Co-signing a loan is a lot different from giving a character or credit reference




Here’s what you need to know before you decide to add your name to that dotted line.

First, what does co-signing really mean?

At the bottom line, it means you are accepting full responsibility for making the loan payments.  You are adding the security of your income and credit history to the transaction, along with the “occupying borrower.”

When you agree to co-sign, your income, credit history, assets, and debts will be scrutinized by the lender, just as if you were the primary borrower. They’re attempting to verify that you have the ability to take over making payments if the primary borrower defaults.

Note that your high credit scores won’t guarantee loan acceptance if the person you are attempting to help has low scores. Credit scores are, after all, a reflection of a person’s track record of handling credit.

Co-signing can reduce your own ability to obtain a loan.

Remember that when you co-sign a note, that debt is added to your own debt with regard to your debt-to-income ratios. That means that while you might show the ability to make new mortgage payments of your own if only your own personal debt was considered, your lender has to assume that you are already making the payments on the note you co-signed.

Co-signing is risky.

If something happens to affect the primary borrower’s financial health, you must either take over making the payments or see your own credit destroyed. Even if the borrower misses just one payment, then catches up and resumes making on-time payments, your credit score will be affected. According to FICO, someone with a score of 780 or more would see a crop of 90 to 100 points in response to a missed payment. Late payments have a similar effect.

In a survey done in 2016, 38% of co-signers reported having to pay mortgage loan or credit card bills, while 28% reported suffering a reduction in credit scores because the primary borrower paid late or not at all. 26% said co-signing resulted in a damaged relationship with their friend or family member.

How can you protect yourself?

You love the person who asked you to co-sign. You want to help, but can you trust that person to meet their obligations? Past behavior is a good indicator of future performance, so first have a look at his or her credit report.

If there are late payments or defaults, is there a very good reason why? If they truly can’t handle money, you won’t be doing them any favors by helping them get further in debt.

If the problem is lack of income, can you see that their income is likely to rise immediately, or will the be stretching themselves too thin? Again, you might do them a favor by saying no.

If you decide to go ahead…

Make sure that you will be shown as a co-owner as well as a co-borrower. This will give you a measure of control, should it be necessary to sell the property.

Next, set up email or text alerts to tell you when payments are due and when they’ve been made. Since mortgage payments generally have a 15-day grace period for payment, this gives you the opportunity to step in and make the payments before a late charge is incurred and the late payment is added to your credit report.

Make sure the person for whom you’re co-signing knows how to reach you and knows that they MUST contact you immediately if it appears that they won’t be able to make a payment on time.

Do you have more questions? Call Homewood Mortgage, the Mike Clover Group. We’ll be glad to provide the answers.

Call us today at 800-223-7409







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Plan ahead to raise your credit score before shopping for a home




When you apply for a mortgage loan to buy a home, the better your credit score, the better interest rate you’ll get. So even if your score is good, it pays to make it better.

If your credit is in poor shape, don’t be lured in to paying a credit repair company. You can do everything that needs to be done. And, contrary to what companies might promise, it cannot be done instantly.

How long will it take to raise my score?

How long it will take to raise your credit scores depends entirely upon what is pulling them down. But first, what scores are you aiming for. Here is how most lenders rate scores:

  • Perfect:            850 (which hardly anyone ever attains)
  • Excellent:         760-849
  • Good:               700-759
  • Fair:                 650 to 699
  • Low:                649 or less

Different lenders have different guidelines, but generally, a score of 660 or more is required to obtain a mortgage loan.

The fastest way to raise your score: Correct errors on your credit report

Experts say that as many as 70% of all credit reports contain some kind of errors. Some are harmless, while others could be dragging you down. Remember that the reports are generated from data entered by humans – and humans do make data entry errors.

Thus, your credit report could be showing an account that’s not even yours. It takes a month or two to correct that type of identity error.

Next, there could be errors with accounts you do own. For instance, a loan that was paid off could still be showing as open. It take up to 90 days to correct those errors – and even longer if your creditor is uncooperative.

Your first step: Get a copy of your credit report from each of the 3 credit reporting bureaus: TransUnion, Equifax, and Experian.

