional Financing?

Mortgage Rejection

Those that give up after being rejected for a home loan end up renting apartments while those savvy enough to understand that there are alternatives to conventional financing will look at the rejection as a bump in the road and move forward. Rent to own is one way to become a homeowner, but a preferred method is MN contract for deed. In a rent to own situation, you pay rent to a property owner that may put aside a portion of your monthly rent as a down payment for a future purchase.

If everything works out, either the seller provides financing or you obtain it at some later date. In a contract for deed sale, you sign a contract that states that you will be given the deed to the property you are occupying after you make all of your required payments. Contract for deed is seller financing, and while interest rates can be a bit higher than conventional financing, credit requirements are typically significantly more lenient.

Finding Contract For Deed Opportunities

There are a limited number of MLS contract for deed listings.  If you’re lucky, you might find the right opportunity in a nice location. At C4D, however, we give you an advantage that others that wish to utilize contract for deed just don’t have. Just bring the home you wish to purchase to us. If we can do the deal, we will purchase the home and sell it to you on a contract for deed basis. We have paved the home ownership road for many that were rejected for conventional financing. Application is easy—just go to our website. C4D has the financial power behind them to make these deals happen.

Contract For Deed Documentation

While C4D offers less stringent credit requirements, we still will need pay stubs and bank statements. We look, however, at your situation today, and we care a lot more about what you can do now than what bad things have happened to you in the past. At C4D even high student loan balances and recent bankruptcies are not necessarily the hindrances they would be at a large bank.

Contract For Deed: How It Works

Although the nightmare of waiting 60 days or more to close on even great credit deals is generally behind us, banks take longer than we do at C4D. We usually can close deals in as fast as two to three weeks.

MN Contract For Deed Costs

We’re upfront about all of this. We do require an origination fee and we do add a small initial property markup. And, the interest rate you pay will be higher than the prevailing conventional mortgage interest rate.

Contract for Deed: What Problems?

We have many satisfied former renters that are now homeowners. We are transparent and forthright. If we can help you, we do everything possible to get your deal done. We are MN contract for deed experts, and happy customers are our paramount concern.

If you deal with an individual that is offering a contract for deed, you have to do serious vetting to ensure that there will be no problems with your deal in the future. With C4D, this is not necessary.

Contract for Deed: True Disclosure

When we purchase your home, we get a loan from our bank. With the blessing and full knowledge of our bank, we then sell the property to you with a MN contract for deed. You make your monthly payments to us and we, in turn, make our payment to the bank. But check this out:

We’ve never missed a payment and don’t ever plan on it.  In addition, we’ve worked with our bank partner to have an assignment of contract included in your documents that basically says if we stop paying our lender, you can pay them directly and your contract remains intact.

You won’t find this protection with most individual contract for deed sales. In fact, many times the seller’s bank isn’t even made aware of the transaction, and this can throw the original mortgage into default because of the due on sale clause that is embedded in almost every mortgage note. Our agreements with our bank do not have due on sale clauses.

Everything is upfront and at closing the contract is recorded at the appropriate County.

Helping You Refinance

Our goal is to get you into a home and ultimately help you refinance with a traditional lender.  We have relationships and systems in place to help make this happen. Typically, we can help people refinance within three years of purchase.

For the Realtor: Turned Down? There Is Still Hope!

So you spent weeks trying to get your buyer and seller agree upon a price. Both were difficult at times, and when you finally got all sides to listen to reason, an old unpaid judgment appeared and derailed the financing. After you’re done binge watching House of Cards to ease your pain, give us a call. We have been able to resurrect many deals that have been turned down by others.

Realtor Contract for Deed

We are a reputable, experienced and recognized company that does MN contract for deed. You bring us the buyer and the property, we buy the property and sell it to your client on a contract for deed. Even if you have an iffy buyer with shaky credit and you have not yet found the perfect property, bring them to us; we will get many of them pre-approved and send them back to you.

Is My Commission Protected?

Realtor Commission

You betcha! 80% of our referrals come from realtors, and they wouldn’t keep coming back if we didn’t guarantee that their commissions would be protected.

The Deed

Contract for deed means exactly that.

  • We buy the property.
  • We hold the deed.
  • We sell the property to the buyer.
  • They occupy the home.
  • They make their monthly payments.
  • At the end of the contract period, we turn over the deed and they are homeowners!
  • They can also refinance early with a traditional lender, and this is something that we will facilitate.
  • In addition, the buyer actually has equitable title, and can sell the property at any time if they wish to move on.

