Should you purchase your own vacation home?

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Askeron, Sweden - September 9, 2016: Environmental documentary of seaside home in woodland slope down to water.

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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Avoid costly mistakes by understanding the home buying process

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happy family moves into a new apartment. happy baby in a cardboard box

The house and the neighborhood you choose are important, but even more important is buying it correctly. You want that house to be a joy. If you make mistakes in buying, it will be a burden.

So start at the beginning – with getting your finances in order.

We know, looking at homes is more fun than doing math, but the math does need to come first. Become financially ready for this giant step by putting your credit in the best possible shape, paying off old debt, and saving at least 3 months’ worth of living expenses in an emergency fund.

Remember that when you become a homeowner, responsibility for repairs and maintenance are all yours. If the furnace goes out on a cold winter’s night, you can’t ignore it and you can’t postpone it – you’ll have to get it fixed. And unless you took out a good home warranty plan, you’ll have to pay for it.

The emergency fund is also good insurance in the event that you should become ill or injured and be without income for a short time.

Next, save money for your down payment, closing costs, moving expenses, and any updates you’ll want to make before you occupy a new home.

How much money does that take?

Save at least 10% of your eventual purchase price for a down payment – 20% if you can. Paying 20% down means you won’t be paying mortgage insurance, and that can save you thousands each year.

On average, closing costs will cost about 3% of the price of the home. These are the fees charged by the title company, your lender, and the “prepaids” that cover property taxes and homeowners’ insurance reserves.

Moving costs can range from just enough to cover gasoline to several thousand dollars. It depends on how far you’re moving and whether you hire a professional.

What about updates? Can you move in now and make improvements later, or do you really need to repaint and install new flooring first? Allow for that cost.

Next, get preapproved for a mortgage loan.

This is the step that will show you just what you can spend and what it will cost you to borrow the money. It’s completely different from a loan pre-qualification, so don’t get the two confused.

To obtain pre-approval you’ll go to your lender with the same documents and verifications that you would take if you’d already found the home and were ready to get the loan. He or she will verify everything, then send the file to preliminary underwriting.

At the end you’ll be better off in two ways: You’ll know your limit, so you won’t spend starry-eyed days looking at homes that are beyond your reach. (Once you’ve looked at homes you can’t afford, the ones you can afford don’t look very appealing.) Second, when you have a pre-approval letter in hand, your home offer will be taken seriously, and will probably be accepted over any offers that come without a letter.

After all, no seller wants to take a house off the market and wait to see if the buyer will qualify for a loan. They’d much rather see it there in writing that “Yes, you can buy this house.”

Choose the loan option that’s right for you.

For many people, a fixed-rate loan is the best option. It gives you the security of knowing your payment will never increase due to fluctuations in interest rates. However, there are times when it’s wise to choose a Lender Paid Mortgage Insurance loan.This is an issue to discuss with your lender.

Most borrowers also choose a 30-year loan, but for those who can afford it, a 15-year term is better. You’ll own the house in half the time while spending many thousands less on interest. The difference between 30 years and 15 years at 4% is $262 per $100,000 loan. ($477.72 at 30 years, and $739.69 at 15 years.)

Once you’re pre-approved and know what you CAN spend, consider what you WANT to spend.  

Remember that your lender doesn’t have any idea what you like to do in your spare time. He or she doesn’t know of your passions or your future goals. You probably do have a few ways you like to spend money – whether it’s sending your kids to a fantastic summer camp, attending concerts, or collecting antique cars.

Leave room in your budget for those things that matter only to you and yours.

Choose a real estate agent to help in the home-buying process.

Sure, you can search on line and get an idea of what’s available, but when it’s time to actually locate the home of your dreams, you need professional assistance.

First, they know how to sort through the listings to find homes in the neighborhood that’s right for you. Remember that the neighborhood is the one thing you can’t change once you’ve purchased a home.

Next, they sometimes know of homes that are just coming on the market. In a competitive market, that will give you an edge.

After that, they know how to write the offer to protect your interests, and to present the offer in the best light. After that, they employ negotiation skills to help you get the most favorable price and terms.

How to choose the right agent.

Look for an agent who has knowledge and experience in the area where you wish to purchase a home. You want someone who is familiar with values and trends in the area and who can answer your questions about services and neighborhood amenities. This is not the time to choose someone from another part of the city, or worse – from another city.

