Tag: housing

Your Home Financing Questions Answered

Getting started in home financing can be a challenge. With so many behind-the-scenes processes, documents, definitions and moving pieces, where do you start?

That’s why we’ve enlisted the help of Shannon Olander, a trusted wealth management mortgage banker at Bremer Bank in Rochester, MN. With over 20 years of experience in the banking industry, Shannon specializes in helping individuals and families finance the home of their dreams. Read on as Shannon answers our most-asked questions on home financing.

Moving to a new community, where do I start the lending process?

The first step is to find a trusted lender. I advise to work with a lender you know or a recommendation from friends or family. Having a positive and trusting relationship with your lender is key. Starting this process with someone you trust to handle these personal, financial and organizational intricacies will set a solid foundation for your lending experience.

Before you go any further in the home search, you’ll need to get pre-approved or prequalified for a home loan. If you find out you are approved for more than expected, this does not mean you should buy at a higher price point. Basic budgeting rule number one indicates to always budget for more than you expect. Some things in life will pop up that aren’t factored into your debt-to-income ratio, like day care or routine travel expenses. You’ll need to make sure these costs are accounted for when purchasing a home.

What is the difference between a pre-approval and pre-qualification?

Great question. A pre-qualification is essentially an approximation – a lender has evaluated your creditworthiness and decided you will most likely be eligible for a loan. A pre-approval is when the lender pulls a credit report and looks at the complete picture of your debt-to-income ratio. It’s an official statement from a lender certifying you are eligible for a specific mortgage amount based on the entirety of your financial information.

While a pre-qualification can be helpful to determine how much a lender is willing to give you, a pre-approval can give you that reliability edge to a seller.

What kinds of things can affect home financing after a pre-approval?

Taking out additional credit and not letting us know! After a successful pre-approval, you shouldn’t do or purchase anything that could affect your credit report or your debt-to-income ratio. That means no new car, furniture, job status, etc. Your income, debt and assets are all factors that could affect your pre-qualification status.

Do you have programs for first-time homebuyers?

Absolutely. From down payment assistant programs, rural housing development, gateway program that covers 100 percent financing and FHA loans, we have access to many programs that could benefit you as a first-time homebuyer.

If you have enough in savings for a 5 percent down payment, it’s generally best to go the conventional financing route. Your lender will be able to evaluate these financing options with you and find a route that will best work for your unique financial situation and needs.

How do you combine credit scores for two people applying for a single home loan?

Good question. We pull reports from three separate credit reporting agencies; take the middle score for each person; then take the lower of these credit scores between you and your co-borrower.

For example, if my three credit scores report 650, 700 and 750, the lender considers the middle score at 700. My husband’s agency scores are 700, 750 and 800, and the lender considers his middle score at 750. Between these, the lender would take the lowest of your two scores, which would end up as 700.

Many lenders set their minimum credit score at 640 or higher to apply for a mortgage.

How do you work with someone who has experienced bankruptcy or other credit issues in the past?

Luckily, recent laws have made it easier for someone with a past short sale or bankruptcy to get preapproved for a home loan. Although a typical lender would like to see at least four years since discharge, there are many different options for moving forward with a home loan, even with past credit issues. Your lender will look at your entire financial picture to determine if it’s possible to move forward with a pre-approval.

To help potential borrowers, we also offer credit counseling to learn more about the types of behaviors that determine your credit score and the role your credit report plays in big financial decisions like home financing.

Does refinancing our loan affect our ability to buy another home in the future?

A refinance does not affect the process of a second move. In fact, current homeowners have a few options when looking to move.

An option many people don’t know about is the bridge loan. For homeowners who have earned high equity in their current home, we can pull equity out and “bridge” it from the old to the new property. Don’t have the means to do a bridge loan? Most banks offer what we call recasting of a loan, where the loan amount starts higher but can be recast to bring the principal reduction down and hence, smaller payments.

Nationally, mortgage rates have been on the rise, up 48 percent since 2011. What are your thoughts on the interest rate increases and what this means for potential buyers?

I’m glad you asked this question. Mortgage interest rates are certainly on the rise, with the average rate for a 30-year fixed mortgage between 4.375 and 4.5 percent. And although they are gradually on the incline, the keyword here is gradually. When I first started in the market, the average rate was just around the 8 percent mark and it was still a great market. Interest rates are not the end-all, be-all of home buying – people will move regardless. And, it’s a good thing rates are gradually inclining and not jumping.

