What is a credit score?
Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule.
The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness. If you have more questions about your credit score, get in touch with one of our bankers today.
Can I apply for a loan before I find a property to purchase?
Yes, applying for a mortgage loan before you find a home is actually a great idea. Applying now lets us issue you a pre-qualification letter online instantly, which you can use to assure real estate brokers and sellers that you are a qualified buyer. Having a pre-qualification for a mortgage may give more weight to any offer to purchase that you make.
Can I borrow funds to use toward my down payment?
Yes, you can borrow funds to use toward your down payment. However, any loans that you take out must be secured by an asset that you own. If you own something of value that you could borrow funds against, such as a car or another home, it’s a perfectly acceptable source of funds. If you are planning on obtaining a loan, make sure to include the details of this loan in the “expenses” section of your application.
How are interest rates determined?
In the big picture, interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates while concerns about rising inflation normally cause interest rates to increase. Our nation’s central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
On a more personal level, your interest rate is affected by your credit score and your loan to value. Rates change constantly throughout the day. Contact us if you would like to know about current rates.
What is an adjustable rate mortgage?
An adjustable rate mortgage, or an “ARM” as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly.
Is a 15-year fixed rate mortgage right for me?
The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire may also prefer this mortgage.
What are closing costs?
A home loan often involves many fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker will give you a loan estimate, including their fees, within three days of making a loan application. This is a great tool to use for shopping. If you would like some information about cost and fees prior to loan application, we are happy to provide that also.
What is mortgage insurance for homebuyers?
Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending. Low down payment mortgages are becoming more and more popular, and when buyers purchase mortgage insurance, lenders are comfortable with down payments as low as 3-5% of the home’s value. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.
What is an appraisal?
To determine the value of the property you are purchasing or refinancing, an appraisal will be required. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal, they also specify the appraiser’s qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states. The appraiser will create a written report for us and you’ll be given a copy.
Do I need an inspection and an appraisal?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you’ve found the perfect home.
The appraiser will make note of obvious construction problems such as termite damage, dry rot, or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.
However, appraisers are not construction experts and won’t find or report items that are not obvious. They won’t turn on every light switch, run every faucet or inspect the attic or mechanicals. That’s where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.
Accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.