Since the Consumer Financial Protection Bureau has safeguards to protect consumers, does it really matter which mortgage company you choose to finance your home purchase or refinance?

Yes, it does matter. The CFPB insists on a level playing field with regard to rates and pricing, but pays no attention to how various banks determine the risk factor in lending to you. And of course, the more risk a bank perceives, the higher interest rate you’ll pay.

In addition, because banks operate under differing underwriting guidelines, a borrower may be rejected by one lender, but approved by another.

Why are there differences? Because some mortgage companies have what are known as investor overlays. These are additional constraints that go over and above the Fannie Mae and Freddie Mac guidelines.

The constraints may cover debt to income ratios, credit scores, and even the source of funds. Additionally, some banks will allow borrowers to pay off debts in order to bring their debt to income ratios into line for qualification while others will not.

In addition, some lenders originate loans and immediately sell them on the secondary market. Thus, they may be far more conservative in product offerings and underwriting than a lender who deals directly with Fannie Mae or Freddie Mac.  

Not all lenders offer all types of loans.

One of our popular loans is the “jumbo” loan – a loan that exceeds the conforming and conforming high-balance loan limits as set by The Federal Housing Finance Agency (FHFA). Here in Texas, the conforming loan limit is $417,000.

Many lenders, fearing the higher risk, refuse to grant a conventional loan if the borrower’s debt to income ratio exceeds 43%. Here at Homewood Mortgage, the Mike Clover Group, we follow Fannie Mae and Freddie Mac guidelines and take more factors into consideration. We grant conventional loans with much higher debt to income ratios. 

FHA loans were designed to help borrowers with credit scores as low as 580, but some lenders refuse to consider a loan for a borrower whose score is less than 640.

We have no investor overlays, and we use the automated underwriting engines approved by Fannie Mae and Freddie Mac. As a result, more of our clients qualify for home mortgages. We are able to operate without undue restrictions and to operate slightly outside the box to help our clients qualify.

As lenders, we’re dismayed by seeing the low, low teaser rates advertised to unsuspecting consumers. Too often, those promises apply only to borrowers with hardly any debt and credit scores in the high 700’s. So before you say “yes” to one of those lenders, insist that they get you pre-approved and that they give you their complete offering in writing.

Meanwhile, whether you’re looking for a new home or need to refinance your existing home, give us a call us at 469.621.8484. We at Homewood Mortgage, the Mike Clover Group, 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 in writing, so you can both shop for your new home with confidence and compare our low rates and fees to any other lender you may be considering. 

Call us at 469.621.8484.

Mike Clover

R.M.L.O

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

Several numbers are important to prospective home buyers. One is the amount you’ve set aside for a down payment; another is the amount you can comfortably afford for a monthly mortgage payment. But possibly the most important number is your credit score.

What IS a credit score? It’s a numerical representation of your credit history. It reflects your track record of paying bills on time and how much debt you carry. It is used in an effort to gauge the risk of lending you money.

A perfect score is 850, and I’m not sure if anyone ever attains that number. All scores above 760 are considered excellent, while scores from 700 to 759 are classified is good. Fair credit means a score of 650 to 699, and below 650 is considered poor.

Those with excellent scores are considered the least risk and are eligible for the lowest possible mortgage interest rates. Why? Because the lenders want this business!  Those with “good” scores can still get low rates, but not the lowest rates. Borrowers with “fair” scores will pay even more, while those with “poor” scores will have to jump through any number of hoops just to get a loan at all. Of course, their loans will be at the highest rates.

Your credit score is determined from three scores, one from each of the three major credit reporting companies: Experien, Equifax, and TransUnion. The three can be slightly different depending upon who reports to them, and what they track.  Many lenders look at the middle score as representative.

How are scores determined, and what affects them?

35% of your credit score is based on your payment history. Even if you’ve paid all of your bills on time for your entire adult life, one 30-day late payment can drop your score by as much as 110 points.

30% is based on your credit utilization, and this is an area that gets some people into trouble. Holding a false believe that you should only have as much credit as you need to use can drop your scores dramatically. For the best scores, you should have far more credit than you need and use. In fact, you should use only 30% or less of the credit available to you from each source.

What does that mean? Don’t cancel an old credit card just because you no longer use it. Instead, use it once in a while and pay the bill in full when it arrives.

