What kind of lender is best?

If you ask a loan officer, “What kind of lender is best?” the answer will be whatever kind of company he works for and he will give you a list of reasons why. If you meet the same loan officer years later, and he works for a different kind of lender, he will give you a list of reasons why that type of lender is better.

REALTORS® will also have differing opinions, and those opinions have and will continue to change over time. In the past, it seemed like most would recommend portfolio lenders. Now, they usually recommend mortgage bankers and mortgage brokers. Most often they direct you to a specific loan officer who has demonstrated a track record of service and reliability.

This article discusses the advantages and disadvantage of different types of institutions, not the individual loan officers. However, it is often more important to choose the correct loan officer, not the institution. The loan officer has many responsibilities, one of which is to act as your representative and advocate to the lender he works for or the institutions he brokers loans to. You want someone who has proven dependable and ethical in the past.

Regarding the institutions, the truth of the matter is that each type of lender has strengths and weaknesses. This does not even take into account the variety of other factors that influence whether a lender is good or bad. Quality can vary, depending on the loan officer, the support staff, which branch or office you are obtaining your loan from, and a variety of other factors.

PORTFOLIO LENDERS

Savings & Loans are quite often portfolio lenders, as are some banks. Portfolio lenders generally promote their own portfolio loans, which are usually adjustable rate loans. They will often pay more compensation to their loan officers for originating a portfolio product than for originating a fixed rate loan. You may also find that they are not as competitive as mortgage bankers and brokers in the fixed rate loan market.

However, it is often easier to qualify for a portfolio loan, so borrowers who may not qualify for a fixed rate loan may be able to obtain a loan from a portfolio lender. A borrower may be able to qualify for a larger loan from a portfolio lender than he could obtain from a fixed rate lender.

Portfolio lenders also can serve as niche lenders because certain things are more important to them than meeting the more standardized underwriting guidelines of a mortgage banker. An example would be a savings & loan, which is more concerned with an individual’s savings history than being able to fully document income and other things.

If you apply for a loan with a portfolio lender and you are declined, you usually have to start the process over with a new company.

MORTGAGE BANKERS

If we are talking about the larger mortgage bankers, you can count on them having several strengths. For the biggest ones, you will recognize the brand name.

Usually, they are much better at promoting special first time buyer programs offered by states and local governments, that have lower interest rates and costs than the current market rate. These programs are often available to buyers who have not owned a home in the last three years and fall within certain income guidelines.

Mortgage bankers may incur problems because they are just too big to manage, or they may operate like well-oiled machines.

If you are buying a home and you need a VA or FHA loan and the development you are buying in has not yet been approved, they will be better at getting it approved than other lenders.

If your home loan is declined for some reason, many mortgage bankers allow their loan officers to broker the loan to another institution. However, because your loan officer is so used to promoting the company’s product, he may not be familiar with which institution may be the best one to submit your loan to. Another reason is because wholesale lenders do not expect to get many loans from direct mortgage bankers, so they do not expend much marketing effort on them.

BANKS and SAVINGS & LOANS

Their major strength is that you will recognize their name. In addition, they will usually be operating as a mortgage banker, a portfolio lender, or both, and have the same weaknesses and strengths.

MORTGAGE BROKERS

The major strength of mortgage brokers is that they can shop the wholesale lenders for the best rate much easier than a borrower can. They also learn the “hot points” of certain wholesale lenders and can handpick the lender for a borrower that may be unique in some way. He will be able to advise you whether your loan should be submitted to a portfolio lender or a mortgage banker. Another advantage is that, if a loan gets declined for some reason, they can simply repackage the loan and submit it to another wholesale lender.

One additional advantage is that mortgage brokers tend to attract a high number of the most qualified loan officers. This is not universal because mortgage brokers also serve as the training ground for those just entering the business. If you have a new loan officer and there is something unique about you or the property you are buying, there could be a problem on the horizon that an experienced loan officer would have anticipated.

A disadvantage is that mortgage brokers sometimes attract the greediest loan officers, too. They may charge you more on your loan, which would then nullify the ability of the mortgage broker being able to shop for the lowest rate.

WHOLESALE LENDERS

Borrowers cannot get access to the wholesale divisions of mortgage bankers and portfolio lenders without going through a broker.

