(00:00:00) For most people buying a home is the single most important Financial investment they make and with the rapidly rising cost of homes. That investment is a sizable one indeed today on our public affairs program. We are going to take a look at some aspects of the housing market in the Twin Cities metropolitan area to help us with that our representatives from the st. Paul and Minneapolis Boards of Realtors. We will also talk with the about the various means available for financing the purchase of a home and to help us with that as a representative of the Twin Cities banking Community. Also joining us by tape will be an extension housing specialist from the University of Minnesota and he will outline some of the do's and don'ts of home buying we by no means expect to provide a detailed buying guide for consumers this morning rather. Our hope is to give you a better idea of what the present housing market in the Twin Cities is like and where it's likely to go in the next six months or so each year about 15 to 20 percent of the homes sold in Minnesota are done. So by their owners without working through a realtor this morning, we will be primarily Concerned with the other 80 to 85 percent that is those who use the services of a realtor at some point in buying and selling a home. We'll open up our phones to listeners later in the program and perhaps at that time questions comments and suggestions on owner selling can be aired with all of that in mind. Let me introduce my guests this morning representing the Minneapolis board of realtors a past president of that organization is mr. Winn Peterson from the st. Paul board of realtors. Mr. Mike Harris and from the banking Community Judith Owen assistant vice president at the First National Bank of st. Paul. Good morning everyone and welcome what I like to do before we start our studio discussion is here from Bill Angel who's an extension housing specialist at the University of Minnesota and he's going to outline some of the do's and don'ts and home buying from his perspective. (00:01:48) I think some of the most important steps include and probably the foremost in terms of importance is assembling a team of professionals who will be working for you. You need to recognize the sources of information as they exist in the marketplace and the objective or the motivation behind those sources of information. For example, independent real estate agents are an excellent source of Market information. However, we know from consumer research in this Metropolitan Market recent survey which indicated up to 30% the home buyers were dissatisfied with the services. They received from independent real estate agents a person I think needs to recognize that when they're working with a real estate agent that the agent is legally and financially the representative of the seller and consequently you need to be able to separate opinions from facts. Banana pin it real estate agent can be an excellent source of information if you recognize the limitations, so that information we know from University of Minnesota research that consumers put a great deal of faith and trust in financial lenders. And for some very good reasons A lender will be your partner. If you're financing your home with a mortgage and A lender can provide some very good fairly impartial observations about sources of information in the marketplace. However, again, you need to recognize that the lender primary motivation is to protect his investment consequently. You may have to take some additional steps for example, determining how much you can comfortably afford to spend other sources of information include an attorney and it's imperative that you have independent legal advice before you enter the Place probably the most common mistake that we see homebuyers making involves slipping from the Casual house looking to the house searching phase and an individual before they enter the marketplace if they first check with a lender and also check with their attorney. They're going to be much better prepared to enter the housing market when a person crosses that (00:04:14) threshold and gets serious and decides. Well, they're definitely going to buy other some things then that the change in that person ought to keep in (00:04:22) mind. Well, I think there are some basic rules of thumb are guidelines that an individual should keep in mind and that is number one that home buying is they rationalized better than a rational process, which may not be undesirable unless you find yourself making a decision that you're going to regret in other words having morning after Blues. Avoid that particular problem with the home. I would suggest that an individual at least take a look twice at a home. Now. I'll real estate agent will say in this hot Market that a home could sell within the time that that you're waiting come back and take a second. Look at it that may be true. However, an individual I think would be much wiser to go fairly slow and cautious and looking at homes on the market today. In other words go back and take at least a second (00:05:16) look. So there's something to be said for not plunking your money down as soon as you find what you think is your dream (00:05:24) home, right? Definitely because we know again from research that the type of buyer that is most dissatisfied is the individual that feels under a great deal of pressure to make it fast decision. And if homebuyer perspective home buyer finds themselves in that mindset, there should be red lights going up all around them. In other words time to exercise some caution (00:05:50) some words of advice from William Angel who is an extension housing specialist at the University of Minnesota. And with his words in mind. I'd like to ask when Peterson first of all representing the Minneapolis board of realtors what the present housing market is like in the Minneapolis area right now, what what kind of price range the average price for a home and what a person might expect to get for that for their money. Well, the market is excellent in the Great. Minneapolis board area we find that we have more listings the first quarter of the year than what we had for that same period last year. We have a much greater volume of sales, but we have a fewer number of sales and actually this may work to the advantage of the buyers. It means that we're creating a little better inventory and the better inventory will take a little of the pressure off of the buyers having to make a decision quite as rapidly as what they have in the past the old theory of supply and demand has I think probably caused the buyer to realize that he had to make up his mind and in many cases didn't have the opportunity to take a second look such as mr. Angel just suggested so we feel the Is excellent but it has created a little better inventory and getting into the average sales