Three good reasons to visit a lender before you’re ready to buy a home

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If you’re dreaming of buying a home but know that you are not yet in a position to do so, visiting a lender is probably the farthest thing from your mind.

It’s time to re-think that idea.

It’s a good idea to go ahead and visit your lender even when you think:

  • Your credit isn’t so good
  • Your income isn’t high enough
  • You have too much debt

Why?

Because your lender can show you exactly where you stand and help you overcome those issues.

Start with your credit. One of the first things your loan officer will do is look at your credit score, your credit history, your monthly liabilities, your income, and your assets. In other words, they’ll examine your entire financial picture.

If your scores are too low to qualify for a mortgage – or too low to qualify for a good interest rate – they can show you where and how to improve. Your lender knows which debts are causing the biggest drain on your scores.  He or she can advise you on which debts to pay off first, and let you know if there’s something there that will force you to wait another year or two.

If your income is a problem, your lender will let you know how much more you need to earn in order to qualify for the home you want. Or – he or she can tell you just how much you can spend per month on a home, and what that translates to in terms of home prices.

If you have too much debt, your loan officer can help you go over your monthly spending habits and find ways to reduce that debt. The fact is, for every dollar of debt you have, you must have two dollars of income to offset it when making a loan application. In addition, if more than 15% of your income is going to consumer debt, you’ll have to bring it down in order to qualify for a mortgage loan.

In other words, it’s worth your while to stop charging and start paying off those bills.

A lender can also advise you on whether or not bringing in a cosigner would be a good idea.

Go ahead and make that appointment with a lender.

Tell him or her up front that you don’t think you’re ready, but you’d like help in getting there.  If the lender isn’t willing to talk with you on those terms, find a different one. The truth is, a good lender can be your strongest ally in your quest to own a home.

Here at Homewood Mortgage, the Mike Clover Group, we’re always willing to talk with future home owners, and always willing to give advice and guidance. So please feel free to call.

In fact, why not call right now, before you forget.

Call today: 469.621.8484

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Fried Quail Recipe for the Holidays

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I got this recipe from a old timer I used as a guide. He we nice enough to share, so I am going to share. Its really good.

QUAIL OR ANY MEAT MARINADE

1 Tablespoon Black Pepper (fresh ground if possible)

2 Tablespoon Kosher Salt

2 Cups Buttermilk

4 Beaten Eggs

2 Tablespoon Tabasco Sauce

1 Quarter Cup Dill Pickle Juice

Mix all ingredients thoroughly and add meat, let it marinate at

least 4 hours preferably overnight.

 

BATTER

4 Cups Flour

1 ½ Teaspoons Black Pepper (fresh ground if possible)

1 ½ Teaspoons Garlic Powder

1 ½ Teaspoons Onion Powder

1 Tablespoon Kosher Salt

Remove all silver membrane from meat before adding it to the

marinade

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If you’re a veteran or active military, check out VA home loans

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If anyone deserves a little help with home ownership, it’s our Veterans and active military. Thankfully, they get that help. Veterans Affairs home loans are even more beneficial now than they were twenty years ago.

Benefits include:

  • More lenient loan requirements
  • No down payment or mortgage insurance
  • Lower closing costs

Loan requirements:

VA borrowers can qualify with credit scores of around 620, while conventional home loans require a score of 620 to 700. In addition, VA borrowers are allowed higher debt-to-income ratios.

No down payment:

Saving for a down payment of even 3% can be difficult on a military paycheck, so VA borrowers don’t have to. In most locations, veterans or active military can purchase a home of up to $424,100 with no down payment. In areas where homes are higher priced, that number is also higher.

This is not to say there is zero money out of pocket. VA buyers must make an earnest money deposit, and there will be buyer’s closing costs to cover:

  • Appraisal
  • Credit report
  • Origination fee
  • Recording fee
  • Survey
  • Title insurance and title fees

However, while the borrower is allowed to pay these costs, up to 4% can be paid by the seller. If the seller isn’t prepared to net less for the house, borrower can offer a higher price to offset the closing costs.

