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



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Untangling the gifted down payment puzzle…



If you want to buy a home, are short on down payment funds, and have a relative with the money and the desire to help you, it’s time to celebrate! However, you will need to follow a few rules.

First, the IRS: Under current Federal tax laws, any individual can give any other individual up to $15,000 per year without being subject to a gift tax. And yes, it’s the giver who pays the tax, if any, not the recipient.

What that means to you is that Grandma and Grandpa can each give you and your spouse $15,000 to go toward that down payment. That’s $60,000. If that isn’t enough, they can give you more without being subject to gift tax, but they will have to file IRS Form 709 to disclose the gift. The excess will then count toward a lifetime maximum that presently stands at $11.4 million.

Should the gifts exceed $11.4 million the giver would be subject to a tax of anywhere from 18% to 40%.

It is important for givers to disclose any gifts in excess of $15,000 to any one individual. If they fail to file the gift tax return, then the IRS can and likely will assess a gift tax, plus penalties and interest.

As far as the IRS is concerned, you could receive gifts from any number of people, as long as they follow the rules.

Banks have their own set of rules regarding gifted down payments.

First, the giver must be a relative. It can be a parent, grandparent, sibling, or spouse.  If you are engaged to be married, your significant other can also give you $15,000.

Next, you will have to write a gift letter to the lender, providing detailed documentation regarding the gift. That would include the name of the donor, their relationship to you, the date and amount of the gift, and bank records showing the deposited funds. The giver will also need to make a written statement verifying that the money was a gift and they have no expectation of repayment.

Banks have always wanted assurance that no part of your down payment was borrowed funds. Thus, they might also require documentation showing that the gift money was “seasoned.”

If you anticipate receiving a gift (or gifts) for your down payment, discuss the issue with your lender.

Different loan programs have different rules that you must follow. In general, if you are putting down 20% or more of the purchase price, the money can all be gifted. If you’re paying less than 20% down, you may have to show that a portion of the down payment is your own money.


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Will checking your credit harm your credit rating?



When you’re planning to purchase a new home, you naturally want your FICO credit score to be as high as possible. As a result, you may be getting plenty of advice on what to do and what not to do.

You’ve heard that every inquiry into your credit can lower your scores.

That’s only partially true.

Checking your own credit does no harm at all, as long as you order your credit reports through an organization authorized to provide reports to consumers. Today some banks offer their customers instant access to credit reports and even alert consumers to big changes in their scores. It’s a good idea to check your credit reports regularly, if no other reason than as an early warning of identity theft.

Note that the scores they provide may not be accurate with regard to your FICO scores. The FICO score is specifically used in mortgage lending. Different scoring formulas are used by credit card companies, insurance agencies, car dealerships, etc. However, they’re all a fair indicator of your credit worthiness.

Credit inquiries made by companies that are considering offering you credit also do not lower your scores. You’ll still see these inquiries on your credit report, however.

Credit inquiries made in response to your application for credit will reduce your scores.

While the impact on each person is different based on their unique credit history, for most a single inquiry will take less than 5 points from their FICO scores.

Multiple credit card inquiries or the fact of opening several credit accounts in a short period of time CAN  do significant harm. This action labels you as a poor credit risk. Statistics show that those who apply for 6 or more credit lines within a short period of time are up to 8 times more likely to declare bankruptcy than those who have made no new credit applications.

However – there is an exception to this.

Credit bureaus and lenders recognize the fact that consumers do (and should) shop for rates. With this in mind, inquiries from multiple mortgage lenders, automobile dealers, or student loan lenders all made within a short period of time will be treated as a single inquiry. A “short period” can be anywhere from 14 to 45 days, depending upon which FICO scoring formula your lender wants the credit agency to use.

Credit inquiries play but a small part in your overall FICO scores.

More important factors are your bill-paying history and your percentage of debt to credit available.

