Home Loan FAQs

Can I qualify for a  loan before choosing a property?

Yes- Pre-qualified means that you have  discussed your income and debts with one of our loan officers, who has  determined a loan amount for which you may be approved.  Pre-Qualification is not a loan approval or a  commitment to lend.  Once you are  pre-qualified the lender will issue a letter to use when making an offer to a  seller.

A Pre-approval means that your  financial situation has been documented and verified and that your loan  application has been submitted to an underwriter and approved. Once  pre-approved, you receive a letter. Being pre-approved can give you negotiating  leverage and enable you to close sooner on your home purchase.

How will I know which  mortgage option meets my needs?

We  offer conventional fixed rate mortgages which have a fixed interest rate for  the entire term of the loan.  Monthly  mortgage payments remain the same for the life of the loan.  We also offer adjustable rate mortgages that have  a lower initial interest rate than most fixed-rate loans. The interest rate can  change periodically and the monthly payment will go up or down  accordingly.  You should weigh the risk  that an increase in interest rate will lead to a higher monthly payment.  Your Southern Bank Loan Officer will discuss  these options with you.

Will my overtime,  commission or bonus income be considered?

To  use overtime, bonus or commission income you must have a 2 year history of  receiving it and it must be likely to continue. You will be asked to provide copies of W-2 statements for the previous  two years and a recent paystub to verify the income. If a significant part of the income is  commission earnings, we will need to obtain 2 years tax returns.

Will income from a  Second Job be used to qualify?

Income from a Second Job is considered if a two year history.

If I am retired and  my income is from Social Security, what will be needed?

Your  pension or retirement income is verified by tax returns, 1099, Awards letter  and Bank Statements reflecting the amount is deposited into your account each month.

What if I have Rental  Income?

Two  Years Tax Returns (most recent) with Schedule E to ensure you have had the  income for 2  years is required for verification.

What if I have  Dividends and or Interest?

Two Years tax returns are required to verify the amount of your dividend and/or  interest income so that an average can be used.

What if I have self employment income?

Two years personal  tax returns (business tax returns where applicable) including all schedules and  a year-to-date profit and loss statement is required for verification.

How is my credit  report used?

Southern Bank uses a triple merge report which includes  your Experian, TransUnion® and Equifax® credit information. This comprehensive  report provides a format making it easy to review your complete credit history.  In addition we use an automated underwriting  system to objectively evaluate your financial information.  We charge a  nonrefundable deposit for the credit information we access, with your  permission, in order to evaluate your application.

Can I use a Gift towards  my down payment?

A gift or gift of equity from a qualified donor that does not have to be repaid  is an eligible source of down payment. Gifts are allowed either from an immediate family member or significant  other.

Can  I borrow funds to use towards my down payment?

Yes, you can borrow  funds to use as your down payment. However, any loan you take out for a down  payment must be secured by an asset that you own. If you own something of value  that you could borrow funds against such as a car or another home, it is a perfectly  acceptable source of funds.

How are mortgage interest rates set?

Many  factors affect mortgage rates. So it pays to understand how mortgage rates are  set.

Actual  mortgage rates are largely determined by the secondary market, where mortgages  are bought and sold. Fannie Mae and Freddie Mac are two government agencies whose  job it is to keep the mortgage secondary market stable. They set prices each  day as determined by the secondary market. They offer a guaranteed price to buy  a certain type of mortgage.

Rates  generally change daily. In fact, rates can change during the day as market  conditions change.  Generally, all  mortgage lenders have access to the same rates. When you shop rates, make sure  you compare rates on the same day, at the same time, on the same program, with  the same fees.

A fixed rate mortgage is the most popular because when  rates are low, fixed rate mortgages are very affordable.  You simply decide the term you prefer (examples  are 15 year or 30 year term).  Once your  Loan Officer has reviewed your documentation and credit package, you  will be advised when you are able to lock the rate.

What is an Adjustable Rate Mortgage?

The initial interest rate for ARMs is normally lower than  a fixed rate. If you only plan to stay in your home for a short period of time,  an ARM might be advantageous to you. The initial rate is locked for a specified term (3 – 10  Years). After the set time period the interest rate will change and so will the  monthly payment.

Examples:

10/1  ARM: Your interest rate is set for 10 years then adjusts for 20 years

7/1  ARM: Your interest rate is set for 7 years then adjusts for 23

5/1  ARM: Your interest rate is set for 5 years then adjusts for 25 years

3/1  ARM: Your interest rate is set for 3 years then adjusts for 27 years

What is an appraisal

A real estate appraisal is the process of establishing your properties market value.  A real estate appraiser will perform an inspection of the property comparing the qualities of your home with other homes that have sold recently in the same vicinity. National standards  govern the format for the appraisal and set forth the requirements for the appraiser’s qualifications and credentials. The appraiser will provide a written report to the lender. It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract is the appraised value very different.

What types of  insurance may be applicable to a mortgage loan?

Homeowners’ Insurance: Required for all mortgage loans, protects the home from damage and theft

Flood  Insurance: Required for all mortgages whose subject property is in a flood zone, protects  the home against property loss from flooding

H06 Insurance for  Condos: Condo insurance that bridges the gap in coverage between your condo  association master insurance policy and your property/personal liability protection

Owner’s Title Insurance: Optional policy ensuring the title will not be subject to a claim of ownership,  lien or other encumbrance

Private Mortgage  Insurance (PMI): Required by most lenders when the down payment  is less than 20%

Federal Housing  Authority (FHA) Mortgage Insurance Premium: Required on all FHA  loans

If my property’s appraised value is  more than the sales price, can I use the difference toward my down payment?

Unfortunately,  if you are purchasing a home, the lender will have to use the lower of the  appraised value or the sales price to determine your down payment requirement.  It  is still a great benefit for your financial situation if you are able to purchase  a home for less than the appraised value, but our investors do not allow the  lender to use this “instant equity” when making a loan decision.

What is Title Insurance?

Title insurance is a form of insurance which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans.  Title insurance is a  result of an alleged comparative deficiency of the land records laws.  It is meant to protect an owner’s or a  lender’s financial interest in real property against loss due to title defects,  liens or other matters.  Title insurance  premiums are generally very affordable and protect you against the slim chance  that a claim may be filed against you.