CalculatorsThere are many financial decisions involved in purchasing or refinancing a home. The calculators we provide here can help you decide some of those decisions.
Your PropertyWhen you buy or refinance a home, the property is used as collateral for the loan. Here's what the lender is looking for and why.
What is an appraisal and who completes it?
To determine the value of the property you are purchasing or refinancing, an appraisal will be required. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.
If you are applying for a Rural Development loan, the appraiser will also determine if the property meets HUD guidelines. It is important to note that the inspections performed by the appraiser for the purpose of estimating value are not intended to replace inspections performed by individuals for the purpose of determining any repairs or deficiencies.
After the appraiser inspects the property, they will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called "comparables" and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.
As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration.
If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value.
Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept.
It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract will the appraised value be very different.
What types of things will an underwriter look for when they review the appraisal?
In addition to verifying that your home's value supports your loan request, we'll also verify that your home is as marketable as others in the area. We'll want to be confident that if you decide to sell your home, it will be as easy to market as other homes in the area.
We certainly don't expect that you'll default under the terms of your loan and that a forced sale will be necessary, but as the lender, we'll need to make sure that if a sale is necessary, it won't be difficult to find another buyer.
We'll review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we'll want to make sure that there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we can't see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.
We'll also make sure that the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell.
We'll also review the market statistics about your neighborhood. We'll look at the time on the market for homes that have sold recently and verify that values are steady or increasing.
Are there any special requirements for condominiums?
Since the value and marketability of condominium properties is dependent on items that don't apply to single-family homes, there are some additional steps that must be taken to determine if condominiums meet our guidelines.
One of the most important factors is determining if the project that the condominium is located in is complete. In many cases, it will be necessary for the project, or at least the phase that your unit is located in, to be complete before we can provide financing. The main reason for this is, until the project is complete, we can't be certain that the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.
In addition, we'll consider the ratio of non-owner occupied units to owner-occupied units. This could also affect future marketability since many people would prefer to live in a project that is occupied by owners rather than renters.
We'll also carefully review the appraisal to insure that it includes comparable sales of properties within the project, as well as some from outside the project. Our experience has found that using comparable sales from both the same project as well as other projects gives us a better idea of the condominium project's marketability.
Depending on the percentage of the property's value you'd like to finance, other items may also need to be reviewed.
I'm purchasing a home, do I need a home inspection AND an appraisal?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you've found the perfect home.
The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.
However, appraisers are not construction experts and won't find or report items that are not obvious. They won't turn on every light switch, run every faucet or inspect the attic or mechanicals. That's where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.
You may want to consider accompanying the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.
I've heard that some lenders require flood insurance on properties. Will you?
Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can't stop floods. Floods happen anytime, anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding.
We use a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner's insurance doesn't protect you against damages from flooding.
How long does it take for the property appraisal to be completed?
Licensed appraisers who are familiar with home values in your area perform appraisals. Generally, it takes 10-14 days before the written report is sent to us. We follow up with the appraiser to insure that it is completed as soon as possible. If you are refinancing, and an interior inspection of the home is necessary, the appraiser should contact you to schedule a viewing appointment. If you don't hear from the appraiser within seven days of the order date, please inform your Loan Officer. If you are purchasing a new home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home.
Does First Mid Bank & Trust provide financing for manufactured homes?
We define manufactured housing as housing units that are factory built with a steel undercarriage that remains as a structural component and limits the structure to a single story. These types of manufactured homes are sometimes known as mobile homes. We do not consider other factory-built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing, to be manufactured housing. If your home is one of these types, please complete the application indicating that your home is a single family home. Unfortunately, manufactured homes are not eligible for all loan programs. Please visit with one of our Loan Officers.
Will I get a copy of the appraisal?
As soon as we receive your appraisal, we'll update your loan with the estimated value of the home. A copy will be mailed to you (e-mailed if requested).
Loans, Rates & FeesWhen it comes to home financing, there are many different options to choose from. How do you find the loan that's best for you? Here is some information to help you.
How are interest rates determined?
Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
It is important to note that interest rates and fees are also determined by a borrower's credit history. The better your credit history the better the interest rate we can offer you. The rates and fees displayed assume the borrowers have a good credit history. Your actual interest rate and fees may be different.