You also want someone who is enthusiastic about helping you and who answers or returns your phone calls or emails promptly. Don’t settle for someone who calls back in a day or two.

Next, choose an agent who takes the time to answer every one of your questions to your satisfaction.

Once you have your loan nailed down and have found a spectacular agent…

It’s time to find that house.

Before you begin looking at homes, create two lists. One is “Must have,” and the other is “Would like to have.” Share these lists with your agent, who will then pare down the list to include only homes that offer the features and amenities you must have. From there, he or she will attempt to put homes with your “Would likes” at the top of the viewing list.

The location is all-important.

Choose a neighborhood or neighborhoods that will put you in close proximity to your workplace, your school, your favorite recreational spots, or possibly to your friends and family members. In addition, choose a “good” neighborhood. That means one where the homes are well-kept, adding to the value of every house nearby. In fact, it’s wise to buy the least expensive home in the best neighborhood you can afford.

The location is the one thing that can’t be changed once you’ve made the purchase, so don’t compromise.

Have your agent look at market trends in the neighborhood. Are homes increasing or decreasing in value? Is there new development planned that will affect home values?

Investigate the school district. Even if you don’t have children, buying in a neighborhood served by a top school district is wise, because it will affect your future resale value.

Choose a layout and floor plan that works for your family and your lifestyle. For instance, if you love to cook, don’t settle for an apartment-sized kitchen. While it’s true that walls can usually be moved, it’s expensive. So choose a pleasing floor plan from the start.

Look beyond the surface. Things like paint color and floor coverings are easily changed, and since most people can’t see beyond that surface, you just might get a great bargain buying a home with a lime-green shag carpet.

Once you’ve chosen the house, it’s time to submit an offer.

Your real estate agent will help you submit a solid offer – which entails a whole lot more than just the purchase price.

An offer consists of many pages, outlining everything from the type of financing and your down payment to the closing date and the contingencies your agent will recommend.

If yours is a good offer and you have no competition, it may be accepted as is. However, do be prepared for a counter-offer. Your agent will help you analyze that counter-offer and decide how to respond. Remember it is sometimes best to give a little on small things in order to obtain the prize: the house you want.

After you and the seller come to agreement, you’ll need a home inspection, an appraisal, and final mortgage approval.

You’ll also need a little patience. Here at Homewood Mortgage, the Mike Clover Group, we strive to complete each purchase loan within 30 days. However, some lenders routinely take 45 to 60 days.

Your contingencies will probably include a home inspection, so get that out of the way first. You may have included a repair allowance in your offer, and if any called-for repairs come within that amount, you can proceed. If more money will be needed, it’s time for more negotiation. Again, your agent will help you.

This contingency is important to you, because if repairs are extensive and the seller won’t agree to have them done, you can back out without losing your earnest money deposit.

Your offer may have called for other inspections, such as checking for insect infestation or determining the condition of a well or septic tank. These are equally important.

The Appraisal.

Your lender will order the appraisal just as soon as you’ve approved the condition of the house and the underwriter has approved your loan. This is to ensure that the bank does not lend more than the value of the house. If the appraisal comes in too low, you have three choices:

  • You can pay the difference out of your own pocket.
  • You can have your agent challenge the appraisal.
  • You can cancel the transaction and retrieve your earnest money.

The final mortgage approval.

Within a day or so of closing, the bank will take one more look at your financial picture – and here is where far too many buyers destroy their own dreams of home ownership.

How? By doing something to change their credit scores or their overall financial picture. At this time it is crucial that you do not:

  • Apply for a new credit card or credit at a retail store.
  • Buy a new car.
  • Co-sign a loan.
  • Increase the balance on an existing credit card or retail account.
  • Use your credit card to make a reservation of any kind.
  • Quit a job.
  • Change jobs.
  • Drain your savings or checking account.

Doing any one of those things could cause your loan to be denied, so don’t do them!

Finally – the closing!

Prior to the big day you should receive a copy of the closing documents for your review. These documents will outline the terms and conditions of your loan and will itemize the costs you are paying.

If you have questions about anything, don’t hesitate to contact your agent and your lender to get an explanation and clarification.

When you go to closing, remember to take along your ID and the cashier’s check for your down payment and closing costs, and be prepared to spend an hour or so. You’ll have pages and pages to sign, and the closer will explain each of them to you one more time as you go through the stack.