price. It's interesting for me to note that the Edina area has an average sale price for the first quarter of 1979 of just over a hundred and two thousand. And this Compares with 94,000 last year at this time for well for the overall year 94,000. Is there an average price that you can point to in the Minneapolis area right now the average price might be just over 60,000 in the general area and what might a buyer expect to get for that just in general terms two three four bedrooms, or is that pretty hard to say? Well, it's awfully hard to say because so much depends on the individual property the particular location the other amenities that are included besides just the number of bedrooms Mike Harris from st. Paul. What's the present market look like in st. Paul and surrounding (00:08:30) counties well in st. Paul the market is starting to climb we too are experiencing more listings this year. In fact our listings for now versus a year ago right now are up about 200. Our sales are up our they're climbing. We did have a little bit of a Slowdown at the Of the year we are moving in now last month was extremely fine month for many of the companies in the st. Paul board area. Our average selling price right now is going to be approximately 57 84 the houses last year. It was at 50 26 the year before it was at 44. So the markets are coming up every Gene. We're saying 10% per year appreciation on the homes. It's actually going up more than that. (00:09:12) Do you have a feeling for when this might all level off? (00:09:20) Well, (00:09:21) I realized that Realtors may not want to see that happen just really very soon. But those of us who are in the market for a house from time to time, I think are somewhat paled by the fact that they they seem to keep Rising the prices seem to be going up so quickly (00:09:39) the houses will level off as soon as the salaries level off because the people are continue learning more money. And as long as our salaries keep going up the prices of homes are going to keep going up. We're actually spending less percentage-wise of our income and we did 20 years ago for a (00:09:55) home when Pearson you have any thoughts about when you think it might might start to level off, well the inflation in home sales, the figure was 8.7 in 1977 last year 1978. I'm sure it was over 10% and I'm afraid that this year. It's going to be at least And good deal more probably I think that (00:10:25) one of the things that occurs that (00:10:27) keeps the inflation going as supply and demand we've had fewer house starts the projection for 1979 on how starts is 1.7 million and last year. We had some over two million which was a record year. I don't see that we're going to drop off seriously in the inflation nari figure that we have in mind. I think that we're going to always have some inflation at least during my lifetime I expected and that we're probably going to have to live some day with 2 and 3% inflation and if we get that low, I think would be very very fortunate Judith Owen assistant vice president at First National Bank of st. Paul outlined for us some of the plans the most used at least two plans that the You can use to finance the purchase of these ever-increasing and cost homes that we find on the (00:11:25) market. Okay, Rich. Basically, there are three common types of mortgages which are available the to that require the smallest down payments are the VA loans and the FHA Loans a VA loan. Can you could possibly if you're a qualified GI obtain a loan up to the appraised value of the home and generally lenders put a maximum mortgage on those homes of $100,000. The the FHA loan is available with a smaller down payment on the first $25,000 of purchase price the FHA would require a three percent down payment and on the balance of 5% down payment with the maximum mortgage on a single family detached home of $60,000. The other type of common mortgage loan is what is known as a conventional loan. These are generally 80 percent loan to value possibly with private mortgage insurance. You could obtain up to a 95 percent loan to value different lenders will look at different maximums on a conventional loan with somewhere around $75,000 generally being a maximum they are available at a greater amount than that, but some lenders will set a maximum somewhere in the area of (00:12:46) 75,000. So for conventional loan, which unless my figures are incorrect. That's the route that most people end up going. Is that (00:12:55) right? Well what the lower down payments the FHA and VA loans are probably preferable for someone who has the income to support the mortgage payment, but hasn't accumulated a great down payment if you're reselling a home and you have a lot of Equity in your home. You may you'll probably use the conventional home (00:13:15) alone. And in the case of the conventional you probably will end up paying about 20% or so down, right? Okay other than conventional and FHA and VA. What are the others? (00:13:25) Well, there are there are some special loan programs which are available on an occasional basis FHA has a another plan which is always available which is called a 245 plan which enables an individual to start out with a smaller monthly payment which increases over the first couple of years of the loan and then levels out there are also special programs which are not always available such as Minnesota Housing Finance Agency occasionally has a program which calls for a lower down payment and hit is a below Market interest rate program and currently they do not there is not one of those programs available. Some of the cities are also offering below Market interest. Straight (00:14:11) programs Explain contract for deed for me, please. That's something that I hear from time to time and it's not clear what it (00:14:20) means. Okay lenders don't get involved with contracts for deed. This is a form that is used between the buyer and the seller where they enter into a written agreement between themselves where the buyer puts so much down and agrees to pay the seller a certain monthly payment and generally those balloon and they are not 30-year mortgages. They'll probably balloon from five ten years down the line. (00:14:45) So it's the VA. It's the FHA and there are a number of of plans under each of those and then there's the conventional and that pretty well covers it does it. (00:14:54) Those are the types of loans that A lender would be offering okay contract for deed is between the buyer and the seller. (00:15:00) What about the money that I understand is currently available through the city of st. Paul you were telling me the other day. There's 50 million dollars that is or was available. How does that (00:15:09) work? That program is a bond program where there were bombs that were sold on the open market and they're collateralized by mortgages and there are many lenders