Brian Parkinson Mortgage Banker

Author Archives: Taylor Stewart

  1. How Does a Divorce Affect your Credit?

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    Divorce in and of itself has no bearing on your credit. However, if you have joint accounts with your ex, you could be in for trouble – even if debts are listed in the divorce decree as being the responsibility of your ex-spouse.  As far as credit is concerned, the divorce decree really has no relevance.

    A divorce decree does not supersede the original agreement between the borrowers and the creditors. So if, for example, you have a joint Chase credit card that was awarded to your spouse in the divorce decree, it will continue to report to your credit report. That will include any late payments your ex-spouse may incur. The same applies to mortgages. The home and mortgage that goes with it may become the sole responsibility of only one of the owners per the divorce decree but in the eyes of the mortgage company, both are still responsible for the loan. If one of the parties incurs a late payment, it will still affect both borrowers.

    If a consumer is going to be getting a divorce or is in the process of getting one, there are proactive steps that should be taken to mitigate a negative impact to your credit. If you have joint credit cards, first and foremost try and have it converted to an individual account. Some credit card companies may agree to this. This option would be optimal because you will still retain all the credit history from that card. If they won’t do this, the best thing to do would be to close the account completely. If it has a balance, the payments will still need to be made until it is paid off. But once it’s closed at least it can no longer be used. If the card is being awarded to your spouse in the divorce decree, you should still be prepared to make payments on the card if your ex misses any.

    There is also the possibility that a credit card belongs to one person but the spouse is an authorized user on the card. Have the spouse removed as an authorized user so they no longer have access to the card.

    If a mortgage is involved in the divorce, the best thing to do is have the house refinanced out of the spouse’s name that is not being awarded the home. It’s important to do this as possible during the process of the divorce or immediately after the divorce is finalized. Refinancing is the only way to remove someone from a mortgage. It has to be refinanced out of their name. The mortgage company won’t even take into consideration that the home and subsequent loan was awarded to a specific person in a divorce decree. The same is true for any joint auto loans you may have. Whoever is awarded the automobile will need to refinance that loan out of the spouse’s name.

    Any utilities, cell phones, etc. that are in both parties names should also have the ex-spouse removed from them. While these entities normally do not report to the bureaus; if payments stop, they will be turned over to a collection agency and those do report to the bureaus.

    It is also best to plan on monitoring your credit report on a monthly basis for at least the first 12 months after the divorce is final. This way you can ensure that any joint debts that have not been separated are being paid on time and that nothing new is being opened in your name.

    A divorce can be a painful and messy procedure. However, with a little foresight and planning, a person can at least prevent their credit reports from being compromised.

    Author: Mindy Leisure, Advantage Credit (Credit Reporting Services),

  2. Understanding Condos: Lending Tips and Rules

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    Financing the purchase of a condominium can be tricky. Mortgage lenders view condos as a higher risk than single family homes because you are in part dependent on other owners in the condo building. Condos also have a more tedious and stringent approval process as they have to go through a full or limited “condo review” depending on the terms of financing. It’s important to understand what the process entails and the difference between townhomes and condos so you can be fully prepared when you’re listing a property and/or showing properties to buyers.

    Condo versus Townhome:

    The key difference between a condo and a townhome is the form of ownership. Regarding the purchase of a condominium, the homeowner owns the inside of their home but the exterior, land and commons areas are owned by the association. However, when you’re purchasing a townhome, you have exclusive ownership of the home, the roof, and the land that lies below it. It’s important to note that not all listings label the type of property accurately. To confirm the type of property, you can navigate to the local county website, search for the property address and check the legal description and plat map. For townhomes, you will typically see a lot & block number and the individual unit will be outlined on the map. When you search for a condo, there is most likely not a lot & block number but rather a CIC # and the entire building (not just the individual unit) is outlined on the map. Once you’ve confirmed whether or not the property is in fact a condo or townhome, there are several rules lenders must follow regarding condos. If you have any questions or hesitations about this piece, just send us the property address and we can confirm it for you.