Another plus for the VA buyer – the lender’s origination and underwriting fee is limited to 1%.

Depending upon the amount of the earnest money deposit, VA buyers often receive reimbursement at closing if the seller is paying more closing cost than was needed.

No mortgage insurance:

Both conventional financing and FHA loans come with a requirement for mortgage insurance if the buyer is paying less than 20% down. This is significant, as it can add $200 or more per month to the mortgage payment.

Instead, VA charges a “funding fee” which can either be paid up front or financed along with the house. This tax-deductible fee helps the VA cover its losses on homes that go into foreclosure.  This fee is waived for veterans with a service-connected disability.

Assistance with appraisals:

In most cases, lenders and agents are not allowed to communicate with appraisers. Not so in the case of VA loans.

The appraisers notify lenders in the event that a home is not going to come in high enough to meet the offered price. The buyers and the agents then have 48 hours in which to supply additional information that might alter the determination. This could be upgrades that the appraiser didn’t know about, or a more accurate list of comparable sales.

If you’d like to learn how a VA loan can help you achieve home ownership, call us! We at Homewood Mortgage, the Mike Clover Group, will be glad to talk it over with you.

Call today: 800-223-7409

 

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Want to buy a home? Heed these lessons from the past.

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The American Dream has long been that of home ownership. It makes you feel settled, and a part of a community. It gives you pride in ownership.

But still, purchasing a home is not a decision to be made lightly, and it’s not a decision to be made if you’re heavily in debt.

In fact, financial guru David Ramsey believes that you should not only be out of debt, you should have a hefty emergency fund set aside. And… if you simply can’t wait long enough to pay cash, you should at least wait until you can pay 20% down.

That’s why our rule #1 is: Make the largest down payment you possibly can.

There are no crystal balls. While the banking industry is being a bit more careful about handing out loans now that it was prior to the housing crash, and while prices are now escalating, home values could drop.

If you purchased a $200,000 home with a 3% down payment and the market suddenly dropped by 20% – or even 10% – you’d be instantly under water. If you needed to move, you’d owe far more than the house would bring.

If you paid 10% or 20% down – or paid cash – you’d be in a much better position.

Lesson #2: Never spend all you can.

Because your lender only knows about the obligations you put on paper, he or she has no idea what your budget really looks like. You may have personal obligations, such as a promise to help support an elderly relative. You may feel that you actually need a skiing vacation each winter in order to re-charge and keep working. You may have children who just “have” to attend an expensive summer camp each year.

In addition, if you and your spouse both work, consider what would happen should one of you become ill or lose your job. Could you make a house payment on just one income?

Before you commit to a monthly payment just because a lender says you qualify, go over your own spending and make your own decision about how much you can spend. A good rule of thumb is to keep your mortgage payment below 25% of your monthly take-home pay.

Lesson #3: Stick with a fixed-rate mortgage.

The foreclosure crisis was due in large part to Adjustable Rate Mortgages (ARM’s) that let buyers in with low interest and low payments for a few years. Then, the rates adjusted, monthly payments skyrocketed, and the buyers were unable to make the payments.

Led by promises of refinance, they didn’t worry going in. But when those homes were no longer worth the mortgage balance, all hopes of refinance went out the window.

When you have a fixed rate mortgage, there are no surprises. Aside from changes in property taxes and insurance premiums, the payment can’t change for the life of the loan. Hopefully, your income will grow over time and the payments will become easier and easier to meet.

15-year mortgages offer lower interest rates than 30-year mortgages, but may strain your budget. However, there’s nothing to prevent you from adding a few extra dollars to each mortgage payment in order to bring the balance down faster – and thus reduce the total interest you’ll pay.

Lesson #4: Think ahead.

