Are you thinking of purchasing a second home? If so, you know the first good reason: You’ll enjoy it! You’ll love the comfort and convenience of having your own things in your own place, and you may even love being able to invite family and friends to share your vacations.

Next, when you finance that purchase through the Mike Clover Group at Homewood Mortgage, you’ll enjoy the same low rates as you would on a primary home purchase – and with only 10% down.

Did you know that you’ll also enjoy tax breaks? In fact, your second home can give you the same tax breaks as your primary home.

You can deduct mortgage interest on the purchase and on a second mortgage or line of credit if the money was used to improve the house. You can also deduct property taxes as long as those taxes are uniformly imposed. (In other words, special assessments that raise the value of your property don’t count.)

As with all things IRS, there are rules, regulations, and limitations. For instance, you can only deduct interest on up to a total of $1 million worth of debt. There are also limitations on deducting second mortgage interest if the two loans together create a debt in excess of the home’s fair market value.

To further complicate things, the IRS puts limits on your itemized deductions if you earn “too much” money. A married couple earning more than $311,300 falls under these limits. This is a topic to explore with your tax advisor.

A nice little bonus…

Say you’ve got a fantastic second home on the oceanfront in a location where your company’s CEO would love to vacation. As long as it’s for 14 days or less, you can rent that home to the CEO for any fee you like. If you stay under the 14 day limitation, you don’t have to report that income.

Should you decide to rent your second home for more than 14 days, you’ll need to keep careful records of the number of days rented, the number of days you used it, and the number of days it was vacant. You or your tax accountant will have to do some detailed calculations to separate expenses for the personal use from expenses related to the income-producing use.

When you use a house as rental property, you’re also entitled to take depreciation – sometimes. These are both issues to discuss with your tax advisor before making any decisions.

Do be aware that in some communities renting your house or condo unit will put you in violation of HOA regulations – so check before you proceed.

If your second home is a week-end get-away…

Perhaps you’ve purchased a second home just an hour or so away from your current home. Deciding which of those homes should be your primary home is something to discuss with your tax advisor if you have any plans to sell either home within the next 5 years.

As you probably know, a capital gain of up to $250,000 ($500,000 for married taxpayers filing jointly) is exempt from capital gains taxes as long as you consider it your primary home and have owned and resided in the home for 2 of the past 5 years.

Of course it’s not enough to just say “this is my primary home.” The IRS will consider other factors, such as where you work, where your mail is delivered, etc.

There’s a lot to consider, but the bottom line is that a second home will give you pleasure, and the tax breaks will help lessen the cost of ownership.

When you’d like to discuss your plans and learn how the Mike Clover Group can close your loan quickly, and with the lowest closing costs and interest rates available, give us a call at 800.223.7409

Mike Clover

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# 23477

Right now many Americans, especially the self-employed, are reviewing their 2015 expenditures to make sure they’ve claimed every legal deduction before filing their Federal and State income tax returns.

It’s a smart thing to do, unless you want to buy a home in 2016 and need to show a higher income in order to qualify.

As many of the self-employed have learned, taking every possible deduction often gives an inaccurate picture of their ability to make mortgage payments. It reduces their “paper income” to a near-poverty level. The higher your income, the bigger the home loan you’ll qualify for. If you reduce it to less than your monthly house payment, you aren’t going to qualify at all.

If you plan to purchase a house this year, it might be in your best interests to forgo some of those deductions and spend a few thousand extra in State and Federal income taxes this year.  You’ll reap the benefit in future years when you deduct the taxes and interest paid on your new home.

If you’re self-employed…

Talk with your lender or a financial advisor before deducting large expenses such as those for a business vehicle or a home office. Learn which deductions they can add back to your income as “paper only” expenses. Then consider eliminating your deductions for smaller expenses such as business meals and travel.

If you’ve made a large one-time purchase, save the documentation and take it along to your lender. Explain why you made the purchase, why it was necessary at that time, and why it will not be an ongoing expense. If you’ve made equipment purchases that could be written off in the first year – shift them over to the depreciation column and take only a portion of that expense.

Caution: Don’t go freelance this year if you want to buy a home.

