While many cite home ownership as a good financial move, it turns out that financial considerations aren’t the prime motivators that cause first time buyers to take the plunge into home ownership.

Each year the Joint Center for Housing Studies at Harvard University surveys participants to ask the question: “What are the most important reasons to buy a home?”

This year the answers clearly showed that finances weren’t the primary reasons. Instead, the top four reasons that survey respondents stated were:

1. Having a good place to raise children. Young homebuyers are looking to their children’s future by choosing homes in safe neighborhoods with well-regarded schools. They want the stability of knowing that they won’t suddenly need to move to a neighborhood that isn’t so desirable for their children.
2. A feeling of comfort, security, and safety. A home provides a physical structure in which families can lock out the world and feel safe in their own space. Unlike a rental home where the landlord can demand entrance, it’s their own property and no one else can enter without permission. Security issues concern all people, so in case you are looking for a modern security solution, learn more about counter-drone technology at https://sixtechsys.com/counter-drone.
3. They want more space. Whether they have a young growing family or want room for an older relative to move in with them, they’re looking for space that fits their needs.
4. Control. A desire to do what they please and control what goes on in their own homes is another prime motivator.  It may be a desire to try new decorating techniques, hang a basketball hoop, plant a garden, or bring a puppy into the family – but they want the freedom to make those decisions themselves.

Financial considerations didn’t come into play until the 5^th reason: A desire to build equity in something they can pass on to their children.

Home ownership does build wealth.

As many learned during the boom and bust times, homeownership is not usually a good vehicle for short term investment, but those who purchase a home for the long haul do build wealth.

The housing market has ups and downs, but over time the value of a home that is well maintained will increase. Those who purchased homes 30 years ago and paid them off in full are now experiencing windfall profits – or passing valuable assets to their children.

When you consider that rental payments must necessarily exceed mortgage payments in order for landlords to find them worthwhile, it’s also easy to see that home ownership saves money in the short term. In addition, as years go by, the difference between a fixed mortgage payment and an ever-increasing rental payment on a comparable home keeps widening.

While a percentage of every dollar spent on a mortgage payment adds to the homeowner’s equity, every dollar spent on rent goes straight to the landlord and his or her equity building program.

This could be one reason why a study done by the Federal Reserve found that the average net worth of a homeowner is thirty-six times greater than the average net worth of a renter.

Is home ownership a smart move?

Yes – as long as you plan to stay in the community for the foreseeable future. If you know you’ll be moving on in a year or two, the answer is no.

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# 234770

Apply at: www.mikeclover.com

The National Association of Realtors has made some predictions, as have the economists at Core Logic.

NAR predicts that:

Mortgage rates will rise, but even after an increase, rates will remain low compared to the rates we saw early in this century. The forecast is for the 30-year fixed rate to reach 5% by the end of 2015 or early in 2016. Since they believe that adjustable rate mortgages will see little, if any change, they predict that we’ll see more adjustable and hybrid mortgages.

Millennials will buy homes. This has been predicted before and didn’t come to pass. However, economists believe that millennials are now looking at an improved jobs outlook, and thus will begin buying. The older millennials – aged 25-34 are starting families and not only moving out of family homes, but looking for stability that can’t be achieved through renting.

The drawback – many are still facing student loan debt along with limited credit histories and tough credit guidelines. Not everyone who wants to buy will be able to buy.

Housing starts will increase. Although new home builders are still being conservative, NAR predicts that starts in the single-family sector will increase by 21%.

What about price? The economists at Core Logic point out that new-home prices have risen far more than existing-home prices, and they expect that to level out. In past years, the difference was about 15%. Now a new single-family home can be expected to cost 38% more than an existing home. They believe this gap is unsustainable, so are looking for new home prices to stay flat in 2015 and fall 2% in 2016. Thus, existing home prices will eventually “catch up.”

Credit will continue to be difficult. Many are hoping that new Federal policies will relieve the situation, but for right now, underwriting guidelines are still tight. According to NAR, if you look at credit scores, at least 10% of the people with current mortgages would not qualify for a new loan today.

The foreclosure crisis will come to an end. For the past seven years, foreclosures and short sales have dominated the market. The numbers dropped in 2014 and NAE predicts that they will continue dropping.

However – others are looking at the fact that many thousands of adjustable rate and interest-only mortgages will reset this year. That could signal a new round of both foreclosures and short sales.

