Getting Started with the Mortgage Process
The Mortgage Process
The first step begins by completing your mortgage application. You may hear this referred to as a Uniform Residential Loan Application (URLA) or a 1003. The mortgage loan application captures important information about you, your finances, and all of the details of the loan you are applying for. Part of the loan application process includes reviewing your credit history. Your credit report will be generated at the time you apply for your loan. BCU offers you several convenient ways to complete your application. You may apply over the phone with one of our Home Loan Consultants at (800)-388-7000 ext. 8167 or you may apply in person at one of our many Service Center locations. BCU even gives you the ability to apply online from the comfort of your own home! You may qualify for an “on the spot” pre-approval on your purchase or refinance application.
Pre-Approval, Purchase, or Refinance
BCU can help you with all three! A Home Loan Pre-Approval means that you are conditionally pre-qualified for the purchase of a home. A Pre-Approval is a great tool to have while house hunting! It helps you to know how much you qualify for and it shows the seller that you are already one big step closer in the buying process. Do you already know which house you want to buy? Great! BCU can help you to complete your purchase application and get you on the road to home ownership. How do you know if a refinance is right for you? If you can reduce your interest rate, save money on your monthly bills, or need cash for a specific purpose, refinancing your home could be a good option for you. To see if you qualify, you may apply online, over the phone or in person at a Service Center location.
Your loan process includes providing us with documentation to verify the information collected on your application. To speed up your final approval process, you may want to have the following documents available at the time you apply:
- Recent Paycheck Stubs
- W-2 Forms
- Tax Returns if Self-Employed
- Bank Statements
- Insurance Agent Contact Info
Interest Rates: When to Lock?
Simply put: If you are afraid that interest rates are on the rise, protect your monthly payment and buying power by locking in the rate at the time you apply for your loan. If you believe that rates could drop during your loan process, you might decide to take a risk and let your rate “float”. This means your rate is NOT locked and you must let us know when you are ready to lock your rate. You can sign up and take advantage of BCU’s “Rate Tracker” to receive an alert when rates are at the level you are looking for. But be careful! Rates are tough to predict, much like the stock market. They may not reach the low that you are hoping for and, if you choose to float during your loan process, there is a chance they can increase. Also, keep in mind the term of your rate lock. Be sure to tell us when you anticipate to close your loan. Remember that if you are purchasing a bank owned property or are refinancing a property with needed repairs, your loan may take longer to close. Make sure your rate lock period allows enough time for your loan to be processed. We’re here to help you with your rate lock questions!
Which Loan is Right for You?
Everybody has a different situation. How do you know which type of home loan is best for you? To find the best loan for your own needs, think about your short and long term plans and goals. To give you a better idea, we have outlined some examples. However, individual situations may vary so please contact a BCU Home Loan Consultant to discuss your individual needs. If you plan to live in your home for many years and/or if you want to budget for fixed monthly payments, your best strategy may be a fixed rate loan. Fixed rate loans are considered to be the most stable, providing the homeowner with a principal and interest payment that never changes over the life of the loan. Loan terms can range from 7 to 30 years. The most common terms are 15, 20, and 30 year loans. However, ask your BCU Home Loan Consultant about a customized fixed rate loan term to best suit you!
If you plan to sell or refinance your home in just a few years, you may wish to take advantage of the low initial interest rates typically associated with an Adjustable Rate Mortgage, also referred to as an ARM. An Adjustable Rate Mortgage (ARM) is a loan with an interest rate that periodically adjusts. ARM’s generally have a lower initial interest rate and monthly payment. This could help you qualify for a larger loan amount to purchase your home. The interest rate and payment will be guaranteed for a fixed period of time, commonly 3,5,7 or 10 years. You should take into consideration your long term plans and financial goals when selecting the initial fixed term for your ARM product. For example, if you plan to sell or refinance your home in 5 years, then the 5 Year ARM product might make the most sense for you. The rate and payments are fixed for 5 years. After the initial fixed rate period expires, ARM’s generally adjust every 12 months. BCU’s ARM products have caps that protect your monthly payment from increasing too much at any adjustment period. Also, there is a lifetime cap, a rate that your ARM will never exceed over the life of your loan.
BCU offers additional loan products aimed at very specific individual member needs. Interest Only options are available to qualified members wishing to keep their monthly payments at a minimum and maintain higher monthly cash flow. An Interest Only product (sometimes known as Interest First) is a loan that requires only interest to be paid over a certain fixed period. An interest only product can apply to some Adjustable Rate Mortgage products as well as Fixed. This type of loan might be beneficial to someone planning to stay in the home for a short period of time. Homeowners should be cautious in considering an Interest Only product, particularly in areas of declining home values. Generally, more equity is required in the home to qualify for an Interest Only product because none of the monthly payment is being applied to the principal balance of the loan, meaning the balance of your loan will not decrease until the initial interest only period has expired and regular principal and interest payments become due.
Ask your BCU Home Loan Consultant about our current products and rates! You may even choose to “buy down” your rate or “roll in” your closing costs. Let us help you decide! Looking to refinance to take advantage of a lower rate? Don’t want to increase the remaining term of your loan? Ask us about our customized Fixed Rate Loan Terms to fit your individual needs!
Look out for lenders offering loans with Pre-Payment Penalties (a fee to payoff your loan early) or Negative Amortization (a feature allowing monthly payments that are less than what is required to repay the loan-resulting in an increasing loan balance) BCU does NOT originate loans with a Pre-Payment Penalty or NegAm Feature!