There’s a second reason for that:

15% of your credit score is based on the length of your credit history. If you’ve held the same credit card or cards for twenty years, that’s a very positive thing. The same is true for any account that reports to the credit bureaus.

10% of your score is based on your “credit mix.” Your credit score is enhanced by having a mixture of different kinds of credit accounts, such as a vehicle loan, retail accounts, credit cards, and a mortgage. Apparently, having different kinds of credit and making those payments regularly signifies that you’re a good money manager.

10% is based on new credit. This is a number that can be a negative. Lenders look unfavorably on a borrower who has opened several new accounts in the months prior to making a home loan application. This signifies that you “might” be borrowing from (or planning to borrow from) your credit card in order to make your down payment.

Don’t apply for new credit if you’re planning to buy a home. That 10 or 15% you could get off on today’s purchases at a retail outlet could end up costing you thousands of dollars in higher mortgage interest rates.

Don’t even let a retailer check your credit, as this could indicate that you purchased some form of a credit application filing service. The safest thing at this point: Do NOT disclose your Social Security number to anyone until you’re ready to apply for a mortgage.

Check your credit score when you first consider buying a home.

Why?For three reasons:

When you know your credit scores and what is affect them, you can take steps to raise them before you make your mortgage loan application. For instance, you can transfer part of a balance from one credit card to another in order to bring all of your ratios under 30% usage. You can also pay down some accounts. These changes take time, so get started early.

Secondly: Because 25% of all credit reports contain mistakes, and correcting them can take time.

Mistakes can happen easily when creditors are reporting. You might have the same name as someone who is habitually late with payments and it can get accidentally reported to your account. The data entry person might transpose numbers when entering a social security number, or hit the 5 when they meant 6.

Lastly, you could have fallen prey to identity theft without knowing it. Someone else could be using your good credit to obtain a job, rent a house, set up cell service, or borrow money. So check to see that every account is yours – and that you don’t have a new address or new spouse!

Get your free credit report from creditscorequick.com and read it carefully. If you find errors, go to a credit bureau web page and follow instructions for reporting errors. If you report to one, they’ll report to the others. Of course, if you find identity theft you should also contact the authorities immediately.

Even if you’re not thinking of buying a home, it’s a good idea to check your credit annually, just to make sure there are no errors.

Mike Clover

Another topic you have to consider is kids saving account. Check this options with Kids Savings Account | Fifth Third Bank.

Does home ownership seem like an impossible dream because you can’t seem to save for a down payment? If so, it might be time to take a look at the places where money is leaking out of your pocket, just a few dollars at a time.

You might be amazed to see just how much money you can save with a few lifestyle changes.

Here are 6 ways to save:

Cable television: At an average cost of $99 per month, cancelling that subscription would save you $1,188 per year. Did you know that you can borrow videos (and books) for free at libraries?

Gym membership: This is one you won’t want to drop if you’re really hitting the gym several days a week and staying fit and healthy because of it. But if you only go now and then, and if you pay $60 per month, stopping that membership will save you another $720.

Coffee: If you stop for coffee every morning on the way to work, that average cost of $3.65 per cup is costing you $949 per year. If you pay $8 for a can of coffee and brew it at home, you’ll probably spend less than $96 (one can per month), saving $853. If you stop again on the way home, double that figure.

Lunch: The average cost of going out to lunch is $11. If you prepare your lunch at home and carry it to work, it will cost about $4 – and probably be better for you. At $7 per day difference, you’ll save $1,820 per year.

Movies: The average cost of a movie ticket is $8.53, so for a couple to go out, that’s $17.06. Then of course you need popcorn – a tub of which is another $8 or so, and two soft drinks at $6 each. That means one trip to the movies will cost in excess of $37 – and that’s if you don’t take the kids along. (And if you have small children and don’t take them – how much do you pay the sitter?) Compare this to $3 or so to rent a movie, plus something under $5 for soft drinks and popcorn enough for a whole family.

If you’ve been going once a week, saving $29 per week adds up to $1,508 a year.

Lottery tickets: These come in prices from $1 to $20 each, but if you’re spending $5 twice a week, and winning $5 back once a month, there’s another $460 you could be saving toward that new home.

Making the changes outlined above would save you at least $6,549 per year, and I’m guessing that if you think about it, you’ll find more ways. Money that drains out of your pocket $1, $5, or $10 at a time really adds up, especially when it’s an every-day “leak.”

