Resources & FAQs
Your one-stop-shop for mortgage facts.
Whether buying, building, renovating, or refinancing – the mortgage world comes with its own lingo, rules, and processes. We’ve gathered all of this information in one place to answer your quick questions.
There are quite a few ways to structure your mortgage. Let’s compare them all!
Glossary of Terms
What is earnest money? What are points? What’s an LE, LTV, and MI? Learn the lingo here.
Step-by-Step Loan Process
Maybe you’ve already applied. What’s next? Let’s take a look at each step of the loan process.
You’ve got questions. We’ve got answers. Take a look at our most frequently asked questions here!
Fixed Rate Mortgage
If you plan to stay in your home for a long period of time, a fixed-rate mortgage offers several advantages:
- Keeps monthly principle and interest payments fixed for the life of your loan
- Protects you from rising interest rates through the years
- Allows predictability for easier budgeting
- Offers a lower monthly payment than on a shorter-term loan
ARM (Adjustable-Rate Mortgage)
If you plan on selling your home or refinancing in the near future, ARMs provide advantageous flexibility:
- Interest rate and monthly payments are initially lower and fixed for a period of 5 to 10 years, then adjust periodically
- Includes interest rate caps that limit how high your interest can go when the adjustment period begins
- Typically has a lower initial interest rate (if you expect future income growth, that flexibility could be a plus)
- Can be set in a variety of longer terms
FHA (Federal Housing Administration)
If you have limited funds to use toward a down payment, or are looking for flexible credit guidelines, an FHA loan has positive features and benefits:
- Open to all income levels
- Available in a variety of loan terms with mortgage insurance required
- Low down payment and closing cost options
- Allows a new buyer to take over the loan if you sell the home
- Co-applicant may help you qualify, even if they do not live in your home
VA (Veterans Affairs)
If you are a qualified service member, financing for your primary residence through the VA offers special considerations:
- Available in a wide range of loan terms and rates
- No monthly mortgage insurance required
- Options for lower or no down payment
- Closing costs may come from gift or grant
- Sellers can pay all reasonable closing costs if they agree
USDA (United States Department of Agriculture)
Rural Housing Loans
Looking to purchase a home in a rural area? A USDA loan promises great opportunities when you meet basic eligibility requirements:
- Low to moderate household income, based on Area Median Family Income standards
- Home must be located in an eligible rural area as defined by USDA
- Modestly priced house for your own use as primary residence
- Must be able to afford your mortgage payments including taxes and insurance (down payment not required)
- Must be unable to obtain credit elsewhere, yet have an adequate credit history
- 30-year fixed-rate loans only
- Cannot be an existing homeowner
USDA loans offer 100% financing. The program is also available for the purchase and repair of an existing and/or newly constructed dwelling. Sellers can pay all reasonable closing costs if they agree.
CNB&T partners with the USDA in their commitment to the future of rural communities. For more information on rural housing loans and eligibility, visit the USDA website or contact our mortgage team.
A shorter-term mortgage (often 5 to 7 years), but with monthly payments that are amortized over a longer period. "Balloon" refers to a single, lump-sum payment you make at the end of the loan term to cover the remainder of the amount you borrowed. It may be possible to refinance the amount of the balloon payment at the end of the loan.
A cap for an Adjustable-Rate Mortgage (ARM) limits the amount your mortgage payments or interest rates may increase or decrease during the term of your loan. This sets parameters you can predict and creates a comfort zone.
Expenses incurred by buyers and sellers above the price of the property during the transfer of ownership. Typically, your closing costs tally around 3% to 6% of your mortgage amount (but may be higher on lower loan amounts). Usual costs include an origination fee, discount points, appraisal fee, title search and insurance, taxes, survey, deed recording fee and other costs assessed at settlement. Your personal mortgage banker will give you an estimate ahead of time.
In determining the amount you are qualified to borrow for a home, your CNB&T mortgage lender calculates the relationship, or ratio, between your total monthly installment debt, including proposed housing expenses, and your gross income.
Debt / Gross Income = Ratio
When the homeowner fails to make a scheduled payment or is out of compliance with the mortgage loan terms.
Discount Points (or Points)
One percent of the loan amount equals one point. Discount points are prepaid interest on the mortgage loan and are tax deductible. Paying a percentage point up front allows you to reduce the interest rate on your home loan. The more points you pay, the lower your interest rate. Typically, your loan rate is reduced by one-eighth percent (0.125%) per point purchased, and you can pay from zero to 3 or 4 points, depending on how much you want to lower your rates.
Down PaymentThe up-front payment you make of typically 3.5% to 20% of the purchase price in order to qualify for your home mortgage. By investing a larger down payment, you can often lower your mortgage payments or purchase a more expensive house.
The money you pay to the seller to secure a transaction or ensure payment—to show you are "in earnest" about buying the home. This amount, usually between 1% to 5% of the purchase price, becomes part of your down payment if the offer is accepted. And even if your offer is rejected, the earnest money will be returned to you. In the unlikely event that you were to cancel the transaction, the entire amount could be forfeited.
