Frequently Asked Questions
1. What is a fixed rate mortgage?
A fixed rate mortgage is a mortgage that has a fixed interest rate and does not fluctuate with market rates. Typically fixed rate mortgages refer to a "30 year fixed" loan, where the interest rate and the payment will be fixed for 30 years.
2. What is an adjustable rate mortgage?
3. What is a FHA loan?
A Federal Housing Administration (FHA) loan is a government backed mortgage insured by HUD (Housing and Urban Development) that has historically been for borrowers seeking minimal down payment, or who fall below standard lending guidelines. FHA loan guidelines have recently changed to reflect higher home values in areas of the country where FHA loan limits were previously too low to help the average household. Today, FHA loans have emerged as the main source of financing for low down payments and/or lower credit score purchases and refinances, and provide excellent financing for most homeowners.
4. What is a VA loan?
A VA loan is a loan guaranteed by the Department of Veterans Administration for qualified veterans and active-duty military personnel and their spouses who are first- or second-time home buyers.
5. What is equity?
Equity is the difference between what your home is worth and the amount of debt owed on the property (your mortgage). This difference proportionally represents the homeowner's financial interest in his or her property. A homeowner can borrow against the equity in his/her home with a home equity loan and use the funds for whatever they please, from debt consolidation to major purchases to home improvements. Because the loan is mortgage-based, interest on the home loan may also be tax deductible. For more details contact your tax adviser.
6. What is APR?
The APR (annual percentage rate) is different from the note rate. APR was created to establish a standard rate system within the industry, measuring the "true cost of a loan", and is used to compare loan programs between different lenders. It prevents lenders from advertising a low rate while hiding fees. Mortgage companies are required to disclose APR by the Federal Truth in Lending law when they advertise rates.
7. What is "private mortgage insurance"?
Private Mortgage Insurance (PMI) protects the lender from a borrower defaulting on a loan with a loan to value exceeding 80%. It was designed to protect lenders financially if a borrower defaults. The policy adds additional costs to the monthly mortgage payment. PMI is not a permanent cost, and may be removed when you have at least 20% equity in the subject property, which can come in the form of loan pay downs, appreciation, property improvements or any combination of the three. This is typically proven through a new appraisal of the property.
8. What are points?
Points, also referred to as "origination" or "discount" points are loan origination fees charged by your lender. One 'point' refers to 1 percent of the loan amount. For example, if you are borrowing $250,000, 1 point would cost $2,500. These fees are optional. Points were designed as an incentive system to encourage you, the borrower, to get a lower interest rate in exchange for paying fees up front (called a rate buy down). If you don't have available cash, you can get a loan that has a fraction of a point or no points at all; but be warned, loans with low points generally have higher interest rates for the borrower in the long run. If you have cash available and plan on keeping your loan for many years, then it may make sense to "buy down" the rate with discount points.
9. Can my mortgage loan be sold?
Yes, but it depends on your mortgage loan. Texell has options for loans that will not be sold to another lender. Ask your mortgage loan officer for the loan that best meets your needs.
10. Am I too young to get a mortgage with Texell Credit Union?
At age 18 you are legally eligible for home ownership and capable of obtaining a mortgage, subject to normal loan qualification guidelines.
11. What down payment is required to get a loan for my new home?
We offer down payments as low as 0% on our VA and USDA loans, down payments as low as 3% on our conventional loans, and down payments as low as 3.5% on FHA loans. Putting at least 20% down allows you to avoid paying mortgage insurance.
12. Will one late payment on my credit card or rent disqualify me from getting a mortgage?
No, although it may affect your rate, please contact one of our mortgage loan officers.
13. How do I know what loan is best for me and my family?
This is a complex question, and depends on a number of factors. Contacting one of our mortgage loan officers is the best avenue to understanding your options.
14. When purchasing a home, who can I rely on for what?
Count on your real estate agent to:
- Preview and present available homes and weed out those that are overpriced or do not meet your expectations.