What is an adjustable rate mortgage?
An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly.
Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off. You get a lower rate with an ARM in exchange for assuming more risk.
For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years.
Here's some detailed information explaining how ARM's work.
With most ARMs, the interest rate and monthly payment are fixed for an initial time period such as one year, three years, five years, or seven years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years.
Our ARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal. If the index rate moves up so does your mortgage interest rate, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down your monthly payment may decrease.
To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin." If you're still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.
An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:
1. Periodic or adjustment caps, which limit the interest rate increase or decrease from one adjustment period to the next.
2. Overall or lifetime caps, which limit the interest rate increase over the life of the loan.
As you can imagine, interest rate caps are very important since no one knows what can happen in the future. All of the ARMs we offer have both adjustment and lifetime caps. Please see each product description for full details.
"Negative Amortization" occurs when your monthly payment changes to an amount less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs we offer allow for negative amortization.
Some lenders may require you to pay special fees or penalties if you pay off the ARM early. We never charge a penalty for prepayment.
Contact a Loan Officer
Selecting a mortgage may be the most important financial decision you will make and you are entitled to all the information you need to make the right decision. Don't hesitate to contact a Loan Officer if you have questions about the features of our adjustable rate mortgages.
Should I pay discount points in exchange for a lower interest rate?
Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them, up front, at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.
To determine whether it makes sense for you to pay discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you actually begin to save money by paying discount points. If the number of months it will take to recoup the discount points is longer than you plan on having this mortgage, you should consider the loan program option that doesn't require discount points to be paid.
If you'd prefer not to make this calculation the "old-fashioned way," we have a discount points calculator!
Is comparing APRs the best way to decide which lender has the lowest rates and fees?
The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees in addition to the interest rate determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up front costs over the entire loan term.
Also, unfortunately, the APR doesn't include all the closing fees and lenders are allowed to interpret which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you'll probably have to pay them.
For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments.
You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that's best for you. Look at total fees, possible rate adjustments in the future if you're comparing adjustable rate mortgages, and consider the length of time that you plan on having the mortgage.
Don't forget that the APR is an effective interest rate--not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.
How do I know if it's best to lock in my interest rate or to let it float?
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're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission.
If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking.
How much money will I save by choosing a 15-year loan rather than a 30-year loan?
A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more important - you'll pay less than half the total interest cost of the traditional 30-year mortgage.
However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.
Who Should Consider a 15-Year Mortgage?
The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.
Advantages and Disadvantages of a 15-Year Mortgage
The 15-year fixed rate mortgage offers two big advantages for most borrowers:
- You own your home in half the time it would take with a traditional 30-year mortgage.
- You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed rate borrowers.
The possible disadvantages associated with a 15-year fixed rate mortgage are:
- The monthly payments for this type of loan are roughly 10 percent to 15 percent higher per month than the payment for a 30-year.
- Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.
Compare Them Yourself
Use the "How much can I save with a 15 year mortgage?" calculator in our Resource Center to help decide which loan term is best for you.
Is there a fee charged or any other obligation if I complete the online application?
There's no cost at all for completing our application.
When can I lock in my interest rate and points?
Once you are approved, a Loan Officer will contact you to discuss your options.
Are there any prepayment penalties charged for these loan programs?
None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.
Tell me more about closing fees and how they are determined.
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 also from 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 the city level - and that is no easy task!
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 loan processing 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.
What is title insurance and why do I need it?
If you've ever purchased a home before, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan or you are refinancing, you may be wondering why you need another insurance policy.
The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours: That no individual or government entity has any right, lien, claim, or encumbrance on your property.
The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.
Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer. Title companies typically issue two types of title policies:
1) Owner's Policy. This policy covers you, the homebuyer.
2) Lender's Policy. This policy covers the lending institution over the life of the loan.
Both types of policies are issued at the time of closing for a one-time premium, if the loan is a purchase. If you are refinancing your home, you probably already have an owner's policy that was issued when you purchased the property, so we'll only require that a lender's policy be issued.
Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or, more likely, the information contained in the company's own title plant.
