December 7, 2020Your Mortgage Questions Answered

Buying a house is a big step. In fact, it is typically the biggest financial a person can make in their lives. With the right information and some guidance, owning a home can be more within your reach than you think. Below, we at PEFCU answered frequently asked questions about buying a home. 

Q: Do I need excellent credit to get a mortgage? What does my credit score need to be?  

A: When we receive your credit report, we don’t only review your credit score, but we view your credit history.  

Q: How much is needed for a down payment? 

A: PEFCU requires 5% down payment of the purchase price plus closing cost. The estimated closing costs can average 2%-5% of the principle balance. PMI (Private Mortgage Insurance) is required if you are financing more that 80% of the purchase price. PMI covers the lender in case if you default on the loan. 

Q: What are the closing costs? How much should I expect them to be?  

A: Closing costs can vary by loan amount and state. These include filing fees, title insurance, surveys, appraisals, etc. Some closing costs can be negotiated with the seller.  

Q: What is a fixed-rate mortgage?  

A: It means your interest rate stays the same throughout the term of your loan. This is good because your interest rate won’t increase based on market conditions. With other banks, if your rate increases, it could increase your required monthly payment.  

Q: Should get a 15-year, 20-year, or 30-year term loan?  

A: It depends on a few factors, like what fits your monthly budget. The benefit of getting a lower term is typically a lower interest rate or you can get a longer-term for a lower monthly payment. We will work closely with you to help you find a mortgage that is right for you. 

Q: What documentation should I gather?  

A: To get pre-approved, we will need the following items: 

• Most recent 30 days of paystubs (including year-to-date income) 
• All W-2s from the last two years 
• All non-PEFCU bank statements from the last two months (all pages) 
• Each Applicant’s email address 
• Copies of each Applicant’s Photo I.D. 

Q: Does PEFCU offer pre-approval?  

A: Yes, we request the documents listed above to figure out the amount we can preapprove for our members.  

Q: What is an escrow account?  

A: An escrow account is set up by a lender to pay property-related expenses like homeowner insurance and local property taxes. While we don’t escrow our mortgages, we offer a Mortgage Reserve savings account separate from your mortgage payment.  

Q: How long does it typically take to close a mortgage? 

A: Typically, 30-45 days from the date of an accepted contract.  

Q: How much will my housing payment really be?  

A: With PEFCU, if you are financing more than 80% of the value of your home, your housing payment will include principle, interest, and PMI (Private Mortgage Insurance). The property taxes and homeowner’s insurance are managed by you.  

With an escrow mortgage, your monthly payment will include principle, interest, PMI (Private Mortgage Insurance) if needed, homeowners’ insurance, and property taxes. To get an estimate, check out our calculator: Mortgage Payment Calculator. 

Q: How do you decide if I am approved for a mortgage?

A: We take many factors into consideration to approve a mortgage, including credit history, the amount of funds available for out-of-pocket costs (e.g. closing costs, down payments, etc.), and more. If we can’t approve your application right away, we can still help you reach your home-buying goals . We can prepare you with financial tools, personal coaching, and educational resources. Just reach out to our Mortgage Department, and one of our Loan Officers will personally assist you with the application and approval process.

Q: What are mortgage points? Do I need to pay them?  

A: Mortgage points are used to buy down an interest rate, 1 point is 1% of your loan amount. The process of buying points may be beneficial if you intend to stay in the house long term and have extra cash to buy points. Beware of teaser rates that other lenders advertise, the teaser rates listed on their promotions can have you paying a lot of points. At PEFCU the interest we advertise is without points.  

 

What other questions do you have about being approved for a mortgage loan? 

Each individual’s financial situation is unique, and readers are encouraged to contact PEFCU when seeking financial advice on the products and services discussed. This article is for educational purposes only; It does not constitute legal advice. If such advice or a legal opinion is required, please consult with competent local counsel.