Why all three? Because they don’t always contain the same information. An error on one report may not show up on another. You need to obtain and carefully read all three.

When you find an error, you’ll need to provide documentation to prove it is an error. For instance, if someone is showing a late payment, you’ll need to bring in a bank statement or a receipt showing that it was paid on time. Today, with electronic payments, you might have an email showing the amount and date of your payments. (A good reason not to delete those emails!)

Once you’ve reported an error, credit bureaus have 30 days in which to investigate. They may ask for additional documentation or ask you to communicate with the creditor. Pay attention to all communications from the credit bureau and the lender!

Your credit scores may be low because you don’t have credit history.

I’ve known people who were both shocked and angry to learn that they had poor credit after a lifetime of paying cash. They’d been responsible citizens, never going in debt, and this was the thanks they got!

It’s true. Unless you’ve used credit and shown your ability to make regular, on-time payments, your scores will remain low.

In this case, you’ll need to open a credit account, use it, and make payments on time. Don’t over-spend and don’t go beyond 30% of your credit limit on any one card. Look for a credit card with no annual fee and the lowest interest rate possible. If you look online, you’ll find a dizzying number of choices, so don’t take the first one you see.

If you aren’t approved for a card because your credit scores are low, it is possible to get a secured credit card. Use it for gasoline or groceries and pay it off each month to avoid high interest charges.

Delinquent accounts must be addressed.

If you have delinquent accounts or accounts in collection, bringing them current will boost your scores quickly.

Your history of making late payments will remain on your credit report for 7 years, but no longer being in arrears or collections will help.

Do note: If you have bad accounts that have been on your report for six years or more, you might want to leave them alone and simply wait them out. These will automatically fall off your report after 7 years. If you attempt to bring them up to date by making one or more payments, then fall behind again, the 7 years will start all over again.

So think carefully before touching those accounts. You might be best off to concentrate on keeping more recent accounts current.

Use less of your available credit!

Just as you shouldn’t spend every dollar you own, you shouldn’t use all the credit you have. 30% of your credit score is based on how much you owe relative to how much credit you have, and that magic number is also 30%.

If you have $10,000 in credit available, strive to use no more than $3,000.

The best way to reduce this ratio is to stop charging and apply more to paying down your balances. However, that can be tough if your balances have crept up over time.

The second best way to change your ratio is to ask your current credit card issuer for a credit line increase – and don’t use it once you get it! Before you ask, be sure to ask if they do a “soft credit pull” before increasing your limit. A “hard credit pull” will automatically lower your credit scores.

Credit card companies report to the credit bureaus once per month. If you’re using your card for daily expenses, then paying down by that amount after the bill comes in, consider making some smaller payments earlier in this month. If you use your card to do a big grocery shop or to fill up your gas-guzzling SUV, then go home and make a payment for that amount on your credit card. This will keep the reported balance at the end of the month down.

Note: A poor way to change your usage percentage immediately is to apply for a new card. Every application lowers your credit scores, and the effect will last for months. If you’re thinking ahead a year, it might be a good tactic.

Thinking ahead to the future…

A good credit score will help you with everything from buying a home, to buying a car, to obtaining a new cell phone. Your credit scores can even affect your ability to qualify for certain employment.

Take steps now to protect your credit. If it’s good – see if you can make it better. If it’s poor, get started on making it good.

Correcting errors, bringing your debts current, and keeping your credit use low will help right now. For the future:

  • Make sure you pay all accounts on time
  • Limit your use of credit
  • If you tend to forget to pay on time, set up automatic payments.
  • Check your credit report regularly, so you can catch and  correct errors.

If you’re ready to see what interest rate you qualify for now, or if you simply have questions, we at Homewood Mortgage, the Mike Clover Group, will be glad to help.

Call us today at 800-223-7409



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Which Type of Home Loan is Right for You?



Unless you’re independently wealthy, shopping for a home means taking out a mortgage loan. Wise consumers shop for the loan before they shop for the house.

Why? Because there are several types of home loans, and because different lenders offer different rates and terms.

The first step is to decide which type of loan is best for you.

