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FAQ
1. How do I know how much house I can afford? Answer
2. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3. What is a credit score and how will my credit score affect my application? Answer
4. Will the inquiry about my credit affect my credit score? Answer
5. How is an index and margin used in an ARM? Answer
6. How do I know which type of mortgage is best for me? Answer
7. Will I be charged any fees if I authorize my credit information to be accessed? Answer
8. What does my mortgage payment include? Answer
9. How much cash will I need to purchase a home? Answer
10. How are interest rates determined? Answer
11. What is an Adjustable Rate Mortgage (ARM)? Answer
12. Is comparing APRs the best way to decide which lender has the lowest rates and fees? Answer
13. How do I know if it is best to lock in my interest rate or to let it float? Answer
14. How much money will I save by choosing a 15-year loan rather than a 30-year loan? Answer
15. Who Should Consider a 15-Year Mortgage? Answer
16. Advantages and Disadvantages of a 15-Year Mortgage: Answer
17. The possible disadvantages associated with a 15-year fixed rate mortgage are: Answer
18. Are there any prepayment penalties charged for these loan programs? Answer
19. What happens at the loan closing? Answer
20. Will I need to have an attorney represent me at closing? Answer
21. Can I get advanced copies of the documents I will be signing at closing? Answer
22. Who will be at the closing? Answer
23. I won't be able to attend the closing. What other options are there? Answer
24. If I apply, where will the closing take place? Answer
25. Can I make my monthly payments with an automated debit from my checking account? Answer
26. How do I lock in my rate? Answer
27. Can I apply for a loan before I find a property to purchase? Answer

Q : How do I know how much house I can afford?
A : Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.
 
Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
A : With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
 
Q : What is a credit score and how will my credit score affect my application?
A : A credit score is one of the pieces of information that we'll use to evaluate your application. Financial institutions have been using credit scores to evaluate credit card and auto applications for many years, but only recently have mortgage lenders begun to use credit scoring to assist with their loan decisions. Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness. Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past. Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won't be paid as agreed. Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a customer.
 
Q : Will the inquiry about my credit affect my credit score?
A : An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing. But don't overreact! The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don't limit your mortgage shopping for fear of the effect on your credit score.
 
Q : How is an index and margin used in an ARM?
A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).
 
Q : How do I know which type of mortgage is best for me?
A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Texas Bay Area Credit Union can help you evaluate your choices and help you make the most appropriate decision.
 
Q : Will I be charged any fees if I authorize my credit information to be accessed?
A : There is no charge to you for the credit information we'll access with your permission to evaluate your application online. You will only be charged for a credit report if you decide to complete the application process after your loan is approved.
 
Q : What does my mortgage payment include?
A : For most homeowners, the monthly mortgage payments include three separate parts:
  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
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    Q : How much cash will I need to purchase a home?
    A : The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
  • Earnest Money: The deposit that is supplied when you make an offer on the house
  • Down Payment: A percentage of the cost of the home that is due at settlement
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house
  •  
    Q : How are interest rates determined?
    A : Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
     
    Q : What is an Adjustable Rate Mortgage (ARM)?
    A : An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly. Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off. You get a lower rate with an ARM in exchange for assuming more risk. For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years. Here's some detailed information explaining how ARM's work. Adjustable Period: With most ARMs, the interest rate and monthly payment are fixed for an initial time period such as one year, three years, five years, or seven years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years. Index: Our ARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal. If the index rate moves up so does your mortgage interest rate, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down your monthly payment may decrease. Margin: To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin." If you're still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future. Interest Rate Caps: An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps: 1. Periodic or adjustment caps, which limit the interest rate increase or decrease from one adjustment period to the next. 2. Overall or lifetime caps, which limit the interest rate increase over the life of the loan. As you can imagine, interest rate caps are very important since no one knows what can happen in the future. All of the ARMs we offer have both adjustment and lifetime caps. Please see each product description for full details. Negative Amortization: "Negative Amortization" occurs when your monthly payment changes to an amount less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs we offer allow for negative amortization. Prepayment Penalty: Some lenders may require you to pay special fees or penalties if you pay off the ARM early. We never charge a penalty for prepayment. Contact a Mortgage Loan Officer: Selecting a mortgage may be the most important financial decision you will make and you are entitled to all the information you need to make the right decision. Don't hesitate to contact a Mortgage Loan Officer if you have questions about the features of our adjustable rate mortgages.
     
    Q : Is comparing APRs the best way to decide which lender has the lowest rates and fees?
    A : The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees in addition to the interest rate determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up front costs over the entire loan term. Also, unfortunately, the APR doesn't include all the closing fees and lenders are allowed to interpret which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you'll probably have to pay them. For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments. You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that's best for you. Look at total fees, possible rate adjustments in the future if you're comparing adjustable rate mortgages, and consider the length of time that you plan on having the mortgage. Don't forget that the APR is an effective interest rate--not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.
     
    Q : How do I know if it is best to lock in my interest rate or to let it float?
    A : Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down. If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission. If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking.
     
    Q : How much money will I save by choosing a 15-year loan rather than a 30-year loan?
    A : A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more important - you'll pay less than half the total interest cost of the traditional 30-year mortgage. However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.
     
