Notes & updates: None currently.

Mortgages and Financing

Banks, credit unions, insurance companies, mortgage bankers, and savings and loans all offer home loans. Lenders and contract terms change regularly as new companies form, established companies merge, and market conditions fluctuate. Comparing loans and fees between several different lenders is a wise idea. Comparison-shopping is not difficult since many home loans are standardized to conform to rules established by the Federal National Mortgage Association (Fannie Mae) and other quasi-governmental organizations that buy loans from lenders. Ask for the same size, type, and length of mortgage—such as a 30-year fixed term mortgage for $300,000—to compare loans accurately.

Mortgage rates and fees are generally listed in the real estate sections of newspapers and are often available on mortgage company Web sites. You can work with a loan broker or someone specializing in matching house buyers with mortgage lenders. Loan brokers usually collect their fees from the lenders.

In addition, research governmentally subsidized mortgages that have no-down-payment plans and low-down-payment plans. Ask banks and other private lenders about first-time buyer programs they might have that offer low-down-payment plans and flexible qualifying guidelines to low- and moderate-income buyers with good credit.
Finally, do not forget private sources of mortgage money—parents, other relatives, friends, or even the seller of the property you want to buy. Borrowing money privately is usually the most cost-efficient mortgage of all.

Options for Buyers Unable to Afford a 20 Percent Down Payment
If you can afford and qualify for large monthly mortgage payments and have an excellent credit history, you may be able to find a low-down-payment loan. You might be required to accept a higher interest rate and loan fees, or points, than a buyer providing a larger down payment.

Private Mortgage Insurance

Private mortgage insurance (PMI) policies were created to indemnify a mortgage lender to a certain extent in the event that you default on your loan and the foreclosure sale is less than the balance that you owe the lender—the amount of your mortgage loan plus the costs of the foreclosure sale. Lenders may require PMI on mortgages when the borrower has a down payment of less than 20 percent. Premiums are typically paid monthly and usually cost less than one-half of 1 percent of the mortgage loan. With the exception of some government loans and older, private loans, you may drop PMI once equity in the house reaches 22 percent and you have made payments on time. Your lender can provide details on the cost of PMI and the requirements for canceling coverage.

Your 401(k) plan can be another potential source for down payment money. Ask your employer or plan administrator if your plan allows you to borrow against your accumulated funds. The maximum amount you may borrow against your 401(k) under the law is one-half of the funds in your account up to $50,000. Your employer sets the conditions: including the minimum loan amount, the maximum term of the loan, the applicable fees, and the interest rate. You must repay the loan in a reasonable amount of time, but the Revenue Code does not define what a reasonable amount of time is. Find out the consequences of leaving your job before you repay in full the loan from your 401(k) plan. Income tax penalties may apply to the outstanding balance of the loan if it is due immediately on departure.

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Areas of Representation

We represent clients in the following areas (and around all of Minnesota):