Underwriting For A Mtg. Bullet Points.




Underwriting plays a crucial role in the timing of your home mortgage loan.

Before you write an offer to purchase a home with a mortgage loan, discuss the time line with your loan officer. You won’t want to promise a closing date that you cannot meet.

While your loan officer will have gone over your credit report, income, assets, obligations, etc. before writing a pre-qualification letter, your transaction must still go through underwriting. Your lender will have a good idea of how long underwriting should take based on the type of loan, the lender in question, and the complexity of your finances.

But keep in mind that is not the only factor affecting the time line. In addition to those factors, your own cooperation will determine the time required for underwriting.

What is underwriting?

Underwriting is the (almost) last step between making a down payment and closing on your home purchase.  It is the process of carefully examining every part of your financial life for the purpose of determining whether or not you are a good credit risk. In order to do the job properly, the underwriter will access your credit report, then require documents such as:

  • Your tax returns
  • W-2 and 1099 forms
  • Pay Stubs
  • Bank accounts
  • Investment accounts
  • Documents verifying other income

When any of these documents raise other questions, you’ll be asked for more. For instance, if your bank account shows a lump sum deposit that is not consistent with your regular income, they’ll want to know where it came from.

Banks want to be assured that you have not borrowed money for your down payment or closing costs. With that in mind, if you want to speed the underwriting process, plan ahead to demonstrate the source of those funds. Did you sell something? Did you receive a gift from a family member? Did you take on some kind of self-employment?

The faster you can answer the underwriter’s questions, the faster he or she will complete the job. So if you anticipate such questions, send the answering documentation along with your other information. (ie: a letter explaining a cash gift from your Grandmother or a copy of the bill of sale from selling your ATV.)

If there’s a question you didn’t anticipate, make haste to provide whatever the underwriter asks for.

Underwriters must verify the documentation…

In addition to reviewing the documents you provide, underwriters contact banks, employers, credit card issuers, etc. to verify that the information is current.

This is why real estate agents and lenders tell borrowers NOT to make any changes in their financial status once the loan is underway. This is not the time to change jobs, buy a car, withdraw funds, or run up credit card bills.

Underwriters are not ogres

While there are many jokes about underwriters being fearsome creatures, they are not. They are simply people following the lender’s guidelines to confirm and assess your debt to income and your credit worthiness.

When they ask for more documentation, it is not because they don’t trust you, but because their own employment rests on following the guidelines. Unlike small-town bankers of 100 years ago, they are not allowed to make decisions based on instinct or their own judgement.

When the underwriter is finished and satisfied that you’re a good risk, you’ll get a conditional approval.

What does “conditional” mean? Just that. The approval is conditioned on nothing changing between the time of approval and the time of closing.

Some lenders will wait until the last day to re-verify such things as bank and credit card balances. So take heed of your agent’s and your lender’s advice: Do nothing to change your financial picture until after your home mortgage loan is closed and finalized.





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If you want to buy a home, step one is to check your credit score




When you approach a lender to obtain a conventional mortgage loan, one of the first things he or she will do is order a credit report. This report will outline your financial history and provide what is known as a FICO score. A high FICO score means you have a long history of paying your debts on time and have not over-used the credit available to you.

The higher your FICO score, the better interest rate you’ll be offered on your home loan. This score, by the way, is also used by those offering credit cards and car loans. So no matter what kind of credit you want, high scores are to your benefit.

FICO scores can go as high as 850, which is a perfect score. An excellent score is anything from 750 to 850, while a good score ranges from 700 to 749. Fair is from 650 to 699 and lower than 650 is considered poor.

If your score is good or excellent, and provided that other lender requirements are met, you should have little trouble obtaining a home mortgage loan.

Lenders are most comfortable lending to borrowers who have a habit of repaying their debts, so the better your FICO score, the more they’ll want your business. Because banks do compete for business, they’ll try to attract you by offering a low mortgage interest rate.

Does a poor to fair score mean you cannot get a mortgage loan? No, although you might be better off with a FHA or VA backed loan. Low scores will mean you may only be offered a subprime loan, with a higher interest rate, and you may be required to purchase private mortgage insurance.

