Home Loans for Beginners

Buying a home is one of the greatest decisions you can make for you and your family. It can also be one of the most stressful and challenging. With an investment of this size, not to mention all of the financial jargon and requests that get thrown at you, it can sometimes feel overwhelming. Which is why we’re here to help.

We’ve laid out the basics for you — sort of a Mortgage 101. It’s all here — from the types of loans available to definitions of some common terms and what you need to know to get started with the home mortgage process. If you need more information, we’re always just a click away.

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Home loan definitions, questions and answers.

Jumping into the world of home buying can be intimidating. Especially when we tend to throw around a variety of abbreviations and some odd sounding words that might not make sense when you are just getting started. Here is our list of home loan definitions so you won’t feel confused as we move through the process. And by all means, if you hear or see something you don’t understand, let us know. Or, if you just have a question about home buying, get in touch today and we’ll get back with you shortly.

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.

Are you ready to own a home?

Owning a home can be a smart choice for a number of reasons. For one, investing in a home versus paying monthly rent is an investment in your future, providing real financial stability. In addition to gaining equity over time, homeowners can also take advantage of tax benefits that make home buying even more attractive from a financial standpoint. But just as significant as financial impact is the satisfaction that comes with achieving the dream of owning your own home. Ready to finally make that dream a reality? Get in touch with the team at Bank of Little Rock Mortgage today.

How to get started.

If you’ve made the decision to become a homeowner, or even if you’re just leaning that way, Bank of Little Rock Mortgage can provide you with everything you need to know to get started on the path to homeownership. Read through our step-by-step guide or, if you prefer, contact one of our bankers today for more information. And if you’d like to start the loan process today, no problem. Just fill out our quick pre-qualification form and you can be one step closer in a matter of minutes.

Applying for a home loan.

You’re ready to buy and you’ve found your dream home. Now it’s time to get that loan, and best of all, get the keys to your new place. But first, we need a few things from you. Actually, quite a few things. But we’ll try to make it as painless as possible. Start the application process here. Or get in touch with one of our bankers and let us walk you through the process. As you get ready to apply, below are the documents we will need to start the loan process.

Required Documents For Your Loan:
  1. Pay stubs from the past 30 days
  2. Most recent two months’ statements for all bank and/or investment accounts
  3. Last two years’ W2 forms
  4. Last two years’ full tax returns
  5. Copy of your driver’s license and Social Security card
  6. Divorce decree (if applicable)
  7. Child support agreement (if applicable)
  8. Bankruptcy papers (if applicable)
  9. Certificate of Eligibility (for VA loans)

Note: If you are receiving a gift for any amount of money needed for closing, please inform your loan officer so you can receive instructions for the required forms and documents.

Closing on your home loan and beyond.

Here is a brief look at some commonly asked questions regarding the closing process. For even more in-depth information, please contact a Bank of Little Rock Mortgage representative today.

What happens at the loan closing?

The closing will take place at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you, but in some states, these two events actually happen separately.

During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have or you can feel free to contact your Loan Officer if you prefer.

Who will be at the closing?

The closing agent acts as our agent and will represent us at the closing. However, your personal Loan Officer will contact you prior to closing to talk about your final documents and to provide a final breakdown of your closing fees. If you have any questions that the closing agent can’t answer during the closing, ask them to contact your Loan Officer by phone and we’ll get you the answers you need — before the closing is over!

Will I need to have an attorney represent me at closing?

In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend that you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Loan Officer. We’d be happy to provide any information necessary.