Here at the Mike Clover Group, we enjoy helping future homeowners take that first step by getting them pre-approved for a mortgage loan.

Whether you’re ready for pre-approval or simply have questions, just call.  Reach us today at 469.621.8484.

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Should YOU choose a 30-year fixed rate mortgage? Maybe not.

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Pretty girl is putting a coin into a piggy bank that her handsome father is holding. Both are smiling while sitting on sofa at home

While the most common home loan is the 30-year fixed rate mortgage, it may not be for you.

This loan was first established as #1 when the Federal Housing Administration embraced it back in 1954. It gave homeowners a longer time to pay, so their payments could be lower than they would have been with a 15-year loan.

In addition, people were happy with the predictability. They knew that the principal and interest portion of their mortgage payment couldn’t change for the duration of the loan.

It’s the most popular loan today for the same reasons. But that doesn’t mean it’s the right loan for you.

Here are 4 good reasons why you may want to choose a different loan:

You don’t have 20% to put down. Yes, you can get FHA loans and even some conventional loans with far less down payment, but then you’ll pay a steep mortgage insurance premium for the life of the loan.

Most conventional 30-year fixed-rate mortgages will require 20% down to avoid mortgage insurance premium.

You have the 20%, but you don’t want to spend it. You might prefer to put the money into a retirement account or keep it on hand for a business opportunity. You may want to consider a lender paid mortgage insurance loan. You pay a little higher rate to avoid mortgage insurance premium fees. This loan is ideal if you are going to be in the house for a minimum of 4 –  5 years.

You want to build equity quickly. If you can afford a higher monthly payment and want to build equity in a hurry, a 15-year fixed-rate loan could be best for you. The 15-year loan offers two advantages: Faster equity build-up and lower interest rates. Thus, each payment will go more toward principal and less toward interest.

You’re planning to sell the home within a few years. Perhaps this is a starter home and you plan to “move up” within a few years. Maybe you’re making giant strides climbing a corporate ladder and expect to be transferred to another city before too long. Or, perhaps you plan to retire to a different climate in just a few years.

In this case, a lender paid mortgage insurance loan is ideal, you can just right off the interest being paid. Also in most cases the payment is less even though the rate is higher because no mortgage insurance premium is required.

Do keep in mind, however, that in order to recoup your purchase price, you need to own a home for 3 to 5 years before selling. We realize that wasn’t true during the boom years before the crash, but in a normal market, such as we have now, that’s the rule of thumb.

Why? Because you’ll have selling costs. Plan on those taking at least 10% off the top of your eventual selling price.

If you plan to move within just a year or two… don’t get any loan at all! You’ll be financially and emotionally better off just renting. Remember that selling a house is a lot of work – not just for the real estate agents, but for the homeowners who need to keep everything in “show-ready” condition, be ready to vacate for showings at inconvenient times, and endure the stress of negotiating, waiting for appraisal and inspection results, etc.

 

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What is a mortgage and how does it work?

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Back view Of Happy Couple Dreaming Of Their New Home And Furnishing On Blue Background. Family With Sketch Drawing Of Their Future Flat Interior.

Unless you have the ability to pay all cash for your new home, you’ll need a mortgage.

What is a mortgage? It’s a loan from a financial institution used to pay off the home’s sellers. It comes with a lien against your new home, and with your promise to the lender to make timely payments of both principal and interest, and to keep property tax and homeowner’s insurance payments up to date. In many cases, taxes and insurance are added to your monthly payment and held in escrow for the bank to make those payments.

Unless you made a down payment of 20% or more of the purchase price, your payments will also include mortgage insurance – which does not protect you, but protects the bank in the event of your default on the loan.

When planning to buy, first take a look at your credit score and debt-to-income ratio.

Low credit scores and high debt to income ratios can either destroy your chances of getting a mortgage loan, or put you into a high interest bracket. So get a copy of your credit report and scores.

If you need to do some work to get those scores up, get started right away. If you’re not sure where to start, please feel free to call us at the Mike Clover Group. We’ll be happy to give you tips and advice. Meanwhile, be sure to make every payment on time, and don’t take on any new debt.

Look at your debt to income ratio. You’ll find it by dividing your monthly debt by your gross monthly income. If the number is more than 43%, you need to begin paying off some obligations and reducing your debt.

