Familiarizing yourself with the terminolgy with which you'll be dealing as you investigate and determine the most appropriate mortgage option for your lifestyle and income makes the process much more comfortable.
What is a Mortgage?
A mortgage is a loan structured to allow you, the borrower, to purchase a home, refinance your current home or even build a brand new home. A mortgage uses your home as collateral and establishes your repayment period. Your mortgage is considered to be one of the most important investments you will make.
Your monthly payment (PITI) will consist of the following:
- Principal: The portion of the house that is financed by the bank.
- Interest: The amount that the bank will receive for lending you the money.
- Taxes: The amount that you will pay based on the local government assessed value of your home.
- Insurance: Private insurance to protect your home investment from damages
- Mortgage Insurance: This insurance is designed to protect the lender against borrower(s) who do not make their monthly payment. When this happens, the lender is forced to foreclose on the loan. This insurance is required if the borrower’s down payment is less than 20% of the purchase price of the home.
Why use a community bank for your Mortgage needs?
Community banks with our “can-do” approach have helped nearly 70 million families become homeowners – helping them achieve the American Dream.
What's nice about using your community bank is that we can eliminate the fear factor that first time homebuyers might experience. We can also advise you as to the mortgage loan which fits your situation. We’ll hold your hand and walk you through the process. Simply follow the links below and you will discover that the path to purchasing, refinancing, remodeling or even building your first home can be a comfortable process -- easy to achieve.
Which Mortgage product is right for me?
B&K offers many different types of mortgages: Fixed rate, Adjustable rate, Balloon, Jumbo and the list goes on. To determine the best mortgage loan to meet your specific need, make an appointment with a B&K Mortgage Loan Officer who can explain your options.
Conventional Mortgage Loan
For most homebuyers a conventional mortgage can be the answer. This type of mortgage offers long term, fixed rate financing. This is a mortgage which is not guaranteed by any federally insured program, and, depending on the amount of your down payment, you may be required to obtain Private Mortgage Insurance (PMI) to provide a guarantee for the loan.
Federal Housing Administration Loan (FHA)
The Federal Housing Administration (FHA) loan is a government insured product. FHA loans are available with as little as a 3.5 percent down payment. This loan does require the buyer to obtain Mortgage Insurance Premium (MIP) through the FHA regardless of the down payment you intend to make. However, this insurance can be financed into the loan amount, and the buyer pays a month premium.
Veterans Administration Loan (VA)
This type of loan is insured by the Veterans Administration (VA) and is offered to qualified members of the armed forces, active military personnel, veterans or their widow(er)s. In many cases this loan is obtainable with no down payment, but it does have a VA Funding Fee which can be financed into the loan.
Adjustable Rate Mortgages (ARMs)
This type of loan offers a low beginning interest rate at the start of the loan, but can be set to adjust as soon as the end of your first year depending on the type of ARM loan that you have chosen. ARM loans can be a special product for the homeowner that knows their income will rise at the end of each year and are prepared to take on the increase in their monthly payment. However, be sure to do your research to determine if this product is right for you.
This type of mortgage is usually amortized for 15 to 30 years, but carries a balloon feature which could require you to pay your mortgage balance at the end of 3, 5 or even 10 years. As with the ARM product, be sure to do your research to determine if this type of mortgage is right for you.
This mortgage is geared for loan amounts that are over the Fannie Mae (Government-insured) limit of $417,000.00. A jumbo mortgage will have tighter guidelines and carry a higher interest rate than mortgages below that amount.
Where do I begin?
Pre-Qualification or Pre-Approval: Is there a difference?
Pre-Qualification: A process in which you and the Mortgage Loan Officer discuss your financial information such as income, monthly debts, assets available, etc. to determine your borrowing power.
Pre-Approval: This process follows the same steps as Pre-Qualification, however the Mortgage Loan Officer takes it a step further and reviews your financial information and requests a credit report from the reporting agency. If all of the lending parameters are met, the Mortgage Loan Officer is able to issue a Pre-Approval letter which the buyer can present to a Seller, Realtor, etc. It is important to know what you can be approved prior to shopping for a home.
Tips on Applying for a Mortgage Loan
Providing as much information to your Mortgage Loan Officer at the time of application will help the process of your mortgage loan request progress very smoothly. If possible, gather this information before visiting your Mortgage Loan Office. The documents that are needed at the time of application are below:
- Most recent pay check stubs—last 30 days
- Names & addresses of each employer—past two years
- Gross monthly salary
- Bank statements for all checking, savings accounts—last 2 months
- Names, addresses, account numbers, monthly payments on all open loans—real estate included
- Address of other real estate owned
- Landlord addresses—past two years, if applicable.