Your MN Mortgage Mom's Blog

I have heard and read a lot about the Cash for Keys programs that banks offer renters or current occupants after the home has been foreclosed on.  Cash for Keys is basically a monetary incentive that the bank will offer to the resident to move out by a certain date, thereby gaining possession of the property quicker and cutting losses.

To read a great article loaded with details on this, go to John Occhi's post, "I Don't Get It!  The Bank Forecloses on Their home and Then Pays Them To Move...Or Why Cash for Keys.

So what is Cash for Keys...with a twist?  Well, today I had lunch with a friend and was literally blown away.  Now some of you may read this and think, "Gosh, that's not so surprising."  But I was speechless and for those of you who know me, that is an anomaly in and of itself.

I knew my friend was not doing well.  He was plagued with over $100,000 in medical bills and the finances were going downhill fast.  He did not want to face foreclosure, so he called his mortgage companies (he had a 1st and 2nd mortgage) to see if something could be worked out. 

He called the 2nd mortgage company and asked if they would be willing to remove the lien from his house.  They were willing to do so for $5,000.  He did not have that kind of cash, so he then called the 1st mortgage company and asked if they would help.  Long story short, the 1st mortgage company paid the 2nd mortgage company the $5,000 to release the lien.  Then the 1st mortgage company turned around and paid my friend a good amount of money to "turn in his keys". 

No foreclosure process EVER took place. 

What blew me away the most?  On his credit report, the mortgage companies reported:

Mind boggling, but I am very happy for my friend!

First Time Homebuyers are my niche...they are the lifeblood to my Twin Cities mortgage business.  I love working with them because I can be a coach, a nurturer and a great knowledge base to learn from.

I've been told that I am a great teacher.  And mortgages are what I know best!

First Time Homebuyers have many questions.  Home financing can be a sea of confusion.  "Where do we start?"  "What do we do first?"  "What is the process?"

When a First Time Homebuyer is beginning the homebuying process, these are the questions I get asked most often.

Here is a list of the most important things to do NOW to be prepared for pre-approval and getting that mortgage for your first home:

1. Is your credit good?  If you have concerns, call me and let's take a peek.  An action plan may be in order and I can help with correction, building new credit or re-establishing credit due to a "not-so-good" credit history.
2. If you have had any job gaps, be prepared to write a letter of explanation as to the reason for the gap.
3. If you have experienced credit issues in the last 12 months, be prepared to write a letter of explanation.
4. Get these documents in order:  2 years most recent W-2's; 30 days most recent paystubs; 2 months most recent bank statements (including retirement account statements); 2-3 years tax returns if you are self-employed.
5. Down Payment:  Where is your down payment coming from?  Your own funds?  If so, your bank statements (as noted above) will be sufficient documentation.  Gift money from parents?  If this is the case, tell Mom and Dad to hold tight.  Do not exchange any monies until we have talked.  There is a clear process of documenting gift funds.  I can help you do this the right way!
6. Pre-approval:  Do not start shopping for a home until you have been pre-approved for financing.  A seller will not give you the time of day if you put an offer on a home without being pre-approved.  A pre-approval is as if you are saying, "Mr. and Mrs. Seller, I am ready, willing and have the ability to finance the purchase of your home."
7. Find a great real estate agent to represent you.  As a buyer, you do not pay a dime for their service.  Use a Realtor.  You need and deserve representation.  Don't know any agents?  ASK ME!  I have been in the business many years and can refer the best of the best.

Not so bad, huh?  The mortgage process really can be stress-free and quite simple.  With a little organization and the help of a professional, you can be moving into that dream home faster than you think!

Your MN Mortgage Mom    

For nearly 15 years, I have enjoyed this wonderful community.  It's great neighborhoods, sense of safeness, friendly people and an overall feeling of peace living here. 

And who can forget about the new Culvers moving in!  Yummmmm!!

Last evening, I took our puppy, Mic, for a walk (okay, puppy in mind and soul...maybe not so much puppy in size).  We stopped along the way to visit with people outside and just enjoyed the beautiful summer evening.

Now, everyone who lives here can tell you how nice our parks are and Mic (puppy) is no exception.  He has one particular favorite that we frequent all the time.  Well, last night, as in all of our walks, Mic walked patiently...waiting to get to his favorite destination.  He knows that when we get there, I will take his leash off and he can run free!

Well, last night was different.  There were lots and lots of people at the park.  There was a soccer game of small kids.  Mic quickly got over the fact that he couldn't run free...better yet!  There were kids all over the place!  Lots of playmates!

All eyes were on the kids playing soccer...Every parent was cheering their children on...And I thought, "Oh dear, should I turn around and go in a different direction?"  I decided to move forward...no one would even notice...I could handle the situation.  As we moved through, Mic did not bark, but he so badly wanted to greet his friends.  I kept a hold of the leash and as we walked by, I realized all eyes started moving in our direction.  The kids stopped playing and the coaches were staring.

"LOOK AT THAT DOG!  WHAT KIND IS IT?  HE LOOKS LIKE A HORSE!  wOW, THAT IS A BEAUTIFUL DOG!"

My fears suddenly turned into large smiles.  Mic pranced as if he were a galliant stallion.  We both handled the situation like pros.  Ane he was very proud.  I smiled one last time as we moved on by and thought, "Huh!  We just stole the show in Cottage Grove!"

Remember the good ole days when a buyer could EASILY turn their current residence into a rental and buy a new home?  Well, those days are over.  Our lives and our buyers lives just got a little tougher. 

There are new guideline changes that became effective Aug 1st that we should all be aware of.  The guidelines are listed below, but in a nutshell, here's what it says:  

We can still use rental income to "offset" the current mortgage payment, but now Fannie (with Freddie soon to follow) is requiring that the only way to use that rental income is if the property has a minimum of 30% equity.  Also, the rental income now has to be documented with evidence of a security deposit and a receipt of that security deposit into the borrower's bank. 

No more just getting a 1 year lease!  

If we don't have 30% equity, the buyer/borrower has to qualify with BOTH mortgage payments....the current and the new.  In addition, the borrower must have 6 months of PITI for BOTH properties in reserves.  

Couple of options to consider:

• Freddie Mac has not implemented these new guidelines, but is expected to follow soon.  This is kind of a "dangerous" option to fall back on, as Freddie could implement the changes tomorrow, 2 weeks, 2 months....we just don't know.  
• If the loan on the current home is not an FHA loan, we could possibly look at doing the new home as FHA.