What About Financing?

Yes, we use a bank.

  • Our bank gives us a mortgage.
  • Our bank knows what we are doing.
  • The buyer pays us and we pay the bank.
  • We are never late.
  • We never miss payments.
  • Our mortgage with our bank does NOT include a due on sale clause.
  • In fact, we have an assignment of contract put in place that basically says if we stop paying our lender, the buyer can pay them directly and the contract remains intact!

The Final Paperwork

We will hold your client’s hand from application to closing. We will assist with all documentation and paperwork.

When The Offer Is Accepted

At this point, Taylor and the C4D Crew take over.  We work directly with the lender and title company to schedule closing and work out all the paperwork.  The C4D Crew will also work directly with the C4D buyer on all the paperwork and logistics for the day of closing This will be one of the easier transactions you do this year!

Down-Payment

Contract For Deed MN Down Payment

A down-payment is of course necessary, but the down payment be gifted to the buyer in a C4D transaction. Just make sure your clients speak with their accountant for possible tax implications.

C4D Crew Reputation

We can provide you with client references. Just by looking at our website you can see that we provide tons of valuable and free information about MN contract for deed. Of course, we are in business to make money—so are you—but we are also dedicated to helping those with compromised credit become homeowners.

How Long Does It Take?

From the time you and your client find a home they’d like to buy, and an offer is accepted, we can close as quickly as two to three weeks.

Credit Score Minimum?

We don’t have one. We look at every deal individually. Prior BKs, student loans, judgments divorces and tax liens are all issues we can work around.

Credit Score

Can You Approve Any Deal?

In short, no. We are not going to lie and tell you that we can do anything, but you would be amazed at what we can accomplish.

Call Us About Contract For Deed

MN Contract For Deed

Again, just because the loan officer rejected your client’s loan, your deal is not necessarily dead. Contact us and we’ll quickly get started on a contract for deed program that can make your client’s home ownership dream a reality.

Home Buying in 2019

Buy in 2019? 7 Must-Do’s Before Homeownership

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Buying your first home can be an exhilarating but exhausting experience. Before you even worry about the ins and outs of finding a great plumber, you not only have to find the place you want, but you must get your financial life in order in a hurry if you haven’t done that already. Here are seven important things to do before you purchase your first home:

Get A Realtor to Represent You

buying your first home

Important technical point #1: Sellers pay all real estate commissions, including those of a buyer’s agent. You should find the best and most knowledgeable real estate professional in your area and sign them up to represent you. They will flood your inbox with listings, they will help you negotiate, and they will draft purchase offers. And you won’t have to pay a penny, so there is no reason to purchase a home without the help of a buyer’s agent.

Look at Your Budget

Understand what you can afford and what you can’t. Principal and interest aren’t the only components of a monthly payment. You have to add real estate taxes, property insurance and maybe even private mortgage insurance (PMI) to the equation. You can’t start the process of buying your first home without understanding exactly where to draw the affordability line as there is no sense in wasting time looking at properties you can’t afford.

Credit score

Buying Your First Home: Get Your Credit Score

A few years ago, you had to pay for your credit score, but not anymore. Today, there are many vendors and credit card companies that will provide your score in seconds. If you have a low score, research what you can do to improve it, as your credit score is the first thing lenders look at.

Seek Pre-approval

While pre-approval from a lender does not necessarily guarantee that you will get a loan, it does give sellers assurance that you are creditworthy. When a seller accepts your offer, they are tying up their property until the deal closes, and if you are not a good risk, sellers will look at other offers.

Gather Your Down Payment Resources

Down Payment Resources

Substantial down payments can work magic because:

  • They lower your monthly payment amount.
  • They show the lender you are committed and serious.
  • They show the seller that you have resources.

Yes, you can but a home with no down payment—a VA loan is one example—but your financing options may be limited, and your interest rate could be higher.

Don’t Fear the Inspection

When buying your first home, you will want to have the property inspected by an impartial third party after your offer is accepted. Many persons worry that the inspector will find something bad and the deal will die. Some deals need to be killed, however, especially if an inspector finds glaring defects and problems. Your dream home can quickly become your nightmare if you don’t have it properly inspected while you still can void your purchase contract.

Have a Contingency Plan

If a deal falls through, or if you are turned down for a mortgage, it’s not the end of the world. There are other homes out there and other financing methods available. MN contract for deed is a great way for those with some credit issues to participate in home ownership. Be sure to contact us if you need an alternative to traditional financing.