After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.
The fact that title companies try to eliminate risks before they develop makes title insurance significantly different from other types of insurance. Most forms of insurance assume risks by providing financial protection through a pooling of risks for losses arising from an unforeseen future event, say a fire, accident or theft. On the other hand, the purpose of title insurance is to eliminate risks and prevent losses caused by defects in title that may have happened in the past.
This risk elimination has benefits to both the homebuyer and the title company. It minimizes the chances that adverse claims might be raised, thereby reducing the number of claims that have to be defended or satisfied. This keeps costs down for the title company and the premiums low for the homebuyer.
Buying a home is a big step emotionally and financially. With title insurance you are assured that any valid claim against your property will be borne by the title company, and that the odds of a claim being filed are slim indeed.
What is mortgage insurance and when is it required?
First of all, let's make sure that we mean the same thing when we discuss "mortgage Insurance." Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower's death. Mortgage insurance makes it possible for you to buy and obtain conventional financing for 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.
The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. Usually, the premium is included in your monthly payment and one to two months of the premium is collected as a required advance in closing. Mortgage insurance premiums may be deductable on your federal tax return. You should check with your tax advisor for deductability.
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 you Loan Officer.
What is your Rate Lock Policy?
The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.
A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan’s interest rate and points are guaranteed. Should interest rates rise during that period, we are obligated to honor the committed rate. Should interest rates fall during that period, the borrower must honor the lock.
When Can I Lock?
In some cases, your on-line application will provide all the information needed and you will have the option to lock immediately after loan approval. When this is the case, a Loan Officer will contact you to discuss your options. Otherwise, you will be invited back to lock after we have reviewed your documentation and credit package.
We do not charge a fee for locking in your interest rate.
We currently offer 30, 45 and 60 day lock-in periods on our site. This means your loan must close, disburse and be delivered to the Secondary Market within this number of days from the day your lock is confirmed by us.
Once we accept your lock, your loan is committed into a secondary market transaction. Therefore, we may not be able to renegotiate your rate lock.
What is the maximum percentage of my home's value that I can borrow?
The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, and the loan type you choose, so the best way to determine what loan amount we can offer is to complete our online application!
What is your home equity loan rate lock policy?
The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.
What is a Rate Lock?
A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan’s interest rate is guaranteed.
When Can I Lock?
You can lock once your loan is approved. We will honor your rate lock if your loan closes within 30 days.
Do I Have to Lock?
Since home equity rates don’t change often, your rate will automatically be locked as explained above.
Tell me more about home equity loan closing fees and how they are determined.
A home equity loan often can involve fees, such as the appraisal fee, title charges, and recording fees
If you have any other questions about fees, please contact us at http://firstmid.mortgagewebcenter.com and one of our Loan Officers will be happy to help!
What is a Home Equity Line of Credit?
A home equity line is a form of revolving credit in which your home serves as collateral. Because your home is likely to be your largest asset, you should consider a home equity line of credit for the purchase of major items such as education, home improvements, or medical bills and not for day-to-day expenses.
With a home equity line, you will be approved for a specific amount of credit—your credit limit—meaning the maximum amount you can borrow at any one time while you have the plan. Since you can get approved for an amount of credit now and not access the funds until you need them, a home equity line of credit is a good choice if you simply want the ability to access cash as you need it.
With our home equity line, you'll have the ability to access funds, up to the amount of your credit limit. You can access your funds by writing a check or using a credit card; it's up to you!
The monthly payment for a home equity loan is typically based on your daily balance and the daily interest rate.
What’s the difference between a home equity loan and a refinance?
A home equity loan is generally a second mortgage against your home, meaning it is a loan that you take out using your home as collateral without paying off your first mortgage. A refinance typically means that you'll be paying off your existing first mortgage and replacing it with a new first mortgage.
Determining whether it's best to refinance or to obtain a home equity loan is very complicated and depends on many factors. You should consider contacting your tax advisor to determine what makes the most sense for you.
