Q: Can I apply for a loan before I have a home to purchase?

A: Yes. You may provide the required documentation for a loan approval to verify income, debts and assets prior to your purchase. Once we obtain a credit report, we can make a credit only loan decision. This process is called a pre-approval. Since the property to be purchased is typically not known for a pre-approval, estimated sales price and loan amount are used to make a loan decision. The interest rate will not be locked-in until a final home purchase is made.

Q: What is an appraisal?

A: An appraisal is a report, made by a qualified person, who sets forth an opinion or estimate of property value. Among other considerations of value, the appraisal uses recent local real estate sales activity as a major basis for valuation. When you apply for a mortgage loan with Farm Bureau Bank, we will initiate the process to get an appraisal ordered.

Q: How important is my credit rating?

A: Your credit rating is an important consideration for loan approval. Information on your credit report is used to determine your history of meeting your obligations. Any late payments or other adverse information contained in your credit report will receive additional review during the underwriting of your loan application, and may require further written explanations from you as we consider your loan request.

Q: What are closing costs?

A: Closing costs cover all the fees and expenses associated with a loan transaction. Closing costs may include fees for an appraisal, credit report, title insurance, survey, and points. Closing costs vary depending upon the loan product and the fees that are customary in your area.

Q: What is title insurance and why do I need it?

A: Title insurance protects the homeowner and the lender against loss resulting from any title defects or claims against a property that were not uncovered in the title search. Defects or claims that are uncovered in the title search are listed as exemptions to the coverage on the title insurance policy.

Q: What is Private Mortgage Insurance (PMI)?

A: PMI is protection for the lender against loss if a borrower defaults. Typically PMI is required if your down payment is less than 20 percent of the purchase price. For example, on a purchase price of $100,000.00, PMI would be required if you put less than $20,000 (20% of $100,000) as a down payment.

Q: Why is it sometimes better to go from a 30 year fixed rate into an ARM (adjustable rate mortgage)?

A: Well there are a variety of reasons of course, but here are a couple of the most common reasons many people go into an adjustable rate mortgage. One common reason is to have a lower payment to fix up their home. Since adjustable rate mortgages can have a considerably lower interest rate compared to 30 year fixed loans, many people are enticed by the large monthly savings for the term of the ARM loan. Another reason might be because most homeowners end up living in the same home for only about 5 years. Because of this, it makes less sense to pay a higher interest rate for a 30 year fixed loan, when you will most likely move within 3-5 years. Many times, the cap (or how much a loan can increase) is around 1% a year, so even if the homeowner moved with 5-7 years, the rate would still be rather low.

Q: So now I understand the reasons behind doing a ARM loan, but what about an interest only loan?

A: There are definitely benefits of doing an interest only loan. One of the major benefits behind this loan is the ability to pay off more of your principle than a standard 30 year fixed loan.

Still have questions? E-mail us or call 208-777-9294 and ask your question.