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Mortgages

Frequently Asked Mortgage Questions


Q: I really want to own my own home, but I'm not sure I can afford it. Where do I start?
A: 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. In fact, for many, home ownership is as affordable as renting - in some cases even more affordable! The best place to start is with our Mortgage calculator. Or call us today at 812.424.2621, option 4. A real estate consultant can walk you through the process and determine if you qualify.


Q: How do I know how much of a house I can afford?
A: 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 to purchase a home with a higher value. If you'd like to know exactly how much you could afford, talk to your EFCU Real Estate Center representative. Just call 812.424.2621, option 4.


Q: How do I know which type of mortgage is best for me?
A: 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 situation
  • 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 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. The best way to find the "right" answer is to discuss your finances, financial plans, and preferences with your EFCU Real Estate Center representative.


Q: Do they really need to know everything about me for the application?
A: It may seem that way - but actually all your credit union needs to know about you is your employment status and finances, along with 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 credit union what information you'll need to complete your application.


Q: How much will my credit history affect my ability to get a mortgage?
A: Many homebuyers are very worried about this issue. However, you can better be 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 specialist - and come to your application meeting with a written explanation.


Q: How much will I need for the down payment?
A: It's probably less than you think. Many buyers are surprised to learn there's no set answer to this question. Generally, though, your down payment can be anywhere from zero to twenty percent of the home's value.


Q: What does my mortgage payment include?
A: For most homebuyers, the monthly mortgage payments include four separate parts:

  • a payment on the principal;
  • a payment on the interest;
  • a payment for hazard insurance;
  • a payment for property taxes.

These elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance). Also, loans with less than 20 percent equity require P.M.I. (Private Mortgage Insurance) as part of the monthly payment. For additional explanation, see Impound/Escrow under the Glossary of Mortgage Terms section.


Q: What happens after I've applied - and how long will it take?
A: Your credit union will begin the work of verifying all the information you've provided. This process can take anywhere from 3 to six weeks, depending on several factors. Within three business days after your application, your credit union must give you an estimate of your closing costs. (The closing is the actual settlement of your loan). You'll also get a statement that shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage. For many homebuyers, this waiting period can be tense. So stay in touch with your credit union, be prepared to answer any questions that may arise.

Some homebuyers find the closing process to be one of the most intimidating aspects of buying a home because it' so unfamiliar. Ask your credit union what to expect at your closing.

Any other questions? Ask an expert!


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