Home price increases will slow. The rapid increases through 2012 and 2013 had many worried that we were heading into a new bubble, but the 2014 increase of around 6% largely put that fear to rest. Depending upon which economist you listen to, home prices nationwide are expected to rise from 3% to 6% in 2015.

NAR also named the top ten metro areas to watch for household growth in 2015, and Texas took two of those slots.

Dallas-Fort Worth-Arlington came in first in forecasted household growth over the next five years. The volume of home sales is expected to rise by 7 %, largely due to Dallas’ strong employment rate. Home prices here are expected to rise by 3%.

Houston-The Woodlands came in 3^rd in forecasted household growth, as already strong employment is expected to increase by 4% – or twice the national rate. Prices here are already higher, so while the volume of homes sold is expected to increase by 5%, the expected price increase is only 2%.

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# 234770

Apply at: www.mikeclover.com

If you’re still paying 6%, 7%, or even 8 ½% interest on your first or second mortgage on your Texas home, you probably wanted to refinance just as soon as you saw mortgage interest rates drop into the 3’s and 4’s. But… if you purchased your home in 2005 or 2006, you were soon disappointed.

Not only was your home not worth what you’d paid – it was worth considerably less than you owed.  Add in a second mortgage you may have taken out for remodeling or other improvements, and you were seriously underwater.

That was then. Now the pendulum has swung so far the other way that you may find yourself able to get a new loan without paying for mortgage insurance – because your equity exceeds 20%.

Because Texas has a low foreclosure rate, a small inventory of homes for sale, and a thriving economy, home values have skyrocketed in the past few years. A case in point is the example that MyFoxdwf.com reported recently.

Consumer reporter Steve Noviello interviewed Jimmy Moore, who purchased a Hazlet home in 2006 for $206,000. Going with no money down, he and his wife were paying 6% on a first mortgage and 7.5% on a second mortgage. Then they took out yet another loan in order to build a backyard pool. That rate was at 8.5%

In 2009, when they saw rates drop, they naturally wanted to refinance. But much to their dismay, they learned that even with the addition of the pool, their home had dropped nearly $40,000 in value. It appraised for only $165,000.

Fast forward to 2014… The Moore’s just refinanced their three loans into one, pulled out $25,000 in equity in order to build a new gazebo, and saw their payment drop by $7 per month. They also shaved 7 years off the life of their payments, since they refinanced for 15 years rather than 30.

The home that was valued at $165,000 in 2009 now appraised for $308,000 – and all they’d done was wait it out.

A mortgage loan rate of 4% versus 6% makes a huge difference. In fact, on a $200,000 loan, the difference is more than $240 per month. If you can also eliminate the mortgage insurance, you’ll save even more.

Financial analysts are cautioning that these low rates can’t last, so if you’re paying 6%, 7%, 8%, or more, give us a call at Homewood Mortgage. We’ll be glad to talk over your situation and share what we know about the value of comparable homes.  We’ll also be glad to get you prequalified for a loan.

An appraisal costs about $500, and it could save you 5 times that amount in just the first year.

Don’t wait – call the Mike Clover Group at 800-232-7409 today.

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# 234770

Apply at: www.mikeclover.com

Recently we reported that the Fair Isaac Corporation (FICO) was making changes to its credit reporting. They’re offering a new scoring model that no longer factors in past-due payments that have been paid off and they’re giving far less weight to medical debt.

Now Rep. Maxine Walters (D-Calif.) is introducing the Fair Credit Reporting Improvement Act of 2014. If enacted, this would make major updates to the 44-year-old consumer protection law.

The last time changes were made to this law, consumers were given the right to a free yearly credit report and mortgage lenders were required to let borrowers see their scores.  That provision put an end to disreputable lenders claiming low scores as an excuse for high rates.

The Fair Credit Reporting Improvement Act contains nearly 20 new provisions designed to make access to credit both easier and cheaper for thousands of Americans.

Key provisions include:

Relief to borrowers who were victimized by predatory lenders. All adverse information about loans that were found to be unfair, deceptive, abusive, fraudulent or illegal would be removed.

Shortening the time that adverse information remains on a credit report. Currently adverse information remains for 7 years. The new bill would lower it to 3 years.

Removing fully paid or settled debt from a consumer’s credit report. Like other adverse information, this currently remains on a credit report for 7 years. Under the new law it would be removed immediately.

