Home Mortgage Loans

Let’s answer those questions.

Homebuying is a unique experience and having questions is always part of the process. So, go ahead and ask away. We’re always here to help.

• Homebuying has a lot of new terms. What do I need to know?

  Appraisal gap. A home appraisal will estimate the market value of your home. Factors that determine an appraised value include a home’s condition, square feet, age, location and market conditions.

   

  APR (Annual Percentage Rate). The APR is the cost of borrowing money expressed as a percentage. It includes fees associated with lending, is usually higher than the interest rate and can be used to determine your monthly payment.

   

  Closing costs. When a mortgage is finalized, homebuyers pay closing costs that include legal and appraisal fees. Closing costs can be paid during signing or rolled into the loan. Talk to your mortgage officer about estimating your closing costs.

  
  Contingencies. Contingencies are placed in an offer by the buyer to ensure a home meets specific conditions before the sale is finalized. Contingencies can include things like drywall or appliance repair or an inspection that finds no signs of water damage.

  
  Down payment. A down payment is an initial amount used to reduce the size of a loan, which then reduces monthly payments.

  
  DTI (debt to income ratio). DTI is a way to see if your debt and income are in a healthy range for a home loan. Most lenders look for a DTI of 43% and below. Your mortgage loan officer can help you determine your DTI.

  If you want to do the math yourself, first add up all your monthly debt payments, then find your monthly income before taxes (gross income), then divide your total monthly debt payments by your gross income. Finally, multiply the result by 100 to get your DTI as a percentage.

   

  Escrow. When a buyer and seller have a contract, escrow (provided by an escrow agent) acts as safe haven for funds until both parties have met their obligations. Escrow protects both the buyer and seller if a home sale falls through.

   

  Equity. The portion of your home that you own is your home equity. For example, if you purchased a $250,000 home with $50,000 down and a $200,000 loan, you would have $50,000 in equity.

   

  HOA. Some neighborhoods have a homeowners association (HOA). All homes within an HOA are required to pay a monthly fee in exchange for HOA services. These services can include taking care of common areas (parks and paths) or contracting garbage collection, landscaping and security services. Some HOAs also set community guidelines for home appearance, safety or even noise levels after dark.

   

  Home mortgage. A home loan or mortgage are similar terms for a long-term loan specifically for purchasing a home.

   

  PMI. Private mortgage insurance (PMI) is used by lenders to protect themselves from buyers who stop making their monthly payments. PMI is generally affordable, can be part of the monthly payment and is required when the down payment in a conventional loan is less than 20%.

   

  Pre-qualification and pre-approval. Pre-qualification is a no-fee application that gives you an estimate of how much you can borrow. Your pre-qualification is good for 60 days and it’s easy to get another 60-day term.

  Pre-approval takes a closer look at your financial information, credit score and debt-to-income ratio and gives you a conditional commitment for a home loan. A pre-approval also provides a personalized interest rate estimate.

  American National Bank offers both pre-qualifications and pre-approvals.

• When is the best time to buy a house?

  Good question. The best answer, no matter the current interest rate, is whenever you can afford monthly payments and are ready to build equity. If interest rates drop, you can always refinance in the future. Even if your first home isn’t a perfect dream house, it’s a first step toward building equity.

• How much can I afford?

  The answer is different for everyone and it helps to review your overall financial picture before you decide. Always consider your current budget, saving goals and the additional costs of homeownership before making a decision.

• How much do I need for a down payment?

  In terms of need, each type of loan has different down payment requirements. All funds above the minimum will help reduce your monthly payment.  

   

  FHA: as low as 3.5%.  

  VA, NIFA and USDA: no down payment requirements.  

  Conventional: as low as 3%.  

  Physician and professional: no down payment required and limited to careers with unique debt and income scenarios.  

• Are there additional costs I should consider when purchasing a home?

  Utilities. The age, design and size of your potential home will determine your utility payment. Before placing an offer, you can contact your local utility providers and ask for a 12-month average cost for a specific property.

   

  Moving. Unless you have a lot of strong friends, most people will pay for professional movers.

   

  Property taxes. Property taxes can be part of your monthly payment.

  
  Home inspection. A good home inspector will provide an investigation-level report of a home’s condition before a purchase.

  
  Home maintenance. Just like a car, your home will need repairs or upgrades from time to time.

   

  The appraisal gap. In competitive markets, a home’s selling price can be above its appraised value. To make up for the difference, homebuyers often include an offer to close this gap for the seller.

• How is my mortgage rate determined?

  American National Bank uses a variety of factors to determine your mortgage rate. These include the current interest rate, your credit score, loan-to-value ratio (LTV), loan amount, loan term and lending fees.  

• What are the principal and interest payments in a home loan?

  Your monthly loan payment is the sum of two separate amounts: the principal and interest payments. The principal goes to paying the amount borrowed. The interest payment is the cost of borrowing the amount of the loan.