Getting a Mortgage

For most people, getting a mortgage is critical to home ownership. Getting a loan for a house can be a complex process, and it can be confusing if you haven’t gone through the process before. Here are a few terms you should understand before you start the process.

Mortgage – a loan used to buy a home, where the home serves as collateral for the home
Down Payment – the initial amount of money paid upfront toward the purchase of a home
Interest Rate – a portion of the loan which is charged as interest to the borrower
Term – length of time which a mortgage is paid back, typically 15 to 30 years
Amortization – the process of paying off a loan with regular payments
Closing Costs – processing fees paid when closing on a home loan (including appraisal fees, title fees, etc; typically 2-6% of the loan amount)
Escrow – a separate account where money is held for taxes and insurance associated with the home
PMI (Private Mortgage Insurance) – insurance required on your loan when buyers make a down payment less than 20% of the purchase price of the home

Before you apply for a mortgage, you should assess your finances to determine if you are financially prepared to own a home. This will also tell you what you can afford. You should look at:

  • Monthly income and expenses: Take an honest look at your finances. How much money do you have coming in and going out each month? This is critical to determine how much you can afford to pay on a monthly mortgage payment.
  • Mortgage interest rate: Your interest rate dramatically impacts your monthly payments. Make sure you are getting as low of a rate as possible.
  • Monthly mortgage payments: Use the KPCU mortgage calculator to determine your monthly payments. A good rule of thumb is to keep your housing expenses (mortgage payment, taxes & insurance) at no more than 30% of your monthly income.

Also before you apply for a mortgage, it is helpful to know what factors a lender will review. Overall, a lender wants to confirm you are a dependable borrower and that you will pay back your loan on time. These factors are:

  • Income and job history: Lenders assess your income to ensure you have consistent cash flow to cover your mortgage payments. They’ll also look at your employment history.
  • Credit score: A low score could indicate that you aren’t a dependable borrower, and lenders will be warier of approving your application. A higher credit score can widen your access to more lender options and help you secure better interest rates.
  • Debt-to-income ratio (DTI): How much debt do you have? Your DTI tells lenders what you pay towards monthly debts compared to how much you earn. A DTI of 36% or less is ideal, but some lenders will accept below 50%.

Looking to purchase a home? KPCU has low closing costs, competitive rates, and fast and friendly service. We give personalized care to all of our borrowers and can even get you prequalified before you start shopping. Stop in to our community credit union and speak to one of our Loan Officers today or call us at (423) 378-9292. We are here for you!

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Kingsport Press Credit Union | 528 West Center St. Kingsport, TN 37660 | Call – 800.748.9978 or 423.378.9292
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