Next, get mortgage pre-approval.

The maximum amount of your loan and the interest you will pay on that loan will depend upon your financial picture at the time of application. So before you begin to shop, it’s wise to get pre-approved for your mortgage loan.

You may have already been pre-qualified, and that can be helpful to you in your planning, but note that pre-qualification is not the same as pre-approval, and it carries no weight with banks or will home sellers. It is based only on a conversation between you and the lender, with no verifications.

Pre-approval consists of a lender getting the same information from you and doing the same verifications that he or she would do if you were making the actual loan application. Your income, your employment history, your assets, your debts and obligations, and your credit scores will all come into consideration.

Pre-approval, which should take no more than 2 or 3 days, gives you two advantages:

  1. You’ll know what you can afford, so you’ll look at the right houses. Beginning the search with homes that are out of your range is disheartening. Once you’ve seen, and fallen in love with, a home you can’t afford, the houses you can afford will have little appeal.
  2. You’ll have a far greater chance of having your offer accepted, or at least considered, than you would with no letter of pre-approval. Sellers aren’t interested in waiting to see if you can get a loan.

Don’t jump at the first mortgage loan you see – shop around.

Research the different types of mortgages and the programs offered by different mortgage brokers and banks before you decide.

First, there are two basic types of mortgage loans – fixed rate and adjustable. With a fixed rate loan, the interest rate will not change for the duration of the loan. The only time your payment will change is when your taxes and insurance change. This is a good loan for a borrower who likes the security of knowing the amount of their payment for the next 15, 20, or 30 years.

An adjustable rate mortgage generally starts out with a lower interest, but is subject to change after a pre-set number of years. (Usually 5 years) The interest rate will have a ceiling, or cap, but can still rise substantially. The difference between a 4% and a 5% interest is about $60 per month per $100,000 owed.

Next, different lenders have different programs and fees. Some, like the Mike Clover Group, can close your loan in 30 days, while others might take 45, 60, or even 90 days.

Apply for your mortgage loan

A common misconception is that once you’ve gotten a pre-approval and/or made a loan application, you’re stuck with that lender. Not so.

Once you’ve made application, you should receive a loan estimate that includes closing costs, the interest rate, and the monthly payment, including principal, interest, taxes, homeowners insurance, and mortgage insurance.

You have every right to take the same information to another lender in order to compare offerings and fees. We at the Mike Clover Group are proud of the fact that our interest rates and loan fees are among the lowest available in Texas.

Note that while letting a retailer check your credit at this time can harm your credit score, making multiple mortgage loan applications will not. The credit bureaus recognize that you’re not trying to take out two or three home loans – you’re shopping.

After you approve the loan estimate…

Your file will go to the underwriter for final approval, and as long as there are no mishaps, you’ll be on your way to closing.

Mishaps? What can happen after the loan is approved?

Your financial picture can change. You can apply for credit at a retail store or get a new credit card. You can co-sign a loan for a friend. You can change jobs or quit your job. You can buy a car or furniture for your new house. You can book a vacation, using a credit card as security. You can be late paying a bill.

The time between your loan approval and closing is critical. Do nothing to change your financial picture, and make no purchases beyond ordinary living expenses.

If you have questions, just call. Here at Homewood Mortgage, the Mike Clover Group, we’re always happy to answer. Reach us today at 800-223-7409.

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Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

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30 Year Fixed Jumbo Loans

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Jumbo loans – not as jumbo as you may think

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Beverly Hills, CA, USA, January 16, 2016: California Dream Houses Beverly Hills .Beautiful homes and estates in Los Angeles, CA.

 

When you hear the term “Jumbo loan” you might think of loans in the millions, but that’s not so.

A jumbo loan is a home mortgage loan for any amount that exceeds the loan limit on conforming loans. In most areas, including Dallas / Fort Worth, that limit is $424,100. In high-home cost areas, the limit is $636,150. In areas outside the contiguous United States, the limits can be even higher. Limits are also higher when purchasing properties with 2, 3, or 4 housing units.

These limits are set by Fannie Mae and Freddie Mac, and are based on a county’s median household income.

Jumbo loans are available for primary homes, vacation homes, or investment properties, and can be either fixed-rate or adjustable rate mortgages.

