Your credit limit is determined by your security deposit. You can use your secured credit card like any credit card to make purchases such as gas or groceries, or for recurring phone bills, without changing your total monthly budget. And, just like a credit card, you make monthly payments of principal and interest. Some cards, like the Capital Bank OpenSky® Secured Visa® Credit Card report to all three major credit bureau monthly. You can open an account for as little as $200 or up to $3,000 (subject to approval). By managing credit responsibly, you can improve your score.
Mortgage Category: Home Buying Assistance
Do I need to put down 20%?
There may be alternatives to providing a 20% down payment on the purchase of your home. By paying Private Mortgage Insurance (PMI) premiums with your monthly payment on a Conventional loan, the down payment requirement may be reduced to 15% down, 10% down, 5% down and in some instances for a 1st time homebuyer even as little as 3% down. Some other options include FHA insured loans which require as little as 3.5% and also have Mortgage Insurance Premiums (MIP). Veterans Administration (VA) guaranteed loans also have low down payment options. To learn about PMI check out our FAQ on Private Mortgage Insurance.
Can I use my own title company?
Yes, you may use your own title company or use one from our preferred provider list. The lender, nor anyone else, can require you to purchase the insurance from a particular title company for either the lender’s coverage title insurance or the optional owner’s coverage title insurance. The title insurance and coverage must meet the lender requirements, though for the lender’s coverage.
Will I be required to purchase title insurance?
Yes. Your lender will want to be sure the property has a clear title and will require a Lender’s Coverage Title Insurance policy. It is optional to purchase an Owner’s Coverage Title Insurance policy to protect yourself from threats to your title and ownership that may have gone undiscovered at the time of closing.
What Are the Costs Associated with Buying a Home?
If you’re researching the finances of buying your first home, you are learning there are a lot of costs associated with buying a home. In fact the term “closing costs” likely keeps popping up. Closing costs are the charges and fees related to buying a house in your state and county and getting a home loan.
It’s a vague term, we know. So let’s break it down and look at what you can expect to pay and the costs associated with buying a home.
What “Closing” on Your Home Sale Means
Closing or “going to settlement” is the end of the home-buying process. That’s the day money changes hands to complete the sales transaction.
When you start the home loan process, the lender is required, by law, to give you a Loan Estimate of your closing costs. Because many factors impact the loan process, fees may vary slightly between the estimate and time of settlement.
Close to your settlement date you’ll find out exactly how much you owe in a Closing Disclosure statement, so that you can be prepared for the costs associated with buying a home.
Wendy Lee, Senior Mortgage Banker at Capital Bank, N.A., explains to her clients that there are four parts to the cost of buying a home. All of the closing costs are paid at settlement, not upfront.
Part 1 of Costs Associated with Buying a Home: Fees Associated with Getting a Loan
The loan you apply for carries various fees depending on the type of loan, and usually includes an application fee whether it’s a conventional home loan, FHA, or VA (Note: Capital Bank waives its application fee for VA loans.) Fees vary among lenders across the U.S.
After you’ve decided to go ahead with the loan, the lender orders a home appraisal to evaluate the property you’re buying and make sure it’s worth the sales price (or more). You are expected to pay the appraiser’s fee. Other fees cover checking your credit and researching items that could impact the property, such as the flood certification for the property address.
Part 2 of Costs Associated with Buying a Home: Title Company Fees
Title companies do a detailed search to show ownership, liens, or encumbrances on the house you’re buying. This helps to make sure sellers have clear title (ownership) of the property and the legal right to sell it.
The search report also includes the amount of real estate taxes for the property. These include state, county, and city taxes as applicable to the location and value of the property. Because fees vary so much by title company and location, the costs associated with buying a home won’t be the same for everyone..
Title companies also issue a title insurance policy to protect the lender. A borrower can also purchase an owner’s title insurance policy. This protects the new home owner from any future claims against a past owner. Owner title insurance is not required by law but is a good thing to have – going to court over a title claim could be costly.
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Part 3 of Costs Associated with Buying a Home: Escrow
Escrow is a holding account for property taxes and insurance premiums. Taxes and insurance are part of your monthly loan payments in addition to the monthly mortgage principal and interest due. Escrowed taxes vary depending on your settlement date and when the taxes are due to be paid. Insurance costs and taxes will vary by property location.
Escrows are not always required for a loan. The type of loan you get, as well as the percentage of down payment on the property purchase can impact whether you will be required to pay an escrow amount each month rather than paying those amounts yourself.