Giving consumers the right and ability to challenge adverse information on their credit reports. Credit furnishers would be required to maintain all relevant records for as long as adverse information remained on a consumer’s credit report. Consumers would have the right to review and challenge such information.

Erase private school loan default information for borrowers who are making an effort at repayment. As is the case with federal student loans, negative information from private school loans would be removed as soon as the borrower made nine consecutive on-time payments.

Bar employees from using credit information to eliminate job applicants. Do late payments on a car loan mean you won’t be a reliable employee? Ms. Walters says no – this is an unfair practice that leads to long-term unemployment. She also believes that it unfairly targets women and minorities who were victims of the financial crisis.

Is everyone in favor of these sweeping changes?

No. Credit experts such as John Ulzheimer of Credit Sesame worry that removing evidence all debt that has been paid would deny companies information needed to assess the risk in extending credit.

This bill was scheduled for introduction to the house on September 10. We’ll be watching the progress and reporting the results.

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# 234770

Apply at: www.mikeclover.com

Gift funds are the path to home ownership for many today. They may constitute part or all of the down payment, the closing costs, and/or the financial reserves. In fact, most borrowers purchasing a one to four unit principle residence are allowed to close with no money of their own.

However, there are restrictions and regulations, so plan ahead and follow procedure.

Who may supply the gifts?

• A relative – anyone related to the borrower by blood, marriage, adoption, or legal guardianship.
• A fiancé, fiancée, or domestic partner.

How must gifts be documented?

The gift letter: The donor must write a letter specifying the amount of the gift and stating that no repayment is expected. It must include the donor’s name, address, telephone number, and relationship to the borrower. If the gift has already been given, it must specify the date when the funds were / will be transferred from the donor to the borrower.

Donor bank statements: The fact that the donor does own the gift funds must be verified via a copy of the donor’s bank statement. As with the borrower’s bank statement, the document must be complete, with no white-outs, cross-outs, or notes.

If the funds have been transferred: Along with the donor’s bank statement, the borrower must provide a copy of the check or the wire transfer; a copy of the borrower’s deposit slip; and a copy of his or her updated bank statement showing the date on which the funds were deposited and the new account balance.

If funds will be transferred at settlement: The donor must have previously provided the gift letter and proof of funds as above. At closing, the gift funds must be presented in the form of a certified or cashier’s check.

When the donor will live with the borrower…

Funds provided by a fiancé, fiancée, domestic partner, or relative who has lived with the borrower for the past 12 months and who will also occupy the home being purchased are not considered gift funds. These “gifts” can be pooled with the borrower’s funds and considered as his or her own.

This is an important point to note in cases when some borrower funds are required, according to MN mortgage lenders. For instance, borrowers are required to contribute 5% when the loan to value will be greater than 80% on the purchase of a 2 to 4 unit principal residence.

When donor funds need to be regarded as the borrower’s, the donor must provide a gift letter proclaiming shared residency, plus documentation showing that his or her address is and has been the same as the borrower’s. This could be in the form of bills, bank statements, or a driver’s license.

As with all funds, the donor must show proof of ownership via bank statements.

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# 234770

Apply at: www.mikeclover.com

More than one borrower has told us: “I Don’t WANT to show my complete bank statement. How I spend my money is my private business.”

We understand. But we don’t make the rules, and the banks do have reasons for wanting to see your bank statements.

They don’t care where you spend your money, and they aren’t making judgments about you based on where you shop or dine. They DO want to see that you aren’t making payments on a loan that you didn’t disclose. They also want to look at your deposits and verify the source of all money coming into your account.

So if you want the loan, give the bank what it wants: Complete, un-altered bank statements.

That means:

1. Include every page
2. If you get a statement in the mail, photocopy and provide it in its entirety.
3. Do not use white-out, don’t strike through any entries, and don’t make notes.
4. If the statement is an Internet printout, it MUST include the bank name, your name, your      account number, your running balance, and the history of deposits and withdrawals for the months they’ve requested. It must also have the bank’s URL on the page.
5. Do NOT try to get by with screen shots – they won’t be accepted.
6. If the statement was printed in the branch, it needs the bank stamp, date, and teller’s initials on EACH page, in addition to the items mentioned in #4.
7. If you are not the only person listed on the account, the other party must provide a letter stating that you have 100% access to the funds.