For that reason, if you’re thinking of purchasing a home, do check your own credit report. If your scores are low, take action to bring them up.

If you’re thinking of home ownership, please feel free to contact Homewood Mortgage, the Mike Clover Group ahead of time. We’ll be happy to take a look at your financial situation and let you know the interest rate we could offer today.  And, if your scores need improvement, we’ll provide some sound advice on raising them.



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Buying a home: How to save for a down payment


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Unless you have an extremely high-paying job, putting together enough money for a down payment is no easy task. That’s especially true today, with inflation taking an ever-larger chunk out of our wallets.

If you’re determined, you can do it, but you do need a goal and a plan.

Trying to save for a down payment without a clear goal and a plan to get there is nothing more than dreaming of “someday.”

Begin by finding out what you can afford to buy based on your monthly income. After all, the down payment is just the beginning. You’ll need to make monthly payments, and you should make sure that they fit comfortably within your ability to pay.

Talking this over with a lender is a good idea. It will help you decide what kind of loan you’ll want (conventional, FHA, VA, etc.), what percentage of the selling price you’ll need for a down payment, and the maximum amount you can pay for a house, based on your income and current interest rates. Of course, this information could change depending upon the interest rates when you’re ready to buy.

Next, consider how soon you’ll want to become a homeowner. One year? Two years? Whatever your answer, take the number of months and divide it into the amount you’ll need for a down payment.

To make it simple, let’s say you need $18,000 for a down payment and you want to buy in 18 months. You’ll need to save $1,000 per month. If that is completely impossible due to your income level, you may need to adjust your target date.

However, first stop to consider all the ways you can save for that down payment.

First, cut some non-essentials.

  • Do you really need all those pay-per-view channels? Cancel the ones you barely use.
  • Did you get used to calling for home-delivered meals during Covid? Consider going back to cooking at home, at least most of the time.
  • Can you make coffee at home? Do that instead of stopping off for a high-priced cup on your way to work or play.
  • Do you really need new wardrobe items each season? No, no one except children who are outgrowing their clothes needs new things every few weeks.
  • Are you actually using your gym membership? If the answer is no, cancel it.

I’m sure that if you look at where your money is going, you’ll see other places where you are not getting enough benefit to make it worth spending those dollars.

Start managing your money with intent.

Are you paying high interest on credit card balances? See if you can transfer those balances to a lower rate card, then pay them off as fast as you can. Credit card interest is a huge drain.

Win the interest/cash back game. Get a credit card that pays cash back, then use it for essentials like groceries and gas. Pay it in full before the due date each month, so you’re paying no interest, but getting the 2% or so back.

Eliminate the word “only” when speaking of dollars. It’s easy to spend too much when you say “It’s only $5” or “It’s only $20.” Think twice before you purchase something. Do you need it, or simply want it? The two ideas are not interchangeable.

Pay sooner to save. You can save impressive amounts of money by paying for things like insurance in one lump sum rather than monthly. Check your policies to see if your insurance company offers that option. And while you’re at it, it wouldn’t hurt to compare coverage and rates with different insurance providers. Sometimes the company that claims to be the least expensive really isn’t.

If you’d rather wait longer to own a house than to feel deprived, make deals with yourself. Rather than entirely giving up dining out, going to movies, attending concerts, etc. Give up each favorite activity for only one month at a time. The next month, give up a different activity.

Consider downscaling your present living arrangements. If you’re renting an apartment with all the bells and whistles, consider moving to somewhere less expensive when your lease runs out.

Turn some of your belongings into cash. You might own jewelry, an RV, a boat, or some other “toy” that you seldom use. Sell it and put the money directly into your house down payment account. You might also consider holding a yard sale to turn smaller items into cash.

Take a second job until you have your down payment money. Even an extra $100 a week will make that fund grow quickly.

Use technology to monitor your spending.

Apps such as Mint and YNAB (You Need a Budget) will help you track exactly where your money is going each month. You’ll soon see where you’re spending more than you planned, so you can take control.

Schedule a meet with the Mike Clover Group to see where you stand.

We at Homewood Mortgage, the Mike Clover Group, will be glad to meet with you to discuss your individual situation. We can let you know the type of loan you’ll qualify for, the percentage of the purchase price you’ll need for a down payment, the closing costs you can expect, and the home price you’ll qualify for based on your current income.

