EXPERT
OPINIONS
Each month, we ask a panel of Realtors and business people in the area for an opinion on a specific topic. Here was the question this month, and their answers below. A recent survey by a online mortgage site discovered that consumers spend only about five hours researching their mortgage options — about half the time they invest in studying how to buy a new vehicle. What are the most critical areas would-be homebuyers need to know about lending before they embark on their search for a mortgage?
Bryan Craft, Texas Properties
As a mortgage brokering loan officer for nine years before getting into real estate sales, and in a time when mortgage lending (the way it was compared to now) largely evaporated around 2007 – 2008 – with exception to buyers with solid credit, income and asset profiles that is – the first thing that matters when trying to get prequalified is: 1. What is the middle credit score for all borrowers on the loan application? The higher the better that is – and the more loan structure options and better rates the buyer will have access to. There may be loan programs that take exception to this but the minimum credit score to give yourself the best chance to get through underwriting with 96.5% LTV (FHA) is 620. This of course will involve PMI (Private Mortgage Insurance) which is lender – required insurance that protects the lender – but the borrower is required to pay for it. Scores over 700 along with solid income and asset profiles may be able to get around PMI by splitting their loans into two. A first (80%) and a second (up to 15%). They may also be able to get around a mandatory escrow account for monthly tax and insurance payments. 2. Self- employed buyers who take significant tax deductions have taken the hardest hit when it comes to trying to get a modern day mortgage loan. Despite what their credit score is and the LTV. Stated income loans and bank statement programs of the yesteryears have completely evaporated and until they come back, it will be difficult for self-employed borrowers who take their rightful write offs to qualify – unless they are able to qualify with their net (after deduction) income showing all pages of the tax returns for the last 2 years. 3. Saying this, W2 wage earners have the best chance to qualify in this lending environment and the underwriter will figure a way to determine the average income for the previous 2 years and may even take into account the current years YTD income – particularly if they are making a higher income than either or both of the previous 2 years. 4. DTI (Debt to income ratio) is also a very important component when getting a loan approval. Rule of thumb for conventional is 45% and FHA can get approvals for up to 50% in some cases. The bottom line is that the loan approval is determined by an automatic underwriting engine who takes into account everything – credit score – proposed LTV – income – assets – and analysis of the details of the credit report (how many 30 day late’s in the last 2 years / length of time out of Bankruptcy for example). Remember also that installment credit types (auto loans / Home Depot or Conn’s purchases / student loans for example) should not count against the DTI if the current principal balance is 10 months or less than being paid off. On revolving type charge accounts (credit cards), only the minimum monthly payment will count against the DTI. Being strong in as many of these departments as possible will always give you the best chance but remember that the credit score is the very first criteria that determines everything. Revolving type charge accounts can influence a credit score for better or for worse so it is best to strategically use those accounts when trying to boost your credit score. Try to keep these balance to limit ratios as low as possible when the individual creditor goes to report the balance and limit to each creditor each month. Each revolving creditor should tell you the specific day in the month that they (separately) report to the 3 bureaus – Equifax – Transunion – Experian. Also it is best to not pay revolving charge accounts down to a $0 balance if you are looking to boost your score. To a credit bureau – a $0 balance looks like no activity – so it doesn’t really help your score as much as if you simply paid it down to a $10 balance.
Pat Walker - Realtor, Keller Williams Metropolitan
The most dreaded words we hear from a buyer…. “Oh, they know me at my bank & they told me they can do my loan.” Please, please, use a good mortgage lender. Ask your Realtor for recommendations for good, honest nd reliable lenders. After all, the goal is to go to closing & move into your dream home. Banks are in the “banking” business, Mortgage brokers are in the home lending business. Choose wisely for a smooth, on time home buying process. See you at the closing table!
Allen Frieze, Keller Williams Metropolitan
I always advise my clients to reach out to more than one lender and shop for the best deal. Always compare rates verses fees as some companies will give you an great rate but fee you to death. Also don’t just reach out to anyone for a loan. Get a referral from your real estate agent or a friend who has had a good experience with that lender. This is also a good time to reach out to mortgage brokers who are shopping more than one bank.