In general, a home equity loan should be considered:
- The lower the interest rate is on your first mortgage
- The shorter the remaining term is on your first mortgage
- The shorter the term is on the second mortgage you are considering
- The higher the rate and points are on a new first mortgage
- The requirement of mortgage insurance for a new first mortgage
Comparing monthly payments of your existing first mortgage and a new home equity loan as opposed to a new first mortgage should help. You should also keep in mind the term of each of your loans, especially if monthly payment is not a significant issue for you.
What is a guarantee fee and when is it required to be paid?
Rural Development loans are guaranteed by the USDA. A fee must be paid by the borrower in order for us to obtain this guarantee. A guarantee is similar to insurance; it will protect the lender in case of loss by reimbursing them in full up to an amount not exceeding 90% of the original loan amount. The cost of the guarantee (insurance premium) for the first year is paid upfront at closing and can be financed. There is an annual renewal fee that is paid monthly.
What is an RD loan?
The Rural Development (RD) Agency is governed by the USDA (United States Department of Agriculture). The loan program is a 30 year fixed rate mortgage. The borrower does not have to make a down payment when the property appraises for the full purchase price. The government guarantees these loans and the guarantee fee can be financed over and above the purchase price/ appraised value. If the appraised value is sufficient, the borrower can add the closing costs to the amount financed.
The borrower does not have to be a first time home buyer. In order to be eligible your income cannot exceed 115% of the median income for the area. You can visit www.rurdev.usda.gov/il/grh.htm to find out more about the program and to check the income limits for your area.
Because final approval must come from Rural Development, we cannot approve these loans online, however, we encourage you to make your application online and a Loan Officer will contact you to discuss the process and documentation required for loan approval.
What is a combination loan?
A combination loan is a combination of a first mortgage and a second mortgage. Together, the two loans provide the funds required to purchase or refinance a property. It is called a combination loan because the second mortgage is “stacked” on or combined with the first. Generally the first mortgage is for 80% of the home’s value, and the second mortgage is used to finance the portion of the remaining 20% that isn’t covered by the down payment. In most cases, the interest rate on the second mortgage is higher than the interest rate on the first mortgage.
Why would I choose a combination loan?
A combination loan eliminates the need for Private Mortgage Insurance (PMI), which is typically required any time a first mortgage is provided for more than 80% of the home’s value. This is accomplished by limiting the first mortgage to no more than 80% of the home’s value and financing any additional funds that are needed using a second mortgage. Typically the interest rate of the second mortgage is higher than that of the first mortgage, but generally less expensive than the cost of PMI. You should always compare the cost of a combination loan with the cost of a first mortgage. Even when combined with the additional cost of a second mortgage, at higher interest rate, the combination loan may still be less than the PMI premium because mortgage interest is tax deductible, whereas PMI is not. It is always prudent to review all your financing options before deciding which is best for you.
Your ApplicationApplying for a mortgage can be very intimidating. You're asked specific details about your income, assets, and debts. Here we will give you information that will let you know how that information is used when applying for a mortgage.
Can I apply for a loan before I find a property to purchase?
Yes, applying for a mortgage loan before you find a home may be the best thing you could do! If you apply for your mortgage now, we'll issue an approval subject to you finding the perfect home. We'll issue a pre-approval letter on-line instantly. You can use the pre-approval letter to assure real estate brokers and sellers that you are a qualified buyer. Having a pre-approval for a mortgage may give more weight to any offer to purchase that you make.
When you find the perfect home, you'll simply call your Loan Officer to complete your application. You'll have an opportunity to lock in a great rate and we'll complete the processing of your request.
What is a credit score and how will my credit score affect my application?
A credit score is one of the pieces of information that we'll use to evaluate your application. Financial institutions have been using credit scores to evaluate credit card and auto applications for many years, but only recently have mortgage lenders begun to use credit scoring to assist with their loan decisions and pricing of products.
Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.
Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.
Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the lower your credit score, the less likely you do not pay as agreed.
Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a customer.
Will the inquiry about my credit affect my credit score?
An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing.
But don't overreact! The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don't limit your mortgage shopping for fear of the effect on your credit score.
Will I be charged any fees if I authorize my credit information to be accessed?
There is no charge to you for the credit information we'll access with your permission to evaluate your application online. You will only be charged for a credit report if you decide to complete the application process after your loan is approved.
