Taking out a home loan can be intimidating: there’s so much to learn and understand about the process and the terminology. In this featured blog post with Sonny Yambao, Mortgage Originations Manager at Travis, he answers some of the most commonly asked questions about Home Loans.
Q: How do I know which loan is right for me?
A: A good mortgage consultant looks at your entire profile and asks about your long-term strategy. Fixed-rate mortgages are guaranteed for the life of the loan; an adjustable-rate mortgage (ARM) tends to have lower payments until the adjustment period when the rate changes. If you are certain you will move, refinance, or pay off the ARM when the fixed period expires, you’re probably better off with this option because the initial rate is lower.
If you’re interested in a Fixed-Rate, how long of a term—30-year or 15-year? The consultant should also ask if you are a veteran or eligible for an FHA loan to find the best fit for your home and finances.
Q: Which is the most common home loan type at TCU, and why?
A: Our 30-Year-Fixed is our most popular, followed by a 15/15 ARM (Adjustable Rate Mortgage). We also offer the 5/5, and 7/1 ARMs, which have the lowest payment possible; however, the 15/15 ARM and 30-Year Fixed offer some people better long-term solutions for debt consolidation and/or lower monthly payments. The 30-Year Fixed mortgage will never change in rate and the 15/15 ARM will only change one time—ever. And, both are amortized over a 30-year term.
Q: How much should someone save for a down payment for a new home?
A: For a purchase, it’s best to save for a down payment and closing costs, including appraisal and title fees. While it is ideal to put 20% down to buy a home and avoid private mortgage insurance (PMI), most buyers don’t have this luxury. Depending on the loan product they qualify for, members can put as little as 0% or 3% down for a new home purchase. In addition to the down payment, one should set aside an additional 3% to 4.5% of the purchase price for closing costs, prepaid expenses, and escrow reserves.
Q: What are the typical documents required for a home loan?
A: It depends on your employment information. Travis typically requires a paystub, two years of W-2s, a mortgage statement, and an insurance policy declaration page. We may also ask for documentation on any solar energy system that is leased or owned.
Q: What should I keep in mind if I’m considering refinancing because rates have dropped?
A: Be sure to review the costs associated with each rate, because the lowest rate may not be the cheapest loan. Compare the annual percentage rates, or APRs, which are expressed as a percentage. Travis also offers a No Points No Fee loan option in which all loan fees (including third party appraisal and title fees) are paid by Travis, in exchange for a slightly higher interest rate. This may be a good option for someone not wanting to finance out-of-pocket costs into their new mortgage loan balance. Those wanting to keep their home loan for more than five years may want a lower rate with costs, as five years is usually when the ‘break-even’ point of the costs to refinance is met. Our mortgage loan officers can help you weigh these options.
Q: Which are the most important considerations for borrowers when shopping for a lender?
A: I think trust and convenience are big. Members may not want to talk to a different person in a call center every time. Travis has dedicated representatives to take care of members in a more personalized way. Competitive rates are important, but so is total cost of the loan. And, many shoppers seek the convenience of managing their finances in one place.
Our Mortgage Loan Consultants are ready to help you determine the home loan that fits your unique situation. Stop by a branch or give us a call. If you’re ready to start your home loan application, visit traviscu.org/homeloans or call (888) 698-0000. Representatives are available from 9:30 a.m. to 5:30 p.m. on weekdays, or by appointment.
About Sonny Yambao:
Sonny is the Mortgage Originations Manager at Travis Credit Union since 2012. Having started in the Real Estate industry in 2001, he has worked for various mortgage brokers and financial institutions such as Bank of America. He grew up in West Contra Costa County but currently resides in Solano.