in the st. Paul area who applied for a commitment to provide mortgages under that program and it's a special program with many details involved and it limits the income of the individuals who can apply for a mortgage under that program. What is the limit? Okay. There are three phases to the program the basic one for existing housing would call for an adjusted gross income maximum of twenty two thousand dollars and a maximum mortgage of $50,000 for new construction or substantially rehabilitated construction within the city of st. Paul. There was an adjusted gross income of $27,000 in a maximum of mortgage of $60,000 and it is meant only for housing that is within the city (00:16:07) limits. Yeah. I want to ask our to realtor Here about contract for deed. But before I do that, I want to ask you one more question about financing and that has to do with financing under the GI loan. Do you find that that is used very often these days given the fact that large down payment seem to be the rule in many cases and it's my understanding that a GI financing does not require any down payment or very little talk a little bit (00:16:38) about the GI type of loan is very, you know, it's a very good means of financing a home for a qualified veteran because it does you can possibly obtain up to a 100% loan while but it's limited to qualified veterans right now the right on a VA loan is nine and a half percent while the maximum rate allowable for a conventional mortgage is ten and a half percent. There are no extra insurance charges or guarantee charges that are that the veteran would need to pay in order to obtain. In that type of loan (00:17:13) tell me when Peterson what contract for deed means contract for deed is exactly what it says. It's a contract between the seller and the buyer whereby the seller agrees to give to the buyer somewhere along the line after certain monies have been paid a deed to the property that has some advantages for an example. It generally doesn't have any financing cost because it's doesn't go through a lender as Judy says and it does have an a disadvantage in that the cancellation period under contract and event of default is somewhat less than the mortgage foreclosure period And that's basically it that's basically an OK and it's something that buyer and a seller don't have to do through a bank. It's something that's something that's done through their attorneys off is the real Tarkin do it for them prepare the papers set up the contract the same as he would in a sale that required a mortgage Mike Harris. What do you suggest people look for in a realtor when they are about to go out and look for a home. They made the decision that they have an idea of what what they've got to spend and the kind of home. They like to buy what kinds of things do they do you suggest they look (00:18:39) for I look tell the people first to find somebody they're happy with if they can have a realtor who is they feel comfortable with who they trust then they can get some pretty good advice from I also recommend that they be able to get a hold of that Realtor at any time during the day or night so that they are working with somebody who's doing it. That they know who's a professional in the field and who's going to be able to say yes. I know where this particular house is and somebody's going to sit down with them for a few hours because many Realtors will put you in a car and they figure well we can wear down you and till you found a house in agree to buy and some people just get tired of looking houses will go out and find a will buy this one many of the Realtors are showing 123 homes to people and if they've sat down with the people who are involved with by and home know what the people want have qualified the people to understand what they would like to make for a monthly investment and a total investment in a home. They don't need to go out and make a hassle like you hear the terror stories that used to be this is no longer needed because if they have confidence in their realtor and give them some time say two to three hours, sometimes I even spend four or five with a family before every show. House so that we know that they want three bedrooms two car garage or maybe a specific type of design or location or maybe money is the limiting factor. We had one people one man call up and said Gee said I've got to find a house for me said I want a two fireplaces 3/4 bath off the master bedroom 4 bedrooms 2 car garage walkout basement. Oh, yes. I'd like to overlook a lake to and he said fine is anything else? Yes. He said I'd like to have it at about 35,000. So I said we'll come on in come on down. He said if I probably can't find everything but if I find say 80% of those would you be willing to buy the house? You said sure So he came on and I gave him just exactly what he wanted. Love the house, except the house instead of 35 was 90,000. Well, there was the limiting factor right there. You've got to you have to be realistic. It's nice that you like to look at those $70,000 homes. But if the lenders will only give you a maximum of mortgage of say for $40,000 home, you're wasting your time going out as a (00:21:09) consumer when Peterson what recourse do I have if I'm not satisfied with a realtor that I've been working with. Well, I would say first of all that you should call the management of that particular Realty firm. And if you don't get satisfaction there you can go to the board of realtors and they'll certainly investigate the matter. If you want a hearing before their ethics and arbitration committee that can be arranged at your request and Then if you get absolutely no satisfaction, you can call the Securities of this Commissioner of Security's office and real estate division and they'll investigate it. And of course you always have the option of taking it up with your attorney and having him get into the picture if it's something that's serious Mike to those square with what you would suggest (00:22:05) right. These are right by what the board of realtors both suggest. (00:22:09) Okay time is twenty three and a half minutes past 10:00 o'clock and you're listening to a discussion of home buying in the Twin Cities metropolitan area and with me in the studio is our 3 guests this morning Mike Harris from st. Paul and when Peterson from Minneapolis the boards of Realtors and also Judith Cohen from the First National Bank of st. Paul and if you'd like to ask any or all of our guests a question this morning you can do so by calling us you can get through to a set to 211550. That's two to one. One five five zero if you live outside the metropolitan area, but in the state of Minnesota, you can call us toll-free at 1-800-669-9133 of those numbers again, 2211550 in the Twin Cities area and one 865 to 9700 outside the metropolitan area and I see that there are at least three or four people listening