  • Conventional fixed-rate loans
  • Conventional adjustable-rate loans
  • FHA loans
  • VA loans
  • USDA loans
  • Bridge loans

The most common type of Conventional loan is the fixed-rate loan. This means just what it sounds like. The interest rate remains the same throughout the life of the loan. They’re offered as 15-year loans, 20 year loans, and 30 year loans.

While many believe that consumers must pay 20% down to obtain a conventional loan, that isn’t so. Rates as low as 3% down (for first time homebuyers) are available. The difference is that the borrower will be required to purchase mortgage insurance to protect the lender.

This is the right loan for consumers who want the predictability of a fixed loan amount from year to year, and who plan to remain in their homes for an extended period of time.

The Adjustable-rate conventional loan (ARM) offers opportunity for consumers who plan to re-sell the home within a few years. Lenders offer a starting interest rate which is considerably lower than their fixed-rate loans, with the agreement that the interest rate will adjust after a set number of years. The amount by which the rate can adjust each time is also pre-set.

Different lenders offer a variety of programs with different pre-set adjustment periods, so if you’re considering this option, talk to your lender about the many options available.

This is a good loan product for people who plan to relocate or refinance into a fixed rate loan before the first adjustment period ends. It does carry some risk, as many learned during the recent housing crisis.

Jumbo Loans

When you hear the term “Jumbo loan” you might think it refers only to loans in the millions, but that’s not so. A jumbo loan is a home mortgage loan for any amount that exceeds the loan limit on conforming loans.

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

Government-Sponsored Loans

FHA (Federal Housing Administration) loans are the first choice for the majority of borrowers with a low down payment. They’re backed by the federal government and require mortgage insurance over the life of the loan. Loans may be for 15 or 30 years.

These loans are limited to a specified amount – in 2019 the limit is $314,827 for a single family home in most communities and $726,525 in high-cost areas such as Los Angeles and New York City.

VA loans are for those who have served or are serving in the United States military for 180 days during peacetime, 90 days consecutively during wartime, or six years in the military reserves.

To be eligible for a VA loan, the home must meet minimum property requirements – so “fixer” properties are not considered. In addition, the home must be the borrower’s primary residence.

These are zero down payment loans with no mortgage insurance. Most borrowers will be required to pay a VA Funding Fee, but even that is waived for Veterans who have been injured in the line of duty. In addition, VA loans offer discounted mortgage interest rates.

USDA loans are also known as Rural Development loans.

These are loans with no down payment and lower interest rates, available to lower income borrowers in specified areas. From the name you’d expect these to all be rural areas, but that isn’t the case. In fact, homes in all but the areas in and around major cities are eligible. Check the map at: to see if homes in your area qualify.

Homes must meet broad safety and health guidelines, and must be the borrower’s primary residence.

Are you thinking of buying or refinancing?

We at Homewood Mortgage, the Mike Clover Group, will be glad to give you more detailed information on loan programs available to you – and to get you pre-approved so you can go forward with confidence.

Call us today at 800-223-7409


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Another reason Californians flock to Texas – our homestead tax exemption



Every state but New Jersey offers homeowners the opportunity to file a homestead tax exemption, which lowers the taxable value of our homes for property tax purposes.

As the name “homestead” indicates, this tax break is available on your primary residence only. Investment property and second homes are not eligible.

In most cases, the homestead exemption is a fixed discount on taxes.

Here in Texas , where the median home value is $197,500, we get a $25,000 exemption for school taxes, and a $3,000 exemption for certain county taxes. Seniors and disabled homeowners also qualify for an additional $10,000 exemption.

If you’re a senior citizen with a home valued at $197,500, you’ll be taxed on $159,500.

In California, where the median home value is $611,190, the exemption is only $7,000. If your home is valued at $611,190 you’ll be taxed on $604,190.

The second benefit of a homestead exemption is shelter from unsecured creditors.

If bankruptcy, illness, or the death of a spouse is causing creditors to call, your homestead exemption can prevent creditors from forcing the sale of your home. If the equity in your home is less than your homestead exemption, there’s nothing they can touch. Beyond that, State laws apply. Rather than force the sale of a home, unsecured creditors can obtain a judgement and file a lien against your home – for payment when and if it is sold.

