Glossary & FAQ

FAQ

Q: I want to get a mortgage. What do I do first?

A: To get started, meet with a CCB Mortgage lender. We can help get you prequalified. This takes the guesswork out of shopping for a home because you will know your target price range.

Q: How do I get prequalified for a mortgage loan?

A: In order to qualify for a mortgage loan, four factors are taken into consideration:

Creditworthiness – A history of good credit and a positive credit rating are essential to obtaining a mortgage loan.

Repayment Ability – As a general rule, the sum of your loan principal, interest, taxes and insurance should not exceed 28 percent of your gross monthly income. In recent years, these ratios have become much more liberal, taking into account a variety of factors to determine your repayment ability.

Marketability of Property – an independent appraisal of the property, you’d like to finance, will be requested. The appraisal is reviewed to ensure the property meets loan guidelines. In most cases, the value of the property should meet or exceed the property’s sales price.

Sufficient Funds for Closing – The amount you will need for closing varies depending upon the loan program you choose.

Q: What happens after I’m prequalified for a mortgage?

A: After you’re prequalified, you can start shopping for a home. Make a list of all the “must-have,” “nice to have” and “cannot have” features that are important to you, and share this information with your real estate agent.

Q: What happens when I find a home I want to purchase?

A: When it comes time to make an offer on a home, your real estate agent will guide you through this process. It typically starts with submitting a formal offer to the sellers or their agent. This letter would include the amount of your offer and any conditions you’d like to include. Before you make an offer, you will want to make sure the asking price is in line with other homes in the area. You’ll also want to consider the current condition of the home. Is it “move-in ready” or will you have to make substantial improvements? If the home needs major upgrades or has been on the market for a long time, you might consider submitting a lower offer. A good real estate agent will know this process well and can provide solid advice.

Q: Do I need a fixed-rate or an adjustable-rate mortgage?

A: A fixed-rate loan has one interest rate that stays the same throughout the term of the loan, while an adjustable-rate loan is linked to the prime interest rate and can change over time. Adjustable-rate mortgages (called ARMs) are often popular because they offer low rates in the beginning, but borrowers need to be cautious of how a higher monthly payment would impact their budgets if the rate rises. One of the main factors to consider in deciding between these loans is the length of time you plan to stay in the home. A CCB lender can help you decide which is right for you.

Q: What are closing costs?

A: Closing costs are fees for various items that you have to pay at closing. These can include appraisal fees, title insurance fees, attorney fees, pre-paid interest and documentation fees, among others. The fees can vary depending on the type of mortgage and your location. We will make sure you receive a loan estimate of closing costs within three days of application.

Q: How long does it take to close?

A: Once the deal is negotiated, homeowners are usually excited and ready to move in right away. But, remember, it can take several days and sometimes weeks from the time you apply for your loan until the time that you close on the house. Our lender will make sure to move the process along as quickly as possible.

Q: Why CCB?

A: Every day, our team helps people just like you navigate the mortgage process. At CCB, you’ll find we offer the convenience of our local mortgage offices, competitive interest rates, same day pre-qualifications, and unmatched customer service.

Glossary

Have you read or heard a word that you didn’t recognize? Here’s a glossary of mortgage-related terms that you will want to familiarize yourself with.

Amortization
The repayment of a loan over time by installments, dealing with how much of your payment goes toward interest and how much is paid toward principal

Annual percentage rate (APR)
The actual interest rate you pay on your mortgage, including fees, points and other costs associated with the loan

Appraisal
A comprehensive report that determines the value of a property

Closing
The last step in the loan process where documents are signed

Closing Costs
These are fees associated with finalizing the purchasing of a property that are not included in the original purchased price. Purchased prices typically include origination fees, discount points, appraisal fee, title insurance, legal fees, real estate fees, prepayment of taxes and insurance, and real estate transfer taxes

Construction Loan
A short-term loan to finance the construction of a new residence, business or investment property, typically converted to a conventional loan after construction

Conventional Loan
A mortgage that is not guaranteed or insured by a government entity such as the Federal Housing Agency (FHA) or Veterans Affairs (VA)

Credit Report
A detailed report that includes vital information about you and your credit history, compiled through credit reporting agencies

Debit-to-Income Ratio
The ratio of your liabilities (monthly bills and living expenses) divided by your gross monthly income

Deed
An official public document that establishes property ownership

Down Payment
A portion of money paid at the beginning of a loan to demonstrate commitment to the purchase

Earnest Money
Money paid to the seller by the buyer as a pledge to complete a real estate transaction

Escrow
A fund administered by a third party and used to pay taxes and insurance for a mortgage transaction

Equity
The value of a property, minus any money owed against it

Fixed-rate Mortgage
A mortgage with a fixed interest rate that will not adjust at any point during the life of the loan

Foreclosure
The process by which a bank or lender sells a property after a borrower fails to meet the repayment terms of the loan

Home Equity Line of Credit
A loan that allows you to borrow money from the equity in your home, based on a certain maximum draw amount

Interest
The money paid by the borrower for the use of the money lent.

Home Inspection
A limited, non-invasive examination of the condition of home that is completed by a third party prior to selling

Lien
A legal claim or hold on a piece of property

Market Value
The price a seller can expect to receive for the sale of a property

Origination Fee
A fee charged for the processing of the application and documentation of the loan.

Points
Points, also known as “discount points,” are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can, in turn, lower your monthly mortgage payments. A point is equal to 1% of your mortgage amount (or $1,000 for every $100,000).

Prequalification
The process through which a lender evaluates the credit of a potential borrower and determines the maximum amount they would be willing to lend

Principal
The unpaid balance on your mortgage loan

Private Mortgage Insurance (PMI)
Extra insurance that a lender requires when a buyer obtains a loan for more than 80% of the home’s value. This insurance can be removed once your loan balance reaches 80% of the home’s value at the request of the borrower

Refinance
The act of replacing the existing loan on your property with a new one

Title
A title is the legal way of saying you own a right to something. For real estate purposes, the title refers to ownership of the property, meaning that you have the rights to use that property.

Title Insurance
Insurance taken out to protect both the borrower and the lender in case of a title dispute

Title Search
Research conducted on a property prior to the sale to show any existing liens against subject property that need to be paid off during closing

Underwriting
The process a lender uses to determine a borrower’s eligibility for a loan

Warranty Deed
A deed is the legal document that transfers title from one person to another.