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.

Minnesota Homeowners' Insurance

The I-word! No one likes setting up, or dealing with insurance-companies (or at least that I know of). They can seem like just another "blood-sucking" business cousin to used car salesmen - and evil stepchild of lawyers. But the fact remains they are a necessary company to deal with when purchasing a new home.

If you are currently renting, you may already have "renters insurance" to cover the cost of your belongings in the case of a disaster. If you own your own home, you'll have "homeowners insurance". In either of these cases you'll probably already have someone you know and trust to handle the insurance on your new place. My only caution in that case is: make sure you're getting good rates. One call to a competitor will answer that question!

If you are purchasing a home for the first time, at a minimum you will need "hazard insurance" as required by whatever lender you use - this is standard. At a bare minimum, the mortgage loan amount must be covered by your policy, but you may want to consider additional including homeowners protection. But talk to your favorite agent to be sure!

You will have to consider how much coverage you want - if you have lots of valuables laying around, it could be a considerable amount. Also what your "deductible" will be. That is, in the event of a catastrophe, how much money will come out of your pocket first, before insurance kicks in. And your agent will ask you some specific questions about what types of coverage you want, for example in Florida, coverage against hurricanes is wise!

In any event, be prepared to have insurance in place before you close to be sure that you are covered from day 1 in your new place!

How Much Money Will You Need?

Often people, when looking at buying a house begin by looking at the price the house is listed at on the local or regional Minnesota MLS (Multiple Listing Service). That is, after all, the single largest expense of a purchase, right?

I do like to remind people, however that it is not the ONLY expense one can incur during the process though. Often simply retaining the services of a Realtor is a cost they may experience up front. Many agents in this business will ask for a some of money UP FRONT as a "retainer fee" for their services, on top of the commission they'll get after the sale.

Other agents will have a gas fee, or per-mile fee to offset the expense of them driving a buyer around to see all kinds of homes. And, at the time of the purchase, there is always a Realtors commission which are simply the cost of their representation, paperwork and coordinating everything with your lender, title and closing companies to be as stress-free as possible. And that, by the way, is already included in the price of the house & comes out of the selling agent commission.

Also, since most people must have a mortgage for their home (not too many people can afford to pay CASH) there are fees associated with the lender. There are points, underwriting fees, desk fees, courier fees, filing fees and all kinds of nickel and dime city, county and state fees. All those fees together, along with the agent commissions and all other fees make up what is usually called "closing costs". Simply "costs" associated with all the details, paperwork and  human labor that go into making a purchase happen.

Now most people know that those are just the normal costs associated with purchasing a Minnesota home. With that being said, I'd like to remind everyone considering a move about the more hidden costs that are often forgotten until you're in the throws of the whole transaction, like moving-costs!

Whether moving out of an apartment or another house, there are always things that are needed for the move. Packing materials are a must, especially for any breakables - such as:

• Boxes

• Packing Tape

• Marker(s)

• Packing peanuts and/or bubble-wrap (or newspaper, for those of us who are penny-pinchers!).

You will also either hire a moving company or utilize friends and family to reduce costs. Even if you use your people, most likely you will feed them a nice meal at the end of the day for their work.

Also, don't forget costs associated with "settling in" to your new digs. Even though you've just found the "perfect place", there are always items needed right away from shelving for storage, a new rug for a unique space, or just window coverings for your new windows. People often forget this one and it can add up quickly!

Moral of the story? Well, if you're planning a move in the near future, it's a good idea to have a little liquid funds, an empty credit card or maybe just a "slush fund" you keep handy. I guarantee you'll find more than enough use for it!

What Is Escrow?

Whenever you're purchasing a home, there are many costs associated with it.

Many of those costs must be "Escrowed" to start off, meaning sums of money put in charge of by a third party to cover those extra costs. Within your mortgage alone are costs referred to as PITI: Principle, Interest, Taxes and Insurance.

• Principle is the amount of money put towards the balance of your loan (usually smaller at first) growing as your mortgage matures.

• Interest is the money (as determined by your interest rates) paid to the bank for carrying your mortgage.

• Taxes are the usual taxes paid to your city/state (based on where you live), rolled into your mortgage.

• Insurance is at least your hazard-insurance (and home-owners' insurance if you have it as well) is also rolled into your mortgage.