If you have credit issues, we’ll offer advice on how to raise your scores to qualify for the lowest possible interest rate.

In other words, we’ll be glad to help you prepare for home ownership. We have some of the best rates and lowest loan fees in Texas. And… we have the friendliest loan officers!

Call us today at 800-223-7409




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Should you recast your mortgage?



First, what does that even mean? What is a recast mortgage?

Recasting a mortgage is the process of paying a lump sum of your principal in order to reduce your monthly payments. It is simply a process by which your loan is re-amortized based on a lower principal balance.

Unlike a refinance, it doesn’t change your interest rate nor does it re-set the number of months/years left on your mortgage loan.

Recasting is rarely done, but it is worth considering under certain circumstances.

When would you consider recasting?

When you suddenly have a windfall, such as an inheritance or a large bonus at work, and you’d prefer to reduce your monthly payments instead of spending it or investing it elsewhere.

You could simply apply the money to your mortgage. That would reduce the principal balance, causing less of each monthly payment to go toward interest and more toward the principal. It would also shorten the life of the loan, saving you even more on interest. However, your monthly payments would remain the same.

You could also refinance for a lower amount.

Note that only conventional loans are eligible for recasting. Government-backed loans such as FHA and VA cannot be recast. Additionally, not all banks offer this service. And finally, most lenders require a minimum of $5,000.

What’s the difference between recasting and refinancing.

Refinancing is taking out a new loan to pay off the old loan. As such, it generally requires the same steps as any other mortgage loan. That includes a credit check, appraisal, and payment of various fees. The cost of refinancing could be as much as $4,500.

Recasting is much simpler, and cheaper. You simply contact your bank, pay a fee of about $250 – $300, and hand over the money. There’s no credit check and no appraisal.

Interest rates are another difference.

When you refinance, you’ll do so at the going interest rate on the date of your refinance. Refinancing makes sense if you plan to stay in the house for the next several years, and if interest rates are significantly lower than they were when you took out the loan. If they’re higher, it does not.

When you recast, you keep the same interest rate you had when you took out the original loan. If rates are higher now, it makes more sense to recast than to refinance.

If you think recasting might be a good idea for you, contact your lender to learn how much you’ll save per month.

If you’d rather refinance, get in touch with us. We’re the Mike Clover Group at Homewood Mortgage, and we’d love to assist you!

Call us today at 800-223-7409




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A new job could mean no new house…


Concentrated young man holding documents and looking at them while woman sitting close to him and holding hand on chin


Think twice about changing employment if you’re buying a home

The new job you’re contemplating might pay more and make it even easier to make mortgage payments on that new home you want. But think twice before you take the leap.

Better yet, talk it over with your favorite mortgage lender. Be clear about the change you want to make and why you’re considering it. Lay out all the facts and let your lender advise you.

Depending upon what you want to do, you may want to wait until after your loan is closed before going forward.  Or – you may want to make the change, then wait a few months before making a loan application.

Whatever you do, don’t change jobs while your home mortgage loan is being processed unless your lender tells you that it is safe to do so. Otherwise, the change could result in a last-minute rejection.

Your employment history is one of the financial matters your lender will look into when you apply for a mortgage loan. Naturally, banks want to know that you have a steady income and can comfortably handle your monthly mortgage payments.

In their eyes, the longer you’ve been in your current position, the better. Changes in employment make them wary.

Moving up or taking a promotion within your current company is probably the safest employment change in your lender’s eyes. This signifies that you’re a valued employee, not likely to be laid off in the near future.

Taking a similar position with a new employer is next in the “least risky” lineup. However, the status of your new employer counts as well. If you’re leaving an established company to take a job with a start-up, the bank’s underwriters might see that as extremely risky.

Next on the risk scale is leaving a salaried or steady hourly wage job for a sales job based on commissions. We all know that commission work can be “boom or bust,” and lenders know that too.

The highest risk is becoming self-employed. Generally, banks want to see 2 full years of tax returns before approving a self-employed borrower.

Whatever you do, don’t try to hide your change in employment from your lender. Banks often re-verify information at the last minute before funding your loan, and finding your deception is a sure way to have your loan cancelled.