Are we right for you?
Whether you're purchasing or refinancing, we're certain you'll find our service amazing!
If you'll be purchasing but haven't found the perfect home yet, complete our application and we'll issue an approval for a mortgage loan now with no obligation!
Can I really borrow funds to use towards my down payment?
Yes, you can borrow funds to use as your down payment! However, most loan programs require loans that you take out must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it's a perfectly acceptable source of funds. If you are planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application.
Will my overtime, commission, or bonus income be considered when evaluating my application?
In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.
If you haven't been receiving bonus, overtime, or commission income for at least one year, it probably can't be given full value when your loan is reviewed for approval.
If I have income that's not reported on my tax return, can it be considered?
Generally, only income that is reported on your tax return can be considered when applying for a mortgage. Unless, of course, the income is legally tax-free and isn't required to be reported.
I'm getting a gift from someone else. Is this an acceptable source of my down payment?
Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.
Prior to closing, we'll verify the transfer and receipt of the gift funds into your account.
I am retired and my income is from pension or social security. What will I need to provide?
Your pension and social security can be verified using either your most recent 1099, pension letter, or award letter. We will also need to document the receipt for the most recent month. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life.
How do you decide what you need from me to process my loan?
With the exception of RD, we take full advantage of an automated underwriting system that allows us to request as little information as possible to verify the data you provided during your loan application. Gone are the days when it was necessary to verify every piece of data collected during the application. The automated underwriting system compares your financial situation with statistical data from millions of other homeowners and uses that comparison to determine the level of verification needed. In many cases, a single W-2 or pay stub can be used to verify your income or a single bank statement can be used to verify the assets needed to close your loan. If you are applying for an RD loan, our Loan Officers will advice you of what items you may need.
I'm self-employed. How will you verify my income?
Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period.
We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need at least one, and sometimes a full two-year history of self-employment to verify that your self-employment income is stable.
Will my second job income be considered?
Typically, income from a second job will be considered if a two-year history of secondary employment can be verified.
How will rental income be verified?
Actual documentation depends on how long you have owned rental property. We may ask for up to two years tax returns and a copy of your current leases.
I have income from dividends and/or interest. What documents will I need to provide?
Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.
Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.
Do I have to provide information about my child support, alimony or separate maintenance income?
Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan or the loan program has income limits. In order for this income to be considered qualifying income, we must document receipt for the previous six months and continuance for at least three more years.
What can you expect when you apply for a mortgage?
First, you'll complete our on-line application.
The application will ask you questions about the home and your finances and takes less than 20 minutes to complete. As soon as you've finished the application we'll review your request for instant approval.
After completing your application, a Loan Officer will contact you to introduce himself or herself and to answer any questions you may have. Your Loan Officer is a mortgage expert and will provide help and guidance along the way. If your request wasn't approved on-line, he or she will ask you for any information required to make a decision about your loan.
If you are purchasing a new home, the Loan Officer will also contact the Real Estate Broker or the seller so that they'll know whom to contact with questions.
We'll order the appraisal from a licensed appraiser who is familiar with home values in your area. Depending on your finances and the loan amount requested, different types of appraisals are used. Sometimes the appraiser will need to view the home. Sometimes they are able to do their evaluation from the street.
Title insurance will be necessary. If you're purchasing a home, we'll work with the real estate broker or seller to ensure the title work is ordered as soon as possible. If you are refinancing, let us know if you need our help ordering. We'll use the title insurance commitment to confirm the legal status of your property and to prepare the closing documents.
We'll contact you to coordinate your closing date.
If you are purchasing a home, we'll also schedule the closing with the real estate broker and the seller.
The closing will take place at your nearest First Mid Bank & Trust location or at the office of a title company.
That's all there is to it! You're on your way to the most convenient home loan ever!
I've had a few employers in the last few years. Will that affect my ability to get a new mortgage?
Having changed employers frequently is typically not a hindrance to obtaining a new mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We'll also look at your income advancements as you have changed employment.
If you're paid on a commission basis, a recent job change may be an issue since we'll have a difficult time of predicting your earnings without a history with your new employer.
I was in school before obtaining my current job. How do I complete the application?
If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0."