this morning because there are that many people on the line. So without any more hesitation, let's go to our first caller. Good morning. We're on the air. (00:23:11) Yes. I'm interested in buying a home in fixing it up for summer job. I talked to one realtor and email list of different complications that would be involved in that. Do you know what can you tell me? It could be a worthwhile thing to do just for summer work. I've had experience in construction (00:23:34) when Peterson well, I certainly see no problem at all with the concept. Is there a lot of people that have done it in the past? There's still some people doing it I think in as much as you can furnish your own labor that you can certainly do very well at it. If for example you had to go and hire the labor along with the materials then I don't think it presents the same opportunity that used to present a few years back, but I don't know of any particular complications that should be more prevalent now than it would have been some time back and I know I have done it in the past and I know many people that have and I would say that there's nothing wrong with the concept at all. Okay, Judith all and I'm interested in knowing are there any special financing plans that are available to people who say is this gentleman has said he's interested in buying a home and wants to rehabilitate it we hear from time to time that there are those kinds of programs in the Twin Cities area are can you bring us up to date on them? (00:24:32) Program is offering mortgages. Which can be used for homes, which are substantially rehabilitated. There are complications in I mean it provides extra things that are taken into consideration and providing a mortgage loan generally mortgage loan has provided once the rehabilitation work has been completed and the owner has to occupy that house. (00:25:00) So it's not something that comes before you buy the place. That's right. I see. Okay. Let's go to another listener. Good morning. You're on the air (00:25:07) placement information concerning what is expected that the mortgage money will go to as far as percentage and houses going to affect the market. Mike Rowe right now. It was announced that next month for the third month in a row the conventional maximum mortgage rate was going to be ten and a half percent other areas that I have been into and check the real estate market mortgages have gone to twelve thirteen to fourteen percent. The houses are still selling. In fact, it was in the early 1900's. We had something like 14 to 20 percent here in Minnesota. So I don't know how high the mortgage rates are going to go (00:25:49) and we'll have something to do as with what we were talking about earlier. This long as there is the demand there is do you think that (00:25:56) that's as long as the houses will appreciate and value higher than the mortgage rate. I think people will continue buying (00:26:02) them and the interest (00:26:03) rate can and if the houses were to appreciate it 25% and the interest rate, we're 20, it is still be a good buy. (00:26:11) When Peterson well, I'll two or three years ago. We felt that the 8982 half percent interest money might affect the market but it didn't seem to and it seems in at least in my opinion that as long as people are able to make the monthly payment that is required that they're not going to be that concerned about the interest nor the overall price and as long as salaries keep keep Pace with the rise in the cost of housing, it seems that we're not going to experience any difficulty and selling homes to the people that can make the monthly payments. I have a question about monthly payments for anybody who wants to answer that and and that is that it seems and we talked about this before to that many people are not able to purchase a home of the home that they'd like to have unless there are two incomes in the family. My question is what happens when Couple in their 20s or 30s decides to purchase a home on both incomes and then they decide to have children shortly after that and they choose to have one of the couple stay home and pretty much be a full-time parent for at least a couple of years that income suddenly disappears and they may have bought into a home which they could pay for fine. They could meet the monthly payments. So just fine on both our incomes, but but can't count on just one. Do you do you look for that in a couple and try and protect them from that (00:27:40) like I do I prefer though to say instead of a monthly payment. I usually tell them it's a monthly investment and if the couple waits for two or three years to have their children many times the one salary will be up high enough that will now be able to take over those monthly Investments that they have so that why when they first purchased the house it required both salaries, they may have to scrimp on some other areas a little bit but they are the only thing that you can buy and know what the price of Going to be at the end of 20 to 30 years is that long-term mortgage on your house? You're going to pay the same for your mortgage today that you do in 20 years from now and you can't do that with anything else and so they can develop their budget knowing on one salary after they've had it for a couple years and the salaries have gone up they can plan for it down the road. So it won't be as great a (00:28:31) hardship. Let's go to another question from a listener. Good morning. You're on the air. (00:28:35) Yes. I'm calling from up and Isanti Minnesota. And I have a two-part question 1. What is the trend in home values in the far outlying areas of the metro area. I live about 40 miles from Downtown Minneapolis. And secondly, what do your experts there? Feel the effect on home values in outlying areas might be from the rising cost of gasoline and energy is this can they feel this will be a great deterrent to buying homes farther out (00:29:06) good questions when Peterson well, I'd have to say that I live Miles away from the office and it seems that the price I paid for the property which I bought about two years ago. I was extremely high and I don't see that properties are going to diminish any and value based on the area in which they are located. I would probably feel that there may be some slowness of the market in the outlying areas. If the gasoline shortage becomes a serious problem, it will tend to cut values possibly but it will certainly slow down the number of buyers that are going to be interested in going too far out of town. I personally don't feel that this is going to happen. I don't believe you're going to have that problem. But as long as people can get gas to drive back and forth you're going to find that they're going to be interested in the Area out of the metropolitan area and certainly prices are going to hold up. Mike also with people living out that far (00:30:21) from town many times. They're more than one or two people who live out in there. They're going to start joining carpools so they can come in. So they're going to continue moving out sure. It may slow down for a couple months why they gas prices are going up and you're hearing about it in the news. It happened before but then it came it came back and people were decided Well, gee it's worth it to it because as we're driving from downtown metropolitan area, we have a half hour or 45 minute drive the tensions leave our body as we're going on at home. We can leave the tensions in the car and we can relax on the way home. And how much is peace of mind worth and as long as they have the peace of mind for the farther distances, they're going to keep traveling them. (00:31:03) So you don't think it's going to make a big (00:31:04) difference. Not that major. No, (00:31:06) okay. Mr. Peters one day one thing I'd like to add is that we're finding that there a lot of the people who are retiring that are interested in moving out and it's something we didn't see as much of a few years ago. So it'll create a little different market and hopefully hold up prices. Okay. Let's go to another listener on the line now. Good morning. We're listening for your (00:31:26) question. Good morning. I'm calling about question about low income Home Loans Forest people live in Minneapolis. You talked about a program in st. Paul. I'd like a little more information if such a program exists in Minneapolis. I think it used to and I'd also like to know if such a program if it does exist can be applied to a second mortgage and a home. I have a home with a conventional mortgage and I have a lien on it held by another party and I'd like to pay off that lean with a low income home (00:31:55) loan. Okay and Judith orange stay on the line. Will you please sir? We don't answer your question all at once you can come back with the rest of it. Go ahead. (00:32:02) Okay, I am aware Rich that there is a program that a low interest Loan program in the City of Minneapolis has somewhat different qualifications in the st. Paul program does a Realtors are probably familiar in dealing with the potential buyers on the actual requirements of that program. I'm under the impression that for the low-income housing loans in the City of Minneapolis. I don't think it can be used for a second mortgage or to refinance a house. I think it's on a new purchase can be an older home. There are certain requirements that are met such as truth in housing and if a customer would like to buy with the low-income housing and they have somebody the house that they want to buy on it the inspectors come in and at that particular time whether the house is sold or not the house then must be brought up. Anything inspector finds it has to be brought up to code such as maybe it needs from 60 amp electricity. It has to be brought up to a hundred or maybe it needs some new Plumbing that is required to be done. Even though the people do not sell it but I don't know whether or not it's available for refinancing. (00:33:15) Where could she go if she wanted to find out an answer to that Trish you could get that (00:33:19) answer. I would have her call one of the local lenders in the City of Minneapolis. Try our own bank first and ask her own loan officers. If you don't have it, where would you suggest that I go to check on it? (00:33:31) Okay. Well, you're welcome. Thanks for calling. Let's go to another listener. Good morning. We're listening for your (00:33:36) question. Would you recap please the what you expect to happen in the rate of inflation of housing in the Twin City area during the next year or two thinking especially of downtown area Condominiums (00:33:51) question about Condominiums. These are both of you. Mr. Peterson. Well, I think that it's probably going to stay somewhat in the same areas the inflationary figure for individual single family homes, and we're looking for I suppose somewhere between 10 and 14 percent as an inflationary figure in that type of housing. Pretty much the same as we're talking about. Yes. I think I'm going about the same as single family. (00:34:25) Now I've got this is where I'm going to disagree because as many of the Condominiums we have been selling this year and selling out of the same areas last year are up almost 50% this year 40 to 50% Some of them. I'm thinking of we were selling 30,000 last year are now going at 49 to 50 51 52 thousand for the same units in the same buildings fairly close to downtown on the Condominiums. They're not all going to appreciate that much in value, but they're probably going up high faster then the condom then the housing market many other places throughout the country the condominium Market has just skyrocketed because they were very down low and price and then people discovered. Hey, we don't have to mow your own lawn. We don't have to shovel our own snow. All we have to do is keep that building up keep it up on the outside, but the maintenance the daily maintenance such as the Grass in the snow. Somebody else takes care of a lot of people want to move into it. They haven't been able to fill them fast enough for a few years ago in Florida. There was a stop of building the Condominiums and now they're going up and they're literally increasing in price again every 60 (00:35:33) days. And again, even though the speak of Maintenance people ought to be aware of the fact that in most Condominiums, they have to pay an extra amount of money to to have some of those are most of the right maintenance done. So are the lawn mowing and things like that. They pay an association fee. Okay Judith own anything to say about Condominiums and financing and how that might differ from purchasing a single family dwelling. (00:35:58) Most of your financing for Condominiums will use the conventional mortgage rather than the FHA or the VA (00:36:06) which would require a fairly large down (00:36:07) payment generally will require a minimum of a 20% down payment. Okay, sometimes with new Condominiums the developer will have arranged and financing and (00:36:19) And the financing (00:36:20) which is your mortgage loan and he may have made arrangements for you know, a certain percentage of the loans to have a lower down payment. (00:36:30) Okay, let's go to another listener. Good morning. You're on the air. (00:36:33) Good morning. I'm calling from Waseca and I've got a couple questions number one. Is it standard procedure for banks to charge points on FHA loans and who should pay those and my second question was on Farmers home Administration and what kinds of loans do they offer and what are the requirements and restrictions? (00:36:53) Okay. Judy Owen. (00:36:55) Okay on FHA and VA loans. They are the mortgage rates on those are set by the FHA and VA currently. The maximum mortgage rate is nine and a