Will I be charged any fees if I authorize my credit information to be accessed?
Will the inquiry about my credit affect my credit score?
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.
It is, however, important to understand that we will require an explanation on all inquiries reflected on your credit report in the 90 days prior to your application. Additionally, just prior to closing, we are required to make a final inquiry to be sure you haven’t taken on any additional debt that would have to be considered part of your application. This final inquiry does not affect your scores.
How are credit scores determined and how will my credit score affect my application?
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. Additionally, the best terms are reserved for those with the highest credit scores. Your interest and/or fees may be affected by your credit scores.
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.
For more information, visit our link on Understanding Credit Scores.
Can I apply for a mortgage loan before I find a new home or property to purchase?
Yes, applying for a mortgage pre-approval before you shop is something most any seller will require. If you apply for your mortgage now and qualify, Great Midwest Bank will issue a pre-approval letter, subject to a few standard conditions, including final verification of your employment and assets for down payment. A pre-approval for a mortgage from Great Midwest Bank offers you an advantage over other simultaneous offers as Real Estate Professionals know that we’ll be thorough in our review. We do that to avoid surprises down the road.
When you find your perfect home, simply call or email your Loan Officer so you can update your application. You’ll have an opportunity to lock in your interest rate as long as your closing is within 45 days or less.
How are mortgage interest rates determined?
Mortgage 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.
Additionally, some Home Loan Programs require adjustments to stated Interest rates based on a loan characteristics such as a Borrower’s credit history or down payment or amount of equity in the home. The online mortgage application and rate quotes are designed to provide you with an accurate quote once we know all of the loan characteristics.
For a purchase loan, can I get a seller credit towards costs?
Yes, but the credit is limited to the actual closing costs plus prepaid items. Prepaid items include interest, taxes, insurance and the inspection cost. Additionally, credits usually cannot exceed 3% or 6% of the purchase price, depending on the amount of your down payment, and cannot be used as a credit towards that down payment.
Is comparing APRs the best way to decide which lender has the lowest rates and fees?
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.
Also, the APR doesn’t include all the closing fees. Fees for things like appraisals, title work, and document preparation are not included even though you’ll probably have to pay them.
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 (or the “note rate), the amount you borrow, and the term of your loan.
What makes up mortgage closing costs?
A bank incurs costs to provide your home loan, including the appraisal, title insurance, closing, recording and various others. These fees vary from lender to lender.
Great Midwest Bank is mutually owned, which means we have no shareholders to please. We can therefore pass along continued competitive rates and fees to you, the customer.
To assist you in evaluating our fees, we’ve grouped them as follows:
Third Party Fees
Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, title insurance fees, flood certification fees, and courier/mailing fees.
Third party fees are fees that we’ll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee, and a title company or an attorney is paid the title insurance fees.
Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate.
Taxes and other unavoidables
Fees that we consider to be taxes and other unavoidables include local taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose.
Fees such as discount points, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible.
This is the category of fees that you should compare very closely from lender to lender before making a decision.
You may be asked to prepay some items at closing that will actually be due in the future. These figures are sometimes referred to as “prepaid items”.
One of the more common required advances is called “per diem interest” or “interest due at closing.” All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you’ll pay interest, from the date of closing through the end of the month, at closing. For example, if the home loan is closed on June 15, we’ll collect interest from June 15 through June 30 at closing. This also means that you won’t make your first mortgage payment until August 1. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the home loan funds are disbursed. It is simply a matter of when it will be collected.
If an escrow or impound account for property taxes and/or insurance will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due. Our home loans usually only require one month deposit of taxes at closing. Most other lenders will cushion your escrow account with 2-3 months extra funds, which you will not see until you pay off the loan.
If your home loan requires mortgage insurance, up to two months of the mortgage insurance will be collected at closing. Whether or not your home loan requires mortgage insurance depends on the size of the down payment you make.
If your loan is for a purchase, you’ll also need to pay for your first year’s homeowner’s insurance premium prior to closing. We consider this to be a required advance.
What is mortgage insurance and when is it required?
First of all, let’s make sure we’re clear on what we mean when we discuss Mortgage Insurance. Mortgage insurance should not be confused with Mortgage Life Insurance, which is designed to pay off a mortgage in the event of a borrower’s death. Mortgage insurance makes it possible for you to buy a home with a low down payment by protecting the lender against the additional risk associated with low down payment lending.
Low down payment mortgages are popular, and by purchasing mortgage insurance, Great Midwest is able to provide mortgages to those customers with a low down payment but with a good credit history and sufficient income to cover the new payment.
The mortgage insurance premium is based on loan to value ratio, type of loan, borrower’s credit score, borrower’s debt-to-income ratio and amount of coverage required by Great Midwest. Usually, the premium is included in your monthly payment; however options do exist to pay it in a single amount at closing. Ask your Loan Officer for more details.
It may be possible to cancel private mortgage insurance at some point. If you have any questions about when your mortgage insurance could be cancelled, please call 888-485-4400 or email us.
Does Great Midwest Bank provide home loan down payment assistance?
Under certain circumstances, homebuyers may be eligible to receive home loan down payment assistance via one or more outside sources and offered through Great Midwest Bank. The assistance can take the form of a grant that is forgiven over a period of time (say, for example, five years) or as a loan where repayment is deferred until you decide to sell your home.
Eligibility is most often based on household income, and will vary depending on the number of people that will be occupying the home. The maximum annual income limits are as follow:
- 1 person household – $41,100
- 2 person household – $46,950
- 3 person household – $52,800
- 4 person household – $58,650
- 5 person household – $63,350
For more details, contact one of our Loan Officers.