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Types of Mortgages

Pretty simple if you think about it – A mortgage is a legal agreement between you and a lender that lets you borrow the money to buy a home in exchange for your repayment of the loan, plus interest, over a certain period.

A fixed-rate mortgage loan is for borrowers who prefer to keep the same rate and monthly payments throughout their mortgage. BankSouth Mortgage offers a variety of down payment options for fixed-rate mortgages.

An adjustable-rate loan offers a fixed rate for a set determined amount of time (3, 5, 7, or 10 years), with the possibility of the rate changing for the remaining life of the loan. ARMs typically offer lower initial rates and, therefore, lower initial monthly payments than fixed-rate mortgages. This type of mortgage is ideal for borrowers who don’t plan to stay in their home very long or want to take advantage of falling interest rates without refinancing.

Your BankSouth Mortgage Loan Officer can help.  There are many types of mortgages out there. Our job is to find the one that fits your unique needs. We’ll help you understand how home financing works and help you pick a mortgage that puts you in control and makes sense for your financial needs. Talk to a BankSouth Mortgage Loan Officer about your options. Learn more about our team here.

A jumbo loan is a loan with a loan amount larger than the limits set by the Federal Housing Finance Agency (FHFA) and followed by Fannie Mae and Freddie Mac. For most parts of the country, the 2023 Conforming Loan Limit is $726,200 for a single-family home. Loan limits are higher in more expensive counties. Because of the large size of these loans, the interest rates tend to be higher and the approval requirements more stringent. BankSouth Mortgage offers jumbo programs with low down payments.

Many different mortgage options are available for buyers in every situation and stage of life.  When you begin thinking about buying a home, contact your BankSouth Mortgage Loan Officer or get prequalified utilizing our ReadyLoan App. A prequalification gives you an estimate of the size of the mortgage loan you qualify for based on your credit history, income, and assets. Once done, your mortgage banker will discuss loan options, down payment requirements, and current interest rates.

Please click here to learn about the variety of loan options BankSouth Mortgage offers.

FHA Loans

The Federal Housing Administration (FHA) loans offer many benefits for those seeking a low down payment with less-than-perfect credit. As an FHA-approved lender, BankSouth Mortgage could provide you with an FHA-guaranteed loan if you qualify.

Highlights of FHA Loans include:

  • Less restrictive qualification guidelines
  • Designed to benefit many first-time homebuyers
  • Some borrowers may qualify for down payment assistance
  • FHA refinance products, including low documentation or streamlined refinance options, are also available.
  • FHA’s Streamline Refinance program allows qualified FHA-insured homeowners to refinance without an appraisal.

USDA Rural

USDA Loans are an excellent option if you’re purchasing a home in a rural area. Funds can be used to build, repair, renovate, relocate a home, or buy a home. There are no down payment requirements, and qualifying is typically easier than conventional mortgages. The property must be in an eligible area to qualify, and income caps also apply.

Highlights of USDA Rural Loans include:

  • 100% financing options available
  • Thin or alternate credit allowed
  • Low monthly mortgage insurance
  • No maximum sales price

 

VA Home Loans

You served with honor; now, let us honor your dream of home ownership with special financing for our country’s military personnel. VA loan programs offer favorable terms and include options to buy, build, renovate, and refinance your primary residence. Veterans and spouses may also qualify.

You can request proof of eligibility by contacting the VA Loan Eligibility Center (1-888-768-2131) or by having your BankSouth Loan Officer order this certificate for you.

VA loans have a one-time Funding Fee, unless the Veteran/borrower is exempt, with no monthly fee charged. Of course, the best way to find all the federal and/or state programs that can help you secure a mortgage is to talk to a BankSouth Mortgage Loan officer who can help you through the process.

Highlights of VA Home Loans include:

  • 100% financing options available
  • No monthly mortgage insurance
  • No underwriting costs or lender origination fees (optional)
  • Thin or alternate credit allowed

Refinancing is the process of a borrower paying off their current home loan with the proceeds from a new mortgage. There are many reasons to refinance your home. These could include taking advantage of a lower interest rate, shortening the terms of your mortgage, renovating your home, or obtaining cash from your equity to finance a significant life milestone.

Refinancing your mortgage could be a wise financial decision when interest rates are relatively lower. At BankSouth Mortgage, our experts are here to answer your questions and consult with you about your refinancing options. Best of all, our ReadyLoan app is accessible on your laptop or smartphone, making it easy to apply for your BankSouth Mortgage quickly and conveniently. BankSouth Mortgage offers premier mortgage services with best-in-class loan originators. With ReadySelect from BankSouth Mortgage, you can customize the term of your loan from 10 to 30 years, giving you the flexibility to time your mortgage payoff with life’s milestones.