    Government loans (FHA or VA):

    • FHA and VA loans require a specific government approval. Check with us/your lender to confirm if the association is approved (we will use a government portal to verify). If the approval has expired, the approval must be submitted directly to the appropriate government agency. The lender can call the agency to get turn times once the approval process is initiated.
    • FHA and VA loans have the same down payment requirements as single family homes. FHA requires a minimum of 3.5% down whereas VA requires as little as nothing down.

    Conventional Loans:

    • You can put as little as 3% down when purchasing a condo but anything less than 10% down requires a full condo review. The lender must obtain the following to initiate the full approval process:
      • Borrower must gather condo resale documents, by-laws and articles from the seller. If you cannot obtain these documents and Alerus must obtain them, there is a fee of up to $200.
    • Lender Questionnaire (completed by Alerus) which has a fee of $160-175.
    • If you put 10% down or more, you can do what’s called a “limited review” which is much less taxing/lengthy and borrowers will avoid the extra fees associated with a full review. A limited review requires the following questions to be answered:
      • Is it an established association? Is it existing or new construction?
      • Is their pending litigation?
      • Does any single entity own 10% or more of the units in the condo building?
    • Non-owner occupied/investment properties always require a full condo approval as well as a minimum down payment of 20 percent.
    • Rates for condos tend to be an eighth of a percent higher than market rates due to added risk.
  3. How to Prepare Yourself for Spring Market

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    Spring market can be a fun yet crazy time of the year for many prospective buyers. Often times, the Twin Cities’ hot spring market involves homes selling in 24 hours, multiple offer situations and/or putting in offers well over asking price. With this in mind, it’s imperative to be prepared for what’s in store so you can come out ahead with securing the house you’ve been dreaming of. Here are a few key tips to consider while preparing for house shopping during the spring:

    • The first step is getting pre-approved with a reputable mortgage banker like Alerus before you start actively looking at homes. Having a good idea of the price point you’re approved for and comfortable with, what down payment you have readily available and the different loan products available to you not only allows you to be well-informed and confident while you’re out looking but also permits you to react quickly. You need a mortgage professional you can trust – giving you peace of mind about the accuracy of the information provided as well as the security of your pre-approval and closing on time with no surprises. Alerus has a strong reputation among real estate agents, appraisers, and title companies in the Twin Cities area and beyond – lending itself well in multiple offer situations when the terms of the offers are otherwise the same. We also work nights and weekends when you’re out looking at homes – allowing you to write offers as quickly as possible. Believe it or not, having Alerus on your side has secured many deals for our clients! With our unique $10,000 Alerus Guarantee (we’ll pay the seller $10,000 if the loan doesn’t close on time) and the fact we’ve never missed a closing in 25 years, shows the listing agent and sellers you mean business when you put an offer in with Alerus’ name on it.
    • In addition to working with a dependable mortgage banker, you’ll also want to connect with an experienced Real Estate Professional who knows the Twin Cities market well. It’s their job to do the research for you, find homes that fit your interests and successfully secure the deal by writing good offers and working well with other agents. With a knowledgeable and flexible agent on your side, it should make the process of looking at homes fun and painless!
    • Knowing what you’re pre-approved for (and comfortable with) provides you with a realistic stance when you’re ready to start shopping for homes. It’s also important to do some research on your own ahead of time and view homes online in your price range before you really start shopping. This gives you a good sense of what to expect in the market. It can be surprising how much location determines what kind of house you can get and what the property taxes are like in each part of the city.
    • Be ready to pay your own closing costs, offer full asking price or even offer more than asking price. Be cognizant of multiple offer scenarios. In these situations, focus on determining the maximum amount you’d be willing to spend for the house rather than trying to guess what others will be offering. You don’t want to lose out on your dream home over a couple of thousand dollars. This is where a skilled real estate agent comes into play and can solicit sound advice when preparing to make an offer.
    • Be ready to put down a bigger earnest money deposit than expected. This shows the seller you are serious about buying the home and gives them security knowing you likely won’t be backing out.
    • If possible, be flexible on the closing date. Whether it’s a quick close (30 days) or the seller needs a little more time (60+ days), the seller will greatly appreciate your flexibility and may even base the acceptance of your offer on how quickly you can or cannot close.
    • Focus on buying a home you can see yourself in for several years – even a house that gives you some room to grow. You never know what the future holds so it’s important to buy with the mindset you could stay there for a while if you wanted to or needed to.
    • Consider writing a letter to the listing agent/sellers – telling them your story and why you love the house. This may create an emotional response which could be to your advantage in multiple offer scenarios. You may even consider adding a family picture. 🙂