Part 4 of Costs Associated with Buying a Home: Mortgage Points or Loan Discount Points
Some lenders charge you “points” to reduce your interest rate. One point costs one percentage point of your home loan amount (or $1,000 for every $100,000). Consider how long you expect to be in your home to decide if you can save enough in interest to make the fee worthwhile. Time is the key to breaking even when it comes to some costs associated with buying a home. If you own your home long enough you may eventually save money, according to the FHA handbook on loan requirements and guidelines.
Closing Costs
Before closing on a mortgage, you’ll receive documents required by state and federal law that spell out all of your closing costs associated with buying a home. Closing costs will vary depending on your lender and your locale, from 2 percent of the purchase price to five percent according to Zillow.
For example, if you purchase a home for $319,500 and 3.3% of the purchase price is the amount of closing costs, then you’ll pay $10,544 in closing costs. This is a lot of money, so it’s worth combing through the details of each cost. Make sure the fees make sense to you – ask your lender if other options are available for fees you’re concerned about.
“Personal attention and flexibility is what sets us apart at Capital Bank,” says Lee. “As your loan officer, I want to answer your questions and help you get through the home buying process in the easiest, best way possible for you and your family.”
Hang in there. When you’re in your new home, it will all seem so worth it!
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If you’re ready to get a mortgage, contact us for competitive rates and great service. Buying your first home is a huge undertaking. Capital Bank wants you to have loan officers who’ll take some of the stress off your shoulders.
What’s the Difference Between Mortgage Prequalification vs Preapproval?
Quick quiz: You’re thinking of buying a home – What’s the first thing you do?
A. Look online for open houses you can tour
B. Find a real estate agent
C. Talk to a loan officer
The answer is “C” – and not just because we’re a bank. A loan officer helps pin down your financial profile and supports you in taking the first steps toward home ownership by getting you pre-qualified or pre-approved for a mortgage.
Mortgage Prequalification vs Preapproval Letters Are Very Different
Getting “pre-qualified” for a mortgage is a common first step for a homebuyer. You work with a loan officer to review your credit history and score, what price home you can afford, and if you’ve collected enough money for a down payment (based on the size mortgage you’ll need). If you fit the risk profile – lender-ese for “this person will probably pay back a loan” – then you’ll get a letter that states you’re pre-qualified for a home loan.
Getting “pre-approved” means that you’ve gone many steps further. You and your loan officer have gathered evidence of your finances and credit-worthiness, and passed the information to a loan underwriter. The underwriter reviews the documentation and approves a mortgage up to a certain amount. You get a letter stating that you’re pre-approved for a home loan from that specific lender.
Determining whether you should get a mortgage prequalification vs preapproval letter can happen before you even find a house to buy! Both letters show that you’re a thoughtful buyer – when you do make an offer on a home, your letter will be included with the contract that gets presented to the seller.
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Mortgage Prequalification vs Preapproval Letters: Which One Has A Better Chance of Getting the House?
When it comes time to actually get a mortgage, “mortgage prequalification vs preapproval letters are miles apart from each other,” says Brian Blonder, Senior Vice President of Mortgage at Capital Bank, N.A. “Pre-qualification speaks to someone’s general ability to execute the process of buying a home. Pre-approval is a commitment, with some contingencies, from a lending institution to give that person a home loan.”
So what do these letters of pre-this and pre-that mean to a seller?
Let’s say you find the perfect house. Your real estate agent puts together an offer to buy packet – your offer price and contract, and financial information to show you’re capable of buying including your letter of pre-qualification or pre-approval for a loan.
And, let’s say the seller has some things he or she is looking for in addition to the right price – a quick sale and a quick move. When the seller reviews the offers, a buyer pre-approved for a loan equals someone who can close on the purchase in as little as 14 days, according to Blonder. All that’s left for the lending institution to do is conduct a home appraisal (to make sure the house is free of defects and worth the sales price) and make sure there’s a clean title of ownership.
On the other hand, a buyer pre-qualified for a mortgage … is going to close in the typical 30-60 days, if he can actually get a mortgage for the price he’s offered, because he still has to go through the loan process that the pre-approved guy went through!
Bottom Line, Get Pre-approved if You Can
From a seller’s perspective, a homebuyer who’s pre-qualified for a loan is in the ballpark for getting a mortgage; a buyer who’s pre-approved is a certainty. That is the difference between mortgage prequalification vs preapproval.