At least, don’t go freelance until after your transaction has closed.

All self-employed people must show a two-year track record of earnings before being considered for a mortgage loan. It doesn’t matter how many years of experience you have in the field. Lenders know you may or may not make it when running your own business.

If you’re drawing a paycheck…

Individuals with W-2’s that prove their income generally have an easier time becoming approved for a loan than those with self-employment income, but still do need to be careful about deductions. For instance, if you use Form 2106 to deduct unreimbursed business expenses, you may want to skip them this year.

Don’t change employers unless you stay in the same field and have roughly the same earnings. Your new employer will have to provide you with a verification of employment letter (using the I-9 Software) to reassure your lender that your earnings will not decrease.

If you’ve been unemployed for an extended period of time in the past two years, be ready to explain the reasons why.

If you have rental income and expense…

You’ll have to show your lender your Schedule E to verify actual rental income and expenses for 2015. So this year, you might want to forgo the deduction for mileage for the trips you’ve made to check on your properties, or the $200 you paid for a new kitchen faucet.

Remember that you could be seeing positive cash flow from your rental properties, but still show a paper loss due to depreciation. Depreciation is one expense that will not be deducted from your rental income when your lender calculates your total income.

The conclusion:

The small (and large) deductions that add up when reducing your income for tax purposes also add up when reducing your income for loan qualification purposes.

If you want to buy a home this year and need to show a higher income in order to qualify, forgo some deductions. Go ahead and pay that additional tax. It will come back to you tenfold when you file your taxes in years to come.

And best of all – you’ll be living in the house you love.

Mike Clover

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# 23477

Are you still holding on to the American Dream of home ownership? If so, you probably know that obtaining a mortgage loan isn’t quite as easy as it was ten years ago. Banks have wisely become more cautious.

But it doesn’t mean you should abandon the dream – it just means you need to take the right steps to qualify for that mortgage loan. One of the first steps is to raise your credit score as high as possible.

Although factors such as your employment and debt to income ratios will affect your success, the #1 most important factor is your credit score.

Different lenders and different loan programs come with different qualifications, but the generally accepted minimum credit score for a FHA-backed loan is 600. FHA loans are popular today, especially with first time buyers, because they have a minimum down payment of only 2.5%.

Conventional loans, which are not backed by government agencies, require at least a 620 score.

Aim far higher than the minimums…

These minimum scores will not guarantee you a loan, nor will they get you a favorable interest rate.

Going into the process with minimum scores means you’re going to have a lot of hoops to jump through. It won’t be an easy ride. You will, of course, increase your chances by coming in with a larger down payment – at least 20% is best.

Interest rates are not the only cost affected by credit scores. Borrowers with less than 20% down are required to pay for mortgage insurance, and those premiums are higher when combined with low credit scores.

Aim for 680 or higher

A credit score of 680 is the unofficial minimum for borrowers who want some choice and flexibility, but don’t stop there. A score in the 740 range will get you the lowest interest rate.

Thus, if you dream of buying a home, but have had credit problems in the past, start now to raise your credit scores as high as possible.

The first step is to get a copy of your credit report from each of the three major bureaus. You’re entitled to free reports once per year at AnnualCreditReport.com. These free reports don’t give you your FICO scores, but they do show you what is included in your report, so you can check for errors.

Even the Fair Isaac Corporation admits that 75% of all credit reports contain errors, so don’t assume that yours does not. Some, such as a typo in your street address, are harmless. Others, such as someone else’s credit account being reported under your Social Security number, will drag down your scores.

The second step, of course, is to make sure all your payments are made on time and to make every effort to pay down your credit card balances. Rather than trying to pay off one card at a time, aim for bringing every card below 30% usage.

Don’t open new credit card accounts, and don’t go shopping for furniture or a car. In short, don’t give out your Social Security number or authorize anyone to check your credit until you’re ready to use it.

When you’re ready, we at the Mike Clover Group of Homewood Mortgage will be happy to talk with you and show you the loan programs available to you. We’ll also be happy to get you pre-approved, so you can shop for your new home with confidence.

You can reach us at 469.621.8484 or you can apply on line at www.mikeclover.com.