When you refinance a loan, you replace the current loan with a new one. There are various reasons to go through this process, from lowering your interest rate to planning for life’s important milestones. Let’s look at the most common reasons homeowners refinance their mortgages, starting with reducing the monthly payment by getting a lower rate.

  1. Get a Lower Rate to Reduce Your Monthly Payment

If you are a homeowner looking to reduce your monthly payment and purchased your home with a higher interest rate than is being offered now, you may want to consider refinancing your mortgage. Lowering your interest rate has a two-fold benefit. Not only does it lower your payment, but it also increases the speed you build up equity in your home.

  1. Take Cash Out of Your Home’s Equity

When you owe less than your home is worth, that means you have equity built up in your home. Up to 90% of the difference between what you owe and your home’s worth can go to you in cash, depending on the lender’s guidelines and your qualifications. You can spend the money on home improvements, debt consolidation, paying off student loans, or any other financial needs you may have.

  1. Eliminate Private Mortgage Insurance (PMI)

Is your loan backed by the FHA, or did you purchase your home with less than 20% down? If so, there is a good chance that you have PMI. Private Mortgage Insurance protects lenders if a borrower falls behind on their payments. If the new loan amount you get when you refinance is less than 80% of your home’s value, you will not likely have PMI on your new loan.

Mortgage Process

Prequalification: Mortgage prequalification may be the best first step in your homebuying journey. A prequalification is an estimate of the size of a mortgage loan you qualify for based on your credit score and financial profile. A prequalification gives you an idea of how much home you can afford and signals to real estate agents and sellers that you are a serious buyer.  Prequalification is also an opportunity to learn about different mortgage options and work with your BankSouth Mortgage lender to identify the right fit for your needs and goals.

Preapproval: A mortgage preapproval is a preliminary acknowledgment of willingness to lend from a lender to buy a home based on their review of your credit, debt, income, and down payment funds.

You can set yourself up for success throughout this process with pre-approval, and BankSouth Mortgage makes it easy with ReadyApprove. Using this key component of our ReadyLoan suite, you may qualify to receive conditional mortgage approval with underwriting in under 24 hours.

Sellers and real estate agents may prefer offers with pre-approval over standard prequalification offers.

Below are some documents you may need to prepare your loan application. Always good to connect with BankSouth Mortgage Loan Officer to learn more.

  • You may need to show the past two years of federal tax returns, W-2s, 1099s, or K-1s, depending on your type of income.
  • If you are self-employed (own 25% or more) and file corporate tax returns, please provide a copy of the last two years’ tax returns.
  • If you filed for an extension for this year, please provide a copy of the filed extension and your two prior year’s federal tax returns.
  • Tax returns need to be signed where applicable page 2 on personal returns and page 1 on business returns).
  • Most recent pay stubs from current employers.
  • 2-year employment history – if there are any gaps, a letter of explanation may be needed by your lender
  • Most recent available asset statements (checking, savings, brokerage accounts, money markets, etc.) covering at least two months. Please provide all pages, even if blank, or is a reconciliation page.
  • Retirement account statements (IRA & 401(k)), all pages.
  • Copy of driver’s license for all borrowers.
  • Current mortgage statement for all financed properties
  • Name and phone number of the insurance company that insures your home
  • Copy of any child support orders, all pages.
  • Divorce decree, if you pay alimony or receive it and want to use it for qualifying.
  • If you have filed for bankruptcy in the last seven years, your lender may require a copy of your filing and discharge papers.

Many borrowers choose an escrow account to maintain funds used to pay the required taxes and insurance associated with their home. If you decide to have an escrow account, at the loan closing, funds are added to this account and each month a portion of your mortgage payment will go toward this escrow account. When your insurance bill or tax bills are due, payments will be made by your lender from your escrow account. Some mortgage programs require borrowers to have an escrow account, while others allow the borrower to choose not to have an escrow account.

The closing process finalizes the home purchase.

During closing, buyers sign several legal documents and pay any additional fees; some fees are recurring costs like property tax; others are one-time closing cost expenses that can include:

  • Loan origination fees
  • Title insurance
  • Appraisal fees
  • Title search fee
  • Other miscellaneous payments

Our ReadyClose process allows you to sign most of your closing documents from home, saving you time!

An appraisal is an evaluation of the property by a third party. Lenders order appraisals before closing to ensure the home is worth at least as much as what the buyer is committing to paying; buyers are not permitted to select their own appraisal company.

The appraiser will compare recent sales of similar properties and market trends and conduct an in-person inspection of the home; this is different from the home inspection. If the appraised value matches or exceeds the contract price, the transaction can continue as planned.