Buying a starter home in order to build equity so you can move up in a few years is a good plan, but do consider that you may be there longer than you anticipated. Another down turn in the market could wipe out that equity.

With that in mind:

  • Consider whether you and your family will still fit in the home a few years from now. Buying a 1-bedroom cottage when you plan to start a family is probably not a wise move.
  • Consider whether you’ll be happy in the neighborhood long-term.
  • Do hire a home inspector so you don’t get caught unawares and find yourself with major repairs in the near future.
  • Consider whether the house will have good resale value. Your real estate professional can point out the pros and cons of any home you are considering.

Before you begin to shop, call on Homewood Mortgage, the Mike Clover Group, to get pre-approved for a home loan. (At the same time, do remember lesson #2.) We’ll be glad to talk with you, show you the available loan programs, and determine the interest rate you’ll be offered based on your employment, income, expenses, and credit history.

We’ll also help you determine what you should spend on your new house based on your own examination of your spending habits.

Call any time: 800-223-7409

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Should you refinance your home mortgage loan?

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Refinancing your home mortgage loan can be a benefit or a detriment to you, depending upon a few factors.

First is the reason for the refinance. If the purpose is to lower your interest rate and/or reduce the remaining years on your loan, it’s a good idea.

It’s an even better idea if you have an FHA loan with a mandatory mortgage insurance payment each month. If you’ve acquired 20% equity in the house and your credit is good, you can refinance into a conventional loan and do away with the mortgage insurance payments.

It can also be a good idea to refinance and take some cash out if the cash is going to be used to do renovations and increase the value of the house.

If the purpose is to extend the length of the loan or take cash out for an unnecessary expense – such as a new car or a vacation – it’s a very poor idea.

Second is the rate of interest you’re paying right now, compared to the rate you would pay on a new home mortgage loan.

Third is your future plans. If you plan to stay in your home until the loan is paid off, then shaving $100 or more off each months’ payment is a really good idea.

If you plan to sell within a year or two, the cost will outweigh the benefit.

Remember that a new loan is not free. You’ll pay for an appraisal, title insurance, and a variety of closing costs and transaction fees. Sit down with your lender and calculate both the costs and the savings. Then you’ll see how many months it will take you to “break even” on the costs of the loan.

Will refinancing harm your credit?

Refinancing your home mortgage loan will have an effect on your credit, but it will be negligible in comparison to the benefit of paying less each month – and therefore less overall – for your home.

The effect on your credit will largely depend upon the FICO version your lender is using.

When you shop for a new loan, each lender will pull what’s called a “hard inquiry” on your credit report. Since the credit bureaus recognize several mortgage loan inquiries in a short time as shopping, your credit score will only be affected by one inquiry.

But what is considered a short time? Under the latest version of FICO scoring, 45 days is a short time. Under older score models, it’s only 14 days.

Also, since refinancing requires closing an old loan to open a new one, you could lose the benefit of your payment history with your current loan. Since payment history makes up 35% of your credit score, this will have a slight impact, depending upon the scoring model used.

Some models will eliminate that history while others will continue to report your payment history for the closed account.  However, the impact of hard inquiries and possible loss of payment history on your current loan will fade over time as you build a payment history with your new loan.

If you’re thinking of refinancing and aren’t sure if it’s the right thing for you, call us! We at Homewood Mortgage, the Mike Clover Group, will be glad to talk it over with you.

Call today: 800-223-7409

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Make your mortgage go away faster…

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You’ve purchased a fine new home and now you have a fine new mortgage. Even though you would have been spending those dollars on rent had you not made the purchase, looking at 30 long years of payments can feel like a heavy burden.

The good news is, you can make that payment go away much faster.

You may have noticed that in the first years of your loan, far more of your payment goes to interest than to paying down the principal. You may also have noticed that over time, those numbers change. Every dollar you pay toward the principal is a dollar that is no longer accruing interest.

