Buying a home is one of the most important decisions you will ever make. While the home buying process is exciting, it can feel overwhelming at times. Read these frequently asked questions so you’ll know more about what to expect.
Q: How do I get started?
A: To get started, you should first meet with one of our mortgage lenders to get pre-approved for your mortgage loan. It’s important to get pre-approved before shopping for a home or even selecting a neighborhood. When you are pre-approved for a mortgage loan, you know exactly how much house you can afford. This gives you a better idea of your price range, and also makes the next steps much easier.
Q: How much house can I afford?
A: Typically, you can purchase a home with a value of two to three times your annual household income. The size of mortgage you will qualify for depends mostly on three factors:
- Your monthly payments as a percentage of your income
- How much cash you have available for a down payment
- Your credit history
We will go over all of this in the pre-approval process, so you’ll know exactly where you stand before you start shopping for homes.
Q: Do I need a fixed rate or an adjustable rate mortgage?
A: Fixed rate loans have interest rates that stay the same throughout the life of the loan. An adjustable rate loan is tied to an index (Prime) and can change over time. To decide which loan is right for you, consider factors such as how an increase in interest rate (higher loan payment) would impact your monthly budget and how long you plan to stay in the home.
Q: How do I make an offer when I find a home that I like?
A: When you are ready to make an offer on a home, your real estate agent will help guide you through the process. Most of the time, you make an offer on a home by submitting a formal offer letter to the homeowners or their real estate agent. The letter would outline the terms and any conditions of your offer. Before you make an offer, consider the following:
- Asking price. Is the asking price in line with similar homes in the area?
- Time on the market. How long has the home been on the market? If it’s been on the market for a long time, the owner might be more motivated to sell at a lower price.
- Home condition. Is the home in good condition, or will you have to make major improvements?
Q: What is an impound/escrow account?
A: An impound/escrow account is an account set up by your lender to set aside money out of your mortgage payments for property taxes and insurance. The lender holds this money and makes payments from this account when they are due.
Q: Does it make sense to pay points to get a lower interest rate?
A: “Points” are an upfront fee that is paid in order to lower your mortgage interest rate. Deciding whether or not to pay points can be a tough call. If you plan to stay in your house a long time, it’s a good idea to pay extra in order to get the interest rate as low as possible. You will reach a “break-even point” where the amount you save on your monthly payment is greater than what you originally spent on the points. However, if you plan to sell or refinance within two or three years, it’s a better idea to get a loan with as few points as possible because you will probably not be in the home long enough to reach this break-even point.
Q: What should I expect at my closing?
A: Your loan closing is the day when the seller officially signs the home over to you. Typically, a loan closing is a meeting that takes place in the closing agent’s office. During the closing, the seller, buyer, real estate agents and the representative for the title company may attend. Here’s what to expect:
- Paperwork. All loan documents will be explained in detail and then signed. Make sure you understand every document and don’t sign anything if the numbers are different that what you expected.
- Cashier’s check. You may need to bring a cashier’s check to cover the down payment and closing costs.
- Escrow account. You may establish an escrow account at the closing to cover property taxes and insurance.
- Your keys. When all the documents are signed and the transfer of funds is complete, you’ll walk away with the keys to your new home.
Q: How long does it take to close on a home?
A: After a purchase offer is accepted, most buyers are anxious to finish the transaction and start moving in. However, it can take several days and sometimes weeks from the time you apply for your loan to the time the house is officially yours—for a number of reasons. Brotherhood Bank will move the process as quickly as we can by working to set a closing date and time that works best for you. We will also help you estimate your closing costs based on your agreement with the seller.
Q: What are closing costs?
A: Closing costs are the fees and expenses associated with a loan transaction. These costs can include fees for an appraisal, credit report, title insurance, survey and points. Closing costs can vary depending on the type of loan and the fee structure that is used in your area.
Q: Why should I use Brotherhood Bank for my home mortgage?
A: Brotherhood Bank has been a trusted lender in the Kansas City area for nearly a century. We understand this market; we know the neighborhoods in this area; and we have a wide range of mortgage products to meet your needs. Your home mortgage loan is one of the most important investments you will make. The process is much easier when you work with lenders who are also friends and neighbors and have the ability to make decisions locally.