Mortgage Resource Center
Successful home ownership begins with the right mortgage. Our lending team is committed to providing you with a competitive, convenient and responsible mortgage financing option. Whether you’re a first-time buyer, an experienced homeowner, refinancing, or just adding to your portfolio, we’ll work with you to identify your needs and tailor your mortgage accordingly.
Feel at home with our lending options that align with your goals and where you are in life.
MORTGAGE FAQs
Frequently Asked Questions
It’s the big question for homebuyers! The maximum purchase price varies for each individual buyer. We carefully review your income, liabilities, credit score, and assets to determine how much you can be approved for. One of our highly qualified loan officers can review your details and determine a price range that works for you.
A pre-qualification is a basic review of your application for a mortgage. In general, a pre-qualification is based on unverified information provided on the application and does not include documentation. Therefore, a pre-qualification is not a firm guarantee of a loan or commitment to lend.
Unlike a pre-qualification, a pre-approval can be a highly useful tool in the homebuying process. The pre-approval process is essentially the same thing as applying for a mortgage, without a specific home being attached to the application. As part of a pre-approval, a lender will check your credit, verify your income and employment, and commit to lending a certain amount of money. Having a pre-approval can show sellers that you’re serious about buying a home, and that you’re likely to be able to follow through on a bid, and close on their property.
The amount of down payment required is determined by certain qualifications of the borrower. The required down payment amount is generally between 3-20% of the purchase price based on credit score and additional criteria. Down payments of less than 20% usually require private mortgage insurance (PMI). In some instances, buyers can purchase a home with 100% financing or $0 down payment.
Talk to one of our loan officers and we’ll help you decide what’s best for your situation.
There are many potential sources for a down payment, including gifts from relatives. While most buyers use their personal savings to fund down payments, other sources can be used such as retirement accounts (401k, IRA), various monetary accounts (stocks, bonds, mutual funds, etc.). In addition, some state and county governments offer down payment assistance programs to members in the community who are ready for homeownership.
Below are some helpful statistics for down payments for homebuyers:
- Savings and retirement- 70% of homebuyers use personal savings and retirement money
- Gifts- 32% of first-time buyers receive gifts from relatives or friends
- Down payment assistance- 10% use grants and loans from nonprofit or government agencies
- Loans- 4% borrow from other properties they own
- Equity – 31% of homebuyers use the proceeds from selling their previous home to fund the down payment of their new home
- Principal: This portion of the payment is applied to your outstanding balance.
- Interest: This portion of payment is applied to the interest charged on the outstanding balance.
- Taxes: Most borrowers escrow their taxes and insurance into their monthly payment. When you escrow your insurance into your monthly payment one-twelfth of your expected annual property taxes will be included in your mortgage payment, and deposited into your escrow account.
- Insurance: Most borrowers escrow their taxes and insurance into their monthly payment. Homeowner’s insurance and any other hazard insurances you’re required to have, such as flood or windstorm, will be included in your monthly payment. If you put less than 20% down on your loan and are required to have private mortgage insurance, the PMI will also be included in your monthly payment.
- Homeowner’s association or condominium fees: If applicable, condominiums and other planned communities require homeowner’s association (HOA) fees. These fees are not included in your mortgage payment and are paid outside of your escrow account.
Private mortgage insurance (PMI) protects lenders against loss associated with default on a loan. You may be billed monthly, annually, as an initial lump sum, or some combination of these methods for your mortgage insurance premium. Ask your REV loan officer if mortgage insurance is required and if yes, the amount of the premium. In the event of a loss for the financial institution that holds the mortgage, a claim is filed with the PMI insurance company to recover a portion of the loss.
The cost of private mortgage insurance is a percentage of your mortgage amount and varies based on credit score, down payment, loan amount, debt-to-income ratio and other loan factors. In most cases, the annual premium is divided by 12 and added to your monthly payment. Did you know that credit unions have access to lower PMI premiums than traditional banking institutions? That’s right! It’s another added bonus of working with REV.
An interest rate is the monthly cost you pay on the unpaid balance of your home loan. An annual percentage rate (APR) includes both your interest rate and any additional costs or prepaid finance charges such as origination fees, private mortgage insurance, and underwriting and processing fees (your actual fees may not include all of the items above). The APR is a universal measurement that will help you compare the cost of mortgage loans (how much you are paying for the loan) offered by different mortgage lenders. As a general rule, the closer the APR is to your interest rate the less you are paying for the loan. The larger the difference between your APR and your interest rate the more you are paying for you loan. APR is often one of the more confusing terms regarding mortgage loans and our knowledgeable loan officers are here to help.
An adjustable rate mortgage (ARM) often offers a lower interest rate than a 30-year fixed mortgage. However, an adjustable rate mortgage is not a good fit for all borrowers. ARM loans typically have an initial period that offers a fixed rate and the rate can adjust after the fixed rate expires. For example: a 5/6/30 ARM loan would offer a fixed rate for 5 years (5). The rate will adjust every 6 months in years 6-30 (6). The payment is amortized over 30 years. (30) . There are risk factors with an ARM loan that should be carefully considered. Keep in mind that with an ARM, your monthly payments have the potential to go up each time your interest rate adjusts. However, interest rates can also go down. With an ARM, borrowers share in the interest rate risk with the financial institution and as a result, the initial rate is lower than a typical fixed rated product.