Say you take out a loan for $200,000 at 4.5% interest. Your monthly payment is $1,013. Of your first payment, $750 will go to interest and only $236 to principal. Each month the numbers shift by one dollar- with one dollar less going to interest and one dollar more going to pay down the loan. It will take approximately 17 years for the balance to shift – more to principal and less to interest.

However, you can change that balance in your favor, simply by paying a little more, especially in the early years of your loan.

You can make one extra payment per year

If you get an annual bonus or always get an income tax refund, use part of that money to make an extra payment on your loan. In the example above, you’d be knocking 4.29 months off the length of your loan – or one year for every 3 years that you make the additional payment.

You can add a little extra every month.

Adding just $50 or $100 each month will shrink the number of years on your loan – but what if you could add an extra $236 per month? You’d effectively be making 2 payments rather than one – and eliminating $750 in interest that you will never owe.

Create your own amortization schedule.

Decide how long you want to keep making those mortgage payments, then create an amortization schedule based on the interest you’re paying today. It’s like refinancing, but without the reduction in interest OR the fees and loan costs that you’d pay for a refinance.

You can find amortization scheduling programs on line, or simply give your lender a call.

You can refinance.

If you’re still paying a high interest rate, it could be in your best interest to refinance. This is especially true if you now have 20% equity in your home and can finance OUT of an FHA loan. As you are probably aware, FHA loans carry mortgage insurance for the life of the loan – eliminating that will give you extra money to pay down your loan.

We at Homewood Mortgage, the Mike Clover Group, will be glad to go over the numbers with you so you can see exactly how a refinance would affect you.

Should you try to pay your mortgage off early?

You should if your goal is to become debt-free and you can answer yes to these questions:

  • Have I paid off my high-interest credit cards? (These should come first!)
  • Do I have an emergency fund set aside?
  • Have I got savings put aside for retirement and/or my children’s college expenses?

If you’re considering a refinance …

  • Is my income stable enough to support higher payments?
  • Is my credit score good enough to get me a low interest rate?
  • Do I plan to stay in the house long enough to benefit from the lower interest rate?

Take care of your day-to-day obligations and nest eggs first. Then think about cutting years off your loan. Considering the amount of interest you’ll save, paying down that mortgage could be more beneficial to you than putting the money in a savings account – and more “sure” than putting it in the stock market.

It’s most beneficial if you plan to stay in the house until it’s paid off, but can also help you build equity that can go in your pocket should you decide to sell at some time in the future.

When you’d like to explore your options, call us at 800-223-7409.

We at the Mike Clover Group will be glad help you see how each of these scenarios will affect your finances.  We’ll also be glad to get you pre-qualified so you’ll know what interest rate you’d pay for a refinance.

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5 ways to make sure your new home appreciates in value

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Some may tell you that all homes appreciate in value over time – or that it doesn’t matter, because you’re buying a home to have a home, not an investment.

The truth is, most Americans do move every few years, so thinking about that house as an investment as well as a home is a smart financial move.

  1. Choose your location wisely.

In fact, don’t even look at homes that are in the “wrong” location for you. You need first to consider your own situation and gravitate toward neighborhoods that will allow you to spend time at home rather than on the road.

In terms of appreciation, look for neighborhoods that are well-maintained and/or going through multiple upgrades. And then, whether or not you have children, consider the school district. Parents across the country are paying more for a home in order to get their children into top schools.

Do drive through the neighborhood looking for “For Sale” signs – too many is a good sign that others are finding it less than desirable. Keep looking.

  1. Search for the smallest, least-updated home in a neighborhood of nice homes. (Never choose the largest home in a neighborhood of small to medium sized homes.)

If you’re able to find the only home on the block that doesn’t have a deck or hasn’t had a kitchen upgrade lately – but you can afford to make those improvements – you’ll add instant value. In addition, pay attention to the size of the lot, since you may want to build an addition later on.