Mike Clover

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# 23477

When you’re thinking of purchasing a home, refinancing, or getting a reverse mortgage, you naturally want the interest rate and terms that will be most beneficial to you. In other words, you want to pay the least for the most benefits.

The rip-off artists in the mortgage industry know that, and they’re counting on your trusting nature to keep you from looking too closely at their “money saving” offerings.

Emails, letters, and full-page ads scream promises that sound good, but may not, in fact, be truthful.

Here are a few terms that should cause you take a much closer look before being drawn in:

Low Fixed Rates

All mortgage lenders do offer low fixed rates today, simply because rates are low right now. However, you may see ads touting rates that are ½% or even a full percentage lower than other lenders are offering. Right now rates are right around 3.875% for a 30-year mortgage. Ads promising a 3% fixed rate are actually offering an Adjustable Rate Mortgage which could go to 5% or even higher within just a few months.

How do they get away with it? By using fine print to disclose that the rate is only fixed for a specific number of months. They’re counting on the fact that the print is not only lengthy; it’s so fine that reading it requires use of a magnifying glass. Most people simply won’t try. They’ll just “trust” that the large print is true and they’re getting a 30-year fixed rate.

Government Backed!

Here’s a phrase designed to lull you into a false sense of security when contemplating a reverse mortgage. Sure they’re government backed, but only because nearly all mortgages are held by Freddie Mac or Fannie Mae.

When the phrase is used by elected officials such as former Senator Fred Thompson, it adds yet another level of security.

Meanwhile, unsuspecting consumers believe that they are buying into a government program that will protect them and their interests. In truth, the fine print might reveal terms that are extremely harmful. Sometimes even the true interest rate and actual cost of the loan is buried in fine print.

Tax free!

This is another promise associated with reverse mortgages, and believing it can lead to foreclosure. They make it sound as if the homeowner will never have to pay property taxes again. In most instances, that is the opposite of the truth.

In most reverse mortgages, the homeowner must promise to pay both property taxes and homeowner’s insurance premiums on time. Failure to do so can lead to foreclosure – which might be exactly what a dishonest lender had in mind.

Read the Fine Print

This one is despicably sneaky. They know that if you did read the fine print, you’d turn down the loan. They’re counting on their invitation to read it to reassure you – so that you will, in fact, not read it.

The Federal Trade Commission and the states of Washington and Colorado are going after lenders who use deceptive advertising, but they aren’t finding all of them, and unscrupulous lenders continue the practice.

Protect yourself

• See “too good to be true” ads as a red flag that something is not as stated.
• Do read the fine print. Get a magnifying glass and go over it line-by-line.
• Don’t be pushed – Do your best to get a copy of your final agreement a day or two before closing so you have time to read and digest. Don’t let a lender rush you through reading 8 or 10 pages at the closing table.
• If in doubt, take the document to an attorney to read.

Call on the Mike Clover Group

The Mike Clover Group at Homewood Mortgage has been helping Texas homeowners and home buyers since 2002. We offer the lowest (honest) interest rates and closing costs available in the industry, and we promise timely closings.

Our reputation is based on customer satisfaction that leads to both repeat business and referrals.

You can reach us at 469.621.8484 or you can apply on line at www.mikeclover.com.

Mike Clover

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# 23477

Today, many who have attained the American Dream of home ownership are taking it a step farther – and dreaming of owning a vacation home. Many are making that dream come true.

According to the National Association of REALTORS® (NAR), 1.13 million vacation homes were sold in 2014. That’s a 57% increase over 2013, and the highest level since NAR began tracking such sales in 2003. 2015 figures have yet to be released.

While many baby boomers are purchasing vacation homes in locations where they intend to reside after retirement, some who have already retired are purchasing “winter homes” in the sunshine or “summer homes” in the northern climates. Others are opting for a get-away cabin where they can relax on week-ends.

Whatever your choice, if you dream of a vacation home, it’s time to get your finances in top shape.

NAR reported that 70% of vacation home buyers use a mortgage to finance the purchase. If that will also be your choice, here’s what you need to know:

You need good credit. Clients with scores above 720 get the best rates, while scores in the mid-600’s are required if you want to be considered at all.

