FREQUENTLY ASKED MORTGAGE QUESTIONS
The Midwest Home Mortgage Team at Heritage Bank has offered some basic answers to your mortgage questions and about the mortgage process. To get a home mortgage started or for more information on any of these topics, please contact one of our Midwest Home Mortgage Team professionals.
Whether you are looking to buy a new home, or you want to refinance your existing mortgage for equity or rate reasons, let the Midwest Home Mortgage Team at Heritage Bank handle your home mortgage needs!
A traditional home mortgage can take between four and six weeks from the start of the application to your loan closing appointment. Each loan is unique and the amount of time can vary depending on the transaction and loan product. Be sure to discuss your projected closing date with our Midwest Home Team lenders during your initial consultation. Once the process is set in motion, your Midwest Home Mortgage Team at Heritage Bank will work closely with you, your real estate agent, and the title company to ensure a smooth process, including scheduling and meeting the anticipated closing date.
Getting some information gathered before you meet with your Midwest Home Mortgage Team member at Heritage Bank can give you a head start on your home loan process. You can even start the application and submit the information online at heritagebankna.com. Your Midwest Home Mortgage Team member will request two current paystubs, two years of federal tax returns with W-2s, two months of recent bank statements, and a completed real estate loan application. Once you’ve submitted this information to your Midwest Home Team member, it is recommended that you refrain from making large purchases or add additional debt. If any of your application information changes throughout the process, such as acquiring a new job, remember to let your Home Team member immediately. Changes such as this could affect the loan amount you qualify for and/or delay the loan transaction.
To some, the terms “prequalified” and “pre-approved” can be interchangeable, but in some cases, there can be a vast difference between the two. To cut some confusion, our Heritage Bank team offers the following clarity: “Prequalification” is merely an estimate and “Pre-approval” is a quote based on your financial information.
Prequalification: After a brief consultation, the Midwest Home Team can provide you with a basic estimate without pulling your credit report or verifying employment and deposit information. It is purely an estimate of what home loan amount you may qualify for and should only be used in the early planning stages.
Pre-approval: When you begin the application process, the Home Mortgage Team pulls your credit report and verifies employment and down-payment monies. Going through the pre-approval process can give you a good idea of what house payment amount is comfortable for you and/or the maximum purchase price you can afford when purchasing a home. A pre-approval from your Home Team member is preferred by most realtors and can expedite the home buying process.
There are loan products available that require no down-payment or very little down-payment. To see if you qualify for these specific programs, it is to your benefit to meet with a Midwest Home Mortgage Team lender to determine which program suits your needs best.
Gone are the days of everyone receiving the same interest rate; the rate is specific to a customer and each unique situation. The interest rate you are given is dependent upon your credit score, the ratio of your loan amount to the value of what you are buying, the type of loan requested, the purpose of your loan, and the type of property considered (condominium, manufactured home, duplex, triplex, etc). Mortgage rates can vary every day. Your Mortgage Loan Originator will work closely with you to determine the best time to lock in your interest rate.
Discount points are the costs associated with buying down your interest rate. One point is equal to one percent of your loan amount. If you choose to purchase discount points, the fee is typically part of your closing costs and paid at closing. In the low rate environment that we have been experiencing, buying down the interest rate has not been common. Should rates show an increase, the purchase of discount points might be considered more often.
Your credit score is a snapshot of your credit usage history and is subject to regular fluctuation. During a home loan application, a credit report is pulled from three consumer reporting agencies known as TransUnion, Experian, and Equifax. Therefore, each applicant is given three credit scores and the Midwest Home Mortgage Team at Heritage Bank uses the middle number as your credit score. Influences on credit score include delinquent payments, collection items, judgments, bankruptcy, high balance to available credit, number of inquiries, etc. Your credit score influences the interest rate you are given on your loan. As allowed by law, consumers can and should request a copy of their credit report annually from each of three credit reporting agencies to ensure that the reported information is accurate.
The Annual Percentage Rate (APR) will always be slightly higher than your interest rate unless there are zero closing costs on your home loan. Like an interest rate, the APR is expressed as a percentage. Unlike an interest rate, it includes other fees such as mortgage insurance, discount points, and loan origination fees to reflect the total cost of the loan. The APR is a broader measure of the cost of your mortgage because it reflects the interest rate as well as other fees.
Closing costs are fees associated with the processing and closing of a real estate transaction. Closing costs vary widely based on where you live and the property you buy. They typically include a loan origination fee, a fee for running your credit report, attorney fees, appraisal fees, title insurance, underwriting fees, and recording fees. Closing costs can also include monies to set up your escrow account to pay taxes and insurance on the home (see “What is an Escrow Account” below). Typically, homebuyers will pay between two to five percent of the purchase price of their home in closing fees.
An escrow account is an account where money is set aside in to pay real estate taxes and insurance on the property that you own. If you establish an escrow account, you will bring in money at the time of your loan closing to immediately deposit into the escrow account to ensure that there is enough money to pay your taxes and insurance when they come due. You contribute to this account monthly when making your mortgage payment. An escrow account can make your life easier as it is a convenient budgeting tool. You do not have to make your taxes and insurance payment when due; rather, you make payments monthly to Heritage Bank and we make the tax and insurance payments for you. Some mortgage loan products require the use of an escrow account while others do not.
When your closing is scheduled, you will need to bring certified funds in the amount given to you by the Midwest Home Mortgage Team, and proof of insurance. Your Midwest Home Mortgage Team member, in conjunction with the title company, will typically provide you with the exact amount of funds needed three to six days prior to the closing. The closing agent might also ask you for a copy of your driver’s license.
The closing is typically performed by the title company issuing your title insurance and is normally held at the office of the title company or at Heritage Bank. The title company is usually selected by the borrower and/or seller. It is not necessary to have your own attorney present to close your mortgage.
Homeowner’s insurance is required to protect both Heritage Bank and the homeowner against loss or damage to the property. Heritage Bank is also required by law to determine if your property is in a flood zone. If it is, you will be required to have flood insurance on the property. If you are purchasing a condominium, you will need to protect the inside walls and contents of the unit by securing the required HO6 policy. It is helpful for your Midwest Home Team member to know your real estate agent’s name and phone number so they may correspond with them during the transaction.
Refer Heritage Bank and the Midwest Home Mortgage Team to a friend!