Here in Texas, judgement liens can remain attached to a property for ten years.

If you’ve just purchased a home, be sure to file your request for a Homestead Exemption with the County immediately. Different states and counties have different deadlines for filings, so don’t take a chance. In Texas, the exemption might transfer with the sale of the house, but it’s still best to check with the County to make sure you’re covered.

While we might enjoy some of the services our taxes pay for, I have yet to meet anyone who would prefer to pay more taxes than absolutely necessary.

If you’re getting ready to buy a home in Texas, call Homewood Mortgage, the Mike Clover Group. We’re proud to offer fast service, plus the lowest fees and rates you’ll find in Texas.

Call us today at 800-223-7409



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Is it wise to pay extra on your home mortgage?




Whether or not you should pay down your mortgage depends upon your plans and the other circumstances in your life. Let’s take a look at the pros and cons.

First, the pros…

Your mortgage will be paid off sooner.

For many who plan to live in their homes indefinitely, paying it off sooner is a huge incentive to add dollars to each month’s payment. When you stop to consider that in the early years of a mortgage loan the bulk of the money is going toward interest, an increase of just a few hundred can knock a full month off the end of your loan.

Just to round things off, consider that you have a $1,200 per month payment and only $300 is going toward the principal. Paying $1,500 is akin to making two payments at once. If you do that for a year, you’ll reduce your loan term by a year. Of course, as you pay down the loan, the ratio of principal to interest will change.

You’ll pay less interest over time.

Let’s assume for a moment that you have a $250,000 fixed-rate mortgage with a 4% interest rate and 30 year amortization. Your monthly principal and interest payment will be $1,193.54. If you pay that amount for 30 years, you will have paid $179,673 in interest.

Should you decide to pay $1,400 per month instead, you’ll pay off the house in about 274 months, and pay a total of $133,600 in interest.

The less you owe, the more equity you’ll have.

This could be a benefit if you some day wish to take out a home equity loan for improvements, or if you wish to sell and use your equity as a down payment on a new home.

The less you owe, the better your credit score.

This could be important at some time in the future, since high scores equal lower interest rates on everything from a car loan, to credit cards, to a mortgage on a vacation home.

Now for the Cons…

Paying less interest could mean paying more income tax.

Depending upon your financial situation, your mortgage interest could be helping to reduce your tax bill. Since tax regulations have changed, this is something to discuss with your tax accountant.

Paying more on your mortgage might mean paying more interest on higher interest debts.

Look at your car loan, a student loan, or a credit card balance before deciding to pay down the mortgage. When you have extra funds to use, it’s always wise to pay off the highest interest debt first.

You might be wise to put more into savings.

First, everyone should have an emergency fund. Having 6 months or more worth of cash in a readily available account will give you peace of mind. Then, consider putting more into retirement funds, especially if your employer will match your contributions.

Your mortgage loan could have a pre-payment penalty: Beware!

While this isn’t as common as it once was, some lenders do add a pre-payment penalty clause to their mortgage agreements. This penalty could equal several months’ interest or be a percentage of the balance due. Be sure to read your mortgage loan documents carefully before deciding to pay down your mortgage.

Interest rates are still way down – so if you’re ready for a refinance, get in touch.

And just so you know, here at Homewood Mortgage, the Mike Clover Group, we never add pre-payment penalties to our mortgage loan documents.

Call us today at 800-223-7409




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Why don’t the APR and my Interest Rate match?




More than one home buyer has been startled to read the APR on their loan closing statement and see that it isn’t the same as their quoted interest rate. They react with “Wait a minute! This isn’t right!”

What they don’t know is that the APR is how much the borrower will pay in interest and other fees. The APR is the total cost of borrowing money over a one year period.

Those other fees include items such as the closing costs, points, origination fees, and private mortgage insurance. These are all lender fees.

In order to make a true comparison, you should obtain and use both your interest rate and your APR when comparing the cost of purchase or refinance loans from different lenders. Two different lenders could quote you the same interest rate, yet have vastly different APRs. This is because one is charging more for the privilege of borrowing money.

