Whether you are buying your first home, changing homes, building a new home, or refinancing your existing home, choosing the correct mortgage can make a huge difference. There are many different types of loans available and the loan experts at S&C Bank have years of experience in helping our customers make the right choices. Let them help you pick the loan that make the most sense for you, your situations, and your financial goals.
6 Keys to a Successful Mortgage
In the “good old days,” you could get a mortgage based on your good name, a firm handshake, and a quick signature. Today you sign your name more than once, but we do our best to ensure that the mortgage process is easy, understandable, and as quick as possible. Our lenders average 20 years of banking experience and they put it all to work for you to find you loan terms that work best for your situation. Choosing the correct mortgage for your situation and goals could save you literally thousands of dollars in extra interest that you might not need to pay.
- Key 1 - Payment/How much can I borrow Find a payment amount and loan amount you are comfortable with. Decide if you would like to be “pre-approved for a specific loan amount” or simply begin looking for houses in your target range. While we can’t help you find a home, we do recommend working with a reputable real estate agent or buyer’s agent. If you would like to be pre-approved, we would be happy to complete that process for you. Just ask your loan officer for details about our FREE pre-approval process and how it can help you when house hunting.
- Key 2 - Financing Steps. An explanation on how the mortgage process works from beginning to end.
- Key 3 -Application Checklist. This checklist can really make the application process easier. It includes most of the information your loan officer will need to fully complete the application.
- Key 4 - Mortgage Types. S&C Bank has literally more than two dozen loan products to meet your needs. This is where your loan officer can really help you save some money. By understanding your situation and goals, we can recommend a product that makes those goals a reality with loan terms that best match your situation.
- Key 5 - Closing Costs. Some basic questions and information about closing costs are outlined here.
- Key 6 - Mortgage Definitions. Mortgages include a lot of specialized language and terms. The Mortgage definitions and your loan officer can help make some sense out of the “lingo.”
Payment/How much can I borrow (Key 1)
Use these calculators to see how much your payments will be and to help you see how much you can afford to borrow. Talk to an S&C Banker if you have any questions.
After you have decided on the home you want to buy, you will make an offer-to-purchase to the seller through your sales associate. Once you and the seller agree on the price by signing the offer-to-purchase, you can start your loan application.
Here are the steps you will go through when we process your loan:
- You will interview with your loan officer – using the information listed on the “Application Checklist.”
- We will process and underwrite your loan by verifying your job, income, debts, assets, credit, etc.
- Your loan officer may issue a pre-approval letter. You do not need to have a property picked out to be pre-approved.
- An appraisal will be ordered to verify the value of the home.
- Title work will be ordered to ensure there are no legal problems with the property.
- Once a date and time are agreed upon by all parties (buyer, lender and seller’s agent), a closing appointment will be scheduled. The buyer will supply the lender with a homeowner’s insurance policy or binder with the lender listed on the loss payee and mortgage clauses, along with a receipt for the annual premium.
- You, the Buyer, may be asked to bring a certified check to the closing.
- The closing agent will have you sign all the proper documents and will give you copies of the documents at the closing, which takes approximately one hour.
Follow this checklist as a guide to documents you may need when you apply for your mortgage loan. Bringing the right documents with you will help speed up the processing of your loan.
- Accepted offer-to-purchase, with any amendments or counteroffers, signed by all parties.
- One complete month’s worth of pay stubs.
- Your last two year’s W-2 forms.
- Your last two month’s complete checking and savings statements.
- Your most recent complete investment statement.
- If self-employed, copies of your complete federal income tax return for the previous two years. If employed by your own corporation, copies of its returns for the previous two years and a year-to-date profit and loss statement in addition to your personal returns.
If you choose to use your social security, disability or pension income, bring a copy of a check or award certificate from the issuing agency or copies of your bank statement showing the direct deposit. Income from alimony, child support, or separate maintenance payments, need not be revealed if applicant(s) do not choose to have it considered as a basis for repaying the loan.- A complete copy of your divorce decree, if applicable.
- A complete copy of your bankruptcy papers, if applicable.
- If you are looking to obtain a construction loan, please bring a complete set of blueprints and a sworn construction statement.
Mortgage Types (Key4)
Your home is an exciting investment in your future. But without the right mortgage, the future of your home might be somewhat less than secure. The experienced S&C Bank mortgage loan officers will tailor a mortgage loan that is just right for you. We’ll make sure the advantages of home ownership are not put at risk by an incorrect loan. With an S&C Bank Mortgage your home will bring you true security and peace of mind.
Below are the types of mortgages available through S&C Bank.
FIXED-RATE MORTGAGES
A fixed-rate mortgage gives you predictable housing costs for the life of your mortgage loan.
