Finding a Lender

The Department of Commerce licenses mortgage originators, also known as mortgage companies or mortgage lenders. Mortgages are also available from other lenders, including banks and credit unions, which are regulated by other agencies. The department also licenses mortgage servicers who process the mortgage payments, among other activities.

There are several ways to shop for a mortgage company. If you are already working with a real estate agent, that agent might have recommendations for a lender. If you have a friend or relative who recently purchased a home, they could provide a referral. Or, look in the yellow pages of the telephone directory or watch for advertisements in newspapers and on television.

Finding the Best Rates

Comparative mortgage rate charts are published in the real estate section of many local newspapers, and it's a good place to start when looking for a mortgage company.

Not all lenders offer the same mortgage products. To make sure that you are getting the lowest interest rates and fees, meet with several mortgage companies to learn what products they can provide.

Questions You Should Ask

• Is this the best rate and terms that I can qualify for?
• Do I qualify for a better loan product that you don't offer? 
• Could I do better with a different mortgage company?

Check with the Department of Commerce

Before you select a mortgage company or an individual mortgage loan officer, call the Minnesota Department of Commerce or check the website to see if they are licensed or if any actions have been taken against the license of the mortgage originator. Use our License Look up Tool for license information. Or use our online document search tool for enforcement actions.

The Department of Commerce has the authority to "censure," or publicly reprimand, a mortgage originator for failing to abide by the law. If further violations occur, the mortgage originator's license can be suspended or revoked.

How to File a Complaint

If you have a complaint against a mortgage originator, write a letter to the Department of Commerce explaining the complaint. In your letter, write the details of the dispute and include as many facts as possible such as dates, what was said, etc. Include a phone number where you can be reached and your mailing address. In addition, attach copies of any documents to support your complaint, such as mortgage applications, advertisements or cancelled checks.

You are welcome to call the department with questions about a problem you may be having; however, an investigation cannot begin until the department receives written documentation of the problem. If you have questions, call 651-539-1600 or 1-800-657-3602.

Consumer Resources

Minnesota Housing Finance Agency offers below-market loans to buyers with low or moderate incomes and to first-time buyers. Call 651-296-7608 or 1-800-657-3769.

Home Ownership Center provides a confidential review of your finances and helps determine what mortgage loan programs will be the best. Call 651-659-9336

Minneapolis Community Planning and Economic Development Agency offers information about housing and low-interest mortgages for Minneapolis residents. Call 612-673-5095

St. Paul Housing Information center provides low-interest mortgages, education and counseling for residents of St. Paul. Call 651-266-6000

Farmers Home Administration offers mortgage loans for low-income rural residents. Write to: FmHA, US Department of Agriculture, Washington, DC 20250.

The Minnesota Department of Commerce urges consumers to check the license status of any company offering mortgage loan modification services in Minnesota. More importantly, before paying an upfront or advance fee for such services, consumers should first consider working directly with their loan servicer or contacting the Minnesota Homeownership Center to take advantage of their free loan modification service.

A growing number of consumers are being contacted by companies or individuals offering loan modifications. A loan modification is an agreement between the homeowner and the mortgage servicer to permanently change one or more of the terms of the mortgage contract to make payments more manageable. Modifications can include lowering the interest rate, extending the term of the loan, or adding missed payments to the loan balance.

The Department of Commerce requires persons who engage in loan modifications to have a residential mortgage originator license pursuant to Minnesota Statutes Chapter 58. Individuals offering or negotiating loan modifications are indirectly acting as mortgage originators. In addition to licensing requirements, all individuals who directly or indirectly negotiate loan modifications for consumers are required to comply with certain standards of conduct outlined in state law.

The loan modification company may propose to communicate directly with the homeowner and the homeowner's lender in order to negotiate the terms of a loan. Some loan modification companies will charge a homeowner an upfront or "advance fee" prior to negotiating the terms of a loan on the homeowner's behalf. Some loan modification companies are also inappropriately advising homeowners to cease making their mortgage payment(s) until the loan modification has been completed.

The Minnesota Homeownership Center offers loan modification services free of charge through their state-wide network of non-profit providers. The providers can also assist homeowners with foreclosure issues. Consumers looking to modify their current mortgage loan may contact the Minnesota Homeownership Center by calling 651-659-9336 or 1-866-462-6466. To check the license status of a loan modification company, contact the Minnesota Department of Commerce or call 651-539-1700 or 1-800-657-3602. 

Following are some "red flags" that may assist you in determining if you are NOT working with a legitimate or honest real estate agent. These tips are not intended to provide legal advice in drafting real estate related documents or provide detailed descriptions of the nature of relationships that may be created between agents and buyers and sellers.