If a home purchase and a change of employment are in your plans, do call us.

We at Homewood Mortgage, the Mike Clover Group, will be glad to furnish advice and information to help you make a beneficial decision.

And of course, if you’re buying a home, call us whether or not you plan to change jobs. We have some of the best rates and lowest loan fees in Texas. And… we have the friendliest loan officers!



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You have the money to pay cash for a house, but should you do it?


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Home buyers who can make an all-cash offer have a bit of an advantage over buyers who need a mortgage loan. Sellers love them because there’s no uncertainty or worry over appraisals or a loan that might fail at the last minute.

However, just because you can make an all-cash offer doesn’t mean you should.

Some extremely wealthy people use mortgages rather than cash. If you’ve ever wondered why, consider these pros and cons.

The benefits of paying cash for a new home:

  • As already stated, sellers like you and will be more likely to accept your offer.
  • You may be able to negotiate a slightly lower price, simply because your offer doesn’t carry the uncertainty of a mortgage loan.
  • Buying for cash is much faster. Given the right circumstances, you could make an offer and close on the purchase within a week.
  • You’ll save money by not paying for an appraisal, mortgage fees, a lender’s title policy, and of course, loan interest.
  • Even if your circumstances change, you still can’t be foreclosed upon. You’ll still have to pay for maintenance, property tax, and insurance, but those are small compared to mortgage payments.

The drawbacks of paying all-cash for a home:

  • You’ll miss out on tax deductions associated with mortgage interest.
  • A large chunk of your money will be tied up in your house. Depending upon your circumstances, you might be “putting all your eggs in one basket.”
  • Again depending upon your circumstances, you’ll be giving up liquidity. You could miss out on money-making investment opportunities because you don’t have immediate cash.
  • Many of the world’s wealthiest individuals say they did it all on “OPM” – other people’s money. When you have your own money in the bank, you’re considered a good risk, so it’s always easier to borrow funds you want for investments.

Never completely drain your assets to pay cash for a home.

This is the same advice we give buyers who are making a down payment on a mortgage. Always keep some funds in reserve to cover the unexpected. Most experts recommend having an emergency fund that covers 6 months of living expenses.

If you’re considering purchasing a home with all cash, make it easy on yourself.

You may be pulling funds from several sources to pay for your new home. If so, consolidate those sources into one account before you begin your home search.

Why? Because the seller will want to see proof that yes, you do have the cash. You’ll need to show your bank statement.

Find out how long it will take to transfer money from that account to the closer, just to make sure you request the funds early enough to close on time.

Set aside funds to pay property taxes, homeowner’s insurance and homeowners or condo association fees. If you’ll ask for a home inspection (which most agents recommend) remember to budget approximately $500 to cover the expense.

Do weigh the benefits and drawbacks before deciding whether or not to pay all cash for a home.

But remember, your decision isn’t set in stone. If you start with a loan and have the cash, you can pay off a mortgage at any time. And, if you pay cash for the purchase and decide it would be better to have more money in the bank for other opportunities, you can take your money out with new financing.

We at Homewood Mortgage, the Mike Clover Group, are always ready and willing to help.

We’re known for our low interest rates, minimal closing costs, fast closings, and some of the friendliest loan officers in Texas.

Call us today at 800-223-7409






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Must I have a mortgage loan pre-approval before choosing a home to buy?


Mid adult Hispanic couple discuss where to put furniture in their new home. The both point in different directions in the emply living room. Custom artwork is digitally imposed on the photo. The artwork contains a sofa, chair, plant, lighting fixture and framed artwork.  Custom artwork copyright is wholly owned by Steve Debenport Imagery, Inc.

Is it necessary to a mortgage loan pre-approval before choosing a home to buy?

The legal answer to that question is no. There is no law or regulation that requires a prospective buyer to become pre-approved before viewing homes, choosing a home, or making an offer.

The practical answer is yes, for two reasons:

  • Agents are reluctant to show homes to buyers who are not pre-approved.
  • Sellers are reluctant to accept offers from buyers who are not pre-approved.

In fact, some agents simply won’t show homes to un-approved buyers. Additionally, some sellers ask that only pre-approved buyers be allowed to see their homes.