- 30-year fixed rate mortgage. For example, an APR of 7.0% on $100,000 would have a monthly payment of $665
- 20-year fixed rate mortgage.For example, an APR of 6.50% on $100,000 would have a monthly payment of $745
- 15-year fixed rate mortgage. For example, an APR of 6.25% on $100,000 would have a monthly payment of $857
- Rural Housing first-time home buyer loans (no down-payment loans)
Choose the best fixed-rate mortgage option that fits your budget. Consider, for example, the benefits of a 30-year mortgage. It offers the lowest monthly payments for a fixed-rate mortgage while providing you with a fixed monthly payment.
SPECIAL SITUATIONS
S&C Bank now offers expanded loan products without the expanded costs from mortgage brokers. We can handle almost any special situation with some of our special offerings.
- Self employed
- Low down payment loans
- No down payment loans
- Less than perfect credit
- 40 year mortgages. For example, an APR of 7.25% on $100,000 would have a monthly payment of $639
- Interest only loans
ADJUSTABLE RATE MORTGAGES (ARMS)
ARMs can offer an excellent choice of financing under certain conditions, such as rising income expectations, high interest rates and short-term ownership. The ARM offers an initial lower rate by sharing future risk of higher rates between the borrower and lender. However, since payments and interest rates can increase either steadily or irregularly, home buyers considering an adjustable rate mortgage need to have the income to keep up with all possible rate and/or payment changes.
You can identify an Adjustable Rate Mortgage by four basic components:
- Initial Interest Rate- normally one to three percentage points lower than that of most fixed-rate mortgages. Lower initial interest rates also make ARMs somewhat easier to qualify for. The initial interest rate is tied to certain economic indicators that dictate in part what the monthly payment will be.
- Adjustable Interval- the time between changes in the interest rate and/or monthly payment: typically one or three years, depending on what index is used for calculation.
- Index- A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other types of investments (such as-, three- and five-year US treasury security yields) which is then used to adjust the interest rate in an adjustable rate mortgage up or down.
- Margin- the additional amount the lender adds to the index to establish the adjusted interest rate on an ARM.
Note: Lenders who offer ARMs are required to give you a disclosure about its ARM program at the time you are given an application form.
BALLOON LOANS
We offer five- and seven-year balloon loans. The interest rate is typically lower than a 30-year fixed rate and would be locked in for either five or seven years. At the end of the five or seven years, the remaining balance on the loan is due; however, you do have some options. You may reset the loan at the current market rate for the remaining term of the loan if certain conditions are met. You also have the option of refinancing your loan at any time. This type of loan would be beneficial to someone who is only going to be in their home for a short period of time. The payments are amortized over a 30-year period. For example, an APR of 6.125% on $100,000 would have a monthly payment of $615
CONSTRUCTION LOANS
If you are building a new home, you may need a construction loan. Construction loan funds are advanced as the construction on your home moves along. You pay interest-only payments until the home is completed and then the construction loan is converted to a permanent mortgage. Construction loan terms are typically less than a year.
LOT/LAND LOANS
If you are looking to build a home in the near future, we can help by providing you with a lot loan.
For your convenience, we’ve compiled the most asked questions regarding mortgages. If after reading the material you still have questions, please call S&C Bank, ask for a mortgage lender and we will discuss your questions.
What types of closing costs are there?
Here are two broad categories of charges and fees that are typically found in settlement or closing transactions nationwide:
- Charges for establishment and transfer of title. This may be referred to as the title search, title insurance, legal fees or settlement supervision fees.
- Costs associated with obtaining the mortgage. These costs include surveys, appraisals, credit checks, loan documentation fees, notary charges, loan origination fees, commitment fees, processing fees, hazard insurance, and underwriting fees.
Who owns what when you refer to a title?
When you buy a car, you see the Owner’s Registration Certificate as proof of ownership or clear title. The burden of proof is upon him/her.
When you buy a house, the burden to provide clear title is usually the responsibility of the seller. The Lender will not give you a mortgage until you can prove that the present owner of the house legally owns it or has title to it.
What about title insurance?
A title insurance policy may be required even though a formal title search was done. This guards against the possibility of error by whoever searched the title on the home, even though errors in this area are pretty rare. However, when these errors do occur, they are catastrophic for all parties concerned. The cost of this procedure is based on the loan amount and is often paid by the buyer. You have the right to ask the seller to pay a portion of the premium costs as part of your negotiation.
A title insurance policy lists the lender as the beneficiary. You need to take out an owner’s title insurance policy to protect yourself. The additional premium cost is usually only a fraction of the lender’s policy and is worth it for peace-of-mind.