  1. Look beyond the lipstick and rouge – or lack of it

Curb appeal: Savvy home sellers go to lengths to create “curb appeal” to draw you in and cause you to expect to love the house before you walk in the door. And it works, many buyers completely pass over homes with poor curb appeal.

So go against the norm and take a look. While it’s true that neglect outside might signal neglect inside, it’s also true that it might not. You don’t know that homeowner’s circumstances. They may be physically unable to do yard work and may not have the budget to pay for it. The interior may be impeccably maintained.

Take a close look – are YOU able to turn that yard into a thing of beauty? If so, you’ll immediately increase the value of your new home.

Décor: Ignore the gaudy paint colors and leopard-print carpet. Forget the ugly couch and the velvet art on the walls. Those things can be changed immediately. Meanwhile, they’ve sent other buyers scurrying out the door, so the price might more than compensate for the cost of getting fresh new paint and flooring.

Instead, look at how the home functions and flows. Check to see that the number of bedrooms and baths fit your household, and that the room sizes will accommodate your furnishings. Look at the closets and the other storage spaces, and then…

  1. Get an inspection.

So many hidden things can be wrong with a house, that it makes a home inspection just about the best insurance you can buy. The inspector checks everything from top to bottom and will give you a written report outlining any and all issues.

Some, of course, are small issues. The inspector may point out that they don’t even need to be addressed. Others, however, can be major. Structural problems, pest infestations, polybutylene piping, a failing septic tank, or foundation failures fall under that category. Repair of these items can come with huge price tags.

Once the inspection is finished, go over it with him or her and ask questions. Find out which issues are major and which are minor. Then talk it over with your real estate agent. He or she may be able to get repair estimates so you can get a true picture of costs.

  1. Don’t over-pay

Experts say the way to make money on a home is at the purchase, not the sale. That means – never over-pay. Your agent will help you compare prices and values so you don’t make a huge mistake. He or she may also be willing to do a comparative market analysis to give you a clear picture of the home’s value in the current market.

In addition, never pay all the bank allows.

Leave room in your budget for unexpected expenses and for things your lender didn’t consider – like the fact that your kids like to go to summer camp, you like a skiing vacation every winter, or you love dining out or attending concerts.

The First Step

When you’re ready to find that home, the first step is to get pre-approved for your loan. So call Homewood Mortgage, the Mike Clover Group, and let’s get started.

Reach us today at 469.621.8484.

 

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VA Mortgage Loans

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New Credit Reporting Rules Will Raise Scores for Some

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Consumer advocates have long been pushing for improvements in the accuracy of reports from the credit bureaus, and now they’ve met with success. Equifax, Experian, and TransUnion are applying new, stricter rules to the information they gather from public records.

The changes primarily affect two major sources of inaccuracies in credit reports – tax liens and civil judgments. These are two areas over which hundreds of lawsuits have been filed and thousands of individuals have vainly fought to have incorrect information removed from their files.

From now on, in order to be included on a credit report, records must include the subject’s name, address, and either their date of birth or their Social Security number. This move should eliminate the possibility that your credit report will contain information about some other person who happens to share your name.

Since nearly half of all tax lien records and nearly all civil judgments do not meet this requirement, they will be stricken from credit reports, raising credit scores for approximately fifteen and a half million people in the U.S.

Changes in credit bureau policies have been happening for the past two years, when 31 state attorneys general got together to crack down on the credit bureaus. Following a deal that was negotiated, credit bureaus had already ceased including traffic tickets and court fines in their files.

According to Fair Isaac, FICO scores will typically increase 20 points or less, but that could be just enough to allow some people to buy a home or a car, get a school loan, or obtain a credit card. For others, it could make a difference in the amount of interest they’ll be required to pay.

Those individuals who have been battling to get incorrect information removed from their files will now be spared the frustration and the endless hours of trying to prove they are NOT the Joe Jones or Suzie Smith with a tax lien or a civil judgment.