After the housing crisis and the enactment of new regulations under the Dodd-Frank legislation, many mortgage brokers pulled out of the jumbo loan business, leaving them to the large retail banks. Homewood Mortgage, however, continues to offer Jumbo Loans, and – as with all of our offerings – at very competitive rates.

Requirements are a bit stricter…

Since lenders have more at risk, they need a bit more assurance that the borrower has the ability to repay their jumbo loans. Thus, while a conventional loan can be obtained with credit scores as low as 620, most lenders require a score of 700 for a jumbo loan.

Here at Homewood Mortgage, we can go as low as 680.

In addition, down payment requirements are higher. While some lenders require 25% down (or a loan to value of 75%) we at Homewood Mortgage require 20% down.

Debt-to-income ratios (DTI) are also lower. Your debt to income is calculated by dividing your minimum monthly debt by your gross monthly income. For most conventional loans, debt can equal 45% of your monthly income. For a jumbo loan, that number is generally reduced to 38%. We will go up to a 43% debt to income ratio.

As with all mortgage loans, a variety of risk factors are considered both for loan approval and for the interest rate, debt-to-income ratio, and the loan to value ratio that the lender will approve.

With housing prices rising across the U.S., the number of jumbo loans compared to conventional loans is also increasing. Numbers for last year are not yet available, but the Wall Street Journal reported that jumbo loans reached 24% of the total in 2015, up from 21% in 2014.

When a jumbo loan is what you need, call the Mike Clover Group at Homewood Mortgage. We not only have low interest rates, we offer low closing costs and a fast turn-around.

Reach us today at 800-223-7409

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Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234

 

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Are you financially ready for home ownership?

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Woman dreaming of financial success

If your dream of home ownership is becoming more of an obsession than a dream, it’s time to take a look at your finances and see if you’re ready to make the leap.

If you can answer yes to these 5 questions, then it’s time to get serious about seeing a lender, getting pre-approved, and beginning the home search:

  1. Am I planning to stay in the community for the foreseeable future?
    This has nothing to do with your finances, but it is the first consideration. It’s not wise to buy if you know you’ll need to sell in just a couple of years.
  2. Am I debt-free and do I have money in the bank?
    Not only do you need money for a down payment, you should have an emergency fund equal to at least three months’ of routine expenses.

    This will ensure that you’ll be able to handle unexpected expenses and unexpected gaps in income. You don’t want to lose your home because of an accident, illness, or job lay-off.

    If you’re not there quite yet, get started! Pay off your debts one-by-one until they disappear. When one is paid off, add that payment to the account that’s next on your list. When you have them all out of the way, commit those funds to your savings account.

  3. Do I have an adequate down payment saved?
    While some programs are offering extremely low down payments again, taking advantage of them isn’t always wise. Strive for at least 10% down – and go for 20% if you can. Once you reach the 20% mark you’ll be able borrow without the burden of paying mortgage insurance.

    That will not only feel good because you’re not throwing money away, it will mean you are able to spend more on the monthly principal and interest payments. After all, mortgage insurance adds approximately 1% of your loan balance to your monthly payment. (On a $200,000 mortgage loan, that’s $2,000 per year, or $166 per month.)

    Speaking of that payment, it’s wise to limit your payment to no more than 25% of your monthly take-home income.

  4. Do I have enough extra to pay my closing costs?
    While it’s true that some sellers will agree to cover those costs, not all do. You should be ready to pay them yourself. These costs can amount to between 2 and 5% of your home’s purchase price, so for a $200,000 home you’ll need between $4,000 and $10,000.


What are these costs?

The loan origination fee

Home and pest inspection fees
Appraisal fees
Prepaid property taxes, homeowner’s insurance, and mortgage insurance
Title insurance to cover your lender
Recording fees
Underwriting fees

Different lenders charge different fees, so you won’t know the exact amount needed until you’ve made your loan application. Be prepared!

You are entitled to receive your final closing papers 3 days prior to closing, so be sure to read the fees carefully and do question anything that wasn’t in your original estimate and anything for which the amount has changed dramatically.

  1. Can I afford the cost of moving?
    You may have friends with trucks and muscles who will help you do the actual moving, but even if they work for free you’ll be expected to provide refreshments. And if you don’t have those friends, you’ll need several hundred dollars to pay a commercial moving crew.

    In addition, you’ll need to purchase supplies such as packing boxes, bubble wrap, tape, marking pens, etc. You’ll also need cleaning supplies, and if you plan to do any painting or other fix-up before you move in, you’ll need those supplies.

