Applying for a Mortgage
Types of Mortgages
Interest Rates & Lock Periods
Closing a Loan
Mortgage Payments
Insurance
WHEDA Loans
Mortgage Terms
APPLYING FOR A MORTGAGE
What information will be required when I apply?
The following information may be required for your application:
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Valid identification and Social Security card
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Last two paycheck stubs
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Last two years W-2's
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If Self Employed, last two years federal income tax returns with all
schedules and a year-to-date Profit & Loss Statement
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Most recent two months bank and other asset account statements
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Loan account information for all open loans
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Employer Name and Addresses (last two years)
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Address of residences for last two years with Landlord Address (if applicable)
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Signed Purchase Contract
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Check for Fees (Application, Appraisal and Credit Report - if applicable)
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A copy of divorce decree or separation agreement (if applicable)
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What is pre-qualification?
Tentative establishment of a borrower’s qualification for a mortgage loan
amount of a specific range, based on the borrower’s assets, debts, and income.
Pre-qualification may not guarantee final loan approval. To see what amount you may
qualify for, use our Mortgage Qualification Estimator
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What is LTV?
Loan-to-Value (LTV) is a ratio between the amount of a loan and the lower
of the sale price or appraised value. A loan with an 80% LTV would be for
$80,000 on a property valued at $100,000.
What is amortization?
Amortization is the payment of a debt in regular, periodic installments
of both principal and interest. Currently loans are amortized for up to a
30 year period. Please use our Loan Calculator
to determine the payments on your loan when amortized over a specific term.
Where can I get more information on applying &
qualifying for a mortgage?
You can obtain a free U.S. Department of Housing and Urban Development
(HUD) Home Buying Guide by calling 1(800) 767-7468 or visit
www.hud.gov. Fannie Mae's Guide to Homeownership is also free
and will help you prepare your application, to order just call
1-800-7FANNIE.
This is a third-party link provided as an additional resource for our visitors. Tri City
National Bank will not be responsible for the content, accuracy or opinions expressed in the link.
What does "servicing a loan" mean?
Servicing a loan includes collection and proper processing of payments
and disbursement of escrow (if applicable). At Tri City National Bank,
all loans closed (except WHEDAs and Student Loans) are 100% serviced by Tri City. This
means your loan questions will always be answered by a branch in your
hometown. You'll never have to call another state for your loan information
and you may always visit your local branch to see a banker.
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TYPES OF MORTGAGES
Fixed Rate
A mortgage with an interest rate that does not change during the life of
the loan.
Adjustable Rate (ARM)
A mortgage with an interest rate that is adjusted periodically according
to a preselected index. The rate is currently based on one year US Treasury
Securities. Although the interest rates will change throughout the term of
the loan, there is a CAP that limits the amount a rate can increase.
Balloon
A mortgage which does not fully amortize over the term of the mortgage.
The principal remaining at the end of the term is called a balloon payment.
Conventional
A mortgage not obtained under a government insured program.
Conforming
A conventional mortgage that meet federal guidelines and are eligible
for sale to either the Federal National Mortgage Association – FNMA
(Fannie Mae) or the Federal Home Loan Mortgage Corporation – FHLMC
(Freddie Mac).
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Jumbo Loan
A conventional mortgage for an amount that exceeds the limits set by the
federal guidelines. Contact a loan officer for more information.
Construction Loan
A temporary loan that is used to finance the construction of a new home.
This type of loan may bridge equity from an existing home throughout the
construction period.
INTEREST RATES & LOCK PERIODS
What is APR?
Annual Percentage Rate (APR) is the rate on your loan which
represents the actual cost of your mortgage because it includes any points
or other prepaid finance charges in the computation. The Truth-In-Lending
Act requires disclosure of the APR which allows a borrower to compare the
mortgage loans with different closing costs.
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What is Truth in Lending?
The Truth in Lending Act is a federal law that requires lenders to provide
certain disclosures to consumers at various points in the transaction.
In particular, the APR, finance charge and payment terms presented in the
note are required by the Truth in Lending Act.