    Download our free app for your phone to help you quickly and easily calculate monthly mortgage payments when you’re on the go and looking at homes. Otherwise, feel free to call or text us if you have any pressing needs or questions. Happy home shopping!


  4. Selecting the Best Interest Rate for You

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    The Process

    It’s important to understand the changing rate environment and how this affects you when it’s time to lock your interest rate. As your lender, we lock your interest rate when the following has occurred:

    • You have an accepted offer on a property
    • You have successfully cleared the inspection phase

    Once you’re past both stages, we will provide you multiple interest rate/origination fee options for you to consider – detailing the differences between each one and allowing you to select which option makes most sense for your specific financial situation. As a mortgage banker, it’s our job to shop your interest rate to all the top lenders and secure the best possible rate for you. Please keep in mind that not all lenders offer the same rates — sometimes they can vary quite a bit — so you want to do your due diligence in finding a loan officer who can provide you the best rate possible.

    Rates Change Daily

    Mortgage rates change daily just as the stock market does. Our global economic market affects which interest rates are being offered. In many cases, rates can change quickly and up to several times each day so it’s in your best interest to be aware of this and complete your property inspection as quickly as possible.

    What Causes Rates to Change?

    In contrast to the stock market, if there is negative economic news, this will, more often than not, draw demand to the safety and security of Mortgage Bank Securities (MBS), Treasury Bills and Bonds. When this occurs, the demand on MBS will drive the price up yet the cost to acquire will go down – thus resulting in better rates. Although we don’t encourage to “time” locking in your interest rate, we will always provide information to give you an idea when/if we believe rates will get better. However, there’s no guarantee.

    Alerus provides a one-time free float down option which means if you lock your interest rate but rates continue to improve after the fact; you have the option to select the lower interest rate as long as you’re 60 days (or less) from your closing date. This is a great feature, not offered by all lenders. A few things to note: Your interest rate must improve by 0.125% or better in order to utilize our float down option and you typically can only lock during business hours.

    Which Rate is Best for You?

    To better understand the different options given to you, let’s look at a few examples for a client considering locking their rate on December 27th, 2016. Their loan amount is $250,000 with 5% down payment. They have a middle credit score of 740 and we’ll lock the loan for a 60 day period.

    Interest Rates, Principal & Interest Monthly Payment and Associated Costs to Acquire:

    • 4.125% Rate (4.609% APR), P&I Payment of $1,211.62, Origination Fee of 0.722% or $1,805.00
    • 4.250% Rate (4.679% APR), P&I Payment of $1,229.85, Origination Fee of 0.018% or $45.00
    • 4.375% Rate (4.757% APR), P&I Payment of $1,248.21Origination Credit of 0.543% or ($1,357.50)

    As you can see, the 4.125% interest rate has the lowest P&I monthly payment; however, it has the highest origination fee (costs the most up-front). Typically, the market interest rate costs around ~1% origination fee. In this scenario, 4.125% would be where the market rate is at with a 0.722% origination fee. The 4.250% option costs only $45 in an origination fee but has a slightly higher monthly payment than the 4.125% option. Many times if you take a higher rate, you do not have to pay an origination fee and also get a lender credit applied to your closing costs – like with the 4.375% option. In this example, 4.375% has no origination fee and provides you with a $1,357.50 lender credit but has the highest monthly payment.

    We always ask our clients how long they think they plan on staying in the home. If you’re thinking five years or so, it usually makes sense to take a slightly higher rate so you have a lower origination fee (less money you have to spend up-front). If you’re certain you’ll be there for 10 plus years or believe it’s your forever home, then it typically makes sense to take the lowest rate and pay the higher origination fee. That’ll save you money in the long run.