In today’s fast-paced real estate market, agents are busy. Their time is at a premium, so they don’t want to waste it showing homes to buyers who may or may not be able to make a purchase.

And, with multiple offers coming on most homes, sellers naturally want to know that the buyer they choose will be able to close on that purchase.

What is a mortgage loan pre-approval, and how do I get one?

A mortgage loan pre-approval is a letter written on a lender’s letterhead stating that the lender will provide you with financing up to a specified dollar amount, as long as the buyer’s financial picture does not change.

A mortgage loan pre-approval is granted after you make a formal pre-approval application and the lender verifies the same information that you would provide if you were making a loan application.

That information includes copies of your pay stubs, federal tax returns, W2’s, bank statements, investment accounts, and residential history. The lender will also verify your employment and access your credit report to learn your credit scores, your current financial obligations, and your financial history.

After analysis, the lender will decide whether or not to issue a pre-approval letter. If the answer is yes, the letter will include the maximum dollar amount you can borrow. At the same time, the lender will provide you with an estimate showing your loan costs, required down payment, and the interest rate he or she will offer you.

The benefits to you of having a mortgage loan pre-approval.

First, and most obvious, any offer you make will be taken seriously. Your pre-approval letter gives the seller confidence that you can purchase for the amount you’ve offered.

Second, it lets you know how much you can spend, and will thus narrow the choices when you begin looking at homes. Looking only at homes you can afford will save you both time and disappointment. It really does feel awful to fall in love with a house you simply cannot buy. Worse, anything else you see will never measure up.

So – if you want to buy a home, just do it.

Call Homewood Mortgage, the Mike Clover Group, and get started on your mortgage loan pre-approval. We’re known for our low interest rates, minimal closing costs, fast closings, and some of the friendliest loan officers in Texas.

Call us today at 800-223-7409



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Will Your Home Sale be Subject to Capital Gains Tax?


Worried Couple Sitting In Living Room Needs Help Due To Financial Crisis


You pay sales tax and income tax – and when you sell your home you may also pay capital gains tax.

What is it? It is the tax on the difference between what you paid for your house and the profit you make when you sell it. Other possessions and property are also subject to this tax.

There are two kinds of capital gains tax: long term and short term. Any sale you make within one year of acquisition is subject to short-term capital gains. These are taxed at the same rate as your other ordinary income.

The Tax Cuts and Jobs Act of 2018 changed the rules somewhat, so here’s what you need to know.

Unlike other investments, the sale of your primary residence benefits from some exemptions.

Under the IRS regulations, each person is entitled to a $250,000 tax-free gain upon the sale of a primary residence. For a jointly owned home, the exemption would be $500,000 – as long as neither party has taken this exemption within the previous two years.

Here are the requirements for taking advantage of the exemption:

  • The home must be your primary residence.
  • You must have owned it for at least two years.
  • You must have resided in the house for at least two of the past five years.
  • You may not have taken the exemption on another house within the past two years.

In other words, if you’ve owned a vacation house for several years and would benefit greatly from this exemption, you should move and make it your primary residence for at least two years.

If your employment forces you to move before the required two years, you may still qualify for a partial exemption. If you are in that situation, read IRS Publication 523 or consult with a tax advisor.

How much are long-term capital gains rates?

The rate you’ll pay will be based on your income and your marital status.

The long term capital gains tax rate is 0% if:

  • You’re a single filer and earn less than $40,400
  • You’re the head of a household and earn less than $54,10
  • You’re a couple filing jointly and earning less than $80,800.

Your rate will be 15% if:

  • You’re a single filer and earn between $40,401 and $445,850
  • You’re a head of a household earning between $54,101 and $473,750
  • You’re a couple filing jointly with earnings between $80,801 and $501,600 (yep, you get hit with a marriage penalty)

You’ll pay 20% on long term capital gains if:

  • You’re single and earning more than $445,851
  • You’re the head of the household earning more than $473,751
  • You’re a couple filing jointly and earn more than $501,601

In addition to federal capital gains tax, your state may impose its own version of a capital gains tax, and very high income taxpayers may be subject to an additional 3.8% net investment income tax.

