Home Loan FAQs
When should I "take the plunge" and buy a home and what should I do when I am ready?
When you think you are ready, please contact us to schedule an appointment to get a pre-approval or visit our mortgage web center to complete an application. We can discuss the many home loan options that we have to offer and inform you of the different steps involved in purchasing your home.
Can Fox Communities Credit Union pre-approve a prospective home buyer "on the spot"?
Yes, after a review of the items mentioned above, a review of your credit history and after calculating your debt ratios. Check out our online mortgage web center where you can apply at your convenience and may be able to get a pre-approval.
Is there a general rule to help determine how much of a home I can afford?
Loan officers look at gross monthly income, with a ratio of 28% for PITI and 36% for total debt as a general guideline. Please remember this is only a guideline. Look at your budget to determine a comfortable figure for yourself. These numbers determine the value of a home you will be able to afford.
What is PITI?
Principle, Interest, Taxes (property) and Insurance (homeowners and mortgage). This would be your total monthly payment.
Must my monthly payment always include taxes and insurance in addition to principal and interest?
No, you can usually elect not to escrow for taxes and insurance. However, if you have less than 20% down, you may be required to escrow.
What are loan officers looking for from prospective home buyers?
In general, they are looking at the 4 "C's".
- Capacity - the ability to repay the loan
- Credit History - are you willing to make the payment
- Collateral - value of the home (appraisal)
- Capital - monies remaining in your checking, savings, investments after down payment and closing costs.
What are good/bad credit scores?
Credit scores do not determine if you will get an approval for a home loan, though some home loans do have a minimum score to qualify. Your entire credit history will be reviewed.
Will Fox Communities Credit Union loan officers review my Credit Report with me?
Yes, we will be happy to review your report with you to help you understand the report and give you a chance to explain any discrepancy. We can also give you suggestions on how to improve your credit - if needed.
What does my credit report have to do with buying a home?
Credit reports show your willingness to repay your obligations. The reports help show us your payment history of past and present loans and credit cards. Having been responsible enough to handle these payments may indicate how your mortgage payments will be made. The credit report will also have your credit score.
If a person can afford to repay a home loan, shouldn't they be able to obtain any loan product?
Capacity or the ability to pay back is only one of the pieces of the puzzle. Again, payment history plays a major role in one's ability to obtain a home loan. Also, the property being financed may limit what type of loans are available.
The collateral "C" refers to the value of the house, isn't the purchase price the homes value?
We will order an appraisal to determine the value. The majority of the time the purchase price and the appraisal value are very similar. For underwriting purposes we will use the lesser of the two figures.
Where can down payment money come from?
This money can come from your savings, checking, mutual funds, CDs and gift money. You can also borrow against assets such as your 401k or even a car. There are also down payment assistance programs through different agencies and WHEDA also offers a down payment assist loan program.
How does "gift money" from a family member work?
If you have 5% of your own money, you may receive additional gift money. If you do not have any down payment the "gift money" needs to be 20% or more.
Can I use my automobile as collateral for down payment?
Not the auto itself, but you may be able to take out a loan and use the cash as your down payment. The 36% debt ratio will still have to be met.
How much money down do I need to avoid PMI (Private Mortgage Insurance)?
Normally 20% down is required to avoid PMI.
How long must I pay PMI?
When your loan balance is reduced to 80% of the purchase price or the appraised value (which was used for underwriting) you can request it to be dropped. By law when the balance is reduced to 78% then the lender must eliminate the PMI.
During a pre-approval what else may happen if I do not qualify to buy a home?
You and the loan officer will discuss what needs to be done in order to be able to purchase a home. The loan officer will also suggest ideas to save money, eliminate debt, improve your credit and hopefully help you plan to purchase a home within a short time.
What type of home loans does Fox Communities Credit Union offer?
What should I do first: Put in an offer to purchase the home I want or visit a lender?
Fox Communities Credit Union recommends setting up an appointment with a loan officer of your choice first to determine if you can purchase a home and at what value.
What is the difference between a home inspection and a home appraisal?
Home appraisals are ordered by the lender to determine a fair market value of the home. An appraisal will note obvious problems but will not determine the condition of the property. Professional home inspectors often can find a problem with a house that you may not uncover on your own. A home inspection is recommended to determine the quality and the fitness of the home.
Should a home inspection always be done?
A home inspection is up to the buyers but it is always recommended. The cost is approximately $225 to $300 depending on the size of the home.
Do I need home insurance and when should that be taken care of?
Fox Communities Credit Union requires home insurance because we have a loan on the home. Prior to closing you will need to obtain a binder and a paid receipt for the first year.
What is Title Insurance and why do I need it?
Title Insurance is an insurance policy that protects the owner and the lender against the possibility of loss created through defects or encumbrances in title that could jeopardize ownerships rights to the property. Some of which may include fraud, forgery, unsatisfied mortgages, judgments, unpaid taxes, liens, land restrictions, defective deeds and even clerical errors in records.
What are the closing costs or fees associated with buying a home?
Closing costs can run between $900 to $1500, which includes the cost of an appraisal, your credit report, recording fees, title insurance, etc.
Is it worth it??? Buying a home?
Yes, it can be. The pride of home ownership, a place to call your own, and hopefully the creation of equity in your home make it a worth while investment. With home ownership come increased responsibility, including the paying of real estate taxes, home repairs and of course the payment. After all, it is YOUR home!