    Now add in deposits on utilities and the cost of any appliances that weren’t included in your home purchase.


In order to plan ahead, get estimates for these items, then pad that budget a little to allow for something unexpected.

 

Don’t ignore this major money-saving move: Hire a buyers’ agent.


Hiring a buyers’ agent is one of the most important things you can do to ensure a smooth transaction.

 

Because agents are familiar with the houses in their market, and because they have access to both the MLS notes and the listing agents, your agent can shave days or weeks from your house hunt.

 

Because agents know the going prices in their markets, an agent can also guide you in making reasonable offers and protect your interests in negotiations.  They’ll also keep you out of trouble by making sure you’ve seen all the appropriate disclosures and have included the correct contingencies in your offer.

 

Except in special circumstances, buyers’ agents are paid by the seller through the transaction, so you get valuable protection at no additional cost to you. Don’t risk purchasing a home without it!

 

Are you ready to get pre-approved and start the search for your new home?

If so, or if you’re not quite sure, get in touch with us at Homewood Mortgage – the Mike Clover Group. We’ll be glad to answer your questions and do a pre-approval to let you know exactly where you stand.

 

We offer fast service and the lowest rates and fees available in Texas, so call the Mike Clover Group at 469.621.8484.

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Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

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Stop! Before you dive into a mortgage you can’t afford…

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Children sitting on the floor and holding their piggy bank

If home prices in your area are rising and you’re worrying about ever becoming a homeowner, stop and think.

Remember all the families who lost their homes after the real estate bubble burst? Many of them were in over their heads, simply because they got in a panic and purchased when they should have waited.

So what should you do? First, consider your options. To do that, you need to evaluate your financial position as it stands today.

Look at how much you have saved and how much you have coming in each month.

The safest, least expensive way to purchase a home with a mortgage is to make a down payment of 20% of the purchase price. That eliminates the need for mortgage insurance and lowers your monthly payment. You can get a loan with as little as 3% down – but should you?

After making a down payment, you should have reserve funds to cover not only closing costs and moving expenses, but unexpected repairs to your new house. Things do happen.

The rule of thumb is that you should spend no more than 25% of your monthly take-home pay on your mortgage payment. Whether you should spend that much depends upon your income and your other obligations. Remember also that you should continue putting money aside – for home maintenance and for your future.

Remember that when a lender qualifies you for a specific amount, he or she doesn’t know your lifestyle and doesn’t know about your family obligations. Use your own common sense and good judgement.

Now that you’ve looked at your situation – should you (or can you) buy the home of your dreams right now?

If the answer is no, consider these three options:

First and most obvious – keep saving.

Make sure you and your spouse are in agreement, then work to pay off any outstanding debts and put more away toward your down payment.

At the same time, work on ways to increase your own income. With a bit of extra effort could you get a promotion and a raise in pay? Do you have a side business you could spend more time on and cause it to grow? Could you take a second job part-time to gain those down payment funds?

How about reducing the outlay? Would it be worth skipping that concert or dinner out to put an extra $200 in the down payment fund? Do you really need that new swimsuit this season? Can you live without those new shoes, a new golf club, or the latest iPad?

A few lifestyle changes can build that fund faster than you might think.

If you’re determined to buy now…

Re- think what you really must have.

REALTORS® today report that most buyers – even first-time buyers – are looking for homes that appear sparkling new. They want move-in ready, with all the latest upgrades to kitchen and baths. They want fresh paint, new flooring, and a landscaped yard.

As a result, there’s extreme demand for houses that fit the description. Quite often there are bidding wars and the selling prices rise beyond the asking prices.

Meanwhile, perfectly good homes that need a little work are often ignored – and their prices reflect it.

For the difference in the price – and in your monthly mortgage payment – you could afford to make those upgrades yourself, a little at a time. The bonus to that is you’d be the one choosing the materials and colors, and the house would become uniquely yours.

Follow these guidelines to make a smart investment in a “less than perfect” home:

  • Choose a neighborhood with rising values
  • Look for a neighborhood with good schools – even if you don’t have children
  • Buy the least expensive house in the best neighborhood you can afford
  • Get a home inspection to make sure there are no major repair expenses lurking behind the walls, ceilings, or floors.

Choose a real estate agent who understands your goal and will work with you to achieve it.

