The Loan Process
How does buying a home compare to renting?
Purchasing a home enables you to receive tax benefits while building equity that you can cash out in the future. Owning a home also gives you the opportunity to truly personalize your space.
Should I prequalify before I find a property?
Yes! Prequalifying first can help you save time and effort before you get too far into the process. You will know upfront how much home you can realistically afford. It also lets real estate agents and sellers know that you’re a serious buyer, which can be an advantage when making an offer.
How does a lender determine how much I can afford?
Your lender will consider a number of factors when determining your maximum loan amount. Some of these include your debt-to-income ratio (how much of your monthly gross income goes toward paying debts), cash available for down payment and closing costs, and credit history.
What is an appraisal?
An appraisal compares the current market value of the home you’d like to buy with other homes in the area that have recently been sold. A recent appraisal is necessary to confirm the property’s current value.
What is an interest rate lock?
This is a guarantee that the interest rate you select for your mortgage loan will not change between the offer and closing and will be the rate used to set your monthly payment. Your loan must be process and close before the rate expiration date.
What are closing costs?
These are the fees and charges due at the closing of a real estate transaction. Both buyers and sellers pay various closing costs. A buyer's closing costs generally include (but aren't limited to):
- Origination fee
- Discount point(s)
- Appraisal fee
- Credit report
- Recording fees
What documents will I receive at closing?
At closing, you’ll sign and receive copies of all legal documents that are recorded and filed for the property you’re purchasing. In addition, you will receive information regarding your monthly mortgage payment and servicing information for your new loan.
What is mortgage insurance (MI)?
This is an insurance policy that protects the lender in case of default, allowing them to approve a loan they might not have otherwise. MI can make buying a home with less than 20% down possible. If you're required to pay for MI, it's typically included in your total monthly payment, your closing costs due at closing, or both.
Based on the loan program, MI can be paid in different ways:
- Conventional Loan
- Your lender may arrange for private mortgage insurance (PMI) with a private company. PMI rates are typically less expensive than FHA rates for people with solid credit. Most PMI is included in the monthly payment, with little or no upfront payment required on closing day. Eligible homeowners may be able to cancel PMI under certain circumstances.
- Federal Housing Administration (FHA) Loan
- All FHA loans require FHA mortgage insurance. The cost is the same for all credit scores, but there's a small price increase if you put down less than 5%. MI on FHA loans includes an upfront cost (can be financed into the mortgage) and a monthly cost (added to your monthly mortgage payment).
- U.S. Department of Agriculture (USDA) Loan
- The insurance structure is the same as FHA (upfront and monthly premiums), but the cost is typically cheaper than FHA. You also have the option to finance the upfront USDA insurance fee into your mortgage.
- Department of Veterans' Affairs (VA) Loan
- There is no monthly mortgage insurance premium on a VA loan. But there is an upfront, one-time funding fee that varies based on the veteran's type of military service, down payment amount, and other factors. A VA borrower can pay the funding fee in full at closing or finance it into the mortgage.
What is homeowners insurance?
Homeowners insurance, also known as hazard insurance, is a policy that covers damages to your home, your belongings and accidents as outlined in your policy.
Is homeowners insurance required at closing?
Yes, proof of homeowners insurance will be required before you can close your home.
How do I know which loan program to choose?
Your loan officer will work with you to determine which loan product benefits you. They will review your current finances and future financial goals. Your loan officer will also consider factors like your target monthly mortgage payment and how long you plan to live in the home.
What is the difference between a fixed-rate and adjustable-rate mortgage?
A fixed-rate mortgage has an interest rate and payment that stay the same over the life of the loan. With an adjustable-rate mortgage, the rate can either increase or decrease, based on market factors. The monthly payment can also go up or down based on the rate adjustment.
What is a balloon mortgage?
A balloon mortgage has a fixed-rate payment for the first 5 to 7 years of the loan, then a lump sum payment of the loan balance is due at a specified date when loan matures.
What is a conventional mortgage?
A conventional mortgage is a home loan that is not offered or secured by a government entity (like FHA or VA). Conventional mortgages typically conform to the loan limits set by the Federal Housing Finance Administration (FHFA) and are eligible for purchase by Fannie Mae and Freddie Mac (the two government-sponsored enterprises that guarantee the majority of mortgages in the U.S.). Unlike government loans like FHA, VA, and USDA, conventional loans can be used for more property types (primary residences, second homes, and investment properties). In addition to the popular 30-year fixed conventional loan, there are also more choices for loan structure including 15-year or 20-year terms and adjustable-rate mortgages.
What is a jumbo mortgage?
This is a loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and is ineligible to be purchased Fannie Mae or Freddie Mac. Jumbo loans can come with maximum limits up to several million dollars. Luxury homes or properties in highly expensive markets are typically financed with jumbo mortgages.
Questions About Your Escrow Statement?
If you have questions about an Escrow Account Disclosure Statement you have received from us, click here for a variety of resources designed to help you understand the statement, changes in your escrow expenses or monthly payment, and more.
Ready for your next chapter?
Whether you are looking to buy, sell, or refinance a home, we're here to help you navigate the process. Browse our FAQs below to get started, and reach out to your loan officer when you're ready to take the first step. As your mortgage partner for life, we are happy to serve you!
Contact our Homeowner Assistance TeamPhone: 866.500.1640
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Hours of Operation: Monday - Friday from 6 a.m. to 6 p.m. MT and Saturday from 8 a.m. to noon MT.