half percent lenders are allowed to charge discount points on these the discount points generally are a reflection of where conventional mortgage rates are. the discount points actually provide An equivalent to a conventional loan rate for instance right now, you will find that points on an FHA or VA loan will run somewhere between four and a half to six or seven percent depending on the lender providing that particular mortgage loan. These points are paid by the seller of the (00:37:46) home. Okay. Is that listener still there? Does that answer your question? (00:37:51) Yes. It does. (00:37:53) You had another question too about FHA in (00:37:56) general Administration (00:37:58) Farmers home Administration (00:37:59) Farmers home Administration is generally used in rural areas, and I'm not familiar with their programs. Okay. Thank you. (00:38:07) Okay time is 20 minutes almost 21 and a half before 20 and a half before 11 o'clock and you're listening to a discussion of home buying in the Twin Cities metropolitan area, and if you have a question for our guests this morning, you can ask a question by calling us at 2 2 1 1 5 5 0 if you live in the Twin Cities area 2211550. Some lines are open right now, or if you live outside the Twin Cities area, but within the state of Minnesota, you can call us toll-free at 1-800-695-1418. 1-800-695-1418 go Another listener right now. Good morning. We're waiting for your (00:38:50) question. Good morning. I believe this is directed to Judith Owens. Once owning. The home is a is it possible to get a home improvement loan for let's say a room that you're going to have to redo and in its entirety. Yes. There are home improvement loans available. Generally those can be financed either with a second mortgage or it can you can refinance your home where the additional funds are used to make improvements to your home that usually at a lower interest rate. Generally. If you refinance your home, it'll be at the conventional interest rate. If you use this second mortgage financing, it's generally at a higher interest rate. And then I have one more question. Okay. Our is Inner City development with the strength of our Minneapolis downtown area continuously growing in the future how much development will there be lets say in the townhouse area and in the condominium Area in the future and roughly as far as the price point in that area. (00:39:54) We spoken some about that already. Generally. It seems to be the consensus is that that they're continuing to go up in value and we expect to see do you expect to see when Peterson more of them being built in the downtown area? Yes. I certainly think so on one of the reasoning for that is that there's a lot less land than there is further out and they utilize the land to its fullest and best use and in most cases that is Condominiums and townhouses. Judy and I want to come back to you and ask you a question about the first question the gentleman who just went off the line had and that is remodeling work or adding a room onto a house how close to the purchase time can a person expect to get some money from a bank to do that kind of thing in other words if I purchase a home that's in generally good condition, but I'd like to fix up the porch into a year-round room and I need maybe six or seven thousand dollars to do that how close to the purchased I'm assuming I've put in a great deal of my money into just being able to buy that home. Can I expect to get out my hammer and saw and go to work or have somebody do it for me? We were talking about a second mortgage and all that sort of thing and just how close to the purchase time. Could I do that sort of thing? The second mortgage would (00:41:18) probably be based on house that you have owned for some time where you have now accumulated considerable Equity into it base to the based on the rising appreciation of your home and at that point in time rather than buying another house you decide you want to remodel your house update the kitchen update the bathroom add a room on and you would come in and talk to your lender about doing that type of work and making arrangements with him for a mortgage loan to improve your house. (00:41:51) What would you suggest for someone who wants to do that? Right off the bat wants to do some fairly expensive remodeling (00:41:57) work if you want to do some remodeling work or some Rehabilitation work to a home as you're buying it. I would suggest that you discuss that with your lender as you're discussing your first mortgage loan with him. (00:42:08) And that might be worked into the first (00:42:10) mortgage might be worked into the first (00:42:11) mortgage. Okay, very good. Let's go to another listener right now. Good morning. You're on the air. (00:42:16) Hello. I was hoping you could tell me something about a program that was written up in one of the Sun newspapers. I didn't read it, but I was told about it if they graduated mortgage payments to a rather remarkable degree where by fifty five thousand dollar home would have a down payment around $2,500 and the monthly payments would only be like three hundred and Seventeen dollars and this is something that's in front of one of the legislative bodies and may or may not pass but it certainly would make more expensive homes available to a lot of people. Do you know anything about this is this going to (00:42:49) happen? It looks like when Peterson does well, this apparently is the Home Ownership Opportunity Act of 1979. If enacted into law would expand the FHA s section 245 program. For graduated payment mortgages first, it would reduce the current down payment from the present requirement. It would lengthen the period of the amortization of the payments and it takes into account the appreciation of the value of the home. It's estimated that eight and a half million people with incomes between fifteen and twenty four thousand dollars would be able to buy today's median priced home under this program. How would a person go about? Well first it has to be passed by the state legislature. Yes. It's not past as yet, but I think it will be and then person could go to be the go to their lender and get all of the facts and after they have the facts they then know what price home they can afford and qualify for and I guess that would be the proper sequence of starting out to find their home. Okay. Let's go to another listener on the line. Good morning. We're waiting for your question. (00:44:10) Yes. I have a question about situation when a person owns a home and has buying another and I'm concerned about the financing between the time that the I have to close on the house. I'm purchasing before I can we can close on the house were selling now. I've heard of something called a swing lone. Is there can you tell me about the availability the interest in terms for that type of situation of let's say