We hope you're finding that our CNB&T website has anticipated many of the questions you have about the mortgage process, especially if you are a first-time homebuyer. For your quick reference, here are answers to some of the most frequently asked questions.
What does my monthly mortgage payment include?
In general, your monthly mortgage loan payment goes toward principal and interest. Your lender also may collect property taxes and homeowner's insurance through your mortgage payment every month, to be held in escrow and then paid on your behalf when the tax and insurance payments come due.
What is an escrow account?
An escrow account is a separate account where the portion of your monthly payment designated for property taxes, homeowner's insurance, and mortgage insurance is deposited. When those items come due, the money is taken from the escrow account and paid. You do not pay interest on the escrow amount nor do you earn dividends on the account.
What is mortgage insurance?
Mortgage insurance protects the mortgage lender by reducing or eliminating a loss in the unlikely event that you default on your loan. If you owe more than 80% of the appraised value, you likely will be required to have mortgage insurance until your equity exceeds 20% or a certain amount of time has passed. Such parameters are established according to the type of loan you have.
Why do I need title insurance?
Unanticipated title problems can arise causing the complete or partial loss of your home or business property. Your title insurance protects you against financial loss resulting from a covered risk. Risks include misrepresentation of wills, undisclosed heirs, errors in tax records, inadequate legal descriptions and many more. Learn more from this extensive list of hidden risks you easily avoid by having title insurance.
What about flood insurance?
Flood insurance is a form of hazard insurance required by lenders to cover properties in flood zones. If you are uncertain about the zoning of your property, your CNB&T mortgage expert can assist you in making sure there are no surprises.
What is the APR and how is it calculated?
The APR, or Annual Percentage Rate, estimates the total cost of your loan, including the interest rate, the origination charge, discount points and other upfront fees you pay for the loan (e.g. processing costs, document fees, prepaid mortgage interest and mortgage insurance premiums). The APR gives you a quick comparison between lenders in relation to fees charged.
What is the difference between a Fixed-Rate and an Adjustable-Rate mortgage?
If you plan to stay in your home for a long time, a fixed-rate mortgage offers you the same monthly payment and protection from rising interest rates for the life of your loan, e.g. 15 or 30 years. An adjustable-rate mortgage, also called ARM, provides flexibility if you plan on selling your home or refinancing in the near future, with lower monthly payments and typically lower interest for an initial period, then both adjusting annually. Click here for a further comparison of the benefits and unique features of these conventional loan types.
What are the differences between FHA and VA loans?
Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) loans are popular choices for many homebuyers, available in a variety of fixed-rate and adjustable-rate loan options. FHA mortgage programs feature low down payments no matter what your income level. VA loans provide financing if you are a qualified veteran, reservist, active duty personnel, or an eligible family member, with low- and no-down-payment choices. Click here to learn more about the specific requirements and additional benefits of these mortgage programs.
What is a USDA rural home-loan?
The Single Family Housing Programs of the United States Department of Agriculture (USDA) give home ownership opportunities to low- and moderate-income rural Americans through several loan, grant, and loan guarantee programs. These programs also make funding available to individuals to finance vital improvements necessary to make their homes decent, safe, and sanitary. CNB&T serves as a lending partner in the State of Texas for new and existing rural development loans of USDA. Visit the well-organized USDA website for detailed information on income and property eligibility as well as the types of loan programs available to rural Texans.