The state of Texas does not impose its own capital gains tax – just one more good reason to live here!

Good record-keeping will help reduce your capital gains tax.

Since this tax is based on the difference between what you’ve invested in your house (the basis) and what you receive when it’s sold, improvements you’ve made will help reduce your tax.

So keep track of things like replacing your roof, finishing a basement, remodeling the kitchen, building a deck, replacing the flooring, installing new windows, etc. All of these activities will add to the adjusted cost basis of your home. Keeping records and receipts will pay off!

Do keep in mind that these expenses must be for improvements – not merely repairs.

Capital gains taxes don’t go both ways.

If you suffer a loss when you sell your personal residence, you won’t pay capital gains tax, but you also won’t get to take a deduction for the loss. If you sell other real estate at a loss, you can take a deduction (subject to limitations), but a loss on your home is considered a personal loss – not business.

The IRS does give heirs a break…

The IRS gives a free “step-up” in basis when an heir inherits the family house. If your parents purchased the family home decades ago, you might be looking at hundreds of thousands in profit over what they paid. Fortunately, you won’t be taxed on that.

Instead, when you sell that house, the cost basis of the house will “step up” to its value on the day your last parent passed away. This is one reason why your attorney will advise you to learn the market value.

If you want to lower future capital gains taxes while getting more enjoyment from your home today…

Come and talk to us about a cash-out refinance or a home equity loan. Then get busy making improvements that will add to the value of your home.

Homewood Mortgage, the Mike Clover Group, is known for our low interest rates, minimal closing costs, fast turn-around times, and some of the friendliest loan officers in Texas.

Call us today at 800-223-7409


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Have you saved enough for a down payment?




One of the first steps toward becoming a homeowner is gathering the funds for a down payment.

If you’re thinking of buying a home, you may have cut back on non-essential services and purchases, held yard sales, or even taken a second job as a means of building your savings. Those are good things to do, but if you don’t know how much you need, you won’t know when you get there.

The truth is, thanks to government programs and assistance options, putting your down payment together may take less time than you think.

The first step: ask your real estate agent to recommend a reputable loan officer.

Real estate agents know which lenders offer programs with low (or no) down payments. They also know which lenders have served their clients well in the past.

Be prepared to share the details about your income, debt, financial accounts, and employment history. Your lender will need to verify and analyze this information in order to determine which programs are available to you. He or she will also need to check your credit report.

When it comes to down payments – how low can you go?

That depends entirely upon the loan program. A typical FHA loan requires 3.5% down. The median home value in Texas as of the 3rd quarter of 2021 was just over $204,000. That would translate to a down payment of $7,140.

However, Veterans Affairs loans and USDA loans require no down payment at all. To qualify for a VA loan, you must be/have been a service member or the spouse of a service member who died in the line of duty. For the USDA loan, you must buy in a community identified as rural. But no, you don’t have to be buying a farm. Homes in communities of less than 2,500 residents also qualify. Ask your lender if the community you’re considering is eligible.

Texas-specific programs also assist with down payment funds.

Texas has at least 5 programs that will assist. Some are 2nd mortgages which are forgiven if you stay in the home for a specific time period. Some are specific to first time buyers.

All are worth exploring if you need help with a down payment.

Do be aware that low and no down payment loans do cost a bit more.

Any time you make a down payment of less than 20% of a home’s selling price, you will be charged a fee for private mortgage insurance as a part of your monthly payment. This fee will be equal to from 0.5% to 1% of your loan amount each year.

This insurance stays with the loan for its duration. Therefore, if prices are rising and you are able to keep putting money aside, it could be wise to refinance in a few years. Once you have 20% equity or can deposit extra cash to bring your loan balance down to 80% of your home’s current value, you’ll be able to dispense with private mortgage insurance.

Of course, with no crystal ball to tell us about future home mortgage interest rates, we can’t say how it would affect your monthly payment.

If you’d like to know how much down payment you need to buy a home in Texas right now…

Contact Homewood Mortgage, the Mike Clover Group. We’re known for having low interest rates, minimal closing costs, fast turn-around times, and some of the friendliest loan officers in Texas.

We’ll be glad to talk with you, answer your questions, and get you pre-qualified for a loan if you’re ready.

