Is Buying a Minnesota Home
The Right Purchase for You?

For many people, buying a home is the largest purchase they will ever make. And with that purchase comes with a lot of responsibility.

Before you purchase a home in Minnesota, you should determine if that is the right plan for you...

For example, do you have a solid credit history and reliable source of income within employment history of at least two years? In order to obtain funding, these are pieces of the puzzle you will need.

You will also want to come to the table with a certain amount of money for the down payment and closing costs. It need not be a huge amount, but banks will look for some cash available at the time of close.

Is your current level of debt manageable enough to add on the costs associated with homeownership? Remember, you will now have a mortgage instead of rent plus utilities, and any other costs associated with maintenance, repair or improvements.

And lastly, are you willing and able to deal with issues as they arise? No house is perfect and maintenance and repairs will come up, it's just a matter of time. If you are not handy, are you willing to interview and hire the appropriate professionals? If this is starting to sound like more than you are willing to endure, you may be the happiest just renting, despite the financial benefits of homeownership.

"This Realtor is a Member
of the Minnesota MLS!"

According to the Regional Multiple Listing Service of Minnesota, Inc. (or RMLS) - rules and regulations, this is the only way that is considered to be acceptable for Minnesota real estate agents to represent themselves with relation to the "Minnesota MLS" on their websites...

This is because the actual MN MLS is really only available to licensed Minnesota Realtors - and the RMLS doesn't want Realtors advertising that visitors can search it because it's not exactly true.

The reality is that the search that IS available to the general public is called, "Broker Reciprocity" - and it includes all kinds of home listings, all of the participating brokers in Minnesota.

What does this mean to you - the Minnesota home buyer?

It means that you CAN still search for thousands of homes that are on the market - but as far as having actual access to the Minnesota MLS - you will need a Realtor that is a member of the Minnesota MLS (like me) to gain information such as the tax history of a property, expired listings, recent price changes, the property's specific history, who the broker and selling agent is, the city-taxation as well as many other important pieces of strategic-information that will help YOU with your negotiations as a buyer.

Buyers' Market Versus Sellers' Market?

There are many cycles real estate goes through, and if you watch the news, whenever they say the real estate market is bad, they mean for sellers.

Right now is what we call a buyers market. That means there are more homes for sale, than people looking for homes by a significant number.

You can imagine, if there are 15 or 20 homes for sale, for every person shopping, they will have the pick of the litter. It is string these time periods that investors have a heyday buying up the best deals. Every area and demographic goes through these cycles. At the opposite end of the cycle from a buyers market is what's often called by the media a hot market.

Although the news reporters who say the market is hot, again, this only means for someone selling. This means value is of homes are continuing to rise, and there may be multiple offers on just one home.

During these times sellers can create bidding wars to get the maximum amount for the homes are selling. If you are a buyer or and this time. You will be paying more for the same home and homes won't stay on the market very long at all.

If you see that homes online are selling in less than 30 days, it's a sure sign of a sellers market. After a period of time for an area being a sellers market, the pendulum must swing back. This time is what we realtors call an adjustment.

The media will say, "the real estate bubble is about to burst". There is no actual bubble, this is the natural cycle of MN real estate.

Most areas come full circle in 6 to 8 years on average. If you are new to the game of buying and selling real estate, you can quickly and easily get this information online, or if not call a local Minneapolis Realtor.

Agents can give you a brief rundown of what's happening in your area, as well as answer any questions you have without your having to sign any contracts or pay any retaining fees.

What Is A Minnesota
Home Mortgage Made Up Of?

Everyone knows that a mortgage is made up of different components. Every time you send in your monthly check, a little piece codes towards the principal balance of the loan, some goes towards the interest on the loan, but where does the rest go?

Most Minnesota mortgages are based on what's called PITI, or Principle, Interest, Taxes and Insurance.

We already talked about principal and interest, how much will I need to pay in taxes and insurance? These are more great questions for your lender, but allow me to simplify what he or she will tell you.

Taxes are roughly based on the amount of the purchase price of your new home. The larger the value of your home, the more taxes, you will pay. And the mortgage companies roll your taxes into your mortgage, so that you aren't surprised a couple times a year with a big tax bill.

Insurance is the other amount that will be included as part of your mortgage. To get a mortgage in the first place, you will be required to purchase a minimum amount of hazard insurance.

What you choose over and above this minimum amount, will contribute to how much insurance you're actually paying.

The greater the coverage, the smaller the deductible, the greater the cost. If, for a down payment, you are putting less than 20%, you will also have something called PMI. This stands for Private Mortgage Insurance. Once someone puts 20% down or more, the bank sees you have some skin in the game. The low 20% down and you are at greater risk of defaulting on the loan.