If my property's appraised value is more than the purchase price can I use the difference towards my down payment?
Unfortunately, if you are purchasing a home, we'll have to use the lower of the appraised value or the sales price to determine your down payment requirement.
It's still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but our investors don't allow us to use this "instant equity" when making our loan decision.
I am selling my current home to purchase this home. What type of documentation will be required?
If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the closing disclosure that you'll receive at the closing to verify that your current mortgage has been paid in full and that you'll have sufficient funds for our closing. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll just ask you to bring your closing disclosure with you to your new mortgage closing.
I am relocating because I have accepted a new job that I haven't started yet. How should I complete the application?
Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location.
If your employment is with a new employer, complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. We'll sort out the details after you submit your loan for approval.
I've co-signed a loan for another person. Should I include that debt here?
Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt doesn't affect your ability to obtain a new mortgage we'll leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification that the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last 12 months.
I have student loans that aren't in repayment yet. Should I show them as installment debts?
Yes, please check with us for current guidelines used to calculate your monthly payment.
How will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage?
If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. We will generally require that two to four years have passed since the bankruptcy or foreclosure. It is also important that you've re-established an acceptable credit history with new loans or credit cards.
What, exactly, is an installment debt?
An installment debt is a loan that you make payments on, such as an auto loan, a student loan or a debt consolidation loan. Do not include payments on other living expenses, such as insurance costs or medical bill payments. We'll include any installment debts that have more than 10 months remaining when determining your qualifications for this mortgage.
What can you expect when you apply for a home equity loan?
First, you’ll complete our online application.
The application will ask you questions about the home and your finances and takes less than 20 minutes to complete.
After you complete the online application, a Loan Officer will contact you to introduce themselves and to answer any questions you may have. Your Loan Officer is a mortgage expert and will provide help and guidance along the way.
If necessary we’ll order the appraisal from a licensed appraiser who is familiar with home values in your area. Depending on your finances and the loan amount requested, different types of appraisals are used. Sometimes they can do their evaluation from the street and won’t have to make an appointment with you to view the inside of your home.
A title report or title insurance will be necessary and we’ll take care of ordering that for you. We’ll use the title work to confirm the legal status of your property and to prepare the closing documents.
We’ll contact you to coordinate your closing date.
After we receive the appraisal, title work, and documentation that supports the information disclosed on your application, we’ll contact you to schedule your loan closing.
That’s all there is to it! You’re on your way to the most convenient home loan ever!
Closing & BeyondHurray! Your loan has been approved and your loan closing date has been set! This section will give you some idea of what to expect at closing and what happens after closing.
Will I need to have an attorney represent me at closing?
In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend that you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Loan Officer. We'd be happy to provide any information necessary.
Can I get advanced copies of the documents I will be signing at closing?
The most important documents you will sign at closing are the note and mortgage, sometimes called the deed of trust. Unless there are special circumstances, these documents are usually prepared one to two days before your closing. Other documents may be prepared by the closing agent as late as the day of your closing. If you would like copies of the completed documents to be sent to you after they are prepared, please contact your Loan Officer.
Who will be at the closing?
A representative from First Mid Bank & Trust or a closing agent acting on our behalf. Your personal Loan Officer will contact you prior to closing to talk about your final documents and to provide a final breakdown of your closing fees. If you have any questions that the closing agent can't answer during the closing, ask them to contact your Loan Officer by phone and we'll get you the answers you need - before the closing is over!
I won't be able to attend the closing. What other options are there?
If you won't be able to attend the loan closing, contact your Loan Officer to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we're able to mail you the documents in advance so that you can sign them and forward them to the closing agent. We're sure to have a solution that will work in your circumstances.
If I apply, where will the closing take place?
We'll schedule your closing to take place at a First Mid Bank & Trust location or title company located near your home.
Can I make my monthly payments with an automated debit from my checking account?
Automated monthly payments are available. At the loan closing or shortly thereafter, an automated payment application will be provided. Simply return it at your earliest convenience to enroll in the automated payment program.
If I apply for a home equity loan where will the closing take place?
We will schedule your closing to take place at a First Mid Bank & Trust location or at a title company located near your home.