Mortgage

Mortgage Information

Home Financing

Average 2022 Home Sales Prices:  

  • Milwaukee County: $230,000 (+7.3%)
  • Waukesha County: $326,000 (+14.1%)
  • Ozaukee County: $410,000 (+6.6%)
  • Washington County: $340,000 (+9.2%)
  • Racine County: $238,750 (+8.5%)

Given the competitive nature of the mortgage business, banks and other lending institutions offer a variety of products that have made home buying simpler. Mortgages come fixed or variable interest rates. Fixed rates are typically one or two percentage points higher than variable rates, but the rate remains constant throughout the life of the loan. They are best when interest rates are stable or for homeowners who plan to live in their home for a long time. Variable- or adjustable-rate mortgages (ARMs) increase or decrease with the prevailing interest rates. Variable-rate mortgages are best when interest rates are changing rapidly or for homeowners who expect rates to decline in the next few years, plan to stay in their home for five years or less, or are confident their income will increase in the years ahead. In order to protect homeowners, variable rate loans have “caps” that limit how much the rate can increase over time.

Buying a Home

Many lenders have online worksheets to help you determine how much house you can afford. Generally speaking, house payments – including insurance and property taxes – should not exceed 28 percent of household gross monthly income (income before taxes). Total household debt (including credit cards, mortgage, auto and other loans) should not exceed 36 percent of monthly income. Homeowners who can’t make a down payment equal to 20 percent of the sales price will likely have to purchase private mortgage insurance, which can add $50 to more than $200 to the monthly payment. Buyers should consult a Realtor or mortgage banker to determine what they can afford.

Local Lenders

Milwaukee has many local lenders, such as Summit Credit Union, who know the Milwaukee market well and can provide valuable assistance with a mortgage.

There are many benefits to selecting local lenders. They know and understand the local market and can provide advice if they think a seller’s price is too high. Sellers and listing agents like working with local lenders because they know each other. Finally, selecting a local lender is a great way to start a banking relationship for people moving to the area.

Prequalification

In the past few years, the Milwaukee market has been very active. Affordable prices and increased demand for housing have significantly shortened the time homes are on the market. In fact, it is not unusual for homes to have two or three offers – at asking price or higher – on the first day that they are officially listed on the market. As a result, potential buyers need to make sure they have everything ready to go when they enter the market.

One of the best ways to prepare is to get pre-qualified by a lender. The lender will review all of your financial records and certify that it will give you up to a specified amount for a mortgage. Having that in hand when you make your offer can ease seller concerns over financing.   

Mortgages

Mortgages are available through mortgage brokers, banks, credit unions and savings banks. Whether you elect to work directly with a lender or through a mortgage broker, it is a good idea to get “pre-qualified.” This will help you definitively ascertain how much you can afford. It will give you a competitive advantage with sellers, because you can present them with a document demonstrating that you will be able to pay the amount they are asking.

Fixed-Rate Mortgages

Fixed-rate mortgages feature an interest rate that stays constant throughout the life of the loan, which typically range in length from 10 years to 30 years.

Adjustable-Rate Mortgages

With an adjustable-rate mortgage (ARM), the interest rate changes periodically. They are typically characterized by the amount of time that must pass before the rate can be changed (1, 3, 5, 7 or 10 years, for example). Rates are generally lower than fixed-rate mortgages, but carry the risk that an increase in interest rates will lead to higher monthly payments.

FHA-Insured Loans

The Federal Housing Administration (FHA) offers several low-down-payment mortgage products for eligible participants. FHA-insured loans are available from most lenders who offer conventional loans. For information and eligibility requirements, contact your lender or visit:hud.gov/fha.

VA-Guaranteed Loans

If you are a veteran of military service, reservist, or on active military duty, you may qualify for a loan guarantee from the Department of Veterans Affairs. These loans have low down payments.