Life After Bankruptcy

Life After Bankruptcy: 6 Ways to Get Back on Track

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Bankruptcy used to be considered the financial death penalty, but times have changed. While many people worry about life after bankruptcy, the future after filing Chapter 7 is not necessarily bleak.

Life After BankruptcyBankruptcy – What Is It?

There are two types of commonly filed individual bankruptcies—Chapter 7 and Chapter 13. Chapter 7 is a liquidation process where certain assets are given to a trustee that sells them in order to pay off creditors.

Chapter 13 was designed for those that wish to pay their debts but need time. A person that files for Chapter 13 bankruptcy works out a plan to make monthly payments to a trustee; the trustee then makes payments to creditors for a three or five-year period. After that time has passes and all payments have been made, certain remaining debt amounts may be cancelled.

Credit Score After Chapter 7

Credit Score after Bankruptcy

The better your credit score is, the more your credit score will decline. Credit scores average around 540 after bankruptcy, so if yours was 750, it will fall a lot further than if it was at 640 before bankruptcy. The good news is that many debts will be discharged—taxes, student loans, child support and some others won’t go away—and you will be able to start fresh. If you are still employed, or if you get a new job, your monthly expenses will be less, and you may even be able to start saving money, especially if you’re bringing in some money through passive income ideas.

Get a Secured Credit Card

If you declare Chapter 7, all of your credit cards may be cancelled regardless of their balances. Soon after your bankruptcy has been discharged, however, you will receive secured credit card offers. Put $500 in a secured account, and you will be rewarded with $500 of fresh credit.

*Note: although it might not be a ton of money, you can also check out using some apps that pay. You never know what a few extra dollars can do for a bank account each month.

You Still Have a Debit Card

Even if you have to open a new bank account, you can get a debit card. You can use it virtually anywhere you can use a credit card, so if you need to buy a plane ticket, you will be able to. Before debit cards became popular, people did have issues paying for items that required a card number, but that’s no longer the case.

You Can Even Get a Car

If you have file for Chapter 7 bankruptcy you cannot file again for eight years. Since you can’t file, you are actually somewhat of a better credit risk, and as time passes you will actually be able to borrow normally for items like appliances and autos.

Think Cosigner

FICO Score

If you have immediate financial needs and you have to borrow, try to get a cosigner. That person will be absolutely responsible for your debt, but if you make all of the payments on time, there will be no harm to the cosigner.

Life After Bankruptcy: Go Back to School

If you haven’t availed yourself of the Federal Student Loan program, you can go to a post-secondary institution for a bachelor or master’s degree or you could even go to law school or enter a PhD program. Federal student loans are available for all citizens—unless you are a drug offender—and there is no credit check required. If you take six credits at a major university, you can have all of your tuition paid and even receive some extra money you can use for expenses.

Back to School

Yes, there is life after bankruptcy. Borrowing for a home will be more difficult, but the financing pros at C4D can help with these types of issues. Be sure to contact us for more information.

7 Things New Homeowners Waste Money On

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Becoming new homeowners can mean a blur of expenses, but it’s really important to think about what you are spending money on so that you don’t make wasteful decisions, especially if you need money now

Here are seven things to consider:

Ditch the Lawn Service

Lawn Service for New Homeowners

New homeowners may think that they don’t have time for yard maintenance, but you can be assured that lawn services don’t do anything different that you could do. The same fertilizers they use are available at garden centers, and services like aeration are just not absolutely necessary. Garden centers will also give you free advice and will walk you through any lawn issues you have. Furthermore, they have the most professional equipment, like riding lawn tractor, it’s very expensive if you buy yourself.

Forget About the Pool

Pool for New Homeowners

If you buy a home with a pool, you have bought a place with lots of monthly maintenance needs. Every time the pool guy comes out, you will incur costs for cleaning, maintenance and pool chemicals. To be safe, your pool has to be regularly tested for proper chlorine levels, and don’t forget about the cost of water that can be very significant in dry southwestern states. While robotic pool cleaners are worth the money long term, the initial price range can set people off, so be sure to do your research first!

No Sun Room

Thinking of adding a sun room? Well think again, because even though new homeowners may hope to recoup their original sunroom investment, studies have shown that unlike kitchens or bathrooms, the addition of a sunroom very rarely even comes close to paying for itself.

Back Up Generator

New Homeowner Energy

ENERGY GENERATION BY SOURCE

A good one can cost thousands of dollars if you live in a non-hurricane prone area, so just trust the grid. And if you’re worried about losing a lot of frozen food, many freezers and homeowners’ insurance policies already protect against this occurrence.