What are points?
Points are paid to buy down your interest rate. One point costs one percent
of the loan amount (i.e., on a $100,000 loan 1 point is $1,000). By
paying point, buyers may save in long term financing costs.
What is a rate lock-in vs. float?
After you apply for a loan, you may decide between locking-in the interest
rate until you close, or allowing the rate to float (fluctuate with the
market conditions). You may typically lock-in an interest rate for up to
45 days. You may also decide to let the rate float for a while and later
lock-in, closer to your closing date.
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CLOSING A LOAN
What will my closing costs be?
Closing costs, also called settlement costs, are funds paid in connection
with the closing of a mortgage. They may involve the costs for some or all
of the following: loan origination or administration, discount points
purchased, appraisal, credit report, title insurance, flood certification,
attorney services, property survey, and prepaid items such as taxes and
insurance escrow payments. You will receive an estimate of the closing
costs within three days of your application for a mortgage. If you would
like more information please request the HUD guide to Settlement costs at
1 (800) 767-7468 or visit www.hud.gov
or just stop in at one of our locations.
This is a third-party link provided as an additional resource for our visitors. Tri City
National Bank will not be responsible for the content, accuracy or opinions expressed in the link.
What is an escrow account?
Escrow payments are made by a borrower for the purpose of paying the taxes,
insurance and other payments associated with home ownership. The lender
collects the additional funds with the periodic payments of principal and
interest and places them into an escrow account. When the bills are due, the
funds are disbursed.
What is a rescission period?
The rescission period is the time during which you have an opportunity to
review the documents and legal disclosures we provide to you at closing. All consumer loans secured
by primary residences allow for this review time. During this time,
you have the right to cancel this transaction at no cost to you. You may exercise
this right until midnight of the third business day after loan closing or
delivery of the required disclosures (whichever is later); therefore Tri
City National Bank is not able to fund the loan until the rescission period has
expired. You will receive a detailed notice of your rights regarding rescission
with your closing documents.
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MORTGAGE PAYMENTS
Can I pay my loan in advance, either monthly or in full?
Yes, most of our loans have no prepayment penalty. You may pay off your remaining
balance at any time without paying additional fees. Partial prepayments, while they
do not change your monthly payment, can help you save interest and reduce the term
of your loan. Please use our
Early Mortgage Payoff Calculator
to see how prepayment can help you.
What does my mortgage payment include?
Most payments have three parts:
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Principal -- a payment to the amount borrowed
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Interest -- a payment on the interest
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Escrow -- a payment for a portion of the property taxes due at year end and/or for hazard, private mortgage or other insurance
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INSURANCE
What is private mortgage insurance?
This insurance is paid by the borrower to protect the lender against loss
due to foreclosure or loan default. Mortgage insurance is required on
conventional loans with less than a 20 percent down payment or equity at
closing of greater than 80% loan-to-value.
What is hazard insurance?
This insurance protects your property against physical damage such as
fire and tornadoes. Lenders often require a borrower to maintain an amount
of hazard insurance on the property that is equal at least to the amount of
the mortgage loan.
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WHEDA LOANS
What is WHEDA?
WHEDA is the Wisconsin Housing and Economic Development Authority which
serves Wisconsin residents and communities by working with others to provide
creative financing resources and information to stimulate and preserve
affordable housing, small business, and agribusiness.
What type of loans does WHEDA offer?
Home loans: Mortgages with low, fixed interest rates are available to help
low- and moderate- income individuals and families purchase a home.
Home Improvement Loans: Affordable home improvement loans of up to
$15,000 are available to low-and moderate-income Wisconsin homeowners.
How do I find more information on WHEDA loans?
You may visit www.wheda.com to obtain more detailed information and income and
purchase price limits.
MORTGAGE TERMS
Adjustment Period
The length of time which dictates interest rate adjustments on an
adjustable rate mortgage. A one-year ARM would have a rate adjustment
every year on the anniversary of the loan date.