Home Inspections 

Lenders may require that you have your prospective home inspected by a professional before they approve your mortgage. Even if they don’t, hiring an inspector is a good way to protect your investment. They may uncover structural, electrical or plumbing problems that could impact the sales price. But a thorough inspection can be beneficial in other ways. The final report can be a blueprint for things the buyer should be thinking about five or more years down the road, such as installing a new roof, furnace or water heater. Home inspections, which typically cost between $300 and $600, can reveal structural problems that may impact the selling price and your interest in the home. Home inspectors are licensed by the state.

Under Wisconsin law, building inspectors are liable for damages that arise from an act or omission relating to their inspection. In addition, they are prohibited from performing any repairs, maintenance or improvements on the inspected property for at least two years after the inspection has occurred.

For more information about regulations or to check the status of an inspector's license, please call (608) 266-2112 or search "home inspections at: dsps.wi.gov.

First-Time Home Buyers

Buying your first home can be challenging given all the details and the money needed for a downpayment. Fortunately, the state of Wisconsin offers educational and financial help through the Wisconsin Housing and Economic Development Agency. For more information, visit: wheda.com/homeownership-and-renters/home-buyers 

Common Financial Terms

Following are financial terms frequently used when buying or selling a home:

  • APR (Annual Percentage Rate): Because it includes points, expenses and other costs charged by the lender, this is the actual interest rate you will be paying. Since all lenders must calculate this figure the same way, the APR provides an excellent method for comparing mortgage proposals.
  • Appraisal: An estimate of the property's market value based on the condition of the structure, the value of the land and the characteristics of the neighborhood. Appraisals are usually needed whenever a home is bought, sold or refinanced.
  • Assumable Loan: A mortgage that can be taken over by the buyer for a fee. These mortgages avoid closing costs and loan fees.
  • Closing Costs: Payments made on closing day to cover attorney fees, appraisals, credit reports, escrow fees, prepaid insurance premiums and other fees
  • Common Area Assessments: Also known as homeowner association fees, these are charges paid by unit owners to maintain the property.
  • Down Payment: The amount of cash paid by the homeowner at the time of closing. Any down payment that is less than 20 percent of the purchase price usually requires mortgage insurance, which increases the buyer's monthly payments.
  • Escalator Clause: A provision that allows the lender to change the interest rates or the amount of the loan if market conditions change.
  • Fixed-Rate Mortgage: A loan with a fixed interest rate that remains constant over the life of the loan.
  • Home Warranty:Insurance purchased by the seller that covers the cost of repairing major appliances, such as the furnace and water heater, if they fail within a year of the purchase date.
  • Interest-Only Mortgage: A loan in which the mortgage holder makes payment only on the interest.
  • Joint Tenancy: A type of ownership that allows two or more parties to own a parcel of property together. In the event of one joint tenant’s death, ownership of the property automatically passes to the surviving joint tenant(s).
  • Loan-to-Value Ratio: The percentage of a property’s value that can be lent to a borrower. Typically, financial institutions will not lend more than 80 percent.
  • Mechanics Lien: A lien against the title of a property for work done on a house. Courts impose liens for non-payment of home-related services and must be satisfied at the time a home is sold.
  • PITI: An acronym that stands for “principal, interest, taxes and insurance.” This is the total monthly payment owed to the lender. It includes payment on the principal and interest, as well as money escrowed for insurance and taxes.
  • Points: Interest that is paid in advance of the loan. A point is equal to one percent of the loan value. Three points on a $100,000 mortgage is equal to $3,000. Paying points lowers the monthly payments.
  • Private Mortgage Insurance (PMI): Insurance that protects the lender in the event the homeowner defaults on the mortgage. It is typically required when the down payment is less than 20 percent of the home’s cost but can vary by lender.
  • Title: A document that indicates a buyer has clear ownership of a property. In order to protect themselves, lenders typically will not issue loans without this document.
  • Title Insurance:Insurance that protects the homeowner and the lender in the event there is an ownership dispute.
  • Variable-Rate Mortgage: A mortgage in which the interest rate is adjusted to reflect market conditions. Variable-rate mortgages feature interest rates lower than fixed-rate mortgages, but the rate can change quickly. They typically have caps that prevent the rate from exceeding a fixed amount.