What can I expect for mortgage-related closing costs?
Although fees may vary from one financial institution to another, below is a list of fees related to mortgage costs:
- Property Appraisal Fees- All lenders require an appraisal, usually by an independent appraiser, of the market value of the home being purchased. This opinion gives the lender some confidence that if the borrower defaults, the lender can recover its loan money from the sale of the home after foreclosure.
- Loan Origination Fees- Also referred to as “points.” Each point equals 1% of the mortgage amount and they represent the equivalent of prepaid interest. This will effect the amount of interest you will pay over the life of the loan.
- Mortgage Insurance- The lender may require you to purchase mortgage insurance as a condition of granting the loan. The most common reason for this insurance is because the borrower’s down payment is less than the lender’s normal minimum (usually at least 20%). Mortgage insurance protects the lender from loss if the borrower defaults. (This insurance does not protect the borrower, but it may allow the borrower to get a loan for which he/she might otherwise not get.)
- Homeowner’s Hazard Insurance- You will be required to have a policy in effect at closing with the first year’s premium paid in full. This insurance is protection against physical damage to the house by fire, wind, vandalism and other causes. (Minimum coverage is to be no less than the mortgage amount.)
- Flood Search- each lending institution is mandated by law to determine if the property you are purchasing is in a flood zone. If the property is in a flood zone, you will be required to purchase a flood insurance policy.
- Credit Report- we will request a credit report to verify what debts you have outstanding and to determine your ability and willingness to repay a mortgage loan.
- Title Work- this is a formal search done to ensure that you will have legal ownership to the property you are purchasing.
Applying for a mortgage means taking an important financial step. You will hear many terms throughout the process. Becoming familiar with the following terms will help you as you continue through the mortgage process.
Adjustable Rate Mortgage (ARM)- is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index.
Amortization- means loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance.
Annual Percentage Rate (APR)- is the cost of credit expressed as an annual rate. It must be calculated by using a formula set by federal law and disclosed to the borrower to aid in comparing different credit plans. All finance charges imposed by a lender are included in this calculation, and an APR is always higher than the simple interest rate when such finance charges like points, origination fees, or mortgage insurance are charged by a lender.
Appraisal- an estimate of the value of property; made by a qualified professional called an “appraiser.”
Closing Costs- usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing are usually between 1% and 4% of the mortgage amount.
Commitment- an agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.
Conventional Loan- a mortgage not insured by FHA or guaranteed by the VA or Farmers Home Administration (FmHA).
Credit Report- a report documenting the credit history and current status of a borrower’s credit standing.
Debt-To-Income Ratio- the ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his/her gross monthly income.
Down Payment- money paid to make up the difference between the purchase price and the mortgage amount. Down payments are usually 5% to 20% of the sales price on conventional loans.
Equity- the difference between the fair market value and current indebtedness; also referred to as the owner’s interest.
Escrow- an account held by the investor into which you would pay money for tax or insurance payments.
Federal Home Loan Mortgage Corporation (FHLMC)- also known as “Freddie Mac”; a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.
Federal National Mortgage Association (FNMA)- also known as “Fannie Mae”; a tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA.
Fixed-Rate Mortgage- a mortgage on which the interest rate is set for the term of the loan.
Gross Monthly Income- the total amount the borrower earns per month, before any expenses are deducted.
Loan-to-Value Ratio- the relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.
Market Value- the highest price that you would pay and the lowest price the seller would accept on a property.
Origination Fee- a fee imposed by a lender to cover certain processing expenses in connection with making a real estate loan. It is usually a percentage of the amount loaned, such as one percent.
Points- also referred to as discount points. A one-time charge used to lower (buy-down) the interest rate. Each point is equal to 1% of the mortgage loan amount.
Pre-Approval Letter- This is a letter you may receive from your lender at the beginning of the application process. The letter will state the loan amount you may qualify for. It aids realtors in finding an affordable home for you.
Prepayment- a privilege in a mortgage permitting the borrower to make payments in advance of their due date.
Private Mortgage Insurance (PMI)- may be required by your lender if the loan you apply for cannot be granted because the loan does not meet the normal standards for the lender. The most common reason for this requirement is a smaller down payment that the lender usually requires (typically a down payment of less than 20%). This insurance protects the lender from loss if the borrower defaults. It does not protect the borrower, though it may allow the borrower to qualify for a loan he/she could not otherwise get.
Title- a document that gives evidence of a person’s ownership of property.
Title Insurance- a policy, usually issued by a title insurance company, which ensures the financial institution against errors in the title search. The cost of the policy is based on the loan amount.
Title Search- an examination of municipal or county records to determine the legal ownership of property, usually performed by a title company.