Now those items, Taxes and Insurance particularly, can be large annual payments. To help the average homeowner manage those big numbers, the common practice is to include them in the mortgage payment. You'll typically pay 2 to 6 months "up front" to get the escrow account started.

This way the mortgage company assures that the city and insurance-company ongoingly get paid and there's never one month where you have to write a giant check from your checkbook to cover these expenses as the rest of the payments are not billed to you (you will just receive the statements and/or invoices).

Now, don't get me wrong - these are not the ONLY additional expenses - just the most common ones. You might also "escrow" special assessments, private mortgage insurance as well as other "large lump sum" items that otherwise could land in your bill pile unexpectedly and ruin your budget for the month.

Where it seems like a lot of money to come up with for closing, it is in your benefit for the long term to structure your accounts and payments this way. And as always, your lender will advise you on the details of this as you get close to closing on your new home.

Should You Buy or Rent?

If you're tired of your landlord telling you what you can and can't do (or what pets you can and can't have) you may be considering owning your own home.

People often come to the conclusion that they're ready to own a piece of the American dream. But are you really ready to "take the plunge"?

Instead of calling your landlord when you have a leak, you must figure out what to do for yourself. Do you try to fix it yourself or call a licensed plumber? Do you call your handy-buddy or let it leak for another week? Instead of the worry and hassle-free maintenance, now YOU'LL be the one responsible for upkeep and that - and for many, this can be too much.

If you own your own home, you'll also regularly fork out money for taxes. You'll have to have hazard-insurance and most likely homeowners-insurance as well. You'll have to deal with the unpredictable expenses like replacing the fridge or repairing the garage door opener. These aren't necessarily nice-happy thoughts, but realistic ones to consider when buying your first Minnesota home.

For more information, check out the "Disadvantages of Buying a Home" and "Advantages of Buying a Home" and decide for yourself. There are pros and cons to everything you do in life, just be mindful of it, especially in the big decisions.

It's best to make educated choices...

Making Your Mortgage-Payments

There will be many choices for you to make when buying your new home. Some will seem silly and insignificant, others much more important. One of the smaller details you will encounter with your lender is the question of scheduling mortgage payments.

There is of course the standard payment due on the 1^st or 15^th. That's easy enough. But now, in the technological age, any payment plan you choose will typically come with the option of "automatic withdrawal" where the payment comes directly out of the account of your choosing. Great for the mortgage company - they're almost assured you'll be paying on time every month. And good for you, you'll save on paper and stamps (and you'll never have to taste those nasty envelopes again).

Just make sure you (and the bank) have good tracking systems in place so there aren't any overdrafts, etc. due to miscommunication. Then if you have an ARM (Adjustable Rate Mortgage) or Option ARM, you will need to specify the details of the withdrawal to insure amounts are appropriate for your situation, although these mortgage-products are fast becoming a thing of the past.

Don't forget you can also make special-requests too. Many lenders are very flexible in collecting money when it works for you. Perhaps you get paid on the 12^th every month - many lenders can set up a payment that's due on the 18^th to give you time to deposit and mail the mortgage amount. Ask your bank, credit union or mortgage broker what they have available - you may be surprised at the options out there!

What Are "Selling Fees"?

Often in cities across the US, Realtors put up a sign in the yard of the home they intend to assist in selling...

That sign can contain information used to sell the home, and also to sell the agent or Realty Company. One of the "tricks" we've seen coming up from time to time is for an agent or agency put their fees right on the sign, so other potential-buyers and sellers will like their rates and call, potentially becoming a client. One of the numbers agents sometimes use is called a “Selling Fee”.

When anyone chooses a Minnesota Realtor, they sign a contract with all the specifics of the agreement: prices, length of contract, what will be done during that time, etc. - and that is the time the commission is negotiated as well (commonly 5% to 8% in total).

That 5-8% pays the agent bringing the buyer 2.7 to 3% usually and anything left over goes to the sellers agent and includes all marketing and expenses.

But some agents want you to believe that a “selling fee” is the same thing as the total-commission, and often they're not. If someone advertises they have a 4% selling fee to get your attention, but the buyer's fee is still 2.7 – 3%, that's no savings at all. The total commission is still between 6.7% and 7%.

So if you see an advertisement like that with a low percentage, make sure you ask what else you will have to pay for at close.

Better safe than sorry, right?!