That being the case, do pay all of your bills on time and do keep balances low on credit cards and other revolving credit accounts. Many experts suggest that your credit card balances should stay below 30% of your available credit.

Open new accounts only as needed, but do not close old accounts. Instead, use them occasionally and pay the balances when due.

If you want to buy a home in the near future and aren’t sure how you stand, call us at Homewood Mortgage, the Mike Clover Group. We’ll be glad to talk with you about your situation, look at the credit report you’ve obtained, and make suggestions for getting your credit scores in top shape before you begin shopping.

Call us today at 800-223-7409

If you know you’re ready, you can either call or

Apply on line at www.mikeclover.com.



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How to choose the right mortgage lender for you


Couple signing loan documents at a bank

When you want to purchase a home, the two people most important to your success are your real estate agent and your mortgage lender. Your agent will be instrumental in helping you find the right house, then negotiating the most favorable price and terms.

Your mortgage lender will be instrumental in helping you in two ways. The most obvious is finding a loan with the lowest interest rate and fees. Less obvious is the role your lender will play in helping you understand the process and get through it smoothly.

Visit your mortgage lender and become pre-approved for your loan before choosing a real estate agent. This will keep your agent focused on showing you the correct homes and will put you in a position to make a confident offer when you find your dream home.

There is no such thing as a one-size-fits-all mortgage.

The mortgage loan that will be best for you depends upon:

  • Your income and assets.
  • The amount of your down payment.
  • Your credit rating.
  • Your current debt.
  • The price of your new home.
  • The type of loan you need will affect your choice of lenders.

While all mortgage lenders will help you with a standard conventional loan or a FHA loan, not all offer Jumbo loans, VA loans, or U.S. Department of Agricultural loans.

Conventional Loans are the best choice for many borrowers.

Conventional loans generally offer the lowest interest rates, and with a down payment of at least 20%, carry no mortgage insurance premium. Conventional loans can be obtained for as little as 5% down and require a credit score of at least 620. At Homewood Mortgage, the debt to income ratio can be as high as 50%.

Your debt to income ratio (DTI) is obtained by dividing the total of your monthly debt obligations (including your new home payment) by your monthly income. For example, if you have $1,000 in monthly debt obligations and earn $6,000 per month, your DTI ratio would be 17%. With the addition of a $1,250 mortgage payment, it would rise to 38%.

The second-most popular home mortgage loan type is FHA.

A FHA (Federal Housing Administration) loan can be obtained for as little as 3.5% down, and the qualifications are much looser. For instance, the borrower’s credit score can be as low as 580. FHA also allows higher debt to income ratios.

However, FHA loans do come with a monthly mortgage insurance premium.

Both Veterans Affairs loans and U.S. Department of Agriculture loans can be obtained with a zero down payment. However, only veterans, active duty service personnel, and some reservists qualify for a VA loan, and USDA loans are only available in specific locations.

Homewood Mortgage, the Mike Clover Group, can help you with Conventional, VA, FHA, and USDA loans. We also write Jumbo Loans and construction loans.

Within each of these loan types you’ll find more choices. For instance, fixed rate mortgages of varying lengths, adjustable rate mortgages, mortgages with balloon payments, etc.

A good lender will help you examine these choices to determine which is best for you in your personal situation.

Your choices in choosing a mortgage lender…

  • The branch of a national lender, such as Bank of America or Wells Fargo
  • A credit union
  • A smaller bank or mortgage company, such as Homewood Mortgage
  • An online lender

While your primary concern will be the cost of the mortgage, including rates and fees, service does play an important role in your success.

When you need a lender who will help you make the right choice from among the many loan programs available, you’ll want a smaller bank or mortgage company. Here you’ll be served by someone who will explain the programs, guide you in improving your credit rating (if necessary), and be available to answer questions from loan application through closing.

Note that not all lenders are alike. Just as in any profession, some are more service-oriented than others. Choose a lender who makes you feel comfortable when talking about your finances, who returns your calls, and who shows a genuine desire to help you make a good choice.