Naturally there are those who fear that the result of this change will be loans granted to individuals who are not credit-worthy.

If you’ve been plagued by an inaccurate credit report and are ready to see how these changes have affected your own ability to purchase a home, call us at Homewood Mortgage, the Mike Clover Group.

Whether you’re ready for pre-approval or simply have questions, just call.  Reach us today at 800-223-7409.

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Should you purchase your own vacation home?

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If you’ve just had a wonderful family vacation at the beach or in a mountain cabin, you may be thinking how nice it would be to own your own vacation home.

You’d have all your own things right there. You wouldn’t have a hassle with booking a rental for the days you want. And, in addition to taking your annual 2 week vacation, you could steal away for long week-ends throughout the year.

It sounds ideal, but before you begin searching the Internet for vacation homes, stop and ask yourself two important questions.

First, of course, is “Can we afford it?”

The expense of a vacation home comes in two parts: The purchase and the upkeep. If you can answer “yes” to these 5 questions, you’re good to go on the purchase end:

  1. Is my primary residence already paid for?
  2. Am I putting away 15% of my income each month for retirement?
  3. Am I saving for my kids’ college expenses?
  4. Do I have an emergency fund equal to 3 to 6 months’ income?
  5. Do I have the cash to purchase a vacation home?

Question #5 is all-important. We believe no one should ever go into debt to buy vacation property.

It also a terrible idea to dip into retirement funds, especially if they’re in an IRA.

Be aware that withdrawing funds before the agent of 59 ½ means you’ll take a 10% penalty hit. Then you’ll owe taxes to the IRS – and possibly to the state. What that means in real numbers is that if you withdraw $100,000 from your IRA you’ll only receive about $70,000.

At the same time, you’ll be forfeiting the compound interest on that account.

Sure, that vacation home will likely grow in value – but as we’ve seen in recent years, that’s not guaranteed, and even in the best of economies it will dependent upon how well you maintain the house during your ownership.

Now consider upkeep.

You’ll need to maintain that home just the way you maintain your primary home, and some of the expenses may be higher.

Homeowner’s Insurance, for instance, costs more for a home that is virtually unoccupied. And, if you’ve chosen a beach home, you’ll probably be required to have flood insurance.

Property taxes may be higher because it isn’t your primary residence.

Monthly expenses – Depending upon the kind of home you choose, you’ll be responsible for utilities, internet/cable TV, garbage service, HOA fees, or lawn maintenance. It’s never good for a house to have utilities and heating/cooling turned off for extended periods of time, so don’t plan on just turning everything off while you’re gone. (The exception would be your cabin in mountains with snowy/cold winters – do pay to have the water system drained and winterized during the months it won’t be in use.)

Property management. Yes, this is an added expense, but it will give you peace of mind to have someone keeping an eye on your property on a regular basis.

Yes – you can use your vacation home as a rental. However, if you do, you run the risk of it being destroyed by tenants. You also have to adhere to rules set down by the IRS. If this is your plan, be sure to talk seriously with your tax accountant before making the move. And finally – check with your REALTOR® to make sure that using your second home as a rental doesn’t violate any subdivision or HOA regulations.

Second – “Do we really want to be locked in to the same vacation spot for the foreseeable future?”

When you own your own vacation home and you’re paying for it all year long, you’re pretty well committed to returning to it each year. That might be fine for the first year or two, but after that some other destination might catch your eye, and you’ll be sorry that you’ve made such a commitment.

Consider renting someone else’s vacation home. This is a short-term commitment that will cost you far less than owning your own. If you really love it, you can book ahead for the next year. If not, you can begin researching other destinations that might be even more fun.

You may have gasped when you read that a former President paid $7,000 per week for use of a vacation home in Hawaii. Many did. However, if you think about it, that’s a drop in the bucket compared to owning such a home for a full year.

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