FAQs | Mortgages | Travis Credit Union Home Loans

What is a mortgage?

Most buyers afford their home with the help of a mortgage, which is a home loan that you pay back over a number of years.

Your mortgage payment typically includes:
a. Principal
The original amount you borrow.

b. Interest
The amount you pay to borrow the principal.

c. Taxes
Property taxes, which may go up or down over time.

d. Insurance
This includes homeowner's insurance and Private Mortgage Insurance (PMI). You generally pay PMI until you have 20% equity in the home. PMI protects the lender if you stop making payments on your mortgage.

Depending on your mortgage and how much equity you have in your home, you may be able to pay taxes and homeowner’s insurance separately from your mortgage payment. However, you may have to make one or two lump sum payments a year.

What makes a mortgage different from other types of loans?

Low interest rates
Extended repayment
Rates and payments are generally based on the type of mortgage loans
The loan is “secured”
Involves additional paperwork

What are the steps for buying a home in California?

1. Identify your goals
Given that buying a home is such a big step, it’s all the more important for you to educate and prepare yourself as much as possible. This means determining why you’re buying a home and what kind of home you’re looking for. Because buying and financing a home are so closely related, it also means examining your current financial situation and determining how much home you can afford. Knowing this will put you in a better position to research your housing and home loan options.

2. Get pre-approved
Generally, it is recommended that you get pre-qualified for a loan before you start viewing homes. The pre-approval process involves meeting with a lender and authorizing them to examine your current financial situation and credit history so you can get prequalified. This way, you’ll know how much you can borrow to buy a home.

3. Contact a real estate agent
Buying real estate is a complex matter, given that there are so many factors to consider and no two homes or transactions are alike. With all the unique opportunities and potential pitfalls of the current market, it is important to contact a real estate agent once you’ve decided to buy.

4. Find your dream home
The key to finding your dream home is to know what you’re looking for. Identify the “must-haves” from the “like-to-haves” so you’ll know what’s really important to you. Nearly 90 percent of buyers use the internet to search for homes. The typical buyer searches for 12 weeks and views 12 homes.

5. Make an offer
Work with your real estate agent to determine your sale price, terms of purchase, closing, possession dates, deposit amount, and other clauses and conditions. Once you’ve written your offer, your agent will present it to the seller and/or the seller’s representative. The seller can accept your offer, reject it, or counter it to initiate negotiations. Be prepared for successive counter-offers until a mutually acceptable agreement is reached or until negotiations break down.

6. Secure financing
Once both parties have agreed upon the price, it is time for you to finance the home. If you’ve prequalified with Travis Credit Union, we’ll go over all the details of financing your home and will ensure your home loan is processed as quickly as possible.

7. Closing the deal
To finalize the deal, you’ll participate in these steps during the escrow/closing process:

a. Home inspection: This is when a qualified home inspector will review the home inside and out to identify any issues that you’ll need to be aware of as the buyer.
b. Final walkthrough: This is your chance to once again view the home to ensure it is in the same condition as when you signed the sales agreement to purchase the home.
c. Settlement: This is typically the closing date and the day you’ll verify and sign all the paperwork required to complete the transaction. The settlement will include paying your closing costs, legal fees, property adjustments and transfer taxes. At that point, you’ll receive the property title and copies of all documentation. And the keys to your home!

8. Enjoy!
Congratulations on your home purchase! The next few months will be hectic as you move in, adjust to your home and explore your neighborhood. Enjoy!

Visit traviscu.org/home-loans for more information.

What does it take to get a mortgage in California?

There’s new data showing what level of credit score you need to qualify for the best deals on mortgages, which is especially relevant now that interest rates are at a record low.

The data comes from LendingTree’s monthly Mortgage Offers Report, which analyzes data from actual loan terms offered by lenders in the LendingTree network.

January 2021 best mortgage offers, for borrowers with the best profiles, had an average APR of 2.65% for conforming 30-year, fixed-rate purchase loans; down from 2.67% in December of 2020. The APR on refinance loan offers also decreased from 3.00% in December 2020 to 2.90% in January 2021.

Mortgage rates vary depending upon parameters including credit score, loan-to-value ratio, income and property type.

For the average borrower, the purchase APR for conforming 30-year, fixed-rate purchase loans on the network was 2.74%, down 4 basis points from December 2020.

Consumers with the highest credit scores (760+, representing the 65th percentile of borrowers) received an average APR of 2.67%, versus 2.89% for consumers with scores of 680 to 719.

The APR spread of 22 basis points between these score ranges is higher than it was in January 2021. For the average purchase loan amount of $300,000, the spread represents over $12,256 in additional costs for borrowers with lower credit scores over 30 years. The additional costs result from higher interest rates, larger fees or a combination of the two.

For the average borrower, the APR for conforming 30-year, fixed-rate refinance loans increased 6 basis points from December 2020 to 3.08% in January 2021.

Contact Travis Credit Union today at (888) 698-0000 to learn about home loan rates and our loan process.

