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Mortgage FAQs

I really want to own my own home, but I'm not sure I can afford it. Where do I start?

Lots of people don't even consider buying a home because they're afraid they can't afford it. But for most people, home ownership is within reach - especially with some of the special programs for first-time home buyers. In fact, for many, home ownership is as affordable as renting - in some cases even more affordable.

Call CNB Mortgage Company for more information on how you can own a home.

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How do I know how much house I can afford?

Before you start looking at homes, you need to have some idea of what you can afford. As a general guide, you can purchase a home with a value of two or three times your annual household income, depending on your savings and debts. However, you may be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value.

If you'd like to know exactly how much you can afford, call a CNB mortgage lender.  You can start by filling out a pre-qualification application. This shows you how much of a mortgage you can afford.   At CNB Mortgage, this application is free.

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When should I talk to a mortgage lender?

The short answer: when you start thinking about buying a home. It's true you can't actually apply for a mortgage until you've chosen your home and signed a contract to buy it. But you shouldn't wait until then to start talking with a mortgage lender.

Our experienced mortgage lenders at CNB will be happy to help you as you look for a home. The lender will work with you to determine how much house you can afford, help steer you to special mortgages for first time home buyers, and perhaps make suggestions that could make it easier to get the best mortgage for you.

Another advantage: you'll already have a good relationship with a lender when it comes time to apply for your mortgage.

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How do I choose a mortgage lender?

When most people think about choosing a mortgage lender, they think about finding the lowest rate. Period.

Of course, financial considerations are important to every home buyer, and you certainly should consider the different rates lenders in your area offer on comparable loans. But you also want a lender you can trust, and someone you can work with effectively. So don't let rates be your only criterion. Here's the process we recommend:

Compare rates for similar loans. Among the things you'll want to discuss with prospective lenders are the rates they offer on mortgages. But when comparing rates between lenders, be sure the rates are for comparable loans -- and remember to include fees and other costs so you're really comparing apples to apples.

You will find that CNB Mortgage Company rates are very competitive.

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How do I know which type of mortgage is best for me?

There isn't a single, simple answer to this question. The right type of mortgage for you depends on many different factors:

Your current financial picture;

How you expect your finances to change;

How long you intend to keep your house;

And how comfortable you are with your mortgage payment changing from time to time.

For example, a 15-year fixed-rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. And an adjustable rate mortgage may get you started with a lower monthly payment than a fixed-rate mortgage -- but your payments could get higher when the interest rate changes.

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Do they really need to know everything about me for the application?

It may seem that way -- but actually all your mortgage lender needs to know about you is your employment and finances, and information about the home you're buying.

However, you will need to provide quite a few details about these topics, and your application process will go much more smoothly if you're prepared. Be sure to ask your mortgage lender what information you'll need to complete your application.

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How much will my credit history affect my ability to get a mortgage?

Many home buyers are very worried about this issue. We've even heard one story that an applicant was denied a mortgage because he had returned a rented videotape late!

Of course, that could never happen. And most people don't need to worry about the effects of their credit history. However, you can be better prepared if you get a copy of your credit report to review before you apply for your mortgage. That way, if there are any errors you can take steps to correct them before you make your application.

If you have had credit problems, be prepared to discuss them honestly with your mortgage lender -- and come to your application meeting with a written explanation. Responsible mortgage lenders know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit will probably be considered satisfactory.

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I have a bad credit rating, will anyone lend to me?

There are mortgage programs available for virtually every situation. It is best to call a CNB Mortgage lender for more information.

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How much will I need for the down payment?

It's probably less than you think. Many first-time buyers are surprised to learn there's no set answer to this question. Generally, though, your down payment can be anywhere from three to twenty percent of the home's value. Down payments can be lower for some special, first-time buyer loans, and veterans or those on active military service can obtain loans with no down payment at all.

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What First Time Buyer Programs are available?

There are literally hundreds of different programs available. The requirements and benefits vary greatly from program to program. Call CNB Mortgage for more information.

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How much will my closing costs be?

Closing costs vary by program, but you will find CNB Mortgage Company’s closing costs are very competitive.

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Should I spend the money to have a home inspection?

Absolutely. The $200 to $500 that a professional home inspection costs could be the best money you ever spend on your house. Not only does the home inspection seek out any defects (and gives you some peace of mind), the home inspector will often give you tips on maintaining and repairing your house.

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What is an appraisal? Will I need one?

An appraisal is an opinion of value of the home you want to purchase. Virtually every lender will require some sort of appraisal before the loan is approved.

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How do I know if it's best to lock in my interest rate or to let it float?

Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down.

If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock-in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission.

You may want your rate to "float" instead of locking. After you apply, you can lock in by contacting your CNB Mortgage Lender by phone.

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How much money will I save by choosing a 15-year loan rather than a 30-year loan?

A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more important - you'll pay less than half the total interest cost of the traditional 30-year mortgage.

However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.

Who Should Consider a 15-Year Mortgage?

The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.

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What is title insurance and why do we need it?

If you've ever purchased a home before, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan or you are refinancing, you may be wondering why you need another insurance policy.

The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours: That no individual or government entity has any right, lien, claim, or encumbrance on your property.

The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.

Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer.

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What is mortgage insurance and when is it required?

First of all, let's make sure that we mean the same thing 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 less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending. Low down payment mortgages are becoming more and more popular, and by purchasing mortgage insurance, lenders are comfortable with down payments as low as 3 - 5% of the home's value. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.

The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. Usually, the premium is included in your monthly payment and one to two months of the premium is collected as a required advance at closing.

It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount - below 78% to 80% of the property value. Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact a CNB Mortgage Lender.

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