When REALTORS® or Builders Recommend a Lender

If your REALTOR® or builder makes a suggestion for a lender, be sure to talk to that lender. One reason REALTORS® and builders make suggestions is the fact that they have regular dealings with this lender and have come to expect a certain amount of reliability. Reliability is extremely important to all parties involved in a real estate transaction.

On the other hand, a recent trend in mortgage lending has been for real estate companies and builders to own their own mortgage companies or create “controlled business arrangements” (CBA’s) in order to increase their profitability. These mortgage brokers sometimes become used to having what is essentially a captured market and may not necessarily offer you the lowest rates or costs.

Some real estate companies also offer different types of incentives to their REALTORS® in exchange for recommending their company-owned mortgage and escrow companies or lenders with whom they have CBA’s. Dealing with one of these lenders is not necessarily a bad thing, though. The builder or real estate company often feels they have more ability to expedite matters when they own the company or have a controlled business relationship. They cannot usually influence the underwriting decision, but they can sometimes cut through red tape to handle problems or speed up the process. Builders are especially forceful on having you use their lender. One reason is that there are certain intricacies in dealing with new homes. If you use a loan officer who usually deals with refinances or resale home loans, he may not even be aware of how different it is to close a mortgage on a new home and this can lead to problems or delays.

It is in your interest to know if there is any kind of ownership relationship or controlled business arrangement between the real estate or builder and the lender, so be sure to ask. Do not automatically disqualify such a lender, but be sure to be more vigilant on getting the best interest rate and the lowest costs.

Conclusion

Make sure to do a little shopping. By knowing the interest rates in your market and making sure your loan officer knows you are looking at rates from other institutions, you can use that as leverage to make sure you are obtaining the best combination of service and the lowest rates.

Don’t go on a spending spree using credit if you are thinking about buying a home, or in the process of buying a new home. Your mortgage pre-approval is subject to a final evaluation of your financial situation.

Every $100 you pay per month on a credit payment could cost you about $10,000 in home eligibility. For example, a car payment of $300/month could mean that you qualify for $30,000 less in a mortgage.

Even if you have accumulated enough savings, you should consider not making any large purchases until after closing. The last thing you want is to know that you could have purchased a new home had you curbed the urge to spend.

What to do if you are facing foreclosure?

It has been a while since I have talked about this subject because there really has not been all that many foreclosures available in the Minneapolis Saint Paul market. I am not going out on a limb and predicting that something is going to change suddenly. Ever since I started blogging and making videos, I had been getting requests from people asking me to cover different subjects in real estate. This one is something that is on many people’s minds right now. It must be a combination of the current political state, inflation, and impending recession as some experts predict along with job layoffs.

Whatever the situation might be if you find yourself falling behind on your mortgage and you are wondering what to do, the video attached to the bottom of this blog will answer those questions. I think the most important thing to consider is staying in control of your situation by deciding ahead of time and having a plan. Many people fall into a situation where they cannot decide, so it is made for them by the bank. Do not be one of those people, stay in control of your destiny no matter how hard it may be to face.

The basic process of a foreclosure is once you fall behind the bank will send you notices. Sometimes it happens after 30 days and sometimes it happens after 90 days. Every single bank is different in how they manage things. Once they have notified you several times, if you have not gotten caught up with what you owe, they will put a foreclosure notice in the newspaper. It is called foreclosure by advertisement. Once that is completed, they set-up a sheriff’s sale. At which time they hold control of the property, and the six-month redemption period starts.

During the six-month period you have the right as the homeowner 2 pay all you owe in payments, interest, and other charges that the bank has now piled on. You can then keep your house and it is back to business as usual making a monthly payment. Your credit will still take a hit but nothing like they hit it will take if you are foreclosed on.

Once the six-month redemption. Is up, at that point it is over, and you will receive a notice of eviction. Again, every single bank is different. Banks will send out a notice with the sheriff within 30 days and others take months before they contact you.

There are two other options that you have before all of this starts. If you feel that you have equity in the home, the best course of action may be for you to sell the house, pay what you owe and walk away with some money in your pocket and hopefully only a small credit ding. contacting a real estate agent like myself is the first step because I can walk you through all your choices and steps of how this plays out.