What are potential challenges for borrowers here in Rochester?

Our biggest challenge is one of inventory – there are simply not enough houses on the market to meet demand, and homes on the market are selling extremely quickly. In fact, there are an estimated 40 pre-approval applications in our office right now, waiting to be processed.

Price point is another challenge for potential buyers in Rochester. Since higher price ranges have higher inventory, it makes competition even more fierce for the average or first-time home buyer.

From a lending standpoint, however, this housing shortage is not affecting appraisals, and we are able to work quick on our feet based on client needs.

If you are starting the home buying process or have questions about options for home financing, we’d love to help you get started. Contact us today.

Home inspections

what they are, why you should get one and what they are not…

Congratulations, your offer was accepted and you’re going to be a new homeowner! Before the celebratory glass of champagne, there’s one step you still need to consider: the home inspection. Home inspections give buyers an idea of their new home’s condition, and is highly recommended on any property you purchase – especially one that is not new construction. Here are our top reasons why you should absolutely have a home inspection, and then our top three things home inspections are not.

The home inspection is your opportunity to accompany a certified professional throughout your potential new home. He or she will look at the major components of the home to make sure everything is structurally sound with the property. These commonly include an evaluation of the home’s foundation, siding, windows and shingles. They will also point out any immediate safety concerns such as evident mold issues, gas leaks, ungrounded outlets and loose electrical wires. The inspector’s job is to make you aware of the complete basic status of your new home, and help you create a list of things to be taken care of immediately upon move-in.

This is your opportunity to be there during the home inspection to ask questions and gain a better understanding on what your responsibilities will be moving forward to maintain your property. The inspection process will give you better insight to how well the property has been maintained up to this point, potential problem areas and items to budget for in the future. Your inspector will provide a detailed, written report on the information gained during the inspection – it’s a good idea to keep this report handy the first year in your new home to reference and budget with. As three to seven years is the average homeownership period, use this timeline to budget for and take care of any outstanding items from the initial inspection report that should be addressed before transferring to another buyer.

Now that we’ve determined what a home inspection is and why you should get one when searching for a new home, there are a few things to keep in mind of what a home inspection is not.

• First, the home inspection should be part of the conversation on your offer, but it is not a sole reason to renegotiate the price with the seller. Although you can retract a purchase agreement on an inspection contingency, you should never tie up a house while continuing to look, knowing you have an “out”. The seller has agreed to the home inspection terms in good faith that you are interested in purchasing their home.
• Second, a home inspection is not a guarantee that everything is going to be perfect. The home inspector will do their best to identify all the areas of your new home to be aware of, but the inspection report should be viewed mostly as a guide as you move forward to understand what you just purchased.
• Lastly, a home inspection is not supposed to be an end-all, be-all list to transform this property into a new home. As property ages, new codes and restrictions come into play, and if you are not purchasing a new construction property, chances are there will be items in the inspection that are not entirely up to most recent code – and that’s okay! The inspector is looking for major structural issues with the property that will keep you safe in your journey of homeownership.

Understanding why you’re having an inspection, and how you can use the results of the inspection in the first few years of owning this home, is pretty important. There are many insights to be gained from a home inspection, which is why we always advise to have one where necessary.

If you’re interested in starting the home buying or selling process, we’d love to meet with you. Contact us today.

Avoiding Buyer’s Remorse

Avoiding Buyer’s Remorse

Know your priorities in the home-buying process.

When the market is fast-paced and the inventory of homes for sale is low – like the current market in Rochester, Minnesota – you have to act quickly if you’re looking to commit to a home. Because of this pressure, acting too quickly can cause some to feel buyer’s remorse after the process is over.

The good news is, we have some advice to avoid buyer’s remorse – by identifying and remembering your priorities in the home-buying process.

We often advise potential home buyers to prioritize their top ten things they want in a home. Of these, then identify your top three non-negotiable, must-have items. Identify and solidify these are your top-tier priorities, and the remaining seven items on your list remain there as want-to-haves, or nice-to-haves.

Having a list of your top three objectives is important because you want to be able to quickly articulate these in conversations with your key decision makers in this process – your spouse, partner or family. You’ll also want to be able to articulate these in conversations with your real estate advisor so they can help you find a home that is perfect for you.

In a fast-moving market like this, it’s important to understand that when a property just comes on the market, you’ll likely be competing with two or three other interested parties. Most often people have buyer’s remorse because they get caught up in the visual appeal, the hype and competition of purchasing a new home, and they make an impulsive offer on a new, shiny house – even if it lacks one or all of their non-compromise items they were looking for.