Finally, widen your search.

Talk with your real estate professional about prices in various areas. Naturally you’ll need to consider travel time and expense to work, but it may save you big dollars to buy in the suburbs rather than the city.

This is especially true if property taxes within the city are high.

In some cases, the reverse is true. So ask your agent: “Is it cheaper to own a home in the city or the suburbs?”

And – what if you chose an entirely different city? Does your employment offer opportunities for relocation? If not, would your skills make it easy for you to find new employment somewhere else?

Housing in the top metro areas in the U.S. is going up in price due to low inventory levels. Other cities which might be just as attractive to you and yours still have affordable prices.

Choose a real estate pro to help make your housing dreams come true.

Now is not the time to take pity on a struggling agent – it’s the time to choose someone with experience and the skills to help you achieve your goals.

  • Look for an agent who knows the market and will share his or her knowledge with you – so you know which areas are improving, which are declining, and which offer the best buys.
  • Look for an agent with proven negotiating skills.
  • Look for an agent with strong connections in the industry – he or she is the one who knows about properties even before they are offered to the general public.
  • Look for an agent who can and will explain every detail of a contract to you, who will answer your calls promptly, and who will monitor your transaction from offer through closing.
  • Look for an agent who will take pride and pleasure in handing you the keys to your new home.

Talking with a lender is a wise first move…

If you’re ready to learn your current homebuyer status, contact the Mike Clover group at Homewood Mortgage.

We’ll be happy to go over your finances with you and let you know what you qualify for today. If it turns out that the time is right, we’ll get you pre-approved so you can move forward with confidence. We’ll even give you a list of experienced, enthusiastic REALTORS® if you haven’t already made your choice.

Call the Mike Clover Group at 800-223-7409

mike-clover-group-email-signature-muy-grande

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

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The step-by-step process of a mortgage loan

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Young couple sitting on the floor and daydream about new home

 

Getting a mortgage loan isn’t mysterious, but it is a step by step process.

Step one: Shop for your mortgage.

All loans and all lenders are not alike. They offer different interest rates, different closing costs, and different terms.  In addition, some lenders are attentive to your needs, keep you fully informed, and assist you in fixing any flaws in your application or your credit rating. Others are not.

So choose your lender and learn about the different loan programs as your first step toward home ownership.

Step two: Get mortgage pre-approval.

One of the biggest mistakes potential home buyers make is finding a home before finding a mortgage.

This is a huge mistake because in today’s market, it means those homebuyers will likely lose out on their first choice. Most sellers today aren’t willing to wait until a buyer finds a lender and becomes approved for a mortgage loan.

Note that pre-approval is far different from pre-qualification. Pre-qualification can happen with a phone call – and it means nothing.

During the pre-approval process your lender will check your credit, verify your debts, income, and employment, and do preliminary underwriting. To apply for pre-approval, you’ll need to provide the lender with the same information as you would if you were ready to purchase immediately.

You’ll need to provide:

  • Pay-stubs for the past 30 days, showing year-to-date income
  • Two years of W-2 forms from your employer or employers
  • Two years of federal tax returns
  • Two months’ statements or a quarterly statement of all your checking and savings accounts, as well as any CD’s, IRA’s, stocks, or bonds.
  • A list of all real estate currently owned.
  • Two years’ history of your current home mortgage – or two years’ information on your status as a tenant, including the name and contact information for your landlord.
  • If your down payment is coming from your parents as a gift, you’ll need to provide a letter that clearly states the money is a gift, not a loan.

Step 3: Go find that home!

Once you’re approved and know how much you can spend, go find that home. Choose a buyer’s agent who will guide you to homes you can afford and who will advise you about making reasonable offers.

Once you come to an agreement with a home seller, notify your lender and take him or her a copy of your purchase agreement.

You may want to pause at this point for a home inspection, since the results might lead to a re-negotiation or cause you to change your mind entirely.

Once you’re sure you’re ready to go forward, your lender will order an appraisal, just to make sure that the collateral you’ll be offering for your mortgage loan has enough value to cover your outstanding balance.

The appraiser will look the house over thoroughly, then compare it to similar homes that have sold recently in the same or similar neighborhoods. When the real estate agents have done a good job at pricing, the appraiser’s value will be very close to the price you’ve agreed to pay.