Private Mortgage Insurance

If you don’t have 25 percent equity in your home, you may need to buy Private Mortgage Insurance or PMI. This can easily cost new homeowners up to $200 per month or more in premiums, and new homeowners never recoup this cost. If there is some way you can find a 25 percent down payment, by all means put that bigger amount down to avoid paying PMI. If you have been in your home for a while, a hot market may have increased your property’s value, and you can apply to have your PMI removed. Check with your lender about this.

Cheap Windows for New Homeowners

If you need new windows, don’t but cheap ones, because your HVAC costs will just increase. Spend more for a better product and your investment will pay off immediately.

New Homeowners & Extended Warranties

Insurance

According to our friends at BeerMoney, “Retailers are not going to sell anything that doesn’t make them money, and when they sell you an extended warranty they are getting extra revenue from you. For example, you purchase a $32 string trimmer.” The extended warranty is $8.00 per year. Sounds good, but after four years, you have doubled the cost of your garden tool. We suggest not paying anything extra, and just buying a new $32 trimmer when and if it breaks.

Also, there may be a convoluted and difficult repair process that could cause you to be trimmer-less for a period of time if you go the warranty route.

We’re really happy you are in your new home. Now, just be sure to carefully consider all of your home-related purchases so you don’t waste precious cash. And don’t forget, if you need to grab a few extra dollars, you can always sell things you currently own, such as totaled cars, old technology and other stuff laying around at home.

Good luck!

Homeowner's Insurance Cost

Homeowner’s Insurance: A Guide to Your First Policy

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While homeowner’s insurance cost is always a major factor, there are other important things to look at as you purchase your first policy. In fact, many insurance and real estate professionals state that focusing only on homeowner’s insurance cost can cause trouble if a major disaster strikes and property insurance is to be relied upon for reimbursement. Let’s look at steps you can take to avoid future issues.

Get Enough Homeowners Insurance

homeowner's insurance costs

Being underinsured is a big problem. If you insure your home for $200,000 but it costs more than that amount to restore everything to pre-disaster status, you can find yourself with a costly problem. Work with your agent make sure that your home is totally covered for replacement cost. Sometimes the extra premium amount to do this is minimal, but if construction costs have risen since you first bought your insurance, a hurricane, tornado or fire can present you with a big bill to restore your premises, even after insurance has paid its share.

Deductibles: What Does That Really Mean?

Homeowners Insurance Deductibles

Your deductible is the amount of money you have to pay toward a claim before your insurance kicks in. Simply, if you have $5000 in roof damage due to a covered peril like hail, but you have a $1000 deductible, your insurance will pay only $4000 and you’re stuck with the rest of the bill.

Furthermore, deductibles used to be expressed in monetary terms like $250, $500, or $1000. Now, it is more common for deductible limits that are equal to a percentage of your home’s value. So, on a $300,000 home, a tiny-looking one percent deductible amount would actually be a whopping $3000.

Discounts on Homeowners Insurance Cost

Do check for discounts since the combination of auto and homeowner’s policies can get you a great break on homeowner’s insurance cost. There are also discounts available for fire protection, security systems, remote security solutions, and even wind-resistant shutters in some areas.

Customization of Your Policy

Customized Homeowner's Insurance

The flood damage experts at BMS CAT told us that, “there are some policies in some areas that do not cover every peril like floods. In fact, true flood damage is usually not covered, so if you live in a flood-prone area, you may be able to purchase FEMA flood insurance, although this isn’t cheap.” Also, watch out for stingy insurance company history. Sometimes insurance companies fight about water entering a home. They may consider it an uninsured flood event, while you may maintain that the water was wind-driven rain. Check with your agent on this.

Video for Proof

Finally, take a video of all of your belongings and upload the files to a cloud-based server. That way, your record of exactly what you own will be preserved. Also, make sure you disclose special possessions like jewelry and musical instruments as these may have to be “scheduled,” or you may even have to buy a separate personal articles policy in order to ensure coverage.

Insurance Claims for Home

Image source: ValuePenguin

If you thought that your days of carefully vetting documents were over when your purchase offer was accepted, think again, personal finance is more complicated than that. Your homeowner’s insurance policy is your lifeline to security, so remember to spend time choosing the proper policy, and don’t base your decision totally on homeowner’s insurance cost. Also, be sure to read up on the best personal finance books, so that you know exactly what you’re reading!

As always, feel free to contact us with any questions!