Why should I get a mortgage with Travis Credit Union instead of a bank? (Or, what are the advantages of a mortgage with Travis Credit Union vs. a bank?)

Travis Credit Union is committed to providing great member service. Credit unions tend to have lower fees and better interest rates on savings accounts and loans. Credit unions are not-for-profit and are owned by their members.

Why should I consider getting pre-approved before buying a home in California?

Getting pre-approved for a home loan is a great way to determine how much of a home you can afford. This also allows you to more quickly complete the home buying process so you can move into your new home sooner rather than later.

A Travis Credit Union mortgage loan officer can help start your home loan preapproval as well as answer any questions you may have with our home loan products. Please call (888) 698-0000.

Whether you are buying a house or looking to improve the one you’re in, our Home Loan Center is here to help. Visit your local branch or go online to traviscu.org/home-loans to apply for mortgages, check rates or learn about buying or improving a home.

What is a mortgage note?

A mortgage note, also known as a real estate lien note, is a promissory note associated with a specified mortgage loan. It is a written promise to repay a specified sum of money and interest at a specified rate and length of time.

While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest. It obligates the borrower, who signs the note, to be personally responsible for repayment.

In foreclosure proceedings in certain jurisdictions, borrowers may require the foreclosing party to produce the note as evidence that they are the true owners of the debt.

A Travis Credit Union mortgage loan officer can help you answer any questions you may have with our home loan products. Please call (888) 698-0000.

What options do I have for taking out a home loan?

For most buyers, a mortgage makes homeownership possible. There are two main types of loans—conventional loans and alternative loans.

Conventional Loans
FHA Loans
VA Loans
USDA Loans

How much down payment do I need for a house in California?

Many first-time home buyers believe they have to put 20 percent down on a home. But that’s far from true.

In fact, the average down payment for first-time home buyers is only 6 percent. On a $250,000 home purchase, that would be just $15,000. And there are loan programs that let you buy with even less than 6 percent down. For example:

Conventional 97 loans — 3% down
FHA loans — 3.5% down
VA loans — 0% down
USDA loans — 0% down

Some of these programs have special requirements, but most are available to the general public. (We’ll get into more specifics about loan programs below.) The main takeaway here is that down payments are flexible.

Yours should depend on your monthly income, what you currently have saved, how expensive the home is, and what your overall home buying goals are.

Briefly, the pros and cons of bigger versus smaller down payments are:
Bigger down payment — Lower interest rate and lower monthly payment
Smaller down payment — Buy a home and start building equity sooner, keep more of your savings intact for emergency expenses.

Why do people say you need 20% down for a mortgage?

Average down payments are well under 20 percent. You might wonder, then, why so many people think 20 percent down is the minimum.

It’s because 20 percent down gets you out of paying for something called “mortgage insurance.”

Mortgage insurance is an extra charge on your mortgage bill, and it often costs a few hundred dollars per month.

Understandably, most buyers would rather avoid paying for mortgage insurance if possible. That’s why some people aim for 20% down.

But there are benefits to paying mortgage insurance if it puts you in a home sooner. It’s just one more cost versus benefit to consider as you put together your home buying budget.

What credit score do I need as a first-time home buyer in California?

Your credit score makes a big difference when you buy a house. It affects your loan options, mortgage, rate, and home buying budget.

This can sometimes be a concern for first-time home buyers who might not have “excellent” credit. For reference, credit scores are generally classified this way:

720+ = Excellent
680 to 719 = Good
620 to 679 = Fair
< 620 = Poor

Those with credit scores in the “excellent” range will usually have access to the most favorable loan programs and lowest rates. But those with fair-to-good credit scores have options, too.

Here are the typical credit score requirements for the most popular first-time home buyer programs:

Conventional loan — 620+
FHA loan — 580+
VA loan — 620+
USDA loan — 640+

How can I buy a house with no money down?

There are two big loan programs that let you buy a house with no money down: the VA loan and the USDA loan.

To qualify for a zero-down VA mortgage, you need to be a veteran or service member. For a USDA loan, you need to buy a house in a qualified “rural” area, and meet local income caps.

For people who don’t qualify for these programs, it’s possible to buy a house with no money down by using gift funds or applying for down payment assistance. There are other loan products available with no money down. Call (888) 698-0000 or go to traviscu.org/home-loans.

Are USDA or FHA home loans better for first‑time buyers?

USDA and FHA loans differ in their eligibility requirements. A few of the biggest eligibility factors include the location of the home and your income level, credit score, debt-to-income (DTI) ratio and down payment amount.

What are my closing costs for my mortgage?