However, markets do change, so the appraisal could come in higher or lower. If it’s higher, congratulations, you’ve just gotten some instant equity. If it’s lower, you and the seller will have three choices:

  • Challenge the appraisal or get a second opinion.
  • Reduce the selling price.
  • Cancel the agreement.

The final steps: A title report and a last-minute check on your eligibility

When you purchase a home you “take title” to that home and it becomes the collateral in case you should default on the loan. Naturally, the bank needs proof that you will have clear ownership.

A title report starts with proof that the seller has the right to transfer the title to you and that there are no clouds on the title. A cloud could be an unpaid lien for work performed on the house, a tax lien, a claim of ownership from a 3rd party, or any number of other problems.

The title company, after doing a complete records search, will issue title insurance wherein they assume the liability for claims they may have missed during the search. You will pay for a title insurance policy that covers the lender. The seller will pay for a policy protecting you (which is not required but is recommended).

And finally – the last-minute check on you.

Many a buyer has found his or her hopes of home ownership dashed at the last minute because they didn’t listen to their lender and their agent when they said “Do nothing to change your financial status until after your loan has closed and funded.”

We’ve seen buyers purchase a new car or new furniture, obtain a new credit card, make reservations for a dream vacation, empty out a savings account, co-sign a loan for a family member, change jobs, or quit their job – just days before their loan was scheduled to close. As a result, their financial status changed and they were no longer eligible for the loan.

Do you want to buy a home?

If you’re not sure whether your credit rating and income will allow you to purchase, get in touch with us at Homewood Mortgage – the Mike Clover Group. We’ll be glad to answer your questions and do a pre-approval to let you know exactly where you stand.

Call the Mike Clover Group at 800-223-7409.

 

mike-clover-group-email-signature-muy-grande

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Posted in Uncategorized | Comments Off on The step-by-step process of a mortgage loan

Could you cover a $400 emergency from ready cash?

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A Federal Reserve survey showed that nearly half of all Americans could not cover a $400 emergency without borrowing from someone, selling something, or putting the expense on a credit card.

That means that nearly half of all Americans aren’t saving any money.

Why aren’t Americans saving?

There are two primary reasons:

  • They aren’t earning enough to do more than cover basic needs.
  • Saving isn’t as important to them as instant gratification. It simply isn’t a priority.

It’s true that some folks barely earn enough to put a roof over their heads and food on the table. Some of them are getting by through careful spending and some are going farther into debt on credit cards each month.

Far more Americans do earn enough to save, but it isn’t a priority. They’d rather go out to dinner and a movie, buy new clothes, own the latest iPhone, or drive a new car.

It really isn’t safe to live that way, because those $400 – or $4,000 – emergencies do come along. When you have no money set aside, you are forced to borrow, usually on high-interest credit cards. And then the spiral into crippling debt begins.

And what about those future expenditures? Your savings can have any purpose you wish – retirement, college for the kids, a down payment on a home – or a bigger home, a new car, or a dream vacation.

You know you need to save, but how?

You might think you don’t earn enough money to begin saving, but the odds are – you do. The secret to finding that money is budgeting.

Have you heard of zero-based budgeting?

A zero-based budget is one in which your income minus your outgo equals zero. You plan how you will spend every last dollar.

Begin with those fixed expenses such as housing, insurance, and the power bill. Then include a figure for necessary spending, such as food and gasoline. Next assign an amount to savings before you decide how the remainder will be spent. And do decide. Assign a purpose to every one of those dollars.

That doesn’t mean you must spend it all – if your budget allows $200 for new clothes and you decide you don’t really need them, you have more to add to savings – perhaps for some more enticing purchase in the future.

Making a budget sounds intimidating, but it really isn’t. Money-guru Dave Ramsey  says his favorite budget app is Every Dollar. The Every Dollar program prompts you to remember all of those miscellaneous expenditures, so you don’t forget a thing. With it you can set up your money plan in about 10 minutes. The basic program is free, so there’s no reason not to get started today.

You can also take advantage of a free trial that connects to your bank account and uploads your transactions. It also lets you track your expenditures on the go, so you won’t be tempted to exceed your budget in any category.

It’s never too late to take control of your money – and the sooner you do take control, the sooner you’ll have more money to control.

mike-clover-group-email-signature-muy-grande

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770

Posted in Uncategorized | Comments Off on Could you cover a $400 emergency from ready cash?