we're closing on a house were buying two weeks before we can close on the one we're selling. (00:44:39) Any takers here Judy. (00:44:42) Well, I would suggest that you talk to your Banker the bank that you normally deal with and talk to him about providing you with a swing loan and look at the requirements that he would have that is a very short-term loan and various lenders will have different guidelines for providing such financing for their customers when Peterson (00:45:03) there are some real estate companies that have their own particular method of arranging a swing loan. It's sometimes difficult for the individual to go to a bank and get a swing loan on short notice and for short period of time. I know our particular company has a program whereby we will alone money to the individual at a rate of 8 percent which is all we can charge under the usury law during that period but this is available only to our customers. We don't do it unless it's someone who purchases a home through us. But we do have the what we call the interim financing which permits them to go ahead and close the home that they're purchasing and we will provide the money for them. It has some limitations of course, but what we do then is take back a second mortgage on the home that they're selling security for that particular swing loan. Now. Do you have to be does your agency have to be selling that home that they're buying how does that work? No to get that swing loan from you. They have to be buying from us and in some cases that home is listed with another firm. Okay. Mike was works is very same way. And (00:46:17) as long as we have one part of the transaction, we will help arrange a swing loan for our customers. (00:46:22) So if buyer anticipates that might happen they should ask about that before they get too far along (00:46:29) their agent should have told him about it be so he didn't have to (00:46:32) ask I see. Okay. Let's go to another listener. Good morning. You're on the air. (00:46:37) Good morning. I have a About refinancing my mortgage bought my home about three and a half years ago. And in the intervening time, I've saved up some money and I have been wondering of whether it's advisable to try to refinance my mortgage to try to cut down on some of the interest charges that I'll be paying over the life of the mortgage and if it's advisable, is it possible? I guess I don't quite understand your question about refinancing your home to cut down on your interest charges. Did I guess that would depend if you had financed your home three and a half years ago at a rate that's higher than what you could get in today's market. I finance that I believe in eight and a quarter percent interest charge interest rate. My question is looking at the total amount of money. I'll be paying over the life of the mortgage. Most of it of course is interest charges and only about one third of it is payment on the actual principal and I'm wondering if it's advisable or possible to refinance the mortgage in some ways so that I'll be paying interest on a significantly smaller amount of principle. You could talk to your lender about making a prepayment on your loan. You wouldn't actually be refinancing it but you would pay down some principle on that loan so that the interest is calculated on a Lower amount and that would actually make your loan amortize suit more quickly so that you would pay it off, you know much sooner than you would under your original plan. I see thank you very much. (00:48:16) Okay, let's go to another listener. Good morning. We're waiting for your question. (00:48:22) Ready? Yes, we're ready. I'm calling regarding a contract for deed about 10 years ago. I bought my house. Can I see the mortgage in the balance on a contract for deed now that contract balloons up and there's no way from that I know of to get the owner to extend the bone. So I'll be forced to sell it is that correct Judy when a contract for deed balloons, you have the obligation to pay the amount that is do if he's unwilling to renegotiate those terms. I would suggest that you talk to a lending institution about getting a mortgage on your home and paying him off family problems. So I can't I can't mortgage it. I just would have to resell it then. I got about a month ago. So if you wouldn't qualify for a mortgage and apply for a mortgage, but is there any law that says how much that well he says he might he might extend the bun doesn't know what it will cost but nothing in writing. There's any state law about doubloons is there. Any recourse for me your agreement with him? It sounds as if it was to pay him at a certain date and if you have some questions about law, I would contact you should contact your attorney contact you to I got two different opinions. Although the one that they really agreed actually but as far as you know, there's no law on that. They were how long a balloon should be (00:49:48) when Peterson has something to say. Well, I might have a suggestion for this individual what you might do is go to the present contract holder in offered to increase your interest on the contract. If it is not maximum at this (00:50:03) time, is it his attorney won't okay as he says that long as I have an interest in the property. He can't negotiate. (00:50:11) Doesn't sound like well, it's in an area of legal advice and I guess I would (00:50:19) but there's as far as you know, there's any provision under the state law, but there's no go ahead and sell the house. (00:50:26) This raises. It seems to me a whole question about what recourse people can take and this gentleman may not have any but other than contacting an attorney. Is there a state agency that a person can go to if he or she is, you know in a situation if like this or similar than wants to wants to get something sorted out well with the case of where they may not be able to afford good legal advice. They can go to the Legal Aid Society and get the advice they need that probably is what I'd recommend this case. What did what is meant by ballooning of a contract for (00:51:01) deed balloon means that the contract for deed comes due at a particular point in time and there's probably a significant amount of principal at a still owing on all of your conventional mortgages in the FHA and VA mortgages. They are written so that your monthly payments pay that loan off during the term of the loan so that you it never comes to a point where all of a sudden you have to come up with a $10,000. Twenty thousand dollar (00:51:27) payment, but that may be the case in (00:51:29) the contract for deed. Generally they balloon so that at a certain point in time you owe him, 10,000 or 15,000 or whatever. The principal balance is still remaining and yet (00:51:39) unpaid and unless you can renegotiate the thing then you're you're faced with that rather large payment. (00:51:45) That's right. And