Each home buyer’s experience is different. You don’t have to have three items on your non-negotiable list – maybe it’s just two. Before you make an offer that will compromise your top tier objectives, be sure to have a serious conversation with your fellow decision makers and your real estate advisor so you can best determine if it’s the right choice for you to proceed on making an offer that compromises your must-haves.

One last point to consider is that your list can change! Especially if you’re just getting started in the market, you might come into the home buying experience with a certain idea in mind – but once you start the process and see what’s out there, you reprioritize the objectives that are important to you. It’s a good idea to continually revisit your list throughout the process to truly find a home that’s right for you.

If you’re interested in searching for a new home, we’d love to meet with you to talk you through the process. Contact us today.

When to pitch a lowball offer

Between the stress, time and hidden costs associated with moving, it can be tempting to want to pinch pennies when making an offer on a new home. You might have even thought about pitching a lowball offer. By definition, a lowball offer is considered an offer below the market value of a home. But if you’re committed to buying your perfect home, is a lowball pitch one you should be making? With nearly 20 years of real estate experience, we’ve seen what works and what doesn’t.

Is it okay to pitch a lowball offer? The short answer: yes, no and maybe.

Take a group of friends for example – Monica, Ross and Chandler. Monica is working with an experienced real estate professional to find a home in Rochester. After looking at properties and doing their homework on the current market and surrounding community, her and her realtor found the perfect home – but it’s clearly overpriced for the current market and neighborhood. Because Monica found a house that checks all her boxes, but knows from working with an experienced agent that it’s priced above market value, Monica has sound reason to make an offer on the home that is lower than the asking price. In this scenario, we would encourage Monica to counter with an offer for a fair market price, even if it might be less than what the seller was asking.

Before looking at properties as a potential buyer, we advise to identify your top three non-negotiable items you’re looking for. When asked to list his top three criteria in a new home, Ross wants a three-car garage, stainless steel appliances and a fireplace. If, like Ross, your top priority is not to find the absolute lowest, best price on a property – don’t pitch a lower offer. If you’ve found a house that meets all three of your criteria, and the cheapest house is not one of those, don’t make a lower offer.

However, if, like Chandler, you are specifically looking for an investment property and it is your top priority to get the best possible deal you can find in Rochester on any given day – then maybe make a lower offer.

In short, there are few situations where we would recommend a true lowball offer. If after due diligent research and consultation with a trusted real estate professional, we always recommend negotiating a good fair market price for a home that meets all your criteria.

If you’re starting the home buying process, we’d love to meet with you to talk through the process. Contact us to set up a meeting today.

Offering an Allowance

3 Tips to Consider Before Offering an Allowance

After years of living in your home, it can be difficult to get it in tip-top shape for the market. Although you might be used to your popcorn ceiling and wall-to-wall pine furniture, buyers today are looking for a clean, updated home that is move-in ready.

Instead of spending the time and money to update old or outdated flooring, wall paint or fixtures, you might be tempted to offer an allowance to a potential buyer for the cost of making these updates themselves. Here are our top tips on what to consider before offering an allowance.

An allowance is only good for reducing purchase price.

According to mortgage regulations, an allowance only allows the seller to lower the purchase price. Although this will reduce the buyer’s monthly payment on the home, there’s no way to actually give cash to a buyer to make the improvements the allowance originally stood for.

Think of it from the buyer’s perspective: between the down payment, closing costs, moving expenses and more, the buyer has cash going out in all different directions. The potential buyer might be thankful for the reduced listing price, but still might not be able to dish out the money actually required to complete the project. For this reason, a buyer would rather move in to a home that already has these basic updates.

There is no wrong choice. 

Some sellers are afraid to make these improvements in their home, because they don’t know where to start. Good news – it’s not as complicated as it sounds. Any local hardware or big box stores will have experts to guide you through the process and ensure you choose a product most buyers will enjoy. Look for a selection that is in stock at an average price point. The risk is small in making the wrong decision.

Take a walk in the buyer’s shoes.

Take a tour of your home as if you were a potential buyer. If the first thing a buyer sees when walking into your home is stained or badly worn carpet or wall coverings, outdated colors or 20-30-year-old kitchen appliances, it is sure to leave a lasting impression. Buyers will evaluate the first three to four rooms they walk into – usually the living room, dining room, kitchen and family room. These areas should be your first priority in making home improvements.