Do be aware that some lenders move some of their costs out of the APR, so take the time to read what is included in each estimate before relying solely on the APR numbers.

Some of your closing costs – those that are 3rd party fees – aren’t included in the APR. These would include the appraisal, title search and insurance, credit report, and transfer taxes.

Both the APR and the Interest rate are important

The APR covers up front fees that you’ll pay at closing. Your interest rate will keep on for the life of the loan. Look at both numbers and compare. Then do the math. It could be wise to pay a higher APR (more out of pocket at closing) in order to obtain a lower ongoing interest rate.

Different lenders offer different APRs and different interest rates, so it does pay to shop around.

Why was I not offered the advertised interest rate?

The advertised interest rate is the best the company has to offer. Unfortunately, most borrowers don’t qualify for the best, due to variations in their situation and the loan they seek.

Six factors are taken into consideration in determining the interest rate a lender will offer. To make it even more confusing, different lenders rate these six factors in different ways.

The factors are:

  • Your FICO credit score
  • The loan amount and down payment
  • The location of the home in question
  • The loan type
  • The length of the loan (term)
  • The type of interest rate

First, your credit score. As you probably know, this is a reflection of your bill-paying habits over the past many years. Lenders see your numerical score as a prediction of how reliable you’ll be in making a monthly mortgage payment. The higher your score, the better interest rate you can obtain. A perfect sore is 850.

Note that your FICO credit score may be different than the score obtained by a car dealer or insurance company.

Your loan amount and down payment matter because they’re a measure of the risk your bank takes when lending against the house. The more of your own money you can invest, the less risk there is to the bank. Banks feel much more secure when you’ve put down 20% than when you’ve only put down 5%.

This is why loans with down payments of less than 20% come with private mortgage insurance (PMI). This will cost you from 0.3% to 1.15% of your home loan, and is added to your payment monthly. While this is insurance paid for by the borrower, it only covers the lender in case of default.

The home’s location. Interest rates are affected by the strength of your local housing market.

The loan type: Conventional mortgages, which are geared toward borrows with well-established credit, steady income, and solid assets, carry the lowest interest rates. FHA, VA, or Rural Development Loans, which are government backed loans available for little or no down payment, carry slightly higher rates.

The loan term: Shorter term loans carry lower interest rates.  Thus, borrowers who are able to meet the larger monthly payments on a 15-year loan will save even more than they save by paying the loan off sooner.

The type of interest rate: Borrowers can opt for a fixed-rate mortgage or an adjustable-rate mortgage, or ARM.

A fixed-rate mortgage is just what it says. The rate is fixed at the time of the loan and does not change. The only adjustments to the borrower’s monthly mortgage payment will come from increases in taxes or homeowner’s insurance.

Adjustable rate mortgages generally start out at a lower interest rate than a fixed-rate mortgage, then the rate adjusts (increases) over time. Rates are adjusted at pre-set intervals of 3, 5, 7, or 10 years.

Adjustable rate mortgages can be beneficial to borrowers who plan to move before the rate adjusts or who feel assured of an increase in income before the end of the adjustment period.

Here at Homewood Mortgage, the Mike Clover Group, we’re pleased to offer the lowest interest rates and APRs available in Texas. We’re also pleased to offer pre-approval services and to help our borrowers determine the most beneficial loan for their unique situation.

Call us today at 800-223-7409


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What is a bridge loan, and why would you want one?



What is a bridge loan, and why would you want one?

Bridge loans aren’t common, and they definitely aren’t for everyone. But in the right circumstances, they’re a useful tool.

What is a bridge loan?

A bridge loan is a short-term loan designed to allow a homeowner to purchase a new home before they’ve sold their present home. They allow people to use the equity in their current home to make the down payment on a new home.

Unless the current home is owned free and clear, the bridge loan puts the borrower in the position of making three loan payments on two houses.

Bridge loans are expensive.

Because they’re short term loans, usually for 3 to 12 months, lenders charge hefty origination fees and higher interest. Reported interest rates are anywhere from 6% all the way up to 16%. Some lenders do offer interest-only options.