Your other option would be to try to do a short sale. But the only way for that to work is if you owe more money on the home than it is currently worth in the market. This one is trickier for several reasons. This is a Hail Mary pass and should be avoided at all costs.

I am not going to sugarcoat it and say that the foreclosure process is easy or the right thing to do. But there are some people who truly have issues like the loss of a job, divorce or medical problems that lead them down this road. It is nothing to be ashamed of. However, if you can avoid it, overall, you will be much better off.

The Essential Guide to Investing in Residential Real Estate

Investing in residential real estate can be an exciting and rewarding venture, especially for first-time investors. However, the process involves numerous steps and considerations to ensure a successful and legally sound investment. This comprehensive guide outlines key steps and essential advice to help you navigate the complexities of real estate investment.

1. Consult a Real Estate Attorney

   Why it’s important: Before you dive into the world of real estate investment, it’s crucial to understand the legal implications. A real estate attorney will guide you through the legal aspects of property investment, such as contracts, titles, and zoning laws. They can also help in resolving any legal issues that may arise.

   What to expect: Expect to discuss your investment goals and any specific concerns. Your attorney will provide advice on legal requirements, potential risks, and strategies to protect your investment.

2. Contact Your Accountant for Financial Advice

   Why it’s important: An accountant plays a vital role in understanding the financial implications of your investment. They can offer advice on tax benefits, expense tracking, and financial planning related to real estate investments.

   What to expect: Your accountant will help you assess your financial health, understand the tax implications of property investment, and plan your budget accordingly.

3. Engage Tom Sommers with Coldwell Banker

   Why it’s important: Having an experienced real estate agent like Tom Sommers from Coldwell Banker can significantly enhance your investment journey. A good agent offers market insights, finds potential properties, and negotiates deals on your behalf.

   What to expect: Tom Sommers will assist you in property search, offer insights into the local market, and provide support throughout the buying process.

Further Steps for First-Time Investors

4. Educate Yourself About the Market
   • Research local real estate markets.
   • Understand market trends and property values.
   • Identify areas with high growth potential.
5. Define Your Investment Goals
   • Are you looking for short-term gains or long-term wealth?
   • Consider your risk tolerance and investment timeline.
6. Secure Financing
   • Explore mortgage options and interest rates.
   • Consider pre-approval to streamline the buying process.
7. Identify Profitable Properties
   • Look for properties in desirable areas.
   • Consider factors like property condition, location, and potential for appreciation.
8. Conduct Thorough Property Analysis
   • Evaluate repair and maintenance costs.
   • Assess potential rental income and occupancy rates.
9. Plan for Property Management
   • Decide if you’ll manage the property yourself or hire a property manager.
   • Understand the responsibilities involved in property management.
10. Regularly Review and Adjust Your Investment Strategy
    • Monitor market changes and property performance.
    • Be prepared to adjust your strategy to maximize returns.

Rental Property Tips for the Beginner: Navigating the Minneapolis-Saint Paul Metro Area

Welcome to the exciting world of rental property investment! This comprehensive guide is designed to equip beginners with essential insights and strategies for navigating the Minneapolis-Saint Paul real estate market. At Tom Sommers Real Estate, we are dedicated to ensuring that every investor has the tools and knowledge to make informed decisions. Here’s what every investor should know before diving into rental property investment.

1. Know the Laws of Your City, State, as well as Nationally

The first step in your investment journey is understanding the legal landscape. The Minneapolis-Saint Paul metro area, like any urban area, is governed by specific regulations that impact rental properties. From city ordinances in Minneapolis and Saint Paul to Minnesota state laws and federal regulations, compliance is key. These laws cover a broad range of topics, including but not limited to tenant rights, fair housing, rental agreements, and safety standards. Familiarizing yourself with these regulations will protect you from potential legal pitfalls and ensure a smooth landlord-tenant relationship.

2. Hire a Real Estate Agent

Tom Sommers, a seasoned real estate agent, is your go-to expert for all investment needs in the Minneapolis-Saint Paul metro area. A proficient agent can offer invaluable advice on the local market, help identify lucrative investment opportunities, and provide guidance on pricing and marketing your rental property. Tom’s deep understanding of the local real estate dynamics and commitment to client success makes him an indispensable resource for both novice and experienced investors.