Some "red flags" that may assist you in determining if you are NOT working with a legitimate or honest real estate agent. These tips are not intended to provide legal advice in drafting real estate related documents or provide detailed descriptions of the nature of relationships that may be created between agents and buyers and sellers.

High-Pressure Tactics

Agents using high-pressure tactics, especially in an attempt to have you sign a purchase or listing agreement

Do not be pressured into entering into a purchase agreement based solely on the agent telling you there are multiple offers so you need to make your purchase agreement offer immediately. Multiple offers may exist but don't be pressured into making a decision you are not comfortable with or if you do not understand the terms of the purchase agreement. If the sellers accept your purchase offer it becomes a legally binding contract. You may have to forfeit your earnest money deposit if you get "cold feet" and later decide that you just don't want or like the property. 

Do not be pressured into signing a listing agreement unless you are comfortable with the agent and understand and agree with the terms of the listing agreement including any marketing strategy. 

Asking for Money

Agents asking for earnest money or a down payment check made out to the agent...or asking for cash

Earnest money should be paid with a check or money order and made payable to the real estate company and not to the individual agent. 

By law, earnest money must be placed in the listing company "trust account" and cannot be mixed with personal funds of the agent. Once the listing company receives the earnest money, it must be deposited within three business days. However, the buyer and seller may agree, in writing, to handle the funds differently. 

Avoiding Clear Answers

Agents who do not provide answers to your questions about the property or fail to return your calls or maintain communication with you

By law agents are required to disclose all material facts they are aware of that may adversely and significantly affect your use or enjoyment of the property, such as existing structural or mechanical problems, water infiltration problems, easements or encroachments, or faulty septic systems.  

Do not enter into a purchase agreement until your questions are answered. You also have the option of including "conditions" or "contingencies" in your purchase agreement. If your conditions or contingencies were not met, you would not be obligated to go through with the purchase. Some common contingencies are a buyer requiring a satisfactory home inspection report by a certain date and at the buyer's expense. If the home inspection is unsatisfactory, the buyer can cancel the purchase agreement and obtain a refund of the earnest money. 

Being Too Private

Agents who don't disclose who they represent

Whether you are buying or selling, it is important to understand the different types of relationships that can be created between you and an agent. Expect agents to act in the best interests of whomever they represent. 

Agents must provide a consumer with an "agency disclosure" form at the first substantive contact with the consumer. The agency disclosure is intended to provide a description of available options for agency and nonagency relationships and a description of the role of a licensee under each option. The agency disclosure form is not a contract. If a buyer or seller wants an agent to represent them, a written contract must be entered into such as a listing agreement or a buyer representation contract. Following are the different types of agency relationships in real estate transactions:  

Seller's Broker: A broker who lists a property of a salesperson who is licensed to the listing broker who represents the seller and acts on behalf of the seller. 

Subagent: A broker or salesperson who is working with a buyer but represents the seller. In this case the buyer is only the agent's customer and is not represented by that agent. 

Buyer's Broker: A buyer may enter into an agreement for the broker or salesperson to represent and act on behalf of the buyer. In this case, the agent represents the buyer only and not the seller. 

Dual Agency: Dual agency occurs when one broker or salesperson represents both buyer and seller, or when two salespersons licensed to the same broker each represent a party to the transaction. Dual agency requires the informed consent of all parties. 

Facilitator: A broker or salesperson who performs services for a buyer, a seller, or both but does not represent either in a fiduciary capacity - meaning the facilitator is not obligated to represent the best interest of either party. 

Only Showing Listed Properties

Agents who will only show you properties they have listed

An agent who you have entered into an agreement with should be acting in your best interest, not his or her own best interests. Agents should be willing to show you properties that they have listed as well as other company listed property and property that is For Sale By Owner (FSBO's).

Asking for Signatures

Agents who ask you to sign blank or incomplete documents

Do not sign any real estate related documents that are blank or incomplete. Most of these documents are legally binding. 

Be wary if you are told, "Don't worry about that section, we'll fill it in later."

Requiring Listing Agreement

Agents who require a listing agreement for extended periods of time

Do not be pressured into signing a listing agreement for lengthy periods of time. A typical listing period is six months but you can negotiate a shorter or longer listing period. 

Avoiding Communication

Agents who are difficult to contact or do not regularly communicate with the consumer

An agent who has your best interests in mind should be easy to reach. 

Not Explaining Listing Price

Agents who do not provide a basis for a listing price

The agent should provide a market analysis with documentation to support the listing price. 

Talking You Out of an Inspection

Agents who attempt to talk you out of a home inspection or hiring an attorney

Agents are prohibited from discouraging the use of an attorney. Hiring an attorney, while not required, may be desired and it's your right to do so. 

If an inspection is discouraged, it might be because there is a defect in the property. 

Make sure your agent is licensed

Visit the Minnesota Department of Commerce website to verify that your agent has a current real estate license and to find out if there are any enforcement actions against him/her.