The national lenders: Shopping around to obtain good faith estimates from a variety of credit unions and national banks can be time-consuming. However, if you don’t want to choose a local lender or mortgage broker, it is important. Different banks have different programs with different costs to the consumer.

Do remember that you’re only one of thousands of borrowers when working with a national lender, so you shouldn’t expect personal service.

If yours is a complicated transaction, such as a mortgage for a self-employed borrower, a construction loan, or a bridge loan, you’ll probably want a smaller lender who sees you as more than just a number.

Many Millennial buyers prefer online lenders.

A study by NerdWallet found that 64% of millennial home buyers prefer to obtain their mortgage loans on line. While these loans might offer lower rates and fees, borrowers get no guidance and no one-on-one service.

Online lenders could be a good choice for some borrowers, but are not the right choice for everyone.

Here in Texas, Homewood Mortgage, the Mike Clover Group, is the local lender who will give you both personal service and the lowest rates and fees available in Texas.  We do take mortgage applications on line, and we do serve borrowers all over the state. At the same time, we offer one-on-one personalized service – whether in our office or on the phone.

Call us today at 800-223-7409
or apply on line at www.mikeclover.com.

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





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What Affects Mortgage Rates?


Mortgage rates sign in a board

If you ever use the Internet or open a newspaper, you’ve seen ads from home mortgage lenders advertising their low interest rates. You may have even contacted one of those lenders, only to learn that the advertised rate only applies if you really don’t need to borrow the money.

The interest rate does matter.

The interest rate you agree to pay will determine both your monthly payment and the total amount of interest you’ll pay over the life of the loan.

For instance, if you get a 30-year on $200,000 with a 4% interest rate, your monthly payment would be 954.83 and you would pay $143,739 in interest over the 30 years. If your interest rate rises by one quarter of a percent to 4.25%, your monthly payment would be $983.88, and you would pay $154,197 over 30 years.

Mortgage interest rates change from day to day and from borrower to borrower.

The overall range of interest rates offered to borrowers across the country fluctuate based on things such as consumer confidence, employment statistics, fluctuations on home sales, and other economic factors.

When economic activity is sluggish, the Federal Reserve will provide more funding and interest rates will go down. This is what we saw after the mortgage crisis, and rates have still not risen to pre-crisis levels.

On a more personal level, the interest rate offered to you will first depend upon the strength of your local housing market.

After that, the loan type will come into play.

Conventional mortgages – those extended to borrowers with solid assets, a steady income, well-established credit, and high credit scores – have the lowest interest rates. FHA (Federal Housing Administration) loans, VA loans, and U.S. Department of Agricultural Rural Development Loans carry slightly higher interest rates.

Next is the type of interest rate.

Borrowers can choose a fixed-rate mortgage or an adjustable rate mortgage. While a 30-year loan is standard, they can also choose a 15-year (or other) term for repayment. Shorter term loans carry slightly lower interest rates. Naturally, loan payments are higher when the term is shorter.

A fixed rate mortgage carries an interest rate that does not change throughout the life of the loan. An adjustable rate loan starts out with a lower rate that adjusts to a higher rate after 3, 5, 7, or 10 years.

After those factors are considered, the interest rate offered comes down to the borrower.

When you apply for a loan the lender will examine everything about your finances, from your credit scores to your debts, your assets, and your income. The better you look, the lower the interest rate.

Your down payment is also a consideration. The more you put down, the lower your interest rate. In addition, if you pay less than 20% of the purchase price for a down payment, you’ll have to pay for mortgage insurance. This will add from 0.3% to 1.15% to your home loan.

What is a mortgage interest rate lock and why is it important?

Since interest rates do fluctuate and borrowers are approved based upon a specific mortgage payment amount, lenders offer “rate locks.” Rate locks protect buyers from a rise in rates (and payment) that would disqualify them from obtaining a loan.