Hazard insurance protects a property owner against damage caused by fires, severe storms, earthquakes or other natural events. The specific event must be covered within the language of the policy for the property owner to receive compensation to cover the cost of any damage incurred. Usually, the property owner will have to pay for a year's worth of premiums at the time of closing, but this will depend on the exact details of the policy and will be included in the closing costs.
A construction loan you receive during the completion of a building project, which is typically replaced by a permanent loan granted to you after the building project is completed.
The Loan Estimate from a lender assists you in making sound decisions when shopping for a loan. This list estimates all fees that need to be paid before closing, all closing costs and any escrow costs you will incur when purchasing a home. In good faith, the lender must present this estimate within three days of receiving your application. (See RESPA for more information.)
Loan-To-Value Ratio (or LTV Ratio)
A lending risk assessment ratio that financial institutions and other lenders examine before approving your mortgage. The LTV ratio is determined by dividing the amount of your mortgage loan by the appraised value of the property. High LTV ratios are generally seen as higher risk. For LTVs above 80%, Mortgage Insurance is usually required.
Mortgage Insurance (MI)
Mortgage insurance, sometimes referred to as MI or PMI (private mortgage insurance), protects the lender or titleholder in the event that a borrower defaults on loan payments, dies or is otherwise unable to meet the contractual obligations of the mortgage. (See also Title Insurance.) Mortgage insurance may come with a typical “pay-as-you-go" premium payment included in your escrow payment, or may be capitalized into a lump-sum payment at the time your mortgage is originated. Should you be required to have PMI due to the 80% loan-to-value rule, you can request that the insurance policy be canceled once the required 20% of the appraised value has been paid off, except on some government loans such as FHA.
An acronym for the four primary components of a monthly mortgage payment: principal, interest, taxes and insurance.
Determining your pre-qualification for a mortgage loan is designed to create safer loans and successful, satisfied homeowners. Your CNB&T mortgage banker calculates how much money you are eligible to borrow before you shop for a home. Knowing your loan pre-qualification amount saves time and enables your realtor to show you homes that you know you can afford. It also lets the seller know you can qualify for the loan when putting in an offer on their home.
RESPA stands for Real Estate Settlement Procedures Act, administered and enforced by the Consumer Financial Protection Bureau (CFPB) under the US Department of Housing and Urban Development. It improves the disclosure of information to protect you throughout the mortgage process from potential abusive practices. The most recent RESPA rule makes obtaining mortgage financing clearer and, ultimately, cheaper for you as a consumer. The new rule requires a standardized Loan Estimate (LE) to facilitate shopping among settlement service providers. The Closing Disclosure, part of your closing paperwork, also has been improved to assist you in determining if your closing costs were within established tolerance requirements. At CNB&T, we implement all RESPA rules with one thing in mind: to make your mortgage process work better for you.
Another valuable part of your mortgage loan process is the measurement of land you're buying, conducted by a registered land surveyor. The survey shows the location of the land with reference to known points, its dimensions and the locations and dimensions of any buildings. Your mortgage lender can recommend professional surveyors who can provide you with a free cost estimate.
Title insurance protects you, the homebuyer, against possible financial loss caused by covered title risks. Sometimes title problems arise in spite of a very careful search of public records such as missing heirs, inaccuracies, fraud and forgery. Click here for a substantial list of these and other unexpected issues that could result in partial or complete loss of property, even lawsuits, without title insurance. A modest, one-time premium buys you priceless peace of mind, knowing your insurer will defend against an attack on your title as insured, or indemnify you against a defined financial loss up to the policy limit.
As a homebuyer, you're not the only one signing on the dotted line. When CNB&T decides to underwrite your mortgage loan, our name and character as a lender fully supports you. At this step in the loan process, a decision is made based on your credit rating, employment, assets and other factors, matching the risk assessment to an appropriate rate and term or loan amount. As your quest for home ownership is about to be realized, Community National stands with you as a trusted partner.
Approximately 3 – 7 Days
After you have returned the acknowledgement showing you received the Loan Estimate, other early disclosures, and The Notice of Intent to Proceed, the loan officer or a member of our mortgage loan staff will request copies of your pay stubs, W2s, bank statement, tax returns, etc.APPLY NOW
Approximately 10 – 15 Days
- Appraisal and title work ordered (approximately 10 business days to receive)
- Application information verified (employment, assets, tax returns, etc.)
- Homeowner’s insurance chosen by customer and quote sent to lender
Approximately 3 – 4 Days
- File submitted to Underwriting for approval
- Application information gathered and submitted, if requested
Approximately 3 – 7 Days
- Final documents prepared
- Compliance review by lender
- Closing Disclosure received (must be received 3 days prior to the signing of your loan)
- Final documents signed by borrower (and seller, if applicable)
Title company receives money from lender and disburses funds as stated on Closing Disclosure (usually the same day closing docs are signed)
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.
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