Each home loan application is unique. Here are the general type of fees a buyer and seller will be responsible for paying at the closing of a home sale.

a. Buyer's Fees:
Here is a general list of the types of fees buyers will typically expect to pay at closing. The types of fees vary with each home loan application.

b. Credit Report:
A credit report is done by an independent credit association to establish your credit rating.

c. Appraisal:
An appraisal is done by an independent appraiser to establish the value of the house.

d. Inspection:
An inspection is done by an independent home inspector, to provide information about the integrity of the house (typically not required by the lender).

e. Title:
A title search is done to disclose whether there are any liens and encumbrances.

f. Recording Fees:
Recording fees are needed to record the transfer of property with the appropriate government bodies.

g. Courier Fees:
Courier fees may be needed to cover the cost of transporting documents between the escrow service and various third-party entities.

h. Loan Origination Fee:
A loan origination fee is imposed by a lender to cover certain processing expenses in connection with making a real estate loan.

i. Discount Points:
Discount points are prepaid finance charges tied to interest rate (the higher the interest rate, the lower the discount points).

j. Escrow Services:
These are services provided to close and record the transaction.

k. Seller's Fees:
Here is a list of fees the seller should typically expect to pay:

Escrow Services (seller's portion)
Title Insurance (based on purchase price)
Excise Tax
Recording Fee
Real Estate Commissions
Water and Sewer Certification: If your new home is not on municipal and sewer facilities, a certification may be ordered through your local health department to save you money.
Building Code Compliance Letter
Mortgage Insurance
Survey

As part of your Purchase and Sale Agreement, you can ask the seller to pay your closing costs and prepaid items. Please be aware that lenders may have limitation on the amount of seller contributions, which are typically 3% to 9%, depending on the loan to value.

A Travis Credit Union mortgage loan officer can explain the various fees and requirements involved in closing a home loan. For more information, please call (888) 698-0000.

What are the different types of mortgages?

a. Fixed-rate mortgage

b. Adjustable-rate mortgage

What is a fixed-rate mortgage? Why choose a fixed rate mortgage?

This type of mortgage locks in the same interest rate for the loan’s entirety. A fluctuation in your mortgage payment may still occur, such as if your property taxes or insurance premiums decrease.

Fixed-rate mortgages allow buyers to lock in a set interest rate for the entire loan, which makes it easier to anticipate and budget for monthly payment amounts.

You may see terms like “3/1” or “5/1” ARMs. That simply means that the initial interest rate remains the same for the number of years reflected in the first number (3 and 5, respectively), and then the interest rate will adjust once a year for the remainder of the loan.

What is an adjustable-rate mortgage (ARM)? Why choose an ARM?

ARMs typically start with a fixed-rate for a set number of months or years. After the initial period, the interest rate may increase or decrease, and your mortgage payment may increase or decrease as well.

ARMs typically offer lower initial interest rates, but uncertainty may kick in once the rate is due to change. Buyers sometimes choose ARMs if they plan to sell the house or refinance their mortgage before the rate changes.

How will California’s mortgage interest rates impact my mortgage payment?

Obtaining offers from several lenders takes more effort, but it will allow you to comparison shop for the lowest interest rate and other terms.

Why is a lower interest rate important for a home loan?

Even a small difference in the interest rate could mean you pay thousands of dollars (even tens of thousands of dollars), more or less, in interest over the life of the loan.

Can I be notified when California mortgage/ refinance rates are updated?

Our mortgage rates are available online 24 hours a day at www.traviscu.org. A Travis Credit Union mortgage loan officer can help you determine your rate to refinance your home. Please call (888) 698-0000.

We invite you to compare our competitive rates on auto and home loans with other financial institutions. You'll find that our low interest rates, excellent service, member-focused products and financial strength together can’t be beat. We’re here for all of your lending needs.

How much does homeownership cost?

When shopping for a home, cost is a big factor. It helps to know the upfront and ongoing costs of homeownership and how they fit in with your other expenses.

a. Upfront costs may include:

0% - 20% for a down payment
2% - 5% for closing costs
$200 - $600 for inspections

b. Ongoing costs may include:

Mortgage payments
Maintenance and repairs
Utilities

c. Additional costs may include:

Homeowners association or condo fees

More Questions To Consider:

What programs are available for first-time homebuyers in California? Call (888) 698-0000 or visit traviscu.org/home-loans to contact a Loan Officer to see which programs are available for you.
What are the requirements for first-time homebuyers in California? An individual who has not owned a principal residence for three years.
How much do first-time home buyers have to put down in California? From 0% - 3.5% of the purchase price.
Who qualifies for down payment assistance in California? Those that do not exceed the program’s income limit.
Where is the cheapest place to buy a house in California? Based on an article from HOMEiA* published on June 5, 2020 the top 5 most affordable cities to live in California are 1. Imperial 2. Vacaville 3. Clovis 4. Livingston 5. Perris.
Do first-time home buyers get a tax break in 2021? See your accountant.
What credit score is needed to buy a house with no money down? As low as 610.
Can you buy a house in California with no money down? Yes, see Q12.
What is considered low income in California? This is dependent on the county where you reside and persons in your household. Call (888) 698-0000 or visit traviscu.org/home-loans to contact a Loan Officer for more details.

* HOMEiA.com is an educational platform that promotes thoroughly researched, well-written, and strongly presented content on topics related to real estate.