The less money down, the greater the risk. So to offset this risk, the bank charges and additional PMI. It's basically insurance that says you won't default on the loan.

The limit of the PMI is based on the percentage down and the loan. It may exist for a limited amount of time, say five years, or when equity in your home reaches at least 20%.

For more information on this, please visit your favorite local Minnesota lender, credit union or bank.

What's The Best Time Of The Year
To Buy A Minnesota Home?

To be very honest, there are good times, and bad times of the year to be a home buyer here in Minnesota.

There are also good markets and debt markets, which can be measured by how many homes there are for sale versus the number of people shopping for those homes. Traditionally, in most areas of the nation the last two weeks of December have the poorest home sales. But the entire time span from Thanksgiving to New Year's is still quite weak.

Most people are far more occupied with the holidays, quite honestly, than they are with the sale of their home. This having been said, sellers may also consider otherwise ridiculously low offers, just to have peace and called over the holiday of knowing their home will be sold soon. Especially if that home has been on the market for quite some time, they will be anxious to have an offer on the table.

Conversely, Spring is the time when most MN homes are for sale, but also most buyers are in the market. There will be greater competition for the good deals that are available and sellers will be less likely to negotiate knowing that another buyer may be right around the corner.

Very often because of this trend, sellers will only place their home on the market during the spring summer and fall months, especially in cold climates taking their house off the market for the winter.

If you are also selling your currently own home to purchase a new home, if you have the financial wherewithal, it may be to your advantage to buy a new home in the winter and sell your old home a couple months later in the spring.

Traditionally, April, May and June are the strongest sales months of the year. This is not only based on the ease of moving bring more months, but also correlating to academic calendars.

Who Should You Believe,
Your Lender Or Your Budget?

Today's lenders have very very sophisticated software and complex computer models based on millions of actual scenarios, to determine exactly who is most likely to be late on payments or foreclose on a home and who might be an excellent borrower.

Assuming you are not one extreme or the other, a lender will be able to see where in the spectrum you fall. And when they see that, they will tell you what you qualify for. If you have excellent credit, you may qualify for a great deal. Let's say you qualify for a home amount that would make your monthly payment $5,000.

But you know, based on your own budget, that $5,000 just isn't going to fly. You may already know that any payment over $2000 would not work.

Choose a mortgage and a monthly payment that works for you. Are there are exceptions to this rule? Absolutely, we all know every rule is made to be broken.

In a market that you know is appreciating strongly, it may be to your advantage to buy a little more than you are comfortable with. If the market is stagnant, with no hope in the future, it may not be wise to over purchase. If you're still uncertain or uncomfortable about the mortgage to select, sit down with your budget, looking at all your other expenses: car, insurance, healthcare, credit cards, utilities, groceries, etc..

If you have a spouse or partner, invite them to join you as well. Go over your budget and see what you can realistically afford. This may aid you in choosing your appropriate price point...

What Does It Mean To Be "Pre Approved"?

When you're preparing to purchase a new home, you will have investigated financing, and someone will have looked at how much financing you qualify for.

Once they have done that, they are adequately informed as to what you will - and will not - be able to purchase.

Within 30 minutes of your time and theirs, they should be able to tell you how much, if any, you can afford. Once the lender knows this information, they will typically send you a form stating how much you can purchase. This should be given to your realtor before making an offer on a MN home that's for sale. The reason for this is that makes your offer much stronger.

Anyone can make an offer on a home, but not everyone can qualify to buy the home. So you see, from the perspective of the seller, if you're offer comes in, accompanied by a pre-approval letter from the bank saying that you qualify to buy the home, that tells them the offer most likely won't fall through because of financing.

Conversely, if you're offer comes in with no evidence of your being able to finance the home, the seller will wonder how serious you are. It is most definitely worth 30 minutes of your time to have this piece of paper submitted with your offer. And your realtor will know exactly what to do with it.

If your agent is a good one, he or she will also know how to write up the offer as a strong one in your favor. There are many pages of legalese for you to cover, and making an offer is actually far easier than it really looks.

Let your MN real estate agent guide you through the detailed paperwork (the tough part), while you worry about choosing the right one, and what's involved with packing and moving.

Who Should Rent And Who Should
Buy Homes In The Twin Cities?

There is no black and white answer to the question of who should rent and who should buy. There are many different circumstances that can have one be preferable to the other.