If you borrow money to buy a home or property, a lending institution will probably make you buy a title insurance policy to protect its interest. As a consumer, it's in your best interest to be well-informed about title insurance, how it works, and what to look for in title insurance.

The U.S. Department of Housing and Urban Development is also a good source of additional information about title insurance.

Most first-time home buyers are familiar with many types of insurance (e.g., auto, life), but have no idea what title insurance is, and the role it plays in real estate transactions. In the rush to close such transactions as quickly as possible, title insurance is probably the last thing people are thinking about.

What is Title Insurance?

Title insurance helps provide home buyers and/or mortgage lenders protection against losses resulting from unknown defects in the title to your property that existed before the closing of a real estate transaction. Those unknown "deficits" could be:

Outstanding liens on the property (e.g., unpaid real estate taxes by a prior owner)

Encumbrances (anything that might hinder the owner's right of ownership; e.g., errors or omissions in deeds, undisclosed errors, fraud, forgery, mistakes in examining records)

These deficits can result in additional costs in the future or even invalidate a home buyer's right of ownership in the property. They might also invalidate the lender's security interest in the policy. Title insurance policies cover the insured party for any covered losses and legal fees that might arise out of such problems.  

What Do Title Insurance Agents/Companies Do?

Title insurance agents/companies search public records to develop and document the chain of ownership of a property. If any liens or encumbrances are found, the title company might require a home buyer to eliminate them before issuing a title policy. Title insurance agents might also hold money in escrow and perform closing services for an additional fee. 

How Does Title Insurance Work?

Title insurance policies are indemnity policies — typically, they protect against losses arising from events that occur before the date of the policy, which is the date of closing. This is different from other types of insurance policies, such as auto or life insurance, which protect against losses resulting from accidents or events that occur after the policy is issued. A title policy is usually paid for with a one-time premium that is handled at the closing of the real estate transaction. 

Who Needs Title Insurance?

Lenders — If a mortgage is obtained in order to purchase property, nearly all lenders require that a  home buyer purchase the lender's title insurance policy for an amount equal to the loan. A lender's policy is issued to a mortgage lender. The policy gives the lender protection from covered losses arising from any defects in the title that have become known only after the insured property has been financed. The lender's insurance policy will remains in effect until the amount financed has been repaid, the property is resold or refinanced.

Owners — Either a home seller or home buyer may buy an owner's policy. In many areas, sellers pay for owner title policies as part of their obligation in the transfer of title to the home buyer. The question of who pays for the owner's policy can be negotiated as part of a purchase agreement.

An owner's policy is issued to a home buyer. It protects the buyer from covered losses arising from any unknown defects in the title that existed before the purchase which become known only after ownership of the property is acquired. Your owner's policy remains in effect as long as you own or maintain an ownership interest in the insured property. 

Marketing and Sales Practices

Although home buyers are free to shop around for a title agent or a title insurer, many home buyers do not. Because buyers are unfamiliar with title insurance, they tend to let lenders and/or real estate professionals who are parties to the home buying transaction make that decision.

Conflicts of interest can occur if the entities making the decision have a financial interest in a title agency/title company. Section 8 of the federal Real Estate Settlement Procedures Act (RESPA) prohibits people involved in a real estate settlement process from giving or accepting kickbacks or referral fees.

Key Points to Remember

• Although a title insurance company will most likely be offered to you during the mortgage transaction process, you are not obligated to use it.
• Be sure to ask what services and fees are included in the title insurance premium and any fees (e.g., cost of search and examination, closing services, etc.) that may be billed to you separately.
• A lender policy only covers a lender's loss. It does not protect a home buyer from losses arising from defects in title. Talk with a local, reputable real estate attorney not involved in the real estate transaction to find out if it is in your best interest to purchase an owner's title insurance policy.
• Make sure to ask about any available policy discounts. Premium discounts might be available if both owner’s and lender’s policies are purchased from the same title insurance company or if you are refinancing your loan.  You might also ask about “substitution” or “reissue” rates, which might, for example, permit you to use the seller’s title insurance policy to get a more favorable rate than might otherwise be available.
• Read all title insurance documents you get at closing, including the fine print. Ask questions if any items are unclear; or if any terms, conditions or amounts are not in line with something you may have been told before closing.
• If you believe that a title/closing agent or title company in a real estate closing/settlement transaction is not following standard business practices (e.g., unexpected or undocumented fees, or requesting that you sign documents relating to the real estate or closing transaction that are not accurate), immediately report this to the Minnesota Department of Commerce. 

The Real Estate Education Research and Recovery Fund (REERRF) grant program provides funds to organizations that provide information to the public on housing issues, including but not limited to, environmental safety and housing affordability.

Real Estate Education, Research and Recovery Fund page