If you are still on the fence about the benefits of home improvements or an allowance, there is one potential alternative to consider. The requested work on the house can be done just prior to closing, with the invoice paid at closing. In these situations, the work is done as the seller moves out, and must be paid at closing for the buyer to move in with. Although this is a convenient option for sellers, waiting until close still makes your home less marketable during the selling process.

We understand the hesitation with making home improvements before selling your home. After all, it’s a major move for the seller, but updating these features could make your home easier to sell and more competitive in the market.

If you are considering a home improvement allowance as you sell your home, we’d love to meet and talk with you through the process. Contact us to set up a meeting today.

Selling Your Home over the Holidays

Most people don’t think of the holidays as the most wonderful time of the year to sell. As if the holiday season wasn’t hectic enough, adding the stresses and responsibilities that come with relocating sounds pretty daunting.

But the thought of selling your home over the winter months doesn’t have to dampen your holiday spirit. In fact, holiday home shoppers tend to be more serious about finding the right home, and fast. This could be a great opportunity to market your home. If you’re planning to sell over the holidays, follow our favorite tips to make the process go smoothly.

Deck the halls, but not too much.

Typically, when people decorate for the holidays, they tend to “add to” the decorations they already have. Any realtor is trying to get you to “subtract from” what you already have.

To keep things clean and clutter-free, we recommend the rule of replacement: if you’re going to add a decoration, take away something else, like a table or a chair. If you’re staging your home to sell, it’s important to replace items in your home with something tasteful that would appeal to buyers.

Remember to follow our core marketing rules.

Just because you’re decorating for the holidays, doesn’t mean all rules are thrown out the window. At the end of the day, your home is still on the market to sell. That means when decorating, you still have to adhere to these core guidelines for home marketing:

Only three things on any flat surface.

Use bigger, single items rather than lots of small doo-dads.

Maintain clean lines.

Keep it clean – dust, vacuum and scrub like your mother taught you.

The best balance to strike with holiday decorating is to keep it simple. It’s okay to be festive – in fact, it looks odd if you don’t! But it’s important to remember that buyers can get distracted with decorations, and you want them to leave remembering the potential of the home itself and not just the elaborate holiday décor.

If you’re getting ready to buy or sell over the holiday season, we’d love to meet with you and walk you through the process. Contact us to set up a meeting today.

Realtor Relationships

Realtor and You: A Relationship

Buying or selling a home is one of the most important decisions you’ll make in your lifetime. It’s a big decision that is influenced by many different factors—your job, family, finances, private preferences, etc. A deeply personal process like this requires the guidance of someone you trust and can be open and honest with.

This is why it’s critically important to choose a Realtor that will be a good match for you during this exciting process. Here are our favorite tips for choosing the Realtor that’s right for you.

Find a Realtor who best suits your personality.

There are many ways to do business. Maybe you’re someone who puts their nose to the grindstone and doesn’t want to waste any time checking off the boxes on your real estate list. Maybe you’re the type of person to carefully weigh the pros and cons of all your real estate options. Whatever your style of communication is, finding a Realtor who will match your personality will make the process go smoothly.

Go on a Realtor speed-date.

Interviewing potential Realtors is the first step to the home-finding process. Set-up meetings with a handful of potential Realtors to test their knowledge, learn their processes, ask questions, and see how your personalities mesh. You will likely be spending a lot of time with this person, so make sure you enjoy being around them and don’t rush into a representation contract.

Are you too “Minnesota nice?”

As Minnesotans, sometimes we’re too nice to just say, “I appreciate your help, but this isn’t working.” Don’t be afraid to find a Realtor relationship that you’re willing to work with and where they will work for you.

Not every real estate agent will meet your needs the same way, and that’s okay. When choosing a Realtor, it’s most important that you feel like he or she is listening to you throughout the entire process.

If you are interested in buying or selling a home, we’d love to meet with you and talk you through the process. Contact us today.

Managing Expectations

Managing Expectations for a Smooth Real Estate Process

A realtor wears many different hats throughout the real estate process. As realtors, we are often also a negotiator, manager, interior designer, photographer, and essentially, a professional juggler.

Of all the responsibilities we juggle, one of our most important is to help you manage your expectations for what this process will look like.

Coming into the real estate process with appropriate expectations is one of the most important aspects in setting a foundation for a successful transaction. We’ve built our real estate partnership upon pillars of mutual respect, trust and open communication. Which is why we want to be honest with you on what to expect from your upcoming real estate transaction. Here’s a few of our favorite tips.