There are many pros and cons involved in both renting and buying, the truth is, you will need to decide for yourself which is appropriate. Her parents advice that buying a home is always the best option is not necessarily true. If you or someone in a job that requires you to relocate frequently, you will have difficulty building equity. If you attempt to own your home. You'll spend a great deal of your money on closing and moving costs rather than paying down your loan. This is just one of the example of someone who should rent.

Furthermore, if you or someone who has neither the talent nor the interest in doing minor home repairs, it may also be appropriate for you to rent. If you are in this category and choose to own your own home. You may want to associate yourself with a handyman.

If you are in an area of the country, where rents are significantly low versus the purchase price of a home and the associated mortgage, it may be appropriate for you to rent versus purchase. Also, if your credit is significantly low or needing repair. It may be appropriate for you to rent until such time as it becomes easier for you to make a purchase. If none of the above scenarios apply to you, it may be appropriate for you to consider purchasing a home.

If you or someone who would like to take advantage of appreciating real estate in Minnesota, i.e. equity, home-buying might be your cup of tea. Also, if your income is sufficient for you to desire a good-sized tax write off from the interest on your home, you to maybe one to consider a purchase. If, in addition, you are even a little handy, you'll find no trouble keeping up with the maintenance of a home that's an average to good condition.

The ownership of a home, also adds security and privacy. My advice to you, if you are even mildly interested in someday owning your own home, would be to find out exactly how much you qualify for with a good lender. When you know that, you can look at what's available online and choose for yourself whether you would like to have that or continue being a tenant. There is no harm in looking.

How Much House
Can I Afford In Minnesota?

Once you've chosen to investigate the potential of buying a Minnesota home, it becomes a matter of finding out what exactly you can afford.

Before even visiting a lender to qualify for a mortgage, there are usually two big questions one wants answered:

• 1: How much money do I have to have saved up for a down payment?

• 2: How much money will my monthly payment be?

However much I would love to answer those questions for you, there is no black and white answer.

You must first find out with the help of the lender, what you qualify for, then choose for yourself the answers to those questions. You may qualify for loans that require no money down. However, putting 5% or 10% down may be advantageous. Then in turn, these factors will greatly affect what your monthly payment will be.

For example, if you know exactly what you'd like your monthly payment to be, and you have some money in savings, you can look at the types of loans you qualify for and see how much down payment is needed to get to that target monthly payment. You may also need to adjust your target purchase price to bring your monthly payment into your acceptable range. This may mean you qualify for a much bigger house than you actually purchase.

Say for example, you qualify for a million-dollar house but, to keep your monthly payment in line, you choose a $300,000 house. A dozen years ago or more, it was more common to go to a Realtor first.

Now most people start with the lender to find out what they qualify for, then get a great Realtor to help them see the houses in their range. You can even start on line with automated prequalification forums. But be aware when you give out your social security number on those forms someone will pull a credit check and someone will call to solicit your business.

Ideally, get recommendations from friends or family members of lenders that they've used and like. If no one has a lender they are loyal to, ask your MN Realtor, he or she will know the reputable people in town.

What's The Difference Between Renting
Or Owning A Home in Minnesota?

There is a small tax benefit paid based on the monthly rent. But otherwise that money is simply gone.

When one owns their own home, that money goes towards their mortgage. The amount that someone pays out monthly is paid to the bank, where they got the mortgage and a portion of that pays off, the principal balance. So the money going out every month, contributes to earning equity from a long-term perspective.

On a more short-term basis for part of the mortgage that is not paying down principle is interest on the loan. That interest paid every month to the bank is tax deductible. So when April 15 rolls around, and you are a homeowner now not only do you get to take your regular tax deductions you get to deduct all interest paid on that long for the previous year. For most new homeowners, this is a very pleasant surprise!

For someone who is rented their entire life, they are not familiar with this benefit and think to themselves "what's the difference if I rent or own?".

Now, on the flip side, there are also cons to owning your own home. The first and most obvious is that you are now responsible for all maintenance and repair. Where as renters rely on the Association and Management to maintain grounds and the exterior of the building, as an owner that responsibility now lies with you. If you purchase a condominium, which is basically an apartment that you own everything in between the walls and ceiling and floor, the exterior of the building parking areas and all facilities will still be maintained by the Association and management.

However, you must pay a monthly Association fee for this to be done. In a single family home, all of those responsibilities fall to you. A town home will be somewhere in between, where some responsibilities fall on the homeowner and some are taken care of by the Association.

If you have pets or other special needs, you will want to consider whether a condominium or town home are appropriate for you as they will have certain restrictions such as pet number, pet size or breed restriction.