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

If you’ve only learned about mortgage loans from television or financial newsletters, or if you’ve only discussed the possibilities with your local banking institution, you probably don’t know all you need to know before choosing a lender and a mortgage loan.

The first mistake is in looking for a home before you talk seriously with a lender. By seriously, I mean you need to get pre-approved. That means providing your financial details and documentation and allowing the lender to check your credit. Far too many people confuse “Pre-qualification” with “Pre-approval,” and come in for a sad awakening when they learn that the pre-qualification didn’t mean a thing.

Rule #1 then, is knowing your limits, so you don’t fall in love with a house that is beyond your reach. Once you’ve seen a house you can’t afford, the ones you can purchase will all look inferior.

Here are a few more mortgage myths you should ignore:

“Today’s loans require a 20% down payment.” No, they don’t. However, loans for more than 80% loan to value ratios do require private mortgage insurance, which is an extra monthly fee. On average, it will add about $1,000 per year to your payments for every $100,000 you’ve borrowed.

It’s true that lending standards tightened up considerably following the mortgage meltdown, but today there are programs that will allow you to buy with a smaller down payment.

VA loans offer zero down (although either you or the seller must pay closing costs) and FHA loans can be obtained for as little as 3.5% down, as long as the borrower has at least a credit score of 580.

Borrowers with scores of 500-579 are required to pay 10% down.

“Only people with perfect credit can get a mortgage loan today.” Again, not true. As noted above, your scores can be as low as 500, although you will need a larger down payment and will pay a higher interest rate.

“You should always choose the loan with the lowest interest rate.” No, not at all. Different lenders and different loan programs, including the 1 hour loan one – all come with different fees. You should examine all of the terms of the loan – not simply the rate. Talk with two or three lenders, and ask for a complete breakdown of the costs for any loan they recommend. Then do the math and make comparisons. Different lenders also offer different levels of service. Do choose a lender who will be available beyond the hours of 9 to 5 – just in case you find your dream home and need your pre-approval letter immediately.

“Adjustable rate mortgages are only for gamblers.” Not necessarily. It all depends upon your future plans and the terms of the loan.

An adjustable rate mortgage starts out with a low, low rate of interest. Then after a set period of time – usually 5 years – the rate begins to increase in increments until it reaches its cap. The cap is the highest interest rate that the loan can have, even after all rate adjustments.

Meanwhile, you’re either paying smaller payments or gaining more equity each month than you would with a higher rate.

If you plan to move within 5 years, then you’re a good candidate for an ARM. However, as we saw during the mortgage crisis, things can change. You might decide not to move, and the price of homes could take another nose dive, making it impossible to sell for the balance owed.

With that in mind, don’t agree to an Adjustable Rate Mortgage without knowing the interest cap on that loan. As long as your income is sufficient to make the payments based on that rate, you’ll be fine, and will have saved thousands of dollars in interest.

When you’re ready, we at Homewood Mortgage, the Mike Clover Group, 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

All you have to do to get unsolicited mortgage advice is tell someone that you’re about to begin looking for a new home. Some of it, such as a recommendation of an exceptional lender, is good. Much of it is not.

 
5 pieces of advice you should absolutely ignore are:

 
1.    Find the house you want before you talk with a lender.
Those who give this advice will tell you that pre-qualifications don’t mean a darn thing, so you’re just wasting your time.
They’re right – pre-qualifications are useless. You need a pre-approval. In a pre-qualification the borrower simply gives information about their current situation and the lender writes a letter that says something along the lines of “If all this is true, then Joe qualifies for a loan up to X dollars.”
In a pre-approval, the borrower supplies relevant documentation, the lender verifies that information and runs a credit report, and an underwriter makes a decision.
The truth: Smart home buyers always get a pre-approval before going shopping. Not only will this prevent them from lusting after homes they can’t possibly purchase, it helps strengthen their offer when they find the right home.
Home sellers naturally are more eager to accept an offer from a borrower who has a pre-approval than from a borrower who has yet to speak with a lender.