- Help you determine the difference between a "great investment" and a "good buy".
- Negotiate the best deal for you — and with your pre-qualification letter, your agent is sure to have the best tools available to catch the seller's attention
Count on your mortgage loan officer or processor to:
- Consult with you on the best possible loan program to meet your needs — now and in the future.
- Offer you an array of possible loan programs with the most competitive rates available.
- Keep you informed of your loan status throughout the entire process.
- Communicate with your Real Estate Agent.
- Communicate with your real estate agent about your expectations, questions and concerns.
- Meet with your mortgage loan officer to discuss your long-term and short-term financial and investment goals and obtain a pre-qualification letter as early in the process as possible.
- During the early stages of the loan process, provide all the documentation that is requested for the loan as expediently as possible.
- Be available for decision-making processes, and ensure that your schedule is flexible for final document signing three to five days before the closing date.
For purchase loans, credit will be run and an application will be taken. An application can be over the phone or in person, but the easiest method is through our website. The loan application will be analyzed to determine the loan amount you are qualified to borrow and we will review your loan options with you. For most loan requests, Texell will approve your loan subject to verification of your income and source of down payment funds.
After completing the process, a letter will be generated for your Realtor®. We will go over the relevant issues of your file as they relate to writing a successful purchase contract, such as:
- Closing costs required from the borrower
- Closing costs credits required from the seller
- Maximum purchase price
- Down payment funds
- Interest rates
For purchase loans, credit will be run and an application will be taken. An application can be over the phone or in person, but the easiest method is through our website. Once the application has been completed, you will supply Texell with the necessary documentation to perform an extensive check on your financial background and current credit rating. The loan application will be submitted for official underwriting review to determine the loan amount you are qualified to borrow and we will review your loan options with you. The preapproval letter will enable you to move quickly when you find the perfect home.
17. How does the appraisal process work?
On a purchase transaction, the appraiser will contact the real estate agent to schedule an appointment. An appraisal will be ordered following the acceptance of the offer. The loan applicant will be required to pay for the appraisal in advance.
An appraisal is an estimated value of a property. It is used by the lender to ensure the purchase price of the property is reasonable. We hire an independent appraiser to prepare the appraisal. The charge for a full appraisal varies, but is generally $450 - $585 for a typical home. The appraisal is submitted to and requires a satisfactory review by the lender for final loan approval.
On a refinance transaction, the appraiser will call the homeowner to schedule an appointment.
18. How does the escrow and title company play into my mortgage approval process?
You will be asked the manner in which you choose to hold title. All records are meticulously maintained in order for the clear title of your home to be transferred to you. The escrow company will ensure that the interests of all parties are met.
You will typically go to the escrow/title company office to sign loan documents and prior to closing escrow, you will be notified of the amount of funds required to be brought to closing. These funds typically must be in the form of a cashier's check
19. What do the closing costs entail?
Purchase or refinance transactions require services from several entities, and each one has a fee connected to the services provided. There are two types of fees included in your closing costs:
Recurring/pre-paid costs are not considered "fees". These are the pro-rated dollar amounts of the recurring costs you will be paying during the life of your home ownership, and include: interest, taxes, insurance, homeowners' dues and mortgage insurance (when applicable).
Interest will be paid from the day before Close of Escrow (also referred to as "funding") until the end of the month, on a per diem basis. Insurance is collected one year in advance for purchases. For refinances, the lender will verify that your homeowner's insurance policy is current. Property taxes will be pro-rated for the current period.
Non-recurring costs are one-time fees. Escrow fees are collected by the escrow company for handling the transaction and to cover expenses such as notary, messenger and overnight delivery fees. Title fees are collected to cover the cost of title insurance and government fees such as recording. Lender/broker fees are collected to cover the cost of loan origination, the credit report, appraisal, loan processing and underwriting. Miscellaneous fees that may also be collected include the costs for property inspections, home warranties and real estate processing.