Sometimes which one you get comes down to timing – if you find a house you love right away, you can get pre-qualified very quickly and that will strengthen your offer to buy.
But “if you’re serious about homeownership,” says Blonder, “Do your due diligence ahead of house-hunting. You should expect loan pre-approval to take at least a week after all your paperwork is submitted. It’s good for 90 days, so at that point the monkey’s off your back and you know you can buy a house.”
Capital Bank will consider pre-approvals for home loans, unlike some banks and mortgage companies that want a specific property address first. If you’re ready to find a home, contact us.
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How to Estimate Your Monthly Mortgage Payment
So, you estimated monthly mortgage payments to see what you can afford and … somebody just broke the news you need to factor in other payments, too. Yep.
Here are some costs of homeownership related to carrying a mortgage. An example of how they might translate to dollars per month is at the end of this article.
Property Taxes
When Ben Franklin said (more or less) that taxes are a certainty, he for sure could have been talking about property taxes.
Property taxes are the biggest cost of homeownership after your mortgage. Homeowners pay annual state and/or local property taxes based on a percentage of the government’s “assessment” (determined value) of land and the house on it.
Although you’ll get a property tax bill after you buy a home, it can be hard to estimate ahead of time. Local governments assess properties every year, and the tax rate can change when property title is transferred from one owner to the next.
“If you really want to pin it down,” says Brian Martucci, a loan officer at Capital Bank, N.A., “search online for the ‘real property assessment and tax office’ of the county where you’re house hunting.”
You’ll need a property address to enter into the search form – either the house you want to buy, or one for sale in your preferred neighborhood and price range to help you understand what you might owe.
Homeowners Insurance
Homeowners insurance isn’t a legal obligation like car insurance. However, it’s required by most mortgage lenders to protect the value of their investment against fire or other disaster.
Relatively speaking, homeowners insurance isn’t expensive. But it pays to shop around for the best rates. Martucci recommends talking with several insurance agencies. He says to make sure you’re asking each agent for the exact same amount of coverage so you can “compare apples to apples.”
Private Mortgage Insurance
A buyer who makes a low down payment – usually less than 20 percent of the purchase price of a home – will have to carry Private Mortgage Insurance (PMI).
It’s no good shopping lenders to get rid of this – it’s a Federal Housing Authority (FHA) requirement. With little equity in the home, an owner doesn’t have a big financial stake. So PMI protects the lender if the loan isn’t repaid.
If you’re a candidate for PMI, know that the larger the down payment you make and the higher your credit score, the better insurance rate you’ll qualify for. And, once your equity reaches 20 percent or more of the home’s value, you may be able to get your lender to drop the PMI requirement.
Sample Cost Breakdown*
It’s time for some numbers that illustrate what we’ve been talking about.*
Let’s say you buy a house for $300,000 with a $15,000 down payment, and get a 30-year loan at an interest rate of 4.5%. You can calculate your monthly mortgage payments for $285,000 online.
With a credit score of 760 or higher, your PMI likely will be $1,083 a year, according to Martucci.
If you happen to buy that house in the Washington, DC suburb of Montgomery County, Maryland – the home of Capital Bank, NA headquarters – your combined state, county, and municipal property tax rate could be in the range of 1.2% per year ($3600) if your house was assessed at the price you paid.
For the purposes of this example, we’ll say home owner’s insurance is $648.00 per year (the low-end of the current county range provided by online insurance aggregators).
Here’s what your monthly mortgage-related payments could look like:*
| $1,444.05 | Mortgage payment |
| $90.25 | PMI |
| $300.00 | Property taxes |
| $54.00 | Homeowners insurance |
| $1,888.30 | TOTAL |
Do all these costs make you question how much home your paycheck can handle? If you’d like more information, contact one of our knowledgeable home loan officers to find out about loans that will work for you!
*The numbers used here are for illustration purposes only and are not intended to represent any actual mortgage or mortgage/homeownership-related costs. For mortgage information and associated costs that would pertain to your situation, please consult with a mortgage loan officer at https://capital.bank/mortgage/. This information is not meant to be legal, financial planning, or mortgage planning advice. Your individual situation may be different. Capital Bank, N.A. is not a debt management, tax planning, financial planning or credit counseling service provider. The information provided is strictly for informational purposes and not meant as legal or financial advice. Please seek professional advice from an accountant, financial advisor or credit counselor.