Kendal Bezecny , Keller Williams Southwest
First of all, you have to have estimate on monthly housing bills, then look at what you can actually afford in a mortgage payment. Fannie Mae recommends that you spend less then 28 percent of your monthly income on housing costs. Do not forget to add in your monthly insurance premiums. Also, find out how much you will be paying in closing costs before they sneak up on you. A house is a great investment, but choosing the wrong house could be very labor intensive and costly to the home buyer, so choose wisely!
Cookie Davenport, Reyna Realty Group
Buying a new home is a big commitment. Not just financially, but of time and effort. Before even thinking about looking at houses, it must be determined if a loan can even be obtained and, if so, how much can be borrowed. There may be credit issues to be “cleaned up” that will involve contacting credit reporting agencies and/or creditors. Any derogatory reports that can be removed from the credit report will help improve credit scores and therefore increase lending ability and could help lower interest rates! Often this is just a matter of time on task and lots of foot work. It’s actually something we should all take a look at occasionally. After a pre-approval is obtained (not just a pre-qualification), it is time to hire a good Realtor and go look for that dream home! But after it’s been found and the offer has been accepted, be prepared to devote even more time and energy satisfying your lenders “conditions” to final loan approval. Although some of these can seem nit-picky and ridiculous, they, nonetheless, must be addressed and handled immediately. The two most important members of your home-buying team will be your loan officer and your Realtor, so ask friends and family who they used and interview until you find the right professional for your needs.
Page 1B • The Leader • October 26, 2013 • www.theleadernews.com
Gordon Homes proud to call Oak Forest home by Michael Sudhalter michael@theleadernews.com
When Justin Gordon founded his homebuilding company in the spring of 2009, he built a couple of regular houses. But now his entire focus is on custom houses, and there are several that he’s working on in Oak Forest. “It seems to be what people are expecting these days as a standard,” Gordon said. “I tailor a home around a client’s specific needs.” Some of the unique features that Justin Gordon Homes has made available are small tunnels between rooms for children to travel through, passage doors between the nursery and master bedroom, and power outlets for Christmas lights. “People typically have a few ideas in mind,” Gordon said. “They ask basic questions and offer ideas that other clients may (already) have in their homes. We encourage clients to visit the job site every day.” Gordon consults with an architect to “incorporate people’s needs” on the custom homes, which now are selling for in the $600,000 range. Gordon, 32, loves the fact that all of his projects are within walking distance of the home he built for himself at the corner of Oak Forest & Woodcrest. “I like the fabric of the community here,” Gordon said. “It’s nice to live and work in the community. I live here, and I’m approachable. It’s extremely rewarding. (I enjoy) walking my dog and running into clients.” Gordon moved to Oak Forest from Timbergrove and has been involved in the community from attending Oak Forest HOA meetings to volunteering time and money for events. He donated $10,000 to Black Middle School to improve its fields and also contributed to Waltrip High School’s marching band. “I think giving back to the community is important,” Gordon said. “As a resident, I enjoy the services provided by the volunteers. It brings together everyone for a better neighborhood. I’d like to have continued involve-
Justin Gordon Homes owner Justin Gordon builds custom homes in Oak Forest. (Photo by Michael Sudhalter) ment in the community.” On Christmas, he’ll dress up as Santa Claus for the children of the neighborhood. “When I was a teacher, I was also Santa,” Gordon said. “I guess they like my pale complexion and rosy cheeks.” Gordon grew up in La Porte, working in his parents’ furniture business. It was there that he learned about customer service and business skills. He graduated from St. Thomas Episcopal High School in Meyerland. He earned a Marketing degree from the University of Pittsburgh and returned home to work several jobs, including fourth grade teacher, Yellow Pages ad salesman and in commercial real estate sales. “I respect teachers a lot more, having been one for a year,” Gordon said. Gordon’s brother-in-law convinced him to
