Frequently Asked Questions
Q: I am considering purchasing a new home. How do I begin?
A: It generally is best to go ahead and get pre-approved for a loan before you begin your home search. When you are approved, Realtors and Sellers are more likely to look at offers more seriously, knowing that the mortgage loan is taken care of.
Q: What will I need for down payment?
A: Down payment is determined by several factors. Credit rating, debt to income ratios, whether or not you wish to pay for Private Mortgage Insurance (default insurance), type of loan you can be approved for, and, of course, assets you have available.
City Bank Mortgage has programs for borrowers who want to make as little as ZERO down, 3%, 5%, or as much as you care to.
Q: I hear about "closing" costs and "pre-paid's". What are these, exactly?
A: Closing costs are the actual fees involved in obtaining the loan. Examples include, credit report, appraisal, attorney fees, underwriting/administration fees, survey, title company fees, etc.
Pre-Paid fees are the fees that make up YOUR escrow account. For instance, you will pay 1 year of your hazard insurance in advance. An additional 2 months of insurance will go into your escrow account, and with each monthly payment, 1/12th of the annual premium will be collected. Then, at the end of the first year of your mortgage, the Investor will have sufficient funds in your account to pay the premium for the next year. The same applies to the property taxes. Approximately 3 months will be collected from you to put into YOUR escrow account, and any additional needed taxes will be collected from the seller. Then at the end of the year, there will be sufficient funds to pay the taxing authorities. Pre-paid expenses also include interest on your new loan. If your property is in a 100 year flood zone, then Flood insurance will be required, and is a part of the pre-paid expenses.
Q: So, my taxes and insurance are a part of my monthly payment?
A: Yes, in many instances. However, if you are obtaining a Conventional loan, and are making a 20% down payment, then these may be waived. Often, there is a small charge for waiving these fees. Therefore, your payment consists of Principal and Interest, Insurance, Taxes, and Mortgage Insurance.
Q: What is Mortgage Insurance?
A: Simply stated, it is default insurance. When a borrower puts less than a 20% down payment on a mortgage loan, the Investor looks at the loan at a somewhat higher risk. Therefore, there is insurance required to protect that investor against a portion of the loss if the borrower stops making their mortgage payments.
Q: I don't have 20% to put down! There is no way to avoid the Mortgage Insurance?
A: Yes there is. Depending on your Credit Rating and loan type, there may be different ways to break up your loan into two separate loans, and actually, "borrow" the 20%, or a portion of it. There are also "blended" interest rates that add the Mortgage Insurance into the interest rate, or it may be possible to include the mortgage insurance into the loan amount.
Q: I have heard the term APR. What does it mean?
A: The APR is a term that simply refers to the Cost of your Credit, expressed as an annual rate. Due to fees that you pay to obtain the loan, the APR is often higher than the actual interest rate that you pay on your loan. The APR is disclosed on a form called the Truth-In-Lending.
Q: What will I experience at loan application?
A: First of all, at City Bank Mortgage, you will experience a Warm Welcome! We are here for one purpose, and that is to make your home buying experience as pleasant as possible. This is true if you have never purchased a home before, or if you are building your dream home.
Before arriving, it is a good idea to call for an appointment, especially if you want to speak with a specific loan officer. Otherwise, there will be an officer here to assist you.
The application starts with asking a few brief questions regarding your job and finances. Your credit report will then be pulled, and the results will often dictate what further documentation we will require. After going over your credit report with you, we will continue with the loan application.
Questions will include:
- Where you've lived for the past 2 years.
- If you have rented, names and phone numbers of landlords.
- Where you have worked for the past 2 years, with names and phone numbers of employers.
- Where you bank and the approximate balances.
- Do you pay child support or Alimony? (we will need documentation, such as a divorce decree)
- Are you a US Citizen? (If not, we will need a Green Card, etc.)
- Have you co-signed a note with anyone?
- Have you declared bankruptcy in the past 7 years? (If so, we will need all bankruptcy papers)
- Have you had a tax lien or foreclosure?
If you earn commission income, or are self employed, we will possibly require tax returns. Before coming in for loan application, it is a good idea to call for an appointment. If that is not possible, we will have loan officers on site to assist you.
Q: Wow! That is a lot of information? How long does the loan application process take?
A: An application takes anywhere from 30 minutes to an hour. We are accustomed to doing this several times per day, and it is not as complicated as it sounds.
Q: How long does it take to get a loan approved?
A: Unless it is an extraordinary circumstance, we will generally have an answer for you before you leave our office.
Q: Then, how long does it take to go through the whole process and finally close on the purchase?
A: Again, depending on the loan type, it can take as few as 2 weeks, or up to 30 days. We always strive to meet the closing date that the buyers and sellers have agreed to.
Q: What if I have poor credit? Then what?
A: We have investors that work with people who have had credit problems. There are also specialists right here in our office who deal only with credit challenges.
If the worst happens, and you cannot obtain a loan right away, we will go over your credit, work history, or whatever the problem is, and counsel you on what it will take to get you into your own home.
Q: If I have other questions, who can I call on?
A: We welcome questions at City Bank Mortgage. You can call any one of our loan officers, or the Branch Manager. We will be more than happy to answer any question you may have that pertains to our industry! If we don't know the answer, we'll find out for you! Our only purpose is to assist you in obtaining your new home!