How the market works

It’s important to remember that the housing market is fluid – much like your stock portfolio. Because real estate is a commodity, the market is constantly changing. The same way a financial investor might advise you not to attempt to time the stock market, we are here to tell you that the best time to list is when it’s right for you.

How long it should take to sell a home

Through all of this, the average number of days a house is on the market is actually consistent throughout the year; and does not fluctuate through months or seasons as much as people think it does.

Yes, there are going to be houses that sell in a day. But don’t panic if your house doesn’t sell in the first three days – because not every house does, and that’s the reality. It’s important to keep in mind that most houses do settle into the average days on market… and that’s okay!

People want to see what else is out there.

Home-buying is seldom a spontaneous decision. Even if a potential buyer looks at your house soon after its listed, chances are they want to look at others as well before coming to a decision.

Averages are healthier.

In general, buyers make better decisions in average markets. Learning to manage your expectations to settle into an average market is more sustainable and manageable for both you and the buyer.

A new home isn’t a decision you want to rush. Avoid buyer’s remorse, and take care when shopping for a new home. And above all, talk with your realtor so you can both set realistic expectations for what the process with look like for you.

If you’re considering a move, and have questions about the process, we’d love to meet with you and talk you through what it might look like for you! Contact us to set up a meeting today.

Fall Home Maintenance Tips

• Similar to a car, your home requires regular check-ups to keep it running smooth all year round. As you wind down from the summer heat and start pulling out your hoodies for fall, take some time to tackle a few simple chores to prepare your home to take on winter in all its glory.
• Here are some of our recommended fall home maintenance tips.
• Disconnect your garden hoses from outdoor faucets and drain them before storing inside for the winter. While you’re at it, turn off any shutoff valves that lead to exterior faucets to avoid unnecessary leaks.
• Clean your gutters to clear all the leaves, twigs and general gunk that might build up during the summer months. Clogged rain gutters come winter could cause ice dams, leading to expensive repairs you won’t want to worry about.
• Don’t leaf it for later – rake ‘em now! That’s right, spending time for typical fall yard work will save you time and money later on. That means raking leaves, trimming trees, and cutting back foliage.
• Double-check your door and window seals, smoke alarms, carbon monoxide detectors, and even your dryer vent. It’s easy to forget about these seemingly little things, but maintaining them well will mean a safer home for your family, and may run your home more efficiently.
• Lastly, one of the biggest things we’ve noticed people don’t do, but should—service your home mechanicals. At the beginning of fall, have your furnace serviced by a professional and in turn, have your air conditioning serviced come spring, as well. Prevent an emergency later on by having your furnace and air conditioning serviced at least once every other year. This allows you to maintain your units on your time, and your dime.
• If you’ve bought a home within the last few years and are starting fall clean-up, go back through your home’s inspection report. There, the inspector will have noted areas for you to watch out for that are specific to your home. This will help you get a jump-start on your fall home maintenance projects.
• If you’re considering a move, or have any questions about annual home maintenance, we’d love to meet with you and walk you through the process. Contact us to set up a meeting today.

Benefits of Listing in the Fall

The summertime real estate season is as hot as the summer sun, but you shouldn’t be deterred from listing your home in the fall.

While most hear “Rochester” and think “Mayo Clinic”, Rochester has a prosperous and diverse economy. Because of its growing business community, access to arts and culture, and a thriving food scene, Rochester sees relocation opportunities year-round, not just the spring months. In Rochester and the Southeast Minnesota area, every month is a good month for real estate.

Many people think listing in the fall isn’t the best idea, however, in our experience, we think it’s actually a good idea. Here’s why:

There’s less competition.

Fewer people will be listing their home in the fall compared to the busy spring and summer months. As a fall seller, you will have less competition in the market, which may help your home sell faster.

Snow is a great equalizer.

Don’t despair come fall and your yard starts to look drab – everyone else’s yard is, too! Think of it as just one less thing to worry about in showing your home. Because everyone’s yard will look comparable to one another during the winter months, this allows you to focus more time and energy in making sure the inside of your home stands out from the competition instead.

Holiday home shoppers tend to be more serious.

People looking for a home during the holidays have immediate needs and a limited selection to chose from. This is a great time to market your home.

Ultimately, the perfect time to list your home is when it’s right for you. If you’re considering a move at any time during the year, we’d love to meet with you and talk you through the process. Contact us to set up a meeting today.