 
2.    Use the bank where you have your checking and savings accounts.
The adviser’s theory is that since you already have an ongoing relationship with your bank they’ll naturally give you more favorable rates. Some even advertise how they make the loan process easy for their current clients. But it’s not necessarily true.
The truth: You should shop for a lender just as you shopped for a home. Each bank has their own guidelines, regulations, and fees – and they wouldn’t change even if you were the loan officer’s sister.
In most instances, you should choose a mortgage broker over a single bank. A mortgage broker has access to a wide variety of loan programs at different banks and can help you find the best one for your particular situation.

 
3.    Always choose the lender and loan program with the lowest interest rate.
This sounds like common sense, until you realize that the interest rate isn’t the only variable. It’s true that your monthly payment will be lower, but that low rate might come in the form of an Adjustable Rate Mortgage, which could come back to bite you.
Thousands fell victim to this in the recent downturn. Home prices fell and they were unable to refinance into a fixed rate mortgage when their interest rates re-set. As a consequence, far too many of those borrowers were forced into short sales or foreclosures.
In addition, low rates might come with high fees, which are added to the loan balance.
Before making any decision, compare ALL of the variables and consider your long-term plans.

 
4.    Reading the fine print is a waste of time. Just sign here.
Yes, it is true that mortgage documents contain a lot of words and it takes a considerable amount of time to read them all. That’s why real estate agents and loan closers want you to trust that it’s all “standard” information and nothing to worry about. No one wants to sit at the table for 2 or 3 hours while you go over each page.
The truth: It may all be standard and nothing to worry about – but it may not.
The fine print could contain clauses that can cost you thousands of dollars. For instance, there could be a sneaky little “due on sale” clause hiding between more benign sentences.
If possible, get your documents a day or two ahead of time and take the time to read and understand them. Otherwise, let the closer know that you’ll be arriving a few hours early for the signing so that you can read the contract in private before being expected to sign.
You may find something you need to dispute. If so, stop right there and don’t sign until the issue is resolved.

 
5.    Borrow as much as your lender says you can afford.
If the bank says you can afford it, why not go for the biggest, best house you can get? After all, they’ve looked at your finances and wouldn’t approve you for more than you can afford.
Several reasons, the first being that your lender doesn’t know what else might be important in your life.
•    You might enjoy the comfort of having money left over at the end of the month.
•    You might enjoy dining at 5-star restaurants, vacationing abroad, spending week-ends at the beach or on a skill hill, or sending your children to expensive summer camps.
•    You might have dreams of early retirement, or of starting your own business.

Add to that the fact that none of us can ever predict when a job layoff or an illness could curtail our incomes. And, don’t forget that the bigger the home, the more expensive the upkeep.

You want to enjoy your new home, not become its slave. So purchase the house the fits your lifestyle, your actual needs, and a monthly payment that fits comfortably within your budget. Don’t spend money on square footage or amenities that will add to your stress rather than your pleasure.
When you’re ready, we at Homewood Mortgage, the Mike Clover Group, 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

If you haven’t gotten a mortgage recently, you might be shocked at the number of documents you’ll need to produce. So even if you’re not thinking of a new home or a refinance right now, start saving paper for the time when you will need it.

Most lenders will require:

• Two years’ worth of tax returns – with all pages included
• Two years’ worth of W-2’s
• At least one month’s worth of pay stubs
• Two or more months’ worth of bank statements from all accounts, with all pages included
• Asset reports for the past 60 days
• Picture identification – as on your driver’s license

They may also ask for details related to derogatory credit events in your past history.

And that’s just the beginning.

You may be asked to provide a financial paper trail to show income and outgo for two or more months, along with details explaining anything unusual. “Unusual” would be defined as any deposits that can’t be accounted for by your employment, child support payments, customary business income, etc.

Should you sell an asset, such as a boat or a motor home, in preparation for coming up with a down payment, be sure that the transaction is well documented. The same goes for gifts from family, income from a “once in a while” job, etc.

If you sell stocks or move money from one account to another, keep every scrap of paper related to the transaction. Be ready to relate those deposits to the withdrawals.

This requirement comes about for two reasons:

• The bank wants assurance that you haven’t borrowed money for your down payment.
• Homeland Security wants assurance that you aren’t laundering money or otherwise abetting a terrorist group.

Keep these records handy so you can supply them quickly should the lender ask for them. A delay in submitting documents will result in a delay in processing your loan. That could put you past the date for a rate lock or past the agreed-upon closing date in your real estate purchase contract.