The 30-year fixed rate offers predictable payments and long-term protection against rising mortgage interest rates. The rate is fixed for the entirety of the mortgage. The principal and interest payment on your loan will never change.
Real Estate Lending Glossary
An estimation of the value of the property by a qualified professional based on the sale of homes similar to the subject property. Appraisals also contain information on property condition and functional years left in major systems. Health, safety, and environmental issues can be brought to light following an appraisal. Any issues raised may be required to be rectified prior to closing. This is protection for the borrower as the property is the collateral for the loan provided by the financial institution.
A real estate agent who represents you during the purchase of a home. A buyer agent walks you through the homebuying process, offers advice, schedules home tours and explains the pros and cons of neighborhoods and properties. The buyer agent also presents offers and negotiates on your behalf. Both the agent representing the seller and the agent representing you, the buyer, will be paid out of the seller’s proceeds at closing.
Fees you pay at the time of purchase. Closing costs may include an appraisal fee, lender fees, title search, and attorney’s fees as well as points and other fees such as government taxes and recording fees collected by the state and county where the home is located. Most of these fees are included in the APR calculation.
A few days before closing, your lender will provide you with a closing disclosure statement that details the exact closing costs, funds needed for close (if applicable), and disbursements. The closing disclosures will have your payment, interest rate, cost of insurance, property taxes, closing costs, and all figures associated with your loan.
Three independent reporting agencies (Equifax, Experian, and Transunion) provide credit reports, which will include your credit history and current debt.
Your credit score is a three-digit number that is intended to represent a borrower’s creditworthiness. Your credit score identifiers are excellent, good, fair, poor, or no credit.
Scores can vary based on the credit model being used. Mortgage credit reports are typically more detailed than most consumer reports. The below scores represent score grades for mortgage purposes:
- Excellent: 750+
- Good: 700 – 749
- Fair: 650 – 699
- Poor: 600 – 649
- Poor: below 600
Most mortgage loan programs require a minimum credit score of 620. There are some mortgage programs that will allow for a credit score as low as 580.
Debt-to-income ratio (DTI) is a calculation that is used to determine the ability to repay the loan. The DTI compares the amount of your monthly gross income to the amount of your monthly liabilities (paying debts). DTI is a tool that helps lenders determine how much home you can afford and qualify for given your income and existing debt obligations. To find your DTI, divide your total monthly debt payments by your total monthly income.
For example:
Income – $5,000 gross per month
- Auto – $500
- Student Loan – $250
- Credit Card – $50
- Personal Loan – $200
$1000 / $5000 = .20
The debt ratio is currently 20%.
Your mortgage lender will also include your new estimated mortgage payment into the debt-to-income ratio. We will use $1500 for the estimated mortgage payment. Using the example above we will use the current liabilities of $1000 per month, add the new mortgage payment $1500, and divide by $5,000.
1,000 + $1500 = $2,500 $2,500/$5000 = 50% debt-to-income ratio
An amount you pay at the time of purchase to reduce the total amount you have to finance.
Dual agency in real estate is when the same real estate agent (dual agent) represents both the buyer and seller in the purchase of a property. It can also occur when different agents within the same real estate brokerage represent the buyer and seller in a transaction. In these situations, the agent primarily represents the seller.
Earnest money is a deposit you pay to show good faith on a signed contract agreement to buy a home. It shows the seller that you are serious about buying the home. If the home sale is closed, the earnest money is applied to closing costs or the down payment. If the contract is terminated for a permissible reason, the earnest money is returned to the buyer. If the buyer does not perform in good faith, the earnest money may be forfeited and paid out to the seller.
Home equity is the difference between your home’s market value and the outstanding balance of your mortgage. Over time, the value of your home generally increases as the amount of your loan decreases, increasing the equity in your home.
A mortgage lender can hold a portion of the borrower’s monthly mortgage payment in escrow to pay property taxes and insurance. Each month, you pay a portion of the estimated annual costs along with your principal and interest.
This insures your property against loss and damage. It may cover damage/destruction caused by fire, tornado, etc.; liability if someone is hurt on your property; and loss/damage to the contents in your home.
Your total personal income before taxes or deductions.
A legal claim that gives a lender or service provider the right to an asset if you default on the loan.
A real estate professional who helps prepare and list a property for sale. They represent the person selling the property in negotiations, helps price the home, and draws up the purchase agreement. Both the agent representing the buyer and the agent representing the seller, will be paid out of the seller’s proceeds at closing.
A ratio determined by dividing the amount of the mortgage by the value of the home. The higher your down payment, the lower your LTV ratio.
A fee that covers the lender’s administrative costs to process the loan.