Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. We can help you determine exactly how much you can afford.
When you are ready to buy a home, you must consider that the monthly mortgage cost is not the only cost you will face. Maintenance costs such as appliances needing repair and utility bills will also come out of your pocket. You should also consider homeowner's insurance as well as association or condo dues depending on your location. Lastly, be sure to remember to allow for property taxes which may be rolled into your monthly payment.
With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM will likely change. There are advantages and disadvantages to each type of mortgage. The best way to select a loan product is by talking to a Member Experience Professional.
We typically will request that you provide recent paystubs that cover a 30-day period, the last 2 years of W-2 forms, bank statements for a 1-2 month period and, if applicable, your most recent retirement statements, including 401k or IRAs. If you are self-employed you will be asked to provide complete signed copies of your most recent tax returns.
There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. We can help you evaluate your choices and help you make the most appropriate decision.
At closing, you, your agent, the seller, the seller’s agent (in most cases), and the settlement agent will go over the legal documents regarding your new home. A good settlement agent will explain what each document means. You should make sure you understand what you are signing and ask questions if you don't. After all the paperwork is signed, you will pay closing cost money and down payment to the settlement agent.
Mortgage interest rate movements are as hard to predict as the stock market, and no one can really know for certain whether they'll go up or down. If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock-in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking.
Your interest rate and points can be locked in once you return your signed initial disclosure documents, which include the Lock In Agreement, along with the Application Fee and Interest Rate Lock Fee. The Credit Union will process your Lock In fee (1% of your loan amount) see Interest Rate Lock In Agreement for details.
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 lender to lender. Any lender or broker should be able to give you an estimate of their fees, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. We take quotes very seriously. We've completed the research necessary to make sure that our fee quotes are accurate.
To assist you in evaluating our fees, we've grouped them as follows:
Third Party Fees
Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees and courier/mailing fees.
Third party fees are fees that we'll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees.
Typically, you'll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
Taxes and Other Unavoidables
Fees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don't quote you fees that include taxes and other unavoidable fees, don't assume that you won't have to pay it. It probably means that the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.
Fees such as discount points, document preparation fees and underwriting fees are retained by the lender and are used to provide you with the lowest rates possible.
This is the category of fees that you should compare very closely from lender to lender before making a decision.
You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.
One of the more common required advances is called "per diem interest" or "interest due at closing." All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you'll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we'll collect interest from June 15 through June 30 at closing. This also means that you won't make your first mortgage payment until August 1. This type of charge should not vary from lender to lender and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed. It is simply a matter of when it will be collected.
If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.
If your loan requires mortgage insurance, up to two months of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.
If your loan is a purchase, you'll also need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to be a required advance.
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 by purchasing mortgage insurance, lenders are comfortable with down payments as low as 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.
The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. The premium is included in your monthly payment and one to two months of the premium is collected as a required advance at closing.
It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount - below 75% to 80% of the property value. Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your Mortgage Advisor.