Since the interest rates are high, most borrowers pay off bridge loans as soon as possible. However, some do have pre-payment penalties. Borrowers should always read the fine print before signing documents for a bridge loan.

Who uses a bridge loan?

People in a fast-moving seller’s market who have found their dream home and don’t want to let it get away from them while they wait to sell their current home.

People who have been transferred and want to purchase a home in their new community rather than rent and have to move twice.

Bridge loans are a gamble.

If you’re in a hot seller’s market and your current home is in good condition, ready to sell, it’s not too risky. It will probably sell soon. However, if you’re in a buyer’s market or a slow market, you stand the risk of losing your home to foreclosure.

Remember that a bridge loan is short term. What if you can’t pay it of at the end of 3, 6, or 12 months?  Most lenders are willing to extend the term, but only for a short while.

If you’re in a buyer’s market and can afford that 3rd loan payment, a safer choice is a HELOC – Home Equity Line of Credit.

The safest choice of all is to sell the existing home before buying a new one.

If you begin shopping after your present house is under contract, it could be possible to do a simultaneous closing or to lease back your old home for a short period of time. Even if that won’t work, it could be worth the extra time and trouble to rent for a few months while you take the time to find the perfect new home.

Does Homewood Mortgage, the Mike Clover Group, write bridge loans? Yes, we do. We don’t recommend them for most borrowers, but when a bridge loan seems to be the right choice, we’ll get it done.


Call us today at 800-223-7409


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What Texas Homebuyers Need to Know About Earnest Money



Beautiful black woman portrait. Scattering money notes dollars in fashion vows style mulatto curly hair with white locks eye view of the camera

When you’ve found the home you want to purchase, you’ll sit down with your real estate agent to fill out the required paperwork.

One of the primary questions, after the price you’re offering and the amount of your down payment, is how much earnest money you’ll deposit. While often included with the offer, here in Texas this earnest money must be deposited into a trust account within 3 days of a fully executed contract.

Why do we need to deposit earnest money?

Buyers deposit earnest money to show good faith – that they are in earnest about making the purchase. It is a serious commitment.

How much earnest money must a Texas homebuyer deposit?

Real estate law does not demand that the buyer deposit earnest money. However, practicality does demand it. Likewise, practicality demands that the earnest money be of an amount to indicate the buyer’s commitment to purchasing the house.

The larger amount shows the sellers that the buyers are serious – that they aren’t going to cancel the contract on a whim and risk losing that money.

1% to 2% of the purchase price is a common amount for earnest money. However, in competitive situations, buyers may wish to deposit more. In slow markets, you may choose to deposit less.

Before handing over your earnest money, be sure that you’re dealing with a licensed real estate agent and that the money will be held in trust by an established Title Company.

Is earnest money an extra charge?

No, the amount you deposit as earnest money will become a part of your down payment on the house.

What if the transaction falls through? Will I get my earnest money back?

What happens to your earnest money depends entirely upon the reasons why the sale fell through and the terms outlined in your purchase contract.

Financing: If you’re getting a mortgage loan, your contract is probably contingent on financing. This would include lender approval for your loan, plus an appraisal at or above your purchase price. If you can’t get financing or if the house doesn’t appraise, you’ll get your money back.

This is one reason why more and more agents and sellers require a lender pre-approval before accepting a purchase offer. No seller wants to wait weeks and begin packing, only to learn that the buyer didn’t qualify for a loan.

In hot markets, where several buyers are competing for the same home, some buyers have been waiving the financing contingency.

Buyers should understand that even if they’ve been pre-approved for a mortgage loan, things can change. Interest rates could change, pushing the monthly payment out of their range. A borrower could lose a job or become ill. The borrower could do something foolish – like make a credit card deposit on a cruise several months in the future.

These things and others could cause the loan to fail, and the buyers would lose that earnest money.

Inspections: Most home buyers do include an inspection contingency in their offer. This protects the buyer from purchasing a house with problems that will cost additional thousands. Generally, there’s a clause stating how much the seller will spend to correct minor issues found on an inspection.

In hot markets, some buyers have also been waiving this contingency. In that case, their only choices after a troubling inspection would be to buy the house anyway or lose their earnest money.