Gaining knowledge is always the best first step, so get in touch!

Call us today at 800-223-7409


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Bad credit-building advice – ignore these 7 myths


Concentrated young man holding documents and looking at them while woman sitting close to him and holding hand on chin

Before you apply for a home mortgage loan, it’s best to get your credit in the best shape possible. The higher your scores, the lower the interest rate you’ll be charged. And of course, if your scores are too low, you won’t get a home mortgage loan at all.

If you’re dreaming of a home, the first step should be to check your own credit scores (known as FICO scores in the housing industry).

Contrary to one popular myth, checking your own credit won’t lower your scores. Only inquiries from entities that grant credit will lower your scores.

So check to see where you stand. If your scores are low, begin now to improve them.

When you read your credit report, check to make sure all of the information is accurate. Check

Step one is to always pay every bill on time – every time. That said, here are 6 more myths that can do your credit more harm than good.

Myth #2: You’ll raise your scores by having and using plenty of credit.

While it is true that you must establish credit in your name in order to prove that you can manage your money, it’s also true that you must not overdo it.

Your use of credit makes up 30% of your credit score. A current home loan, a car loan, and credit cards are all good, as long as you keep paying on time and don’t over-use your credit lines.

Each credit card comes with a maximum line of credit. To keep your scores high, you should never utilize more than 30% of your maximum credit line. In other words, if your credit limit is $10,000, the balance you carry should be no more than $3,000.

The bottom line – having plenty of credit is good. Using all of it is not good. If you’re currently carrying balances on credit cards, pay them down as much as you can each month. The bonus to that is the faster you pay down those balances, the less interest you’ll pay.

The best plan for improving your credit  – use your credit cards and pay the balance in full each month.

Do use credit. People who have prided themselves on always paying cash can find themselves unable to obtain a home mortgage loan, simply because they have not established themselves as being able to handle credit responsibly.

Myth #3: You should cancel credit cards you aren’t using.

No – you should not. Keep them and use them occasionally – paying off the balance when it’s due. This shows that you have plenty of credit and have the self-control not to use all of it.

Keeping old accounts also give you a credit history. The longer you’ve held an account (and paid on time), the better for credit-scoring purposes. If all of your accounts are new, you have no history to fall back on. Unfortunately, this is one aspect of your credit score that you can’t fix quickly – it builds over time.

Your credit history makes up 15% of your FICO score, so closing old accounts can actually harm you.

Myth #4: A late payment now and then is no big deal.

Oh yes it is. Your bill paying history accounts for 35% of your FICO score. While nearly everyone has accidentally been late with a payment a few times in their lives, being late or missing payments with regularity is a big red flag to mortgage companies. It says you aren’t serious about managing your money and probably can’t be trusted to make mortgage payments on time. Late payments will not only lower your credit scores. They could prevent you from getting a mortgage at all.

Pay every bill on time. Every time.

Myth #5: Adding your spouse to your account will increase your credit scores.

Again, no. Each individual has his or her own credit scores. The only way adding your spouse could help your scores is if your spouse is the responsible one and makes sure those accounts are paid on time. Otherwise, it will have no effect.

Where adding a spouse with good credit does help, is in making a joint application for credit. The lender will look at both parties’ scores in determining whether you are jointly credit-worthy.

Myth #6: You should check your credit report often.

You can, and it won’t hurt anything, but there is no need. Check every few months to make sure no accounts have been opened in your name without your knowledge. That would be a sign of identity theft and needs to be addressed.

If you do find an error or signs of identity theft, each scoring company has instructions on line for making reports.

Myth #7: If your credit scores are low, you need to hire a credit repair agency.

Only if you like wasting money. There is nothing a credit repair agency can do that you cannot do for yourself. They may promise to remove negative information, but if the information is accurate, they cannot.

The bottom line: The only way to build and maintain good credit scores is to use credit, and use it wisely.

One more myth: You have to have perfect credit to obtain a home mortgage loan.

No, you don’t. While high scores result in the lowest interest rates, we do have mortgage loans available for those whose credit is not perfect. No matter what situation you’re in right now, we at Homewood Mortgage, the Mike Clover Group, will be glad to speak with you.

Call us today at 800-223-7409



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