3. Hire a Real Estate Attorney

Securing the services of a real estate attorney is crucial for navigating the complexities of property investment. An attorney can assist with the legal aspects of purchasing a property, including title searches, closing documents, and compliance with local, state, and national laws. They are also instrumental in addressing any legal issues that arise, ensuring your investment is protected.

Additional Tips for Successful Rental Property Investment

• Understand the Market: Conduct thorough research on the Minneapolis-Saint Paul real estate market. Understand local trends, including which areas are up-and-coming and what types of properties are in demand.
• Financial Planning: Assess your finances carefully. Consider the initial investment, potential rental income, ongoing expenses (maintenance, taxes, insurance), and the return on investment (ROI). Ensure you have a solid financial strategy in place.
• Property Management: Decide whether you will manage the property yourself or hire a property management company. Property management can be a full-time job, and a professional company can alleviate the burden by handling day-to-day operations, tenant relations, and maintenance issues.
• Build a Network: Establish a network of professionals, including attorneys, contractors, and other service providers. Networking can provide support, advice, and opportunities for growth.
• Continued Education: The real estate market is constantly evolving. Stay informed about market trends, legal changes, and investment strategies by attending workshops, seminars, and networking events.
• Market Your Property Effectively: Utilize online platforms, social media, and traditional marketing methods to reach potential tenants. High-quality photos, detailed descriptions, and highlighting unique features of your property can attract more interest.

Tom is committed to guiding you through every step of your investment journey in the Minneapolis-Saint Paul metro area. Our expertise and personalized approach ensure that your real estate investments are both successful and rewarding. Start your investment journey with confidence, backed by the knowledge and support of Tom Sommers, the right agent for all your real estate investment needs. Tom is just a phone call away 952-994-7204.

I’m Tom Sommers, a dedicated real estate agent with Coldwell Banker, and I specialize in the Minneapolis Saint Paul metro area. My expertise lies in guiding clients through the intricacies of real estate investment, whether they’re seasoned investors or first-timers looking to navigate the profitable realm of residential real estate. Today, I’d like to share some insights into the various investment strategies that can help you achieve your financial goals, whether you’re interested in long-term holding or flipping properties for quick returns.

Investing in Long-term Rental Properties Long-term rentals are a cornerstone of real estate investment. This strategy involves purchasing properties to rent them out for extended periods. It’s ideal for investors looking to generate steady monthly income while also benefiting from property appreciation over time. Here are key considerations:

• Location: Choosing properties in high-demand rental areas, such as those near schools, parks, and workplaces, can significantly impact your rental’s appeal.
• Type of Property: Whether it’s single-family homes, duplexes, or multi-family units, each has its advantages depending on your target market and investment goals.

The Fix-and-Flip Approach Fix-and-flip is perfect for those who enjoy the thrill of transformation and quick returns. This strategy involves purchasing underpriced homes in need of repair, renovating them, and selling them at a higher price. Key factors include:

• Market Analysis: Understanding the after-repair value (ARV) of a home is crucial to ensuring profitability.
• Budget Management: Accurately estimating renovation costs and keeping them under control is essential for a successful flip.

House Hacking House hacking is a creative way to reduce or eliminate your living expenses while investing in real estate. By purchasing a multi-family property, living in one unit, and renting out the others, you can cover your mortgage and possibly generate extra income.

Vacation Rentals With the rise of platforms like Airbnb, investing in vacation rentals has become an attractive option. Properties in tourist-friendly locations can offer higher rental income, though they require more active management.

BRRRR Method The BRRRR method—Buy, Rehab, Rent, Refinance, Repeat—combines the best of both worlds: the long-term benefits of rental properties with the immediate gains of flipping. It’s a powerful strategy for growing a real estate portfolio quickly and efficiently.

Turnkey Properties For investors looking to avoid the hassles of rehabbing a property, turnkey investments offer a more straightforward path to owning rental property. These properties are move-in ready and sometimes already occupied by tenants, allowing you to start earning rental income immediately.

As your go-to real estate agent in the Minneapolis Saint Paul metro area, I’m here to help you navigate these investment strategies and more. With my extensive knowledge and experience, I can provide the insights and support you need to make informed decisions and maximize your real estate investment returns. Whether you’re looking to build long-term wealth through rental properties or seeking the immediate gratification of a successful flip, I’m dedicated to helping you achieve your investment objectives.