If you want to avoid sharing your financial transactions:

Begin planning long before you’re ready to purchase a home. Open a separate savings account more than 90 days prior to making loan application. Lenders must verify the source of funds for any account opened within 90 days of the application date, so start early!

Deposit the funds you’ll need for a down payment and closing costs at least 60 days ahead of time. Ninety days is even better, since you’ll need to supply 2 months’ bank statements and banks don’t always process their statements on the same day each month.

Remember, cash that’s sitting in your safe deposit box or under your mattress needs to be deposited no less than 60 days before you apply. Otherwise, the bank will consider it “unverified funds” and they will not use it in determining whether you have funds to close.

The benefit to your privacy: If you have plenty of money for closing in that account, you won’t be required to share statements from your other accounts.

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# 234770

Apply at: www.mikeclover.com

With all the talk about health care and insurance these days, few people mention the ways in which insurance companies pad their profits and just how destructive their practices are to American consumers’ credit scores.

How do they pad their profits?

• By denying or limiting coverage for many things, leaving their insureds to pick up the slack.
• By simply delaying the payment of charges that should be paid under their coverage.

According to an article in the Wall Street Journal,  as of July about 64.3 million Americans had a medical collection on their credit report – and some aren’t even aware that it’s there. They assumed their insurance provider would take care of those bills (as promised) so didn’t worry when they got past due notices.

How do they harm American consumers?

First, by not informing them when bills will not be paid. Second, by letting bills they should have paid go into collection – causing those consumers’ credit scores to plummet.

Some say that the consumer should have known and should have paid the bills themselves as soon as they got the first past due notice. There are two things wrong with that idea: One is that they might not have the money to pay an unexpected bill. Second is that they’ve paid for the insurance and they’re trusting that their provider will come through.

Unpaid medical debt is on the rise. According to a report released last year by the Commonwealth Fund, as of 2012 41% of U.S. adults (75 million consumers) had trouble paying medical bills. This is up 29% from 58 million in 2005. Part of this is, of course, due to some citizens’ complete absence of insurance coverage in the face of rising rates.

What’s the good news? Big changes in credit scoring.

Fair Isaac Corporation, the nation’s foremost credit scoring bureau, just announced changes to their scoring model.

Their new model will give far less weight to medical collections – a change that could add 25 points to many borrower’s FICO scores.

Since a mere one point can often make the difference between acceptance and denial or acceptance at a lower rater versus a higher one, a 25 point jump is significant.

The expectation is that credit card issuers and auto lenders will implement the new scores first, with mortgage providers being slower to come on board. This is a prediction based on the fact that many lenders are still “two versions behind” in upgrading to the latest scoring models. (Lenders have a choice of which model to use when requesting credit reports.)

Good news, part two:

Fair Isaac also announced that they will discontinue inclusion of collections that have been paid off or settled. This is in bold contrast to the present model, which keeps collections on a consumer’s credit report for up to 7 years.

Collections, even if they’ve been paid in full, can lower a person’s credit score by as much as 100 points. Dropping them is a significant step forward for consumers who are struggling to rebuild credit after a financial blow. If you apply for a loan, you should also remember that there are different credit scoring models, so VantageScore 3.0 vs FICO issue also remains and can effect the final decision on your loan.

Of course there are critics. Some believe the changes will encourage those who can’t handle debt to dive back in and repeat the process.

And of course that could be true for some consumers. But for those whose financial troubles stemmed from the crash of the housing market, the new scoring system will be the blessing that allows them to become homeowners once again.

Are you ready to begin the search for a new home?

The first step is to become pre-approved for your mortgage loan, and we’ll be happy to do that for you. Reach us by phone at 1-800-232-7409 or apply on line at http://www.mikeclover.com.

And remember, we’re now serving clients in both Texas and Washington State.

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# 234770

Apply at: www.mikeclover.com

They want to know, and if you want the loan you have to tell them – then prove it.

Remember the Patriot Act? It added a second layer of caution and curiosity to banks’ inquiries into where you got the money you’re going to use to purchase your new home.

The banks’ original reason for wanting to know the source of your funds was to assure themselves that the money was not borrowed funds. They’ve looked at your income and liabilities and decided to grant your home loan based on that income and those liabilities. An undisclosed loan might make you a poor credit risk.

Then along came the Patriot Act and paranoia that you might be laundering money for terrorists. You might also be a drug dealer or a human trafficker. That’s why any cash deposit of $10,000 or more must be reported to the government.