    In our example, it’ll take 8.045 years to recoup the cost of taking the 4.125% rate versus the 4.25% rate. With that being said, if you plan to stay in the house for 8 years or less, it makes sense in this particular scenario to take the higher rate of 4.250% over 4.125%.

    As each situation is unique, it’s important to discuss all options with your loan officer so you can make the most informed decision when it comes to locking your interest rate. Feel free to contact us at any time if you have any questions!


  5. Warmest Holiday Wishes

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    To our dear clients, friends & business partners,

    The holiday season is a wonderful time for us to remember and thank everyone who help make our jobs a pleasure all year long. Our business would not be possible without all of you and your continued support. It has been an honor and pleasure to work with each of you.

    We’d like to sincerely thank you and send our best wishes to you and your loved ones. May the new year be filled with all the success, happiness and health you deserve.

    Happy holidays and a prosperous new year!

    Brian Parkinson, Kelley Johnson & Taylor Stewart


  6. Understanding Mortgage Insurance

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    It’s important to discuss mortgage insurance (MI) with your loan officer so you’re aware of what it is, when you have to pay it and what payment options you have. If you have less than 20 percent down payment, you are required to pay mortgage insurance. Private mortgage insurance is a policy that protects lenders against financial loss if you default on your loan. The assumption is that the less money you invest in your home, the more likely you are to walk away from your loan and the riskier you are to an investor.

    The MI premiums are based on your middle credit score (whoever has the lowest middle credit score for joint borrowers) and your loan-to-value ratio.

    A quick example of what loan-to-value means: If you put 10% down on your home, your loan-to-value ratio would be 90%. Meaning, you are financing 90% of the home’s value and the remaining 10% is the equity you have in the home.

    Individuals with a credit score of 760+ and a loan-to-value ratio of 85% (or 15% down payment) receive the lowest mortgage insurance premium. From there, the premiums increase based on which credit score range (e.g. 720-739) and down payment category you fall into. The lower your credit score and down payment, the higher the premium. Here are the four loan-to-value categories:

    • 97% to 95.01% (3% to 4.99% down payment)
    • 95% to 90.01% (5% to 9.99% down payment)
    • 90% to 85.01% (10% to 14.99% down payment)
    • 85% to 80.01% (15% to 19.99% down payment)

    There are several ways in which you can pay mortgage insurance. It’s critical to walk through all options with your loan officer to find out which option best fits your financial situation.


    • Option #1: Pay it monthly
    • Option #2: Buy it out with a single upfront premium — increasing your closing costs
    • Option #3: Increase your interest rate — giving you a lender credit that is applied to the buyout costs of mortgage insurance

    Let’s look at the different payment methods for the three options above for the following scenario:

    250,000 purchase price, 5% down, 4% interest rate (4.689% APR), 740 credit score

    • Option #1: Principal & Interest + Monthly MI = $1,316.46/mo.
    • Option #2: Principal & Interest = $1,193.54/mo. + single MI premium of $4,375.00
    • Option #3: Principal & Interest with higher interest rate of 4.375% = $1,248.21/mo.

    Total Cost in Five Years for P&I Monthly Payment + MI Payment Options:

    • Option #1: Cost of P&I + Monthly MI = $78,987.60
    • Option #2: Cost of P&I + single MI premium = $75,987.40
    • Option #3: Cost of P&I with a 4.375% interest rate = $74,892.60

    Depending on how long you plan to stay in your home, how much cash you have readily available and how quickly you’ll reach 80% loan-to-value, ultimately determines which option makes sense for you. However, you’ll notice that sometimes taking the higher interest rate (even after 5 years) is the cheaper option. Pretty surprising, right?


    In order to request the removal of mortgage insurance, you must show good payment history, no liens against your home and prove 20% equity with a new appraisal (which will typically cost $500) two years from your first payment date. Some clients assume if their appraised value comes back considerably higher than the sales price during their purchase transaction, they can get their mortgage insurance removed quicker. However, you still have to wait the required two year period unless can prove 78% equity instead. Regardless, it’s a good idea to contact your servicing lender for clarification before doing this.