If a vacation home purchase is in your future, start now to make sure your credit is in order. Get a copy of your credit report and check it for errors. Even FICO admits that a huge percentage of credit reports do contain errors – and some of them can be damaging to your credit.

If your scores could be higher, get to work on raising them long before you’re ready to make a loan application.

You’ll need at least 10% for a down payment. While programs exist to help you own a primary residence with as little as 5% down, lenders want a larger investment when you purchase a second home. For the best interest rates and to avoid mortgage insurance, start saving toward the 20% mark.

You’ll need extra cash on hand. Once the down payment and closing costs have been paid, you’ll need enough left in your accounts to cover two months’ worth of expenses on that second home.

You’ll need enough income to support both properties without exceeding a 43% debt to income ratio. In addition to the monthly cost of mortgages and taxes on both of your homes, your student loans and car payments must total 43% of less of your monthly income. (There can be exceptions to this rule in certain circumstances.)

You can’t claim projected rental income on your second home as an addition to your income. Remember, this is a vacation home and as such it comes under a specific set of guidelines. Investment (rental) properties come under a different, stricter set of guidelines.

When you’re thinking of a vacation home, call the Mike Clover Group.

Here at Homewood Mortgage, the Mike Clover Group, we offer low closing costs combined with the lowest mortgage interest rates possible – whether you’re purchasing villa rentals, a primary home or a vacation home.

We’re always happy to get you pre-approved so you can make purchase offers with confidence, and we’ll be glad to give you pointers on raising those credit scores. Just give us a call at 469.621.8484 or visit us online at www.mikeclover.com.

Mike Clover

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# 23477

When you set out to purchase a home you have several financial factors to consider. First, of course, is the price of the home. Next is your mortgage interest rate. Those two factors, together with taxes and insurance, will determine your monthly payment. After that you have to consider Homeowner Association Fees, the cost of repairs and maintenance, and even the cost of commuting.

Today mortgage interest rates are at historic lows, but unless you’ve purchased with your own cash, mortgage loan interest is still the heaviest cost of home ownership. On the other hand, it’s also a tax deduction, which has the potential of putting a few of those dollars back in your pocket.

With mortgage interest, you’re always in arrears…

Just like rent, your mortgage interest is paid monthly. Unlike rent, which is paid in advance, mortgage interest is always paid for the preceding month. Thus, when you look at your monthly statement, the balance due is not the payoff amount. You owe that much on principal plus interest for the previous month. Your monthly interest is calculated on the balance owed, which is why it decreases just a little each month as long as you make your payments on time.

For the first ten years of a thirty-year loan, the lion’s share of your payment will go to pay the past month’s interest. Very little will be applied to the principal. That’s why it’s so easy to “double up” on payments in the early years.

For example: You have a mortgage loan with a payment of approximately $900 per month. A portion of that payment, say $200, will go into escrow to pay your taxes and insurance. Depending upon your interest rate and the age of your loan, about $500 could go to interest, leaving just $200 to reduce your outstanding loan balance. Making a payment of $1,100 rather than $900 would effectively be making two payments rather than one, because that extra $200 would go toward reducing your loan balance.

Good credit scores will make you eligible to pay a lower rate of interest, which will lower your monthly payment (and perhaps make it easier to “double up” on those payments).

It’s always a good idea to check your credit scores before making a loan application. You can do so at no cost to you by visiting www.creditscorequick.com. If your scores are low, take steps to raise them before making application. Here at Homewood Mortgage, the Mike Clover Group, we’re always happy to consult with you and make recommendations for improving your scores.

Refinancing is a good idea, but only if…

If your credit scores and your financial position have improved since you purchased your current home, refinancing into a lower rate is a good idea if the difference is enough to justify the cost of an appraisal and loan fees – and if you plan to stay in the home long enough to benefit. It’s a poor idea if you plan to move within just a few months.

Refinancing doesn’t mean you get a “payment-free” month, even though it might look that way.

When you refinance, your new loan will pay off the principal balance owed plus unpaid interest up to the date of closing.