generally the idea is to refinance by that point in time so that the seller obtains the money his financial interest in the property (00:51:55) seven minutes before 11 o'clock were talking about home buying in the Twin Cities metropolitan area with the to Realtors and a banker and if you have questions about home buying in the Twin Cities area, you can call us at 2 2 1 1 5 5 0 that's two two one one five five zero and there are a couple of lines open right now if you live outside the Twin Cities, but in the state of Minnesota toll-free number for you 1-800-662-2386 go to another caller right now. Good morning. (00:52:25) Good morning. I would like to have the panel react to a situation which is which seems to be becoming more and more frequent today. And that is my term at the myth of homeownership. And that is the more and more people seem to be questioning. This long-held ideal that was handed down from parents and so forth. That is they're stepping back and they're looking at home ownership in terms of the idea of equity which of course doesn't really begin to build until after the interest has begun to be chopped away at the idea that the same forces that are causing their house to appreciate are going to appreciate all the other houses and that the profit or increase that they might realize from appreciation will probably be eaten up by both inflation and the inflated prices of other houses in Minnesota here the severe weather conditions that The exact price on a house the upkeep maintenance and so forth the general hassle that seems to be creating coops condominium and people that are considering renting more and more like to hear reaction to that Mike Harris. Will Condominiums are owning your own home. It's just in a long building with a series of homes with zero lot lines long as you're coming into it. However, if you were renting people are finding that their rents go up year after year and they go up significantly, sometimes they may go up two to three times during a year depending on what the lease is on a home when you're buying at today. You are buying a commitment from A lender and you're buying it at a set price per day that you're going to keep that same commitment for 30 years or you call you can and you're always going to be paying the same amount on your monthly investment for principal and interest now taxes and insurance can vary a little bit in there, but instead of going up, A $30 a month every year. It may go up five six, maybe maybe ten dollars a month on an annual basis for taxes and insurance but you also have then tax advantages for owning your own home because the interest is deductible. We're finding that a lot of young people a lot of first home buyers are coming into the office has not just our offices but offices for all the different real estate companies in the st. Paul board and the lot of young people are trying to go out and buy their own homes. How is the best way to do it? Where should we start? What types of income do we want? It many people are out there trying to buy that first home the people who are starting to move into apartments are many of the retired people who say look we don't want to take we don't want the bother of the upkeep lead. Let's rather have somebody else do it. So it's not the young people that are trying to avoid getting homes fact, they're coming in. We had four people walk into our office yesterday because they saw the sign outside said, what's the market like in can we (00:55:24) buy so you don't And as this gentleman suggests that the people are beginning to become skeptical of buying a home is a way of investing in the future. (00:55:35) It has been done. It has out an investment in a home is doing much better than stocks bonds with the appreciation rate. It's going up. (00:55:46) Three minutes before 11 o'clock and we have time for just one more quick question from a listener. Go ahead. We're waiting for your (00:55:52) question. Good morning. I'm wondering if a person is assuming an FHA mortgage that is 2 years old on a duplex. Is there any guarantee or way of knowing that this property is still up to FHA standards or code? No, there are no inspections that are made after the sale of the that particular home. (00:56:15) Is that to that raises the whole question of inspection when Peterson well, I think that it's a misconception to feel that the FHA inspection is going to determine whether or not the property is up to code the FHA goes out and makes an inspection of the property solely for the purpose of determining what kind of a mortgage they will guarantee for that particular purchaser and I don't think it makes any guarantee or representation to that by or as to the condition of the (00:56:41) property and what you might want to do. If you haven't purchased that home put it into your purchase agreement that the that the home is to be up to code and it will be inspected by the city inspectors. And then you then you are covered by it Judith on the FHA simply makes an inspection prior to ensuring a mortgage on that particular property and they may require some repairs on that home before they will agree to ensure that particular mortgage but that does not ensure even at the time of initial purchase at the home does meet (00:57:12) code something very quickly. Mike that you mentioned the business of putting into the purchase agreement and inspection requirement. That's something that people ought to keep in mind and that's something that that they can build into the purchase so that when they buy the house they've already had the owner from whom they're buying make sure that the house is up to code. That's right. Okay. Well, that's all the time we have this morning and I want to thank you all for being with me when Peterson from the Minneapolis board of realtors and Judith Owen from the First National Bank of st. Paul and Mike Harris from the st. Paul board of realtors. Thanks for being with me. And also thanks to William Angel who was with us by tape earlier in the program Bill Angel and extension housing specialist at the University of Minnesota. I want to mention a buying guide that the University of Minnesota puts out. Its called buying a Minnesota home. It's extension bulletin 414 and it was published last year and you can get it by writing it's free and you can get it by writing to the bulletin room at Coffee Hall at the University of Minnesota. Paul St. Paul campus 55101 is the zip code. I'll give that address very quickly. Again. It's the bulletin room at Coffee Hall University of Minnesota. St. Paul campus 55108 and in the bulletin number is 414. It's entitled buying a Minnesota home special thanks to this morning to our engineer John Lapland and to Tommy Richmond for handling the phone traffic the time in 10 seconds will be 11 o'clock. This is Minnesota Public Radio a listener-supported service.