There’s no getting around either the bank’s curiosity or the Patriot Act, so plan now to comply.

Here’s how to simplify your life as you prepare to refinance or to choose a new home and obtain a mortgage loan:

First, if you’ve been putting cash aside in a safe deposit box, under your mattress, or in the cookie jar, deposit it in the bank (in increments of less than $10,000) just as soon as you start thinking of buying a home. If you don’t already have a savings account to earmark for the purpose, open a new savings account that won’t be used for anything except your refinance or home purchase.  If you’ve been keeping extra money in your regular checking account, transfer that money into the account 90 days prior to making loan application.

If you plan to sell expensive toys such as a boat or motor home to get down payment funds, do it right away and put that money in the same account. If you’ve waited too long and can’t get the money deposited at least 90 days before making your loan application, document the sale carefully. Here’s how:

• Hang on to the records of your prior ownership.
• Keep a copy of the bill of sale signed by both you and the buyer.
• If you accepted a check or a money order, keep a copy.
• Make an extra copy of the bank deposit page showing the date of the deposit and the amount that matches the bill of sale.

The bank wants to know where every dollar in your account came from. So be prepared to document any deposit that isn’t clearly identifiable on your bank statement as payroll, Social Security, a store refund, an income tax refund, etc.

Even if you hold a yard sale, document the funds. Keep a copy of the ad or the flyer advertising the sale, then document the proceeds and put them in the bank immediately after the sale. If you’ve taken checks, photocopy them before making the deposit.

Remember: You can never have too much documentation. So keep verifiable records of everything having to do with money deposited to your accounts.

The easiest solution is for you to have your down payment and closing costs funds in a separate account at least 60 days prior to purchasing (or up to 90 days, depending upon the date when your bank prints statements). Then you won’t be required to prove the origin of funds in your other accounts.

Transferring funds:

If you do need to transfer funds from other accounts just prior to closing, be prepared to prove where you got all the funds in those accounts.

One more thing: Make the transfer properly. Do NOT withdraw funds one day and deposit them to the “house account” the next day. Do a transfer through the bank so you have a valid 3^rd party record of the transfer.

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# 234770

Apply at: www.mikeclover.com

CNN Money recently reported that nationwide, loan fees are up 6% over this time last year. The average cost of closing on a $200,000 loan is now at $2,539. And that doesn’t include prepaid items such as taxes and homeowners insurance, nor does it include Title Insurance or homeowner’s association fees.

Of the $1,539, approximately $662 goes for 3^rd party services, such as the appraisal and credit report, putting the average bank fees at $1,877. Third party fees have remained stable, which means actual bank fees have risen approximately 9%.

In some states the increase is even higher. In Wisconsin, fees are up 28%, in New York 24%, and here in Texas 23%.

Backing the $662 out of the total brings bank fees to:

Wisconsin:          $2,146

New York:           $2,230

Texas:                   $2,384

Is that necessary? No, we at Homewood Mortgage don’t believe so. Our fees remain at a low $1,150 – less than half the state average.

So why have so many banks decided to raise their fees?

According to them, the blame goes to new federal guidelines that are designed to make borrowing safer. Lenders are now required to check a borrower’s credit history, income, and debt – something reputable lenders have being doing all along.

Some lenders say they have had to add additional services in order to comply with the new rules. Among those are a fraud check, an automated valuation model, and a last minute credit check. Do these steps cost an additional $155 per borrower?

What can you do to avoid excessive fees?

In Texas or Washington State, you can call the Mike Clover Group at Homewood Mortgage. Reach us by phone at 1-800-232-7409 or apply on line at http://www.mikeclover.com.

In all other states, take the time to get referrals from your real estate agent, attorney, or accountant. Then shop around. Meet with the recommended lenders and ask to see their closing costs. Lenders are required to give you a GFE – Good Faith Estimate – so you can compare those fees before committing to the loan.

So why have so many banks decided to raise their fees?

Because they can. Because far too many homebuyers don’t realize that fees vary from one lender to another. Thus, they fail to shop and they’ll pay the inflated fees without question.

If you’re in Texas or Washington, call today! 800-232-7409

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# 234770

Apply at: www.mikeclover.com

 I am a 2014 Five Star Mortgage Professional featured in Texas Monthly Magazine

This Award for exceptional client service is only awarded to 1% of all the Mortgage Professionals in the Dallas/Fort Worth region

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