Whether you close on the 5^th of a month or the 25^th, you’ll pay interest for the entire month.  Say you close on your new loan on May 15. Your lender will add interest from May 1 to May 15 into your loan and pay it off at closing.  Interest from May 15 to May 31 will be added to your closing costs and show as prepaid interest on your closing statement.

You won’t be obligated to make a payment on June 1, so you’ll effectively miss one month of making a payment on the principal balance. You’ll pay interest for the month of June when you make your July 1 payment.

While we do provide borrowers with Loan Estimates and do explain the various costs in advance, closing statements can still be confusing to anyone who is not using them on a daily basis. So never be hesitant to ask questions.

We of the Mike Clover Group are always happy to take the time to explain each item and make sure you fully understand every aspect of your loan before you sign the closing documents.

Call us at 469.621.8484 or visit us at www.mikeclover.com.

Mike Clover

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# 23477

Should a friend or family member ask you to co-sign a mortgage loan, the best thing you can do for everyone concerned is to say no.

Let’s assume that it is your brother who has approached you about co-signing…

Why is it the best thing for your brother if you say no?

Do you remember the mortgage crisis? It came about because people who couldn’t afford the homes they wanted were granted loans. If your brother is asking you to co-sign it means his credit is poor or his income isn’t high enough to qualify for the house he wants. Keeping up with payments is likely to be a struggle.

Saying yes is simply setting him up for failure. Saying yes is also making him indebted to you in a way that could easily harm your relationship.

Why is it the best thing for you to say no?

Because co-signing a mortgage loan will completely change your own credit worthiness.  It is technically not your debt, but since you have agreed to responsibility for it, it will go on your credit report.

Because you are now legally obligated to pay an additional sum each month, your debt to income ratio (DTI) will change. If your current debt is $2,000 per month and you earn $6,500, your DTI is .31, or 30%. If the new mortgage payment is $1,000, it would bring your current debt to $3,000 per month and raise your DTI to .46, or 46%.

That will naturally lower your credit scores, and the high debt to income ratio could cause you be denied credit when you need it. If you are granted credit, it will likely be at a higher rate.

Next, if your brother is late with a payment or misses a payment entirely, the black mark will go on your credit record as well as his – and that will lower your credit scores. Are you prepared to monitor the account and make the payments if your brother is unable to do so?

Even worse than the financial impact…

Whether you help your brother out of love, affection, or a feeling of family responsibility, your relationship could be irreparably strained or even destroyed if he fails to meet his obligations. That strain could affect your parents, your other siblings, and even your spouse and children.

Co-signing a loan is really not worth the financial or emotional risk.

Better solutions…

• Help him get his financial life in order and show him ways to cut expenses and put money aside while he builds his credit.
• Encourage him to focus on buying a home he actually can afford.
• Help him research the various programs that assist with closing costs, etc.
• Help him find a mortgage lender with access to a variety of programs.
• If you can afford it, make him a cash gift that will assist with the down payment.

Is it ever wise to co-sign a loan in order to help someone make a purchase or build their credit?

Yes, but only if:

• You’re in a very solid financial position so additional debt won’t reduce your own credit scores.
• The amount is small – as in a used car loan or a credit card with a reasonable limit.
• You’re prepared to monitor the account and make the payments yourself, so they’re never late.
• The reason is to build credit, not to repair credit that has been destroyed.

If you (or your brother) are ready for a home loan, contact Homewood Mortgage, the Mike Clover Group. We offer the best rates and the lowest closing costs you’ll find anywhere – and we’ll be happy to get you pre-approved. Call us at 469.621.8484 or apply on line at www.mikeclover.com.

Mike Clover

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# 23477

First, what it does NOT mean is that you’re likely to see an immediate increase in mortgage loan rates.

Mortgage rates are tied to the yield on mortgage-backed securities, which are tied to the yield on the U.S. 10-year Treasury rates. These yields could end up higher or lower in the near future, but it won’t be because the Fed raised the target federal funds rate.

Right now, the majority of home mortgage loans are backed by Fannie Mae, Freddie Mac, and Ginnie Mae. These loans are sold to the Federal Reserve in Mortgage Backed Securities. This has been going on since the financial markets crashed in 2008.