Understanding the difference between foreclosures and short sales

As a dedicated Coldwell Banker residential real estate agent, I’ve navigated the complexities of the Minneapolis-St. Paul real estate market with a keen eye on opportunities and challenges alike. Today, I want to share my insights into two critical aspects of our market: foreclosures and short sales. Understanding these can be the key to making informed decisions whether you’re looking to buy or invest in the area.

Foreclosures in the Minneapolis-St. Paul Metro Area

Foreclosures occur when a homeowner fails to make mortgage payments, leading the lender to seize and sell the property to recover the owed amount. The process can be lengthy and fraught with legal proceedings, but it also opens up opportunities for buyers to find properties at potentially lower prices. In the Twin Cities, like elsewhere, purchasing a foreclosure means dealing with a process that can vary significantly depending on the property’s stage in foreclosure.

When considering buying a foreclosure, it’s crucial to understand the different stages: pre-foreclosure, auction, and bank-owned properties. Each stage presents unique challenges and opportunities. For example, buying a property in pre-foreclosure allows you to negotiate directly with the owner before the house is auctioned off. However, this requires navigating complex negotiations and understanding the urgency of the homeowner’s situation.

Bank-owned properties, or REOs (Real Estate Owned), are often seen as less risky compared to buying at auction because they come with the possibility of inspections, and the bank may even offer financing. However, they’re usually sold “as-is,” requiring a careful assessment of potential renovation costs.

Short Sales in the Minneapolis-St. Paul Metro Area

Short sales present a different set of challenges and opportunities. This process occurs when a homeowner sells their property for less than the outstanding mortgage, with the lender’s approval. Short sales can offer great deals, but they’re known for their complexity and the lengthy time frames involved.

One of the primary pitfalls in pursuing short sales is the uncertainty. Lenders can take months to respond to offers, and there’s no guarantee they’ll accept your proposed price, even if the homeowner does. Additionally, short sales in the Minneapolis-St. Paul area can involve competing with multiple offers, and properties are often sold “as-is,” similar to foreclosures. This means buyers need to be prepared for possible extensive repairs or unexpected issues.

Moreover, navigating a short sale requires an understanding of the lender’s perspective and the ability to negotiate effectively on several fronts. It’s a balancing act between the seller’s circumstances, the lender’s requirements, and your interests as a buyer.

Navigating Your Real Estate Journey

Whether you’re considering a foreclosure or a short sale in the Minneapolis-St. Paul metro area, the process can be complex and filled with nuances. As a Coldwell Banker residential real estate agent with extensive experience in these types of transactions, I’m here to guide you through every step of the way.

Understanding the local market, identifying potential pitfalls, and negotiating effectively are critical aspects of securing a deal that meets your needs and expectations. If you’re looking to explore the opportunities that foreclosures and short sales present in our vibrant real estate market, I invite you to reach out. Let’s discuss your options and how we can navigate this journey together.

Call me, Tom Summers, to discuss your real estate aspirations in the Minneapolis-St. Paul metro area. Together, we can find the path that leads you to your ideal home or investment opportunity.

Exploring the Possibilities of Foreclosure Homes in the Twin Cities

If you’re eyeing the Minneapolis-St. Paul metro area for your next home, considering a foreclosure might be on your radar. It’s crucial to weigh the pros and cons, whether you’re thinking of settling in, renting out, or flipping the property. The landscape of foreclosures has changed dramatically since the 2008 real estate market crash, with fewer properties entering foreclosure thanks to a strong market recovery. Most homeowners now have enough equity to avoid losing their homes to the bank in tough times.

The Downside of Foreclosures

• Unknown Property History: Banks, now owning these properties, often lack the detailed history you’d get from a standard seller, making a thorough home inspection essential.
• Condition Concerns: Foreclosed homes may not be in the best shape, necessitating a purchase price well below market value to account for repairs and updates.
• Overpaying Risks: With foreclosures rarer now, banks might price these homes closer to those in traditional sales, heightening the risk of overpayment. An experienced real estate agent can provide a market analysis to ensure you’re paying a fair price.
• Title Complications: Ensuring a clear title is paramount. Some title companies might not be as diligent, so insisting on a detailed title binder and investing in title insurance can safeguard your purchase.