Appraisal
An estimate of value. For mortgage loans, the value of real property is
estimated.
Buydown
Where the buyer pays additional discount points or makes a substantial
down payment to lower the initial or permanent interest rate of the
mortgage.
Commitment
An agreement to lend.
Construction-to-Permanent Mortgage
A loan secured by real estate where payment terms and conditions alter at a
designated time or after construction is complete.
Credit Report
A report run by an independent credit agency which verifies certain
information concerning an applicant’s credit history.
Default
The non-payment of a mortgage or other loan in accordance with the terms
as specified in the note.
Discount Point
A charge by a lender used to lower the interest rate.
Down Payment
Money given by the purchaser of a property to the seller to acquire the
mortgage and hence the property. The difference between the purchase
price and the mortgage amount. Typically it should be cash, but it can
also be a gift that is not to be repaid.
Federal Home Loan Mortgage Corporation (Freddie Mac)
A quasi-governmental, federally sponsored organization that helps facilitate
the access of mortgage money by creating a secondary market for conventional
mortgages. FHLMC sets many of the guidelines for mortgages.
First Mortgage
The earliest recorded mortgage on real estate that has not been satisfied.
Floor
The lowest interest rate of an adjustable rate mortgage.
Free and Clear
A property without a mortgage liability.
Fully Amortized
A mortgage with a zero balance at the end of the mortgage term.
Index
An interest rate compiled from other indicators over a certain period of
time. An index is used on adjustable rate mortgages (ARMs).
Interest Rate Cap
A limit on the amount an interest rate can increase at the adjustment period.
Life Cap
The amount an interest rate can increase over the entire term of the loan.
Lock-In
The guarantee of a specific interest rate for a specified period of time.
Margin
The amount added to the index on an adjustable rate mortgage to establish
an adjusted interest rate. A margin of 1.00 added to an 8.00% index
establishes an adjusted interest rate of 9.00%.
Mortgage
A legal instrument naming real estate used to serve as security for
repayment of a loan.
Mortgagee
The lender
Mortgagor
The borrower
Note
A legal instrument that specifies the terms of an obligation and shows
the borrower is obligated to pay it.
PITI
An abbreviation for Principal, Interest, Taxes and Insurance.
Prepaids
Costs paid at closing for charges occurring in the future. For example,
prepaid interest for interest which will accrue after the loan closes,
before the first payment is due.
Qualification
According to the lender’s standards, the borrower’s ability to repay a
mortgage based on credit, employment, assets, debts and income.
Refinance Mortgage
Money borrowed by the owner of real estate to pay off an existing mortgage
with a different lender.
Residential Real Estate
Property built and owned for the purpose of living and/or renting to tenants.
Residential real estate is limited to units for one to four families.
Second Mortgage
A loan secured by real estate with an existing mortgage lien.
Secondary Market
A market made up of investors which purchase mortgages from lenders to sell
them to other investors.
Servicing
The process of collecting monthly mortgage payments and properly crediting
them to principal, interest and taxes. This procedure also includes keeping
the borrower informed of any changes to his or her mortgage.
Settlement Agent
A person who conducts a mortgage closing or settlement.
Survey
A measurement of the real estate boundaries, including any buildings,
easements, rights of way, roads, etc.
Term
The life of a mortgage.
Title
Ownership record of property.
Uniform Residential Loan Application
A preapproved form for applying for residential mortgages.
Uniform Residential Appraisal Report
Approved appraisal format used by appraisers to estimate the value of real
estate.
Uniform Settlement Statement (HUD-1)
Standard document summarizing closing information as requiried by the Real
Estate Settlement Procedures Act.
Underwriting
The process used by lenders to analyze risk. Factors such as credit,
employment, assets, and debts are used to complete the procedure.
Verification of Deposit
Standard form which verifies an applicant’s assets held at a financial
institution.
Verification of Employment
Standard form which verifies an applicant’s employment history, including
income information.
Verification of Mortgage
Standard form which verifies an applicant’s mortgage with a financial institution,
including payment history and present balance.
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