The Fed is not now using “new money” to purchase these securities, but is rolling-over all the income (estimated at $24-$26 Billion per month) into new Mortgage Backed Securities.

What it does mean is that the rate on your existing ARM (Adjustable Rate Mortgage) is likely to increase. Now would be a very wise time to refinance into a fixed rate mortgage.

It also means that auto loans and credit card interest rates are likely to increase.

When it comes to cars, don’t panic. A ¼% rate increase would add only about $3 per month to the payment on a $25,000 car loan.

When it comes to credit cards – now is a good time to pay them off or to take advantage of the “zero rate” or low rate balance transfers you’re offered. Then pay them off.

Does it mean anything to your savings accounts? Probably not. No one expects the banks to share this quarter-percent hike.

Since home mortgage rates could potentially rise in the near future, it does mean that this is a good time to get serious if you’re considering a home purchase.

Rates in the 4% range have become “normal” over the past few years and young buyers especially panic at the idea of paying more.

However, these rates aren’t historically normal. For many decades rates ranged between 8% and 12%, and in the early 1980’s were at 18%. And yes, people still purchased homes. They were simply more conservative in what they paid for the homes they purchased.

By the late 80’s it was considered a triumph to get a home loan at 10% – without paying points.

So, while no potential home buyer wants home mortgage rates to rise, it can probably be considered inevitable at some point in the future.

Do you have an adjustable rate mortgage to refinance before the rates to up? Or, are you considering a home purchase? If so, Homewood Mortgage, the Mike Clover Group will be pleased to help you accomplish your goals. We offer fast closings, along with the best rates and the lowest closing costs you’ll find anywhere. You can reach us at 469.621.8484 or you can apply on line at www.mikeclover.com.

Mike Clover

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# 23477

What is a boomerang buyer? A person, or a couple, who lost their home when the real estate bubble popped back in 2006 and is now ready to re-enter the housing market.

A recent study by TransUnion found that approximately 700,000 such former homeowners could become home purchasers within the next year, and more than 2 million more will again become homeowners by 2020.

Whether you can become a boomerang buyer in 2016 depends upon several factors, beginning of course with your current credit rating.

But there is more that will be taken into consideration:

• When did you lose your home?
• Why did that happen?
• What kind of loan can you get?

For a conventional loan the waiting periods are four years after a short sale and seven years after a foreclosure. However, if you qualify for a FHA or VA loan, you may be able to become a homeowner sooner.

You may also be able to get a conventional loan sooner if you lost your last home due to circumstances beyond your control. For instance, the death of a breadwinner, a major health problem that prevented your employment, or loss of a job due to downsizing or a company going out of business. As long as you are now in good shape financially, many lenders will make an exception to the four and seven year rules.

Your credit rating is a major factor, and the higher it is the better your chances not only to get a loan, but to pay the least interest on that loan. Rates naturally fluctuate, but in general, over the course of a 30-year loan on a $200,000 balance, there’s a difference of more than $16,000 in interest that will be paid by a borrower with a 700 score and one with a 760 score.

You’ll also need to show a few years of steady income and a low debt-to-income ratio. So if you’re still waiting for eligibility, stay steady at your job, pay down your debt, and work on raising your credit scores.

Before you go shopping, you’ll need to become pre-approved for a loan. This is far different from the old “pre-qualification” that many lenders did prior to the bubble bursting.  Pre-qualification called for a phone conversation and no documentation.

Pre-approval calls for the same documentation required to approve the loan after you’ve found your new house, and it is stringent. You’ll have to present verification of your income, your assets, and your debts. You may also have to present proof that you’ve paid your rent on time.

If you got your last loan during the time when standards were loose, you may feel overwhelmed by the paperwork and documentation required, but it is necessary and it does, in fact, provide you with some protection from getting in over your head.

Pre-approval is important for two reasons. First, it will tell you what you can or cannot spend on your next home. You won’t waste time looking at homes that are out of your reach. Second, most real estate agents today won’t show you homes without it – and very few home sellers will accept an offer from a buyer who has not been pre-approved.

Unless you qualify for a Veterans’ Administration loan, you’ll also need a down payment.