Area sales & prices performing strong At best, some sales and prices soared in some Leader ZIP codes in September – at worst, they held steady. Overall, the Houston housing market posted its 28th consecutive month of positive home sales with no let-up in sight, according to data from the Houston Association of Realtors, and continued to drive housing inventory down again. The Garden Oaks-Oak Forest 77018 ZIP code posted the highest year-over-year increases in sales and average home prices, according to HAR statistics. Home sales were up from 28 in September 2012 to 49 this September, an increase of 75 percent, with prices rising 20 percent over last year’s, from $328,000 to $395,000. Also performing robustly was the 77008 ZIP in the Heights, with 88 sales this September compared to 69 last year, an increase of 27.5 percent. The average home price rose to $412,000, up 16 percent from September 2012. While sales were down slightly in 77009, also Heights, from 37 last year to 35 this, prices were up 27 percent, with the average home going for $376,000. While the 77091 and 77092 ZIPs sales are quiet, they’re still on the increase from last year – 26 this year in the two ZIPs compared to 19, and prices have gone up 20-22 percent for an average of $155,000 in 77091 and
$147,000 in 77092. The only area showing flattening in September year-over-year was a traditional high performer, the 77007 ZIP, which compromises the Washington Avenue from Memorial Park to downtown, area up slightly north of I-10. Housing sales were down from 11.5 percent from last September, 61 to 54, with prices increasing 8 percent, to an average of $471,000. In the big picture, if the Houston real estate market were a car, it would be fair to say its driver had the pedal to the metal, HAR reported. The pace of home buying drove months of inventory down to 3.2 months compared to 4.7 months at this time last year. Home sales soared 23.5 percent year-over-year, with contracts closing on 6,168 single-family homes, according to the newest monthly report prepared by the Houston Association of REALTORS®. That is the lowest onemonth sales volume since March and follows four months in a row of home sales that exceeded 7,000 units. The median price of a singlefamily home—the figure at which half the homes sold for more and half for less—rose 10.2 percent to $181,750. The average price increased 13.1 percent year-overyear to $248,256. Both figures represent the highest prices for a September in Houston.
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become a homebuilder. He used personal savings and inheritance to start Justin Gordon Homes and has been successful with the company ever since. “I’ve always been interested in Real Estate, and it felt like a good time,” said Gordon, who employs six people -- three full time and three part-time. Gordon Homes has been recognized as an Energy Star rated builder and has shown a commitment to environmentally-conscious homes. Gordon said he’d like to grow his company -- to a point. “My objective isn’t to have a gargantuan company,” Gordon said. “I never want to lose touch with the client. I try to call every (client) back within a day.”
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As we have observed for the past several months, September brought gains to all housing segments except the under-$80,000 market. Homes selling from $250,000 through the millions scored the greatest increase in sales volume.??“Houston continues to benefit from a confluence of very positive economic forces: strong job growth, low interest rates and reasonable home prices compared to other parts of the country,” said HAR Chairman Danny Frank with Coldwell Banker, United REALTORS®. “Home prices have steadily risen all year and I’m often asked if our market risks experiencing a bubble. That only becomes a possibility if we don’t soon see a reversal in our shrinking inventory of homes – the fundamental concept of supply and demand.” The latest Texas Workforce Commission’s report indicated that nearly 81,000 net new jobs had been added to the Houston metropolitan area over the past year, representing 3.0 percent growth in local employment. Foreclosure property sales reported in the HAR Multiple Listing Service (MLS) declined 45.0 percent compared to September 2012. Foreclosures currently make up just 7.4 percent of all property sales, down from 19.6 percent at the beginning of the year. The median price of foreclosures rose 6.6 percent to $87,450.
September sales of all property types in totaled 7,466, a 25.7 percent increase over the same month last year. Total dollar volume for properties sold shot up 40.2 percent to $1.75 billion versus $1.25 billion a year earlier. September monthly market comparison Houston’s real estate market enjoyed across-the-board gains in September when comparing sales to September 2012. On a year-over-year basis, total property sales, total dollar volume and average and median pricing all rose. Month-end pending sales totaled 3,563, a 1.5 percent gain over last year and the same rate of increase the market saw in August. As HAR reported last month, while pending sales typically serve as a bellwether of the following month’s sales activity, this statistic apparently reflects the unprecedented pace of home sales that has kept many transactions from ever attaining “pending” status. Active listings, or the number of available properties, at the end of September declined 17.5 percent to 32,457. Houston’s inventory of available homes dipped from 3.3 months in August to 3.2 months in September, down from the year-ago level of 4.7 months
see Area sales • Page 3B
Heights Office
2222 North Durham Houston, TX 77008 281.517.8760 Scott Lester - Bank Office President Margaret Vandever - Senior Vice President Amy Ritter, Banking Officer/Lender
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