Loan term

Your loan term is the amount of time you have to pay off your mortgage balance.

Shorter loan terms typically mean higher monthly mortgage payments, but often have lower interest rates. If you pay off your mortgage balance within a shorter term, you may pay less in total interest than with a longer-term mortgage.

30 YEARS, 15 YEARS, OR OTHER: This choice affects:

• Your monthly principal and interest payment
• Your interest rate
• How much interest you will pay over the life of the loan

Interest rate

The interest rate is the percentage of your loan amount we charge you to borrow money.

Interest rates are based on current market conditions, your credit score, down payment, and the type of mortgage you choose.

FIXED RATE OR ADJUSTABLE RATE: Interest rates come in two basic types: fixed and adjustable.

This choice affects:

• Whether your interest rate can change
• Whether your monthly principal and interest payment can change and its amount
• How much interest you will pay over the life of the loan

Remember that interest rates only tell part of the story. The total cost of a mortgage is reflected by the interest rate, discount points, fees, and origination charges. This total cost is known as the annual percentage rate (APR), which is typically higher than the interest rate. The APR lets you compare mortgages of the same dollar amount by considering their total annual cost.

Loan type

CONVENTIONAL, FHA, OR SPECIAL PROGRAMS: Mortgage loans are organized into categories based on the size of the loan and whether they are part of a government program.

This choice affects:

• How much you will need for a down payment
• The total cost of your loan, including interest and mortgage insurance
• How much you can borrow, and the house price range you can consider

Discount points

Points, also known as discount points, lower your interest rate in exchange paying for an upfront fee. Lender credits lower your closing costs in exchange for accepting a higher interest rate.

• One-point equals 1% of your mortgage amount. If you qualify, you may be able to pay one or more points to lower your interest rate. A lower interest rate means lower monthly mortgage payments.
• Points are usually tax deductible. Consult a tax advisor regarding tax deductibility. On refinances, you may be able to finance points as part of your mortgage amount.

Origination charge

• On a mortgage, this amount includes all charges (other than discount points) that all loan originators (lenders and brokers) involved will receive for originating the loan.
• The origination charge covers items including fees, document preparation, and underwriting costs, and other expenses.
• On refinances, if you qualify, you may be able to finance the origination charge as part of your loan amount.

Monthly mortgage payment

Your monthly mortgage payment is typically made up of four parts:

• Principal. The part of your monthly payment that reduces the outstanding balance of your mortgage.
• Interest. The part of your monthly payment that goes toward the cost of borrowing the money.
• Taxes. The part of your monthly payment that goes toward property taxes charged by your local government. We typically collect a portion of these taxes in every mortgage payment and hold the funds in an escrow account for tax payments made on your behalf as they become due.
• Insurance. The part of your monthly payment that pays for homeowners or hazard insurance, which provides protection against losses from property damage due to wind, fire, or other risks. Like taxes, insurance costs are usually collected and paid from an escrow account.

Depending upon your property location, property type, and loan amount, you may have other monthly or annual expenses such as mortgage insurance, flood insurance, or homeowner association fees.

Income

Do you have a reliable, continuing source of income to make monthly payments?

• Income can come from primary, second, and part-time jobs, as well as overtime, bonuses, and commissions.
• You may use other sources of income if you want them considered for payment, provided they can be verified as stable, dependable, and likely to continue for at least three years. Some examples include retirement or veteran’s benefits, disability payments, alimony, child support, and rental or investment income.

Current debts and credit history

Do you pay your bills, loans, credit cards and other debts on time?

• We examine your payment habits before deciding to loan you money.
• We also review your credit history and credit score.

It's a clever idea to check your credit history and correct any problems before applying.

Assets and available funds

Do you have enough funds for a down payment (if you're buying a home) and closing costs? 

• You may use funds from various accounts including savings accounts, certificates of deposit (CDs), investments, and retirement funds.
• If you're buying a home, in some cases, you may be able to use gift funds toward closing costs and all or part of your down payment.
• Generally, you’ll also need to show that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.

The property

• What is the market value of the property you want to finance?
• We will order a property appraisal to make sure the value of your property meets our underwriting requirements.