While “no money down” loans were common before the crash, many lenders today require 20% down for conventional loans. FHA loans can still be obtained for as little as 3.5% down. A study at RealtyTrac showed that in the first quarter of 2015, the average down payment for a home was 15%.

This does vary from lender to lender, and here at Clover Mortgage we’ve been placing a good number of mortgage loans with from 3% to 5% down.

The bottom line is that you will need some cash for a down payment. You’ll also need closing costs, unless you find a seller willing to pay them for you.

If all of this means that you may need to wait a bit before purchasing a home, know that it will be worth it in the long run. When you enter into your next transaction with a down payment and a good credit score you’ll save money.  And… when you’ve been approved for a loan under the new rules of documentation, you’ll be far more secure.

Homewood Mortgage, the Mike Clover Group, offers the best rates and the lowest closing costs you’ll find anywhere – and we’ll be happy to get you pre-approved. So if you’re ready to become a boomerang, call us at 469.621.8484 or apply on line at www.mikeclover.com.

Mike Clover

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# 23477

As of October 3, 2015, the new TILA-RESPA Integrated Disclosures (TRID) rule is in effect. Under this rule, lenders are required to provide home buyers with a Closing Disclosure three days prior to their scheduled closing.

This disclosure is intended to give buyers time to double-check that all the details are correct and to get answers to their questions if anything appears not in keeping with what they expected. Should changes be necessary, the three days will begin again – which would delay closing and cause problems/inconveniences for all involved, most especially buyers and sellers.

With that in mind, we offer some “Do’s and don’ts” for obtaining a home loan under the new regulations:

Do: Take time to discuss and compare all of your options with your lender before choosing the loan that best suits your situation. Then make your application.

Don’t: Ask for a loan estimate on a 15 year fixed loan, then change your mind and ask for a 30-year loan a few days before closing.

Do: Fully disclose your income, assets, and liabilities to your lender before making your formal loan application.

Don’t: “Forget” to mention your child support payments or a wage garnishment in hopes that no one will notice these liabilities.

Do: Supply documentation of your income before asking him or her to prepare your Loan Estimate (LE).

Do: Include only verifiable income when asking for a LR.

Don’t: Think you can use the dollars you earned “under the table” to help you qualify for a loan.

Don’t: Wait until after the lender prepares your LE to mention that you haven’t filed Income Taxes for the past four years.

Do: Review the fees and services offered by available title companies before making your choice.

Don’t: Select a title company, then change your mind after the work has begun.

Do: Take your lender’s and agent’s advice with regard to the days required to close your loan and finalize your purchase. Understand that loans take longer to close under the new rules. This is not something your lender can control.

Don’t: Insist on a closing within seven days of your offer acceptance, just because someone on late night TV said it could be done.

Do: Give your lender current email addresses for all borrowers, then check those accounts daily.

Don’t: Furnish an outdated email address or one you check only occasionally.

Do: Carefully read your Closing Disclosure as soon as you receive it. Check for any errors and call your lender immediately if you find discrepancies or have questions.

Don’t: Fail to check your email until the day before closing, then ask your lender to re-schedule the closing because you haven’t had time to examine it.

Do: Understand that your lender MUST send you the Closing Disclosure three business days prior to closing.

Don’t: Ask him or her to make an exception for you because you have things to do and places to go three days from now. TRID is not optional for your lender.

The new regulations have been dubbed “Know before you owe” because they’re designed to ensure that borrowers know exactly what they’re agreeing to before they sign their loan documents.

For a detailed explanation and to view samples of the new Loan Estimate and Disclosures, visit the Consumer Financial Protection Bureau (http://www.consumerfinance.gov/owning-a-home/loan-estimate/)

Here at Homewood Mortgage, the Mike Clover Group, we have always provided accurate estimates and full disclosures to our borrowers, because we have always believed that our borrowers deserve to “Know before they owe.” The only thing the new TRID regulations mean for us is that we’ll be using the government-sanctioned forms and providing the disclosures 3 days prior to closings.

We’d love to help you get the right loan for your financial situation, so call us at 469.621.8484 or apply on line at www.mikeclover.com.

Mike Clover

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# 23477