Home Loan FAQs
Can I qualify for a loan before choosing a property?
Yes- Pre-qualified means that you have discussed your income and debts with one of our loan officers, who has determined a loan amount for which you may be approved. Pre-Qualification is not a loan approval or a commitment to lend. Once you are pre-qualified the lender will issue a letter to use when making an offer to a seller.
A Pre-approval means that your financial situation has been documented and verified and that your loan application has been submitted to an underwriter and approved. Once pre-approved, you receive a letter. Being pre-approved can give you negotiating leverage and enable you to close sooner on your home purchase.
How will I know which mortgage option meets my needs?
We offer conventional fixed rate mortgages which have a fixed interest rate for the entire term of the loan. Monthly mortgage payments remain the same for the life of the loan. We also offer adjustable rate mortgages that have a lower initial interest rate than most fixed-rate loans. The interest rate can change periodically and the monthly payment will go up or down accordingly. You should weigh the risk that an increase in interest rate will lead to a higher monthly payment. Your Southern Bank Loan Officer will discuss these options with you.
Will my overtime, commission or bonus income be considered?
To use overtime, bonus or commission income you must have a 2 year history of receiving it and it must be likely to continue. You will be asked to provide copies of W-2 statements for the previous two years and a recent paystub to verify the income. If a significant part of the income is commission earnings, we will need to obtain 2 years tax returns.
Will income from a Second Job be used to qualify?
Income from a Second Job is considered if a two year history.
If I am retired and my income is from Social Security, what will be needed?
Your pension or retirement income is verified by tax returns, 1099, Awards letter and Bank Statements reflecting the amount is deposited into your account each month.
What if I have Rental Income?
Two Years Tax Returns (most recent) with Schedule E to ensure you have had the income for 2 years is required for verification.
What if I have Dividends and or Interest?
Two Years tax returns are required to verify the amount of your dividend and/or interest income so that an average can be used.
What if I have self employment income?
Two years personal tax returns (business tax returns where applicable) including all schedules and a year-to-date profit and loss statement is required for verification.
How is my credit report used?
Southern Bank uses a triple merge report which includes your Experian, TransUnion® and Equifax® credit information. This comprehensive report provides a format making it easy to review your complete credit history. In addition we use an automated underwriting system to objectively evaluate your financial information. We charge a nonrefundable deposit for the credit information we access, with your permission, in order to evaluate your application.
Can I use a Gift towards my down payment?
A gift or gift of equity from a qualified donor that does not have to be repaid is an eligible source of down payment. Gifts are allowed either from an immediate family member or significant other.
Can I borrow funds to use towards my down payment?
Yes, you can borrow funds to use as your down payment. However, any loan you take out for a down payment must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it is a perfectly acceptable source of funds.
How are mortgage interest rates set?
Many factors affect mortgage rates. So it pays to understand how mortgage rates are set.
Actual mortgage rates are largely determined by the secondary market, where mortgages are bought and sold. Fannie Mae and Freddie Mac are two government agencies whose job it is to keep the mortgage secondary market stable. They set prices each day as determined by the secondary market. They offer a guaranteed price to buy a certain type of mortgage.
Rates generally change daily. In fact, rates can change during the day as market conditions change. Generally, all mortgage lenders have access to the same rates. When you shop rates, make sure you compare rates on the same day, at the same time, on the same program, with the same fees.
A fixed rate mortgage is the most popular because when rates are low, fixed rate mortgages are very affordable. You simply decide the term you prefer (examples are 15 year or 30 year term). Once your Loan Officer has reviewed your documentation and credit package, you will be advised when you are able to lock the rate.
What is an Adjustable Rate Mortgage?
The initial interest rate for ARMs is normally lower than a fixed rate. If you only plan to stay in your home for a short period of time, an ARM might be advantageous to you. The initial rate is locked for a specified term (3 – 10 Years). After the set time period the interest rate will change and so will the monthly payment.
Examples:
10/1 ARM: Your interest rate is set for 10 years then adjusts for 20 years
7/1 ARM: Your interest rate is set for 7 years then adjusts for 23
5/1 ARM: Your interest rate is set for 5 years then adjusts for 25 years
3/1 ARM: Your interest rate is set for 3 years then adjusts for 27 years
What is an appraisal
A real estate appraisal is the process of establishing your properties market value. A real estate appraiser will perform an inspection of the property comparing the qualities of your home with other homes that have sold recently in the same vicinity. National standards govern the format for the appraisal and set forth the requirements for the appraiser’s qualifications and credentials. The appraiser will provide a written report to the lender. It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract is the appraised value very different.
What types of insurance may be applicable to a mortgage loan?
Homeowners’ Insurance: Required for all mortgage loans, protects the home from damage and theft
Flood Insurance: Required for all mortgages whose subject property is in a flood zone, protects the home against property loss from flooding
H06 Insurance for Condos: Condo insurance that bridges the gap in coverage between your condo association master insurance policy and your property/personal liability protection
Owner’s Title Insurance: Optional policy ensuring the title will not be subject to a claim of ownership, lien or other encumbrance
Private Mortgage Insurance (PMI): Required by most lenders when the down payment is less than 20%
Federal Housing Authority (FHA) Mortgage Insurance Premium: Required on all FHA loans
If my property’s appraised value is more than the sales price, can I use the difference toward my down payment?
Unfortunately, if you are purchasing a home, the lender will have to use the lower of the appraised value or the sales price to determine your down payment requirement. It is still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but our investors do not allow the lender to use this “instant equity” when making a loan decision.
What is Title Insurance?
Title insurance is a form of insurance which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Title insurance is a result of an alleged comparative deficiency of the land records laws. It is meant to protect an owner’s or a lender’s financial interest in real property against loss due to title defects, liens or other matters. Title insurance premiums are generally very affordable and protect you against the slim chance that a claim may be filed against you.