Some sellers will lower the listing price to match the appraisal; others may disagree with the appraisal and refuse to negotiate. If a seller refuses to negotiate, the buyer can either make up the difference or request another appraisal. It’s up to the lender to approve the second appraisal.

The appraisal process can take days to weeks to complete. It will take longer if the buyer or seller requests a second appraisal.

The appraisal is important because it lets both the lender and buyer feel comfortable with the investment.

Credit scores are used to determine the risk in lending money to a borrower. In other words, how likely is a borrower to pay bills on time? Credit scores range from 300 to 850 and reveal how well a borrower has paid bills and managed debt in the past. The higher the score, the better the chance you will have access to credit when you need it from financial institutions.

What are the consumer scores?

Consumer scores means any score that the consumer can obtain themselves, aside from the purpose of obtaining credit. Keeping track of credit scores over time allows consumers to see how their financial decisions impact their scores. However, many different scoring models are used to produce consumer scores, and almost all do not use the same model as mortgage lenders. For example, one site provides 28 different scoring models to consumers for a cost, claiming the same ones used in the mortgage industry are included.

Why are scores different?

Many are unaware that there is a difference between their consumer and mortgage credit scores. How each scoring model weighs and scores a person’s credit history and credit mix varies. In most cavary person’s mortgage score is much lower than other consumer scores. Mortgage lenders are required to use a unique version of the FICO scores. Lenders pull from all three credit bureaus (Equifax, Transunion, and Experian) and use the middle score. Fannie Mae and Freddie Mac are the largest purchasers of mortgages on the secondary market; therefore, they mandate the scoring model that EW considered the industry standard.

Rates and Affordability

If you want to determine the sales price and mortgage amount you can afford, there are a few things you need to consider. First, consider what you can reasonably pay monthly for your mortgage, insurance, and property taxes. This will give you an idea of where you need your mortgage payment. Next, decide how much you can put down on the home as your upfront down payment. Consider what you currently have saved and how much you want to remain in savings after your buy your new home. You can also consider any gifts family members may offer to purchase your home.

APR (Annual Percentage Rate) is the cost of credit, expressed as a yearly rate including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans; however, APR should not be confused with the actual note rate.

Discount points are fees you can pay a lender to lower the interest rate on your loan at closing. Each discount point is equal to 1 percent of the loan amount, also referred to as “points.”

Depending on your budget and how long you plan to own your home, paying discount points can make sense. When you pay discount points at closing, your upfront costs are higher, but your interest rate and monthly payments are lower. You may also be able to negotiate to have the seller pay the discount points for you. However, if you are not planning to own the home or keep the mortgage for long, there may be better options than paying discount points.

Other Languages

Language Assistance Resources if English is not your Preferred Language

At most financial institutions, the mortgage application and closing process will most likely be conducted in English. However, there are resources available to help customers whose preferred language is not English. To help you navigate the mortgage process, we’ve compiled the following list of resources you can use to help you understand the mortgage process and the loan documents and disclosures.

Consumer Financial Protection Bureau (CFPB)

https://www.consumerfinance.gov/consumer-tools/

At the top of the website, you can choose your preferred language. Then, you can view many resources, including information on buying a house or getting a mortgage.

Available in:

  • Spanish / Español
  • Chinese / 中文
  • Vietnamese / Tiếng Việt
  • Korean / 한국어
  • Filipino / Tagalog
  • Russion / Pусский
  •  Arabic / العربية
  • Haitian Creole / Kreyòl Ayisyen

Federal Housing Finance Agency (FHFA)

https://www.fhfa.gov/mortgagetranslations

On the Mortgage Translations page, you can find translated versions of the standard mortgage loan application and a guide to help you learn about the important steps in the mortgage process. There is also a search tool where you can look for many other documents relating to mortgages that have been translated into your preferred language.

Available in:

  • Spanish / Español
  • Chinese /中文
  • Vietnamese / Tiếng Việt
  • Korean /한국어
  • Filipino / Tagalog

Fannie Mae

https://singlefamily.fanniemae.com/multi-language-resources-lenders

On Fannie Mae’s website, they provide translated versions of many of the documents that are used in mortgage transactions. This includes the Loan Estimate and Closing Disclosure that explain the loan terms and costs associated with your mortgage, and the CFPB – Your Home Loan Toolkit that provides important information on the mortgage process and costs, as well as information about owning a home.

Available in:

  • Spanish / Español
  • Chinese /中文
  • Vietnamese / Tiếng Việt
  • Korean /한국어
  • Filipino / Tagalog

At BankSouth Mortgage, we understand that our customers may not always prefer to conduct business in English. We hope this list of resources helps many customers, and we will continue to work to bring available resources to you.