Clear title: One contingency that applies nation-wide is clear title. If the seller (via the Title Insurance Company) is unable to give a buyer clear title, the agreement will terminate and the buyer will get his or her earnest money deposit back.

What if I simply change my mind?

If you terminate the contract for no reason other than “I’ve changed my mind,” expect to lose the earnest money.

This is why home buyers should think carefully and be SURE that they really do want the house in question before writing an offer and depositing earnest money.

Get pre-approved before you shop.

If you’re dreaming of a new home, obtaining a mortgage loan pre-approval should be your first step. We here at Homewood Mortgage, the Mike Clover Group, will be happy to provide that service.

Call us today at 800-223-7409



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Should you choose an existing home or build a new home?


A construction site for a new single family home in Rochester, Michigan. A recent trend is to tear down older homes in smaller, but liveable communities, and replace them with large, modern homes.

Whether you’re considering your first home purchase or are ready for a change, you may be considering both existing homes and new homes.

  • Which costs less?
  • Which will give you more of what you want in a home?
  • Which will offer more appreciation should you decide to sell?

Let’s start with which costs less to purchase.

At first glance, a new home usually costs more than an existing home.

Across the U.S., the median cost of an existing single-family home is $223,00. This is for an average 1,500 square foot home built prior to 1960. The median price of a new home is $289,415 – but the median size is just over 2,400 square feet.

In spite of rising costs for labor and materials, it turns out that a new home costs less per square foot.

These figures, of course, vary from state to state, city to city, and even neighborhood to neighborhood.

The cost of a home doesn’t end with the purchase price.

The next thing to consider is maintenance.

Face it – older homes are older. They’ve had some wear and tear, and some of the systems may soon need to be repaired or replaced. The average cost to replace a furnace is $4,000, while replacing a roof could run well over $5,000. Even a water heater costs several hundred dollars.

You may also want to replace flooring or fixtures before too long, especially if they’re worn or if the colors or styles are dated.

A new home, on the other hand, will likely come with a builder’s warranty. You might not need to consider paying for repairs for the next ten years. In addition, the flooring and fixtures are new. If you contracted to have that house built, they’re even colors and styles you’ve chosen yourself.

What will it cost to live in a new house vs. an existing house?

That all depends upon the age and quality of the existing house. If built within the last 20 or 30 years, it might have good energy efficiency features. If built in the 1950’s, it will probably have thin insulation and single-pane windows. Newer heating and air conditioning units are also more energy efficient than older models.

Of course you can make upgrades, but that costs more money.

Quality is another consideration.

There is something to the old saying that “They don’t make ‘em like they used to.” Some older homes were built out of materials that are superior to those in use today. For instance, most were built with old-growth wood, which is far stronger than wood that has been subject to forced growth.

In addition, some were built by craftsmen who took great pride in their work.

And how about charm…

Older homes that were expensive in their day generally come with added touches like crown moldings, wainscoting, an abundance of built-ins, large closets, huge claw-foot tubs, and bay windows. You can get these features in a new home, but you’ll pay extra for them.

When you contract to build a custom home…

You supply the builder with the plans, so you choose what rooms you want, along with their sizes. You choose colors, finishes, fixtures, and floor coverings.

This gives you far more flexibility in getting what you want than does buying an existing home or choosing a builder’s model home. It allows you to have the space you want and need without paying for space that will only become a catch-all.

Technology might pose a problem in an older home…

New houses are built to accommodate cable TV, Internet access, and smart home technology. If you want to control the systems in your home from your phone, or ask your refrigerator to keep track of its contents and pull up a recipe and shopping list for you, you might want to stick with new construction. The same would be true if you want intercoms between rooms, television in every room, or stereo speakers discretely placed throughout the house and grounds.

Landscaping is another consideration.

Older homes generally have established landscaping, and often have larger yards. In fact, studies show that as home prices rise, lot sizes shrink.

If you want shade trees and shrubs, you might be happier with a home that’s been in place for at least 10 years. New landscaping is expensive and new plantings do take several years to mature.

What about appreciation?