    Q : Who Should Consider a 15-Year Mortgage?
    A : The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.
     
    Q : Advantages and Disadvantages of a 15-Year Mortgage:
    A : The 15-year fixed rate mortgage offers two big advantages for most borrowers: - You own your home in half the time it would take with a traditional 30-year mortgage. - You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed rate borrowers.
     
    Q : The possible disadvantages associated with a 15-year fixed rate mortgage are:
    A : - The monthly payments for this type of loan are roughly 10 percent to 15 percent higher per month than the payment for a 30-year. - Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.
     
    Q : Are there any prepayment penalties charged for these loan programs?
    A : None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.
     
    Q : What happens at the loan closing?
    A : The closing will take place at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you, but in some states, these two events actually happen separately. During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have or you can feel free to contact your Mortgage Loan Officer if you prefer. Just to make sure there are no surprises at closing, your Mortgage Loan Officer will contact you a few days before closing to review your final fees, loan amount, first payment date, etc. The most important documents you will be signing at the closing include: HUD-1 Settlement Statement - This document provides an itemized listing of the final fees charged in connection with your loan. If your loan is a purchase, the settlement statement will also include a listing of any fees related to the transaction between you and the seller. If this loan will be a refinance, the settlement statement will show the pay off amounts of any mortgages that will be paid in full with your new loan. Most items on the statement are numbered according to a standardized system used by all lenders. These numbers will correspond to the numbers listed on the Good Faith Estimate that will be provided in your application package. This document is also commonly known as the closing statement and both the buyer and seller must sign this document. Truth-in-Lending Statement - This document provides full written disclosure of the terms and conditions of a mortgage, including the annual percentage rate (APR) and other fees. It is exactly the same as the TIL that you received immediately after your initial application, except it has been updated to reflect the final rate and fee information. Federal law requires that all lenders provide you with this document at closing. Note - This is the document you sign to agree to repay your mortgage. The note will provide you with all of the details of your loan including the interest rate and length of time to repay the loan. It also explains the penalties that you may incur if you fall behind in making your payments. Mortgage / Deed of Trust - This document pledges a property to the lender as security for repayment of a debt. Essentially this means that you will give your property up to the lender in the event that you cannot make the mortgage payments. The Mortgage restates the basic information contained in the note, as well as details the responsibilities of the borrower. In some states, the document is called a Deed of Trust instead of a Mortgage. If your loan is a refinance, Federal Law requires that you have three days to decide positively that you want a new mortgage after you sign the documents. This means that the loan funds won't be disbursed until three business days have passed. The closing agent will provide more details at the closing.
     
    Q : Will I need to have an attorney represent me at closing?
    A : In some areas of the country it is very 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. By all means, we recommend that you have an 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 Mortgage Loan Officer. We'd be happy to provide any information necessary.
     
    Q : Can I get advanced copies of the documents I will be signing at closing?
    A : The most important documents you will sign at closing are the note and mortgage, sometimes called the deed of trust. Unless there are special circumstances, these documents are usually prepared one to two days before your closing. Other documents are prepared by the closing agent the day before or the day of your closing. If you would like copies of the completed documents to be sent to you after they are prepared, please contact your Mortgage Loan Officer.
     
    Q : Who will be at the closing?
    A : The closing agent acts as our agent and will represent us at the closing. However, your personal Mortgage Loan Officer will contact you prior to closing to talk about your final documents and to provide a final breakdown of your closing fees. If you have any questions that the closing agent can't answer during the closing, ask them to contact your Mortgage Loan Officer by phone and we'll get you the answers you need - before the closing is over!
     
    Q : I won't be able to attend the closing. What other options are there?
    A : If you won't be able to attend the loan closing, contact your Mortgage Loan Officer to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we're able to mail you the documents in advance so that you can sign them and forward them to the closing agent. We're sure to have a solution that will work in your circumstances.
     
    Q : If I apply, where will the closing take place?
    A : We use a nationwide network of closing agents and attorneys to conduct our loan closings. We'll schedule your closing to take place in a location that is located near your home for your convenience. We'll deliver our loan documents and wire transfer your loan funds to the closing agent or attorney prior to closing so that they'll have plenty of time to prepare for your closing.
     
    Q : Can I make my monthly payments with an automated debit from my checking account?
    A : Automated monthly payments are available. At the loan closing an automated payment application will be provided. Simply return it at your earliest convenience to enroll in the automated payment program.
     
    Q : How do I lock in my rate?
    A : Please contact a Texas Bay Credit Union Mortgage Loan Officer.
     
    Q : Can I apply for a loan before I find a property to purchase?
    A : Yes, applying for a mortgage loan before you find a home may be the best thing you could do! If you apply for your mortgage now, we'll issue an approval subject to you finding the perfect home. We'll issue a pre-approval letter online instantly. You can use the pre-approval letter to assure real estate brokers and sellers that you are a qualified buyer. Having a pre-approval for a mortgage may give more weight to any offer to purchase that you make. When you find the perfect home, you'll simply call your Mortgage Loan Officer to complete your application. You'll have an opportunity to lock in our great rates and fees then and we'll complete the processing of your request.