Buying a Home is a Big Step in Life

It requires some preparation and a little self-education. That’s where we can help. Some of the things you’ll need to consider in the home-buying process are:

• How much house can I afford?
• What kind of a mortgage is best for us?
• What do I bring to the application appointment, and how long does it take to get approved?
• What kind of fees should I expect to be charged?
• How long will I be paying on my home and are there any ways to shorten that time?

Step One: The Agent

Working with a qualified Real Estate Agent will make your search for the right home much easier. Emerald Bank can offer you a list of names of local agents if you haven’t found one on your own.

Step Two: The Prequalification

Prequalifying for a loan is nothing more than assessing your income and current debt to see how much you can afford to pay monthly. This will help you know what purchase price ranges to seek for your new home.

	Establish your Income Ratio:
	Total monthly gross income (before taxes)	$____________
	Multiply by 28%	X ____________.28
	Amount here is money you have available for a mortgage payment including insurance, taxes and interest	$____________
	What is your Total Debt Ratio?
	Total monthly gross income (before taxes)	$____________
	Multiply by 38%	X ____________.38
	Amount here is money you have available for all consumer debt.	$____________
	Now subtract your monthly installment debt (car loans, credit card payments, and other loans)	$____________
	Amount here is the total you have available for your mortgage payment including insurance, taxes and interest.	$____________

The lesser of your Income Ratio and your Total Debt Ratio is a safe calculation of a mortgage payment.

Step Three: What do I bring to the application appointment?

Your lender will require you to complete a loan application which will ask you about your current debts, so bringing a list of creditors, addresses and account numbers is helpful. You will also be asked for 2 years of tax returns to verify your income.

Once your application is completed, credit and income verifications are performed. Your preliminary loan approval usually takes from 3 to 5 days*. If you have a need to close within a specific timeframe, be sure to tell your lender.

Step Four: Type of Mortgage and Term

Adjustable Rate Mortgage (ARM)
This Mortgage Loan usually offers a lower interest rate, so your mortgage payments will be lower. The rate can fluctuate during the loan term as the economy fluctuates. Your payments can change when this happens. There are “caps” to limit the amount of increases in rate. This type of loan is good if you expect an increase in your income, plan to sell this home within a short period of time or believe rates will go down soon.

Fixed Rate Mortgage
This Mortgage Loan rate remains the same for the life of the loan. The only way to take advantage of a drop in interest rates is to refinance the loan. With this type you can be certain your payment will remain the same each month. This type of loan is good if you want absolute consistency of payments, if you are on a very tight budget or if you think interest rates will rise.

The term of a Mortgage Loan can vary and can be chosen depending on your long-range plan. They are typically available in 30, 20, 15 and 10-year loans. A 30-year loan will have a higher interest rate and lower payment, and will cost the homeowner more in interest. A shorter pay-off period will result in a lower interest rate, higher payment, and will cost less because it is paid off sooner.

Beware of “Discounted Rates”. These rates are established to get a new mortgage with the certainty that the interest rate will rise in the future. During the time of payments on the discounted rate, rarely is the homeowner paying on the principal – they are simply paying interest. These are dangerous loans because the balance can actually increase during the discount time period, putting the homeowner at risk of being unable to repay the loan.

Emerald Bank will work with customers to lock in certain interest rates during the purchase process to assure the availability of those attractive rates. Ask about this service.

Step Five: The Loan Closing

Once your loan is approved, you will be asked to provide documentation of insurance on the home and property. If you do not have an insurance company, Emerald Bank can help you by providing you with a list of insurance companies from which to choose.

You may also be asked to bring proof of payment to any association fees due in connection with your particular property (like condominium fees, etc.).

Your loan officer will also help with PMI Insurance if your down payment is less than the standard 20%.

Closing your loan also requires the payment of closing costs. These include title fees, appraisal fees, credit report fees, title insurance fees, survey, inspections and the like. Your Emerald Banking Company lender will carefully review these and any prepayments with you so you will know your obligation.

You will be asked at this time about setting up your payments. Emerald Bank is extremely flexible in this area. You can pay your mortgage monthly, bi-monthly or weekly. Depending on your frequency of payment, you may be reducing your loan term and saving money on interest with no penalty. By keeping your loan current and paying money more frequently, you will be reducing the principal faster, thus shortening your loan term. Emerald Bank also offers better rates for direct withdrawal from a Emerald Bank deposit account. Ask your lender.

Your personal circumstances may be different.