As we learned during the mortgage crisis, there are no guarantees. However, established homes in established neighborhoods do have a track record that you can investigate. You can see if home prices in that neighborhood are rising or falling. You can see if people are improving their homes or letting them deteriorate. You can gauge the popularity of the neighborhood.

If you choose to build in a new subdivision, you have none of that. It will be your guess whether the neighborhood will be popular and appreciate well. If yours is one of the first new homes, it will also be your guess about how long it will take for other homes to join yours.

What about financing?

It’s faster and simpler with an existing home, of course.

Financing new construction requires a bit more paperwork and a few more steps, but it doesn’t have to be intimidating. We at Homewood Mortgage, the Mike Clover Group have a good system for helping you get it done with a minimum of stress. We’ll be happy to explain the process and help you get started.

Call us today at 800-223-7409

Mike Clover
Homewood Mortgage,LLC
Mortgage Banker
NMLS# 234770
18170 Dallas Pkwy
Ste. 304
Dallas, TX 75287


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Is Recasting Your Mortgage Loan Right for You?



If you’ve never heard of recasting a mortgage loan, don’t be surprised. It isn’t generally advertised, and the method isn’t widely used. And yet, it might be of benefit to you.

What does recasting a mortgage loan entail?

Briefly, it entails paying a lump sum toward your mortgage loan and having the note re-written with the now smaller principal balance. The interest rate and the term of years remaining on the loan remain the same.

The benefit, of course, is lower monthly payments. If your original loan was for $200,000 at 4% for 30 years, your principal and interest payment would be $954.83. Making a $5,000 lump sum payment with recasting would bring it down to $930.96, which might not be enough to matter. However, a $20,000 lump sum payment with a recast would reduce the payment to $859.35 – almost $100 difference per month. If you have 25 years remaining on your loan, that would amount to a hefty $30,000.

You could, of course, refinance instead, and if interest rates have come down, it could be a wiser choice.

If your original interest rate is the same or lower than current rates, then recasting makes more sense, especially since it is far easier, costs far less, and can usually be done in less than 30 days.

Recasting is done with far less paperwork, with no appraisal, no income verification, and no credit check. You do, however, need to be current on your mortgage payments. While a refinance can cost up to 4 or 5 thousand dollars, the recast fee is only a few hundred.

Who can use recasting?

In order to consider recasting you must first have a conventional loan. FHA and VA loans are not eligible.

Second, your bank must offer recasting. Most large banks offer this service, while small banks and credit unions usually do not.

Finally, you must have a good sized lump sum to apply to your mortgage. As a general rule of thumb, $5,000 is the minimum.

Who does use mortgage loan recasting?

Anyone who has come into a lump sum and wishes to turn it into equity in their home. It may be from an insurance settlement, an inheritance, an investment distribution, a large bonus, the sale of investment property, or from the sale of a previous home.

Recasting is particularly useful for those who purchased a new home before selling a previous home. They may have intended to roll the equity from their last home into their new home, but were unable to sell it in time. Recasting allows them to complete a “do over” without the expense of a refinance.

Recasting doesn’t shorten your loan term. Making a lump sum payment without recasting does.

If you’re not concerned with lowering your monthly payment, but do want to reduce the amount of interest you’ll pay by paying your loan off early, simply apply that lump sum with your next payment.

Take a look at the billing statement from your last mortgage payment. Unless you’re nearing the end, you’ll likely see that the payment on principal is 1/3 or less of the total payment.

For instance, if your payment is $1,500, the principal might be $500, with the rest going to interest, taxes, and insurance. Provided that you do make payments on time each month, every time you pay an extra $500, you’ll reduce your loan term by one month. A $5,000 lump sum would shave 10 months from the term.

Would you like to explore the pros and cons of recasting your own home mortgage loan?

We’ at Homewood Mortgage, the Mike Clover Group will be glad to discuss it with you.

Call us today at 800-223-7409


Mike Clover
Homewood Mortgage,LLC
Mortgage Banker
NMLS# 234770
18170 Dallas Pkwy
Ste. 304
Dallas, TX 75287



Posted in Uncategorized | Comments Off on Is Recasting Your Mortgage Loan Right for You?