This is a commitment from a lender to give you a home loan at an agreed-upon interest rate, provided you close your loan on or before a certain date. That date is generally 30 days from the date of approval. If you’re close to closing, many lenders will extend the lock as a courtesy while others will extend for a fee.

Do remember that at this point, the loan is still provisional. You have a loan approval and a rate lock, but that loan approval is based on a last-minute review.

So don’t do anything foolish.  Don’t quit your job, co-sign a loan for a friend, give your Social Security number to a salesman for any reason, apply for a new credit card, deplete your bank accounts, or run up the balances on your current credit accounts.

In other words, until your mortgage loan is finalized, don’t do anything at all to change your financial picture.


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What Homeowners Need to Know about Capital Gains Taxes



Couple getting financial advice

First, what is a capital gain? It’s the profit (if any) that you make on property, such as a personal residence, that you sell after owning it for a year or more.

Capital Gains Tax is the tax on that profit.

The new Tax Cuts and Jobs Act made changes to the Capital Gains Tax, so even if you understood it in the past, it’s a good idea to brush up on your knowledge.

The $250,000 exclusion didn’t go away.

The IRS still gives each person a tax-free exemption for up to $250,000 of the profit on a personal residence. Thus, a couple with joint ownership could exclude up to $500,000 in gains, as long as they meet the residency requirements.

  • They must have owned the home for at least two years.
  • They must have occupied the home as their primary residence for at least two of the past 5 years.
  • You must not have used the exclusion within the past two years.

Other partial exclusions do exist, so if you don’t meet these requirements, consult your tax advisor and/or review IRS Publication 523.

If your capital gain exceeds the exclusion…

Let’s assume that you and your spouse have owned a home for a number of years and your gain after paying all the costs of selling will come to $600,000. You qualify for the exclusion, so you now owe Capital Gains Tax on $100,000.

How much tax you will pay will depend upon your income. (In the past, it was dictated by your tax bracket.)

If you and your spouse earn less than $78,750 (or you as a single filer earn less than $39,375) you owe nothing.

A 15% tax will apply if you’re a single filer earning up to $434,550, joint filers earning up to $488,850, or the head of a household earning up to $461,700.

If your earnings exceed these numbers, your capital gains will be taxed at 20%.

Do keep in mind that some states also impose a capital gains tax, and very high earners could owe a 3.8% net investment income tax.

What if you inherited the home you’re selling?

If you inherited recently, you should owe little or no capital gains tax, because the tax basis of a home “steps up” upon the death of the owner.

Even if your parents paid $50,000 thirty years ago for a house that is now worth $1,000,000, you won’t owe capital gains unless it appreciates in value between the date of their death and the date of the sale. As far as the IRS is concerned, the tax basis of that home is now $1,000,000.

This “step-up” in tax basis is the reason why probate specialists advise heirs to cancel any sale that was pending prior to the owner’s death.

Careful bookkeeping can help you avoid capital gains

Since the real estate market can be volatile, you never know how much your home might appreciate over a few years. That’s especially true if you make major improvements.

Just to be on the safe side, do document those improvements and keep all the receipts with your other documents related to the home.

You can’t count repairs to the AC or replacing a torn window screen, but things like adding a deck, finishing the basement, remodeling the kitchen, replacing the flooring, installing new roofing, or trading out to energy-efficient windows and doors do count.

Those improvements do increase the value of your house and their cost will become part of your base for taxation – as long as you have the documentation to prove it.

Can real estate investors avoid capital gains tax?

Yes, but it is more complicated, and it only works if you intend to stay in the real estate investment business.

By using an IRS approved 1031 Exchange, you can sell one property and buy another without recognizing the gain – and thus not having taxable gain.

The process is complicated and is subject to strict rules and timelines, so consult with a tax advisor and/or real estate attorney well in advance of making such a move.



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