Contract for Deed Homes: What Realtors NEED To Know

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There are a number of reasons Minnesota residents looking to buy contract for deed homes have had success. But you might ask: why not just buy your home with a traditional mortgage from the bank? Let’s talk about that.

We’ve all had it happen. 

Loan Rejection

After a difficult and protracted negotiation period, you finally got both your buyer and the seller to agree on price, contingencies, and before-closing repairs. At the end, everyone came to their senses, gave a up a little, and all parties were looking forward to closing.

Then the bank stepped in and killed the deal. Even though your buyer was pre-qualified, they made a mistake, didn’t follow your instructions and decided to finance an expensive vehicle. As the bank did a final credit check, the new car loan appeared and skewed the buyer’s debt to income ratio. The deal was dead, but you could have brought it back to life.

Contract for Deed Homes

Image result for home buying process

Contract for deed is a widely accepted Minnesota financing tool where a seller finances the property purchase on an installment basis, and they buyer receives the deed upon making the final payment. Many think that for this to work they need to find free and clear properties where a seller agrees to be the bank.

Why free and clear?

Because sellers can’t usually sell encumbered properties without breaching the lender’s mortgage contract. Therefore, those interested in contract for deed financing look specifically for contract for deed homes. There is another way, however.

Companies Like the Contract for Deed Crew (Yes, that’s us!)

There are quality companies out there like C4D, and it works like this: You bring a deal to C4D. Like a bank, C4D analyzes the deal to ensure that the seller can make the required monthly payments.

Unlike a bank, however, C4D can look past problems like the vehicle purchase mentioned above. With a good contract for deed homes company, you will be dealing with the company owner—not a bureaucratic bank loan officer. If C4D approves the deal, they will buy the property.

They do this with a bank loan, but the company’s bank does not include a due-upon-sale clause in its mortgage to C4D. Therefore, C4D legally and ethically buys the home, and with the bank’s blessing, C4D sells it on a contract for deed to the buyer.

Contract for Deed Homes

Benefits to the Realtor using Contract for Deed

  • You can explain difficult situations to C4D and they will understand. A debt to income ratio that has recently changed can be worked with if the buyers can legitimately afford the home.
  • Contract for deed revives dead deals. Banks can be arbitrary and unforgiving, but with a contract for deed transaction, the seller has more leeway to analyze what really makes the buyer worthy.
  • While a down payment is needed, the actual percentage is not necessarily set, and there are even ways the contract for deed companies can facilitate payment assistance.
  • Buyers can look at any home—not just contract for deed homes. With a MN contract for deed sale, the seller is unaffected since a company like C4D is the only purchaser they need to deal with.
  • All real estate commissions are protected.
  • Sellers can move their homes more expediently because companies like C4D have lots of buyers waiting for their dream homes.

Also, if you’re looking to understand property value event more, check out this presentation:

Presentation courtesy of LoseTheAgent, a listing platform for homes for sale by owner.

Don’t let loan officers and finicky banks get in your way. Consider using MN contract for deed for any deal where the lender is causing you trouble. It’s worth an email!

saving for a minnesota house

10 Tips to Start Saving for a House in Minnesota

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Unless you can get a VA no-down payment loan, you are going to work on saving money for a house for a first home deposit. Conventional mortgages usually require at least five percent down, and FHA loans will ask for three percent. If you are buying a second home or if you have compromised credit, you will have to come up with more cash. Let’s look at some ways to accumulate that elusive down payment when you are saving money for a house, including those awesome side gigs.

Saving for a house

Image via bankrate.com

Treat Money Wisely

You don’t necessarily have to go on the peanut butter only diet to save cash, but with some commodities like milk, the bottom of the shelf brand that the stores try to hide is probably the same product as the more expensive nationally branded milk. Try it, and if it tastes the same, buy the cheaper brand and you’ll save money every week.

Pay Yourself

According to SavingLoop, “it’s important to set up a bi-weekly direct deposit to a savings account—same as a deduction taken from your check. You won’t feel it, and you will accumulate dollars fast.”

Ditch the Corvette

Saving Money with Kia

*Save money with a Kia lease

Get a sensible car that is reliable. Think KIA Soul, and if you can drive a manual transmission, you can lease one of these for under $200 per month.

Become a Landlord

Rent your garage or an extra bedroom and pick up cash monthly. This strategy really helps saving for a house. Let’s say you have an apartment in an area like Uptown, well, maybe you have a money-making opportunity on your hands. Rent it out!