    If you don’t request cancellation of mortgage insurance, once you pay the principal balance down to 78% of the original purchase price, the MI will automatically fall off. The good news is you’re not stuck with it forever for conventional loans.

    If you have further questions about which payment option is best for you, feel free to contact the Parkinson Group to discuss with us today!

  7. What is A Mortgage Recast and Why Do It?

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    Ever heard of a mortgage recast? Maybe that term sounds familiar… but do you really know what it is and when it’s beneficial for you to consider?

    First off, let’s define what a recast is. Mortgage recasting is the process of unlocking the amortization schedule of a fixed rate mortgage, applying a lump sum payment towards your principal balance, and then re-setting the payment based on the new loan amount. In a typical fixed rate mortgage, when an additional lump sum payment is made towards principal (say, an extra $10,000 you received from Grandma), the term of the loan is shortened but the payment remains the same until the loan is paid off. The difference (and advantage) of a mortgage recast is that the payment re-calculates once a lump sum is applied towards the principal balance, reducing your monthly payment.

    When would this be beneficial?

    This might make sense if you receive a large amount of cash from someone or some event and want to use that money to reduce your loan amount AND your monthly payment. It’s also beneficial if you sell and close on your current home after the closing of your new property. For example, when you receive $50,000 in net proceeds after you’ve already bought and closed on your new home, you could then apply that (or a portion of that) amount to the mortgage on your new home, reducing your total monthly payment.

    The great thing about a mortgage recast is that it’s very inexpensive (compared to refinancing your home). It’s about $250-300 per executed recast. A mortgage recast doesn’t require an appraisal (which costs you $500 if you are hoping to refinance in addition to other mortgage and title fees).  Keep in mind — there is a timeline restriction. Typically, you must wait until the new loan has been on the books for a minimum of 90 days and you must maintain a perfect payment history. Also, not all mortgage lenders allow this process or even make their clients aware of this feature so make sure you ask the loan officer you’re working with.

    Let’s look at an example of a 30 Year Fixed Rate Mortgage at 3.5% with a lump sum payment of $50,000:

    Original Loan Amount = $250,000

    Original Principal & Interest Payment = $1,122.61

    New Loan Amount after $50,000 lump sum payment = $200,000

    New Principle & Interest Payment = $898.09

    This gives you a total monthly reduction of $224.52!

    If you have any questions or would like more information about mortgage recasting, please don’t hesitate to contact the Parkinson Group!


  8. HomeReady Program: Perfect for you?

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    With standard loan programs offering such historically low interest rates, you may not think there’s another loan program out there that could beat standard loan pricing. But, that’s not the case thanks to Fannie Mae’s HomeReady program.

    If you’re a creditworthy low- to moderate-income borrower looking for low down payment options, HomeReady may be the perfect program for you. HomeReady is available when purchasing or refinancing any single-family home as long as the borrower meets the income limits of the property location. Plus, you don’t have to be a first time homebuyer to qualify. It’s available for anyone who falls within the income eligibility limits. And depending on where the property is located, there may not even be income limits.

    With that being said, here are a few great benefits of this program:

    • Low down payment options with up to 97% LTV financing for home purchase (meaning, you can put as little as 3% down)
    • Competitive pricing that meets or typically beats standard loan pricing
    • Flexible sources of funds with no minimum contribution requirement from borrower’s own funds (1-unit properties)
    • Reduced Mortgage Insurance (MI) coverage for down payment of 10% or less

    So, you’re essentially getting an unbeatable rate and lower monthly mortgage insurance – which help reduce your overall monthly payment. The only thing you have to do is complete an online Homeownership course for $75 and send the certificate of completion to us. It’s that simple. And trust me – the modest fee is worth it after all the money you’ll save in the end.

    One other important thing to note: HomeReady is perfect for borrowers with lower credit scores because they benefit from not only the affordable pricing but also don’t get hit as hard with high mortgage insurance premiums because of the reduced MI coverage.