Financing Basics for Homebuyers

Whether you are purchasing a home or refinancing, having a basic understanding of the process before making a decision should be your first step.

First let’s talk about some basics: A mortgage is a loan for your house.  You can use it to purchase a home, construct your dream house, refinance your existing home loan for more favorable terms, or take cash out for debt consolidation or other remodel projects. The Bank takes a lien on your property until the loan is paid off. 

First Bank offers fixed rate, fixed term loans. This means your rate and payment for principal and interest will remain steady over the life of the loan.  We can set the length anywhere from 5 to 30 years. The longer the length (term), the lower the payment will be. On the other hand, the longer the term the more interest you will pay over the life of the loan.

Another major factor to consider is the down payment percentage. Conventional mortgage loans are for 80% of the purchase price or appraised value; whichever is the lessor. A higher down payment will generally secure a lower rate and payment.  We know that a 20% down payment may not be feasible for every borrower so we also offer Private Mortgage Insurance. This is an extra small monthly payment included in the loan payment until the loan is paid down to 80% loan to value or less.  With Private Mortgage Insurance, we can loan up to 95% loan to value.

We also offer escrow.  Escrow, simply put, is a way to save for the large annual fees associated with home ownership.  Real estate taxes are generally paid twice a year and homeowners’ insurance once. These fees are divided over a 12-month period and added to your monthly loan payment. Then the Bank will pay the taxes and premiums on your behalf from your escrow account when they come due.  If you have a loan with Private Mortgage Insurance or live in a development with a Homeowners association, these fees can also be included in your escrow payment.