Sell It to Start Saving for a House

Old cards, vintage guitars and collectibles that you never will use can sometimes fetch great prices. If you are not using it, turn it into cash.

Don’t Be a Walmart Snob

Stuff is cheaper there and you can really save some money at Costco. It really is. That $4.50 two-ounce tube of cortisone cream you just bought at CVS is probably sold at Walmart for two bucks. Check out dollar stores as good retail alternatives also, and saving for a house will be less of a hassle.

Saving for a house with Costco

Get a Side-Hustle to Start Saving for a House

This means a second income stream. Cut lawns, wash cars, walk dogs, babysit, work catering gigs; just find out what else you are good at beside your regular job and work a few extra hours.

Locate Your Rich Uncle

Your family may include someone that will loan you down payment cash. Don’t be afraid to ask.

Buy a Smaller House

If your dream home is out of reach, go intermediate and buy a smaller or starter home. Treat it nicely and in a few years, you can sell it and move on up.

Find a Duplex

Duplex

If you have only saved a minimum down payment, find a duplex where you can rent the other side. While this falls into the starter home category, think of the advantages that having someone else paying half of your mortgage will afford you.

All in all, there are a ton of ways to save money; we’re not saying one is better than the other. A lot of people use really cool apps like Digit, but there are a ton of ways you can do it, too.

As you know we, at C4D really hope you can get traditional financing. But if you can’t, be sure to let us know. Yes, we also require down payments, but our innovative use of MN Contract for Deed has allowed us to help many that had previously thought home ownership was impossible. Be sure to contact us!

First Time Minnesota Home Buyer Programs

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While you may think that you are at a disadvantage being a first time home buyer, there are Minnesota first time home buyer programs that can assist you. First, let’s talk about the difference between being a first-time buyer and a multiple-time home buyer.

The U.S. government and the State of Minnesota both want everyone to be able to participate in the American Dream of home ownership, but they realize that there are barriers to entry. One of the biggest problems is the ability to accumulate a large enough down-payment. Initial down-payment requirements can range from zero to 10 percent or more. Ten percent on a $200,000 home is $20,000, and that can be difficult for a new buyer to come up with.

What Do You Know About Closing Costs

Another issue is closing costs, even with Minnesota first time home buyer programs. If you have good credit (yes, you can still buy with bad credit), and you are offered a credit card, there are usually no fees involved. Even with some personal and auto loans, there can be very in fees required to complete the transaction. Look, however, at this list of closing costs for a residential home loan:

Item

Fee

Loan Origination Fee

$2,500 (1%)

Discount Fee $625 (0.25%)
Processing Fee $450
Underwriting Fee $500
Wire Transfer $25-$50

Credit Report

$35

Tax Service $50
Flood Certification $20
Title Insurance $550
Escrow/Signing $450
Courier Fee $20
Appraisal $450
Recording $110

Homeowner’s Insurance first year premium

$700
6 Months’ Property Tax Reserves

$1,500

Those are a substantial amount of potential fees, and closing costs can easily rise to almost $10,000 in some transactions. Yes, you can try and get the seller to pay for some of these, but again, closing costs can be a problem to overcome. Luckily, there are Minnesota first-time home buyer programs in place to help.

National First Time Home Buyer Programs

First let’s talk about national programs. VA loans are available for veterans and they require no minimum credit score, low down-payment requirements, and do not require PMI or private mortgage insurance. There usually is a VA funding fee, however. If you are a veteran, first look to the VA, as this is one of the most advantageous programs out there.

If you’re not a veteran, you can investigate FHA Minnesota first-time home buyer programs. FHA loans can usually be done with only a three percent down-payment requirement. Even if you have a very low credit score, you still can possibly get a loan with a higher down-payment rate however.

Minnesota First Time Home Buyer Programs

Minnesota First Time Home Buyer Programs

According to our friends a www.nerdwallet.com, “As a [Minnesota] first-time home buyer, you may benefit from loan programs offered by the Minnesota Housing Finance Agency, or Minnesota Housing. If you’re eligible for these programs, you’ll also have access to down payment and closing cost assistance. Minnesota Housing defines a first-time home buyer as anyone who hasn’t owned a home in the past three years; however, certain programs are available to repeat buyers as well.”

Check out this site for further information.

What Are The Alternatives?

As we have consistently mentioned, we like traditional financing and hope that you are approved for it. But even if some of the available Minnesota first-time home buyer programs don’t work for you, please contact us at C4D. We are Minnesota contract for deed experts, and we have ways to provide the path for home ownership that others do not.