Where Do I Start?
Got a question about mortgages? You've come to the right place. We're here to make sure you have all the answers, from loan application to closing and even beyond.
Whether you're a first time buyer or a current homeowner looking to refinance or purchase a second home, Kennebunk Savings can:
- Find you the best loan or refinancing option
- Walk you through gathering the necessary financial documents
- Help you understand the mortgage application process
- Help you understand mortgage closing costs
- Provide helpful tips, checklists, and worksheets
If you are just starting the process of finding and purchasing a home, we can help guide you from start to finish—including pre-qualifying you so you know how much house you can afford at the outset.
Planning for Home Financing
The interest rate for a fixed rate mortgage does not change over the life of the loan. You can count on both the rate and the monthly principal and interest payments remaining the same over time, making it easy to manage your budget.
An adjustable rate mortgage (ARM) differs from a fixed rate mortgage because the interest rate on the loan can vary over the life of the loan. Usually an ARM has an initial interest rate that is fixed for a number of years, and after that time will adjust as interest rates change.
The initial interest rate on an ARM can be lower than a fixed rate loan. However, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future.
We do not charge any penalties for paying off your mortgage loan early. You can pay off your mortgage at any time with no additional charges.
If you are planning to finance a home, you should be familiar with the phrase loan-to-value (LTV). Simply put, LTV reflects the percentage of your property that will be mortgaged and is calculated by dividing the mortgage loan amount by the value of the property.
Let’s look at an example. If you are looking to buy a home valued at $250,000 and have saved $50,000 for the down payment, you would need to finance the difference or $200,000 with a mortgage. To calculate the LTV, you would divide the mortgage amount by the value of the home.
$200,000 ÷ $250,000 = .80 or 80%
In the case noted here, the LTV is 80%, meaning that the money you want to borrow is 80% of the home’s value.
The LTV may affect which product is right for you. In general, there are more mortgage programs available when your LTV is low, or up to 80%. However there are many types of loan programs that allow for a higher LTV. For example, Kennebunk Savings has some loan programs that allow you to borrow up to 98% LTV.
Your LTV is one of many things considered when you apply for a loan. The best way to determine the maximum amount you can borrow is to give us a call to discuss your borrowing needs. We’d be happy to walk you through the numbers and the lending options available.
Each personal situation is different and the amount of money you may need on-hand will depend upon a number of items. Generally speaking, you should plan for the following:
Earnest money (which is the deposit and part of the down payment) that will accompany your offer to buy a house.
Down payment which is the amount of cash you will be putting towards the purchase of your home that is paid at the closing.
Closing costs which are the various fees a homeowner pays when they buy a home and obtain a mortgage. Closing costs come from a number of sources and generally fall into three areas:
1. Application or loan processing fees. Kennebunk Savings has a loan processing fee, which essentially helps cover the cost of our mortgage underwriters and processors-our employees. Some Lenders charge both a loan processing fee and an application fee. It’s important that borrowers understand in advance what types of fees may be charged so that there are no surprises.
2. The vast majority of closing costs are for services provided by other businesses. There are a lot of businesses involved in the mortgage process. The services they provide will result in some type of fee that the lender will pass on to the borrower. These services include things like
- An appraisal to determine the fair market value of the property
- Credit report to show the borrowers payment history
- Attorney’s fees for conducting the closing
- Title search to determine if the title of the property can be transferred to the buyer free and clear of any restrictions
- Lenders Title Insurance, which is required on all real estate secured loans. An owner’s title insurance policy is optional.
- Flood determination-and if your property is in a flood zone, you will be required to purchase flood insurance
- Transfer taxes which are paid to the state by both the seller and buyer whenever a property changes ownership
- There may be delivery fees charged by the secondary mortgage market if your loan is sold. The secondary market is made up of companies that buy mortgages from lenders. Many people choose a mortgage that can be sold because the interest rate is typically lower on these mortgages
3. Lastly, home buyers should expect to pay prepaid interest and prepaid insurance premiums. Prepaid interest is the amount of interest that will be due on the loan from the closing date to when the first payment is due. This amount will vary depending on the closing date. A new homeowner may also have to prepay homeowners insurance that is due at the closing
Please also note that there could be some additional expenses if the homebuyer has a home inspection done or elects to purchase an owner’s title insurance policy.
To better understand the type of closing costs you may incur, it is always a good idea to connect with a mortgage lender early in the home buying process.
Yes, prequalifying for a mortgage loan before you start house-hunting is a smart move. When you apply to prequalify for a home loan, we will review your income to give you a general idea of how much you may be able to borrow. You will then receive a letter that states how much home you may be able to afford, based on the information you provided to the bank. You can give this information to your real estate broker to assure them that you are a serious buyer. When you find the perfect home, simply call your Mortgage Lender at Kennebunk Savings to move the mortgage application process forward.
As part of the application process, in addition to filling out the application form, it is important to provide all the requested documentation needed, like income verification and bank statement documents. To help you prepare, check out our handy Mortgage Application Checklist.
There are steps you can take to help speed up the loan process.
- Be available because the loan processors and underwriters will have questions. Your quick response to their inquiries will keep the process moving forward.
- Provide all information requested right up front. Your lender will provide a list of items needed to process your mortgage application and if you omit important information or are not accurate with the information you provide, it could slow down the process.
- To help expedite the loan process, you should ask your lender about submitting and receiving disclosures and other required information electronically. Secure electronic document sharing has become increasingly popular because it speeds up the document delivery time throughout the mortgage application process.
- And finally, do not hesitate to reach out to a member of your lending team when you have questions. It is better to provide the right types of information when needed, than to omit information because you are not sure about what to provide, which can slow down the process.
Yes, your down payment can include borrowed funds. However, any loans that you take out must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it's a perfectly acceptable source of funds. If you are planning on obtaining a loan for all or part of your down payment, make sure to include the details of this loan in your application.
Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify for a loan.
As always, if you have additional questions about qualifying for a mortgage loan, do not hesitate to give us a call.
Yes, down payments can include gift money if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.
If your loan request is for more than 80% of the purchase price, you may need to contribute funds towards the down payment. Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank deposit receipt or statement to verify that you have deposited the gift funds into your account.
We need information about all the real estate you own to insure we have a reasonable estimate of your net worth. If you don't know the exact value of your real estate holdings, provide your best guess - in most cases that is all we will need to process your new mortgage request.
To determine the value of the property you are purchasing or refinancing, an appraisal will be required. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.
The appraiser will create a written report for us and you'll be given a copy prior to your loan closing.
Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can't stop floods. Floods happen anytime, anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding.
We use a third party company who specializes in the review of flood maps prepared by FEMA to determine if your home is located in a designated Special Flood Hazard Area. If it is, then flood insurance coverage will be required, since standard homeowners insurance doesn't protect you against damages from flooding.
In some areas of the country it is customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. You may of course, have your own attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Loan Officer.
The closing agent acts as the Bank’s agent and will represent us at the closing. However, your personal Mortgage Lender will contact you prior to closing to talk about your final documents and to provide a final breakdown of your closing fees.
In most cases the closing occurs at the title company’s office. Prior to closing, you will receive your closing disclosures which will include the cost of the loan. Once all the documents are received and accepted, your closing will be scheduled.
From the Blog
Here's a behind-the-scenes look at what happens during the underwriting process.
Prequalification is an important step in the home buying process. Find out how easy it can be!