Specific circumstances will trigger the need for even more paperwork…

You’re divorced. In addition to a settlement agreement, you may be required to provide all pages and schedules of your divorce decree – even if the divorce was 10 years ago.

You’ve been through a short sale. You’ll need to provide the final settlement statement, since many loan programs have a waiting period before you become eligible for a new mortgage loan.

You’ve been through foreclosure. As with a short sale, there are waiting periods. You’ll need to provide a copy of the trustee’s sale date, available through your local recorder’s office.

You’ve gone through bankruptcy. Give your lender the entire package, showing everything related to the discharge and, of course, the discharge date. Again, that discharge date is critical.

You’ve had a loan modification. You’ll need to provide the full loan modification agreement.

You’re not a U.S. citizen. In this case, you’ll need to provide your birth certificate.

Save that Paper!

Saving paper isn’t always fun or convenient, but saving it as you go along is much easier than trying to find documents later on. So set up a filing system, document everything you do related to money, and be ready to provide everything you’ll need when you decide to make a move.

Here at Homewood Mortgage, the Mike Clover Group, we’ll do all in our power to streamline your application and get you into that new home. So call – tell us your situation ahead of time and we’ll be happy to let you know what documentation you’ll need when it’s time to apply.

You can reach us at 469.621.8484.

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

Here are 4 easily avoided mortgage mistakes that home buyers make every day… 

The first one is not paying attention to ALL of the terms of a loan.

You might see a fantastically low advertised rate and think that’s what you’re going to pay, but in most cases, it isn’t. For starters, only those with perfect or almost perfect credit will qualify for those low rates you see advertised. And even then, those advertisers might not be telling you the whole story.

Unusually low rates often come with a requirement to pay points. (One point is equal to 1% of your loan balance.)

After that, some lenders tack on excessive fees. You might not be asked to pay them up front, but they’ll be a part of your loan balance, and will effectively increase your percentage rate.

Next is not comparing lenders.

Your bank might offer you good rates, but then again, they might not. It’s good to see what they’ll offer, but don’t stop there. Check with a mortgage broker (or two) who can shop your loan to a variety of lenders to see who will offer the best rate and terms for your particular situation.

If you’re a do-it-yourselfer, you can shop a variety of places yourself. Check local banks, national banks, a credit union, and a savings and loan. To do this, you’ll need to give each lender your personal information and permission to access your credit report. Until you’re pre-approved, anything they tell you is just talk.

Choosing the wrong type of loan is another huge mistake.

Before you decide whether you want a fixed rate loan or an adjustable rate loan, consider how long you plan to stay in the home, and consider the cap on how high that adjustable rate can go. If you can’t afford the payment at that highest rate, stick with a fixed rate loan.

Before the crisis, people entered into adjustable rate loans with the promise that in just a few years, their homes would be worth far more, their credit would have improved, and they could refinance into a low interest fixed rate loan. As we all saw, that didn’t happen, and millions of people lost their homes to foreclosure and short sales.

When you have a fixed rate loan, your taxes and insurance might go up, but the principal and interest payments can’t change for the life of the loan.

Waiting for a better rate

It feels good to pay the lowest possible rate, but do you want to lose the home of your dreams over a quarter of a percent in interest? For each $100,000 of your mortgage, an increase of ¼% amounts to $14.52 per month.

And of course, the danger is that rates will go up rather than down.

Instead of waiting to see if rates can go even lower than they are now, focus on paying a bit more on your loan, especially in the first few years, when the bulk of your payment is going to interest.

I know one homeowner who pays $1,000 per month when the required payment is $744. Since the amount going to principal from that $744 is less than $250, by paying an additional $256, he is effectively making two payments each month.

When you want to avoid mistakes, call on the Mike Clover Group at Homewood Mortgage.

We’ll be glad to get you pre-approved so you can shop with confidence, and we routinely offer rates that are ¼ to ½% lower than other Texas lenders. We’ll also save you money on fees. While most charge at least $1,000 in loan fees, our fee remains at $855 for loan amounts $250k or above..

We offer personal service, and we close our loans within 30 days.  In addition, we have access to some loan programs most lenders just can’t match. For instance, the Reduced-Doc jumbo mortgage.

When you’re ready to purchase a new home or to refinance your current home, just call 1-800-223-7409 or apply on line at http://www.mikeclover.com.

We’ll find the best loan for you and your unique situation

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 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