The Upside of Foreclosures

• Potential for Equity: Foreclosures can be a goldmine for equity seekers willing to invest in repairs and updates. Not all require extensive work; sometimes, it’s just about cosmetics and minor fixes.
• More Bang for Your Buck: Compared to newer, often smaller homes, a foreclosed property can offer more space once it’s fixed up, potentially at a better value.

Navigating Your Purchase in the Twin Cities

In the current Twin Cities market, where foreclosures are less common, it’s easy to get caught in a bidding war, especially among buyers unfamiliar with the process and costs. Leveraging the expertise of a real estate professional can guide you through these competitive waters.

Foreclosures might not be for everyone. The allure of move-in-ready homes often outweighs the appeal of a fixer-upper, especially for those with busy lifestyles. However, understanding the local market with the help of a professional can clarify whether a foreclosure fits your goals.

Conclusion

Before diving into a foreclosure investment, get acquainted with the Minneapolis-St. Paul real estate scene. A conversation with a seasoned agent can help outline your options, ensuring you make an informed decision that aligns with your desires and circumstances. Exploring foreclosures could unveil unexpected opportunities, but always approach with caution and thorough research.

#ForeclosureInvesting #RealEstateTips #BuyingForeclosures #InvestmentProperties #HomeBuying #RealEstateAdvice #PropertyInvestment #RealEstateInvestor #HouseHunting #RealEstateMarket

As Tom Sommers from Coldwell Banker in the Minneapolis-St. Paul metro area, I’ve navigated the intricate world of real estate for years, witnessing firsthand the evolution of various practices. One question that frequently emerges in discussions with both buyers and sellers is whether an abstract of title holds any significance in today’s market. To address this, it’s crucial to explore the nuances of modern real estate transactions, especially considering how the relevance of title abstracts has shifted over time.

Historically, an abstract of title has been a fundamental component in real estate transactions. It’s a comprehensive document that outlines the history of a property, including previous ownership, liens, and any legal disputes, essentially providing a roadmap of the property’s legal background. This information has been pivotal in ensuring a buyer’s peace of mind and securing the legitimacy of the transfer of ownership.

However, the landscape of residential real estate, particularly in urban and metro areas like Minneapolis-St. Paul, has undergone significant changes. The process of maintaining and updating an abstract of title has become notably expensive, making it a less appealing option for many sellers. The financial burden, coupled with the hassle of keeping such documents updated and intact, has led to a gradual phasing out of their use in residential transactions. Moreover, it’s not uncommon for these documents to be misplaced or lost over time, adding to the challenges of preserving an accurate historical record.

In the context of urban real estate, the reliance on title abstracts has diminished, largely due to the advent of title insurance. Title insurance offers a modern solution by protecting buyers and lenders against any losses from disputes over property ownership. It’s a one-time purchase made at closing that covers any unforeseen issues with the title, making the process smoother and more secure for all parties involved.

Despite these shifts in urban and metropolitan areas, the abstract of title retains its importance in specific scenarios, particularly concerning rural property, acreage, or lake property outside the metro vicinity. In these cases, the abstract becomes an invaluable asset. Rural properties often come with complexities such as ambiguous lot lines, easements, and rights of way that are not as prevalent in urban settings. An abstract of title can simplify these complexities by providing clear historical data, making it easier to determine boundaries and resolve any disputes.

For property owners in rural areas or those owning land with unique characteristics, holding onto the abstract of title can facilitate smoother transactions and property management. It offers a level of detail and historical context that is sometimes necessary for dealing with the intricacies of non-urban real estate.

In conclusion, while the abstract of title may no longer be a staple in the fast-paced world of residential real estate within metro areas, its value cannot be entirely dismissed. The decision to maintain or seek out an abstract should be informed by the specific nature of the property and the challenges inherent to its location. As we navigate the evolving landscape of real estate, understanding the tools and documents that best serve our needs becomes paramount. For those in the Minneapolis-St. Paul area and beyond, I’m here to guide you through these decisions, ensuring your real estate journey is both successful and informed.

1. #RealEstate
2. #HomeBuying
3. #SellYourHome
4. #RealEstateTips
5. #HomeOwnership
6. #RealEstateAdvice
7. #PropertyInvestment
8. #FirstTimeHomeBuyer
9. #RealEstateInvesting
10. #HomeSale