Frequently Asked Questions When Applying for a Mortgage (Part 3)
Robins Financial Credit Union is dedicated to our mission to be Member Focused, Financial Partners, Community Proud. We empower our members with the financial knowledge and resources they need to make informed decisions and achieve their financial goals.
Applying for a mortgage can seem like a daunting process, especially if you're not sure where to begin. As your trusted financial partner, we’re here to simplify the journey. We know our members often have questions about the requirements, the steps involved, and how to set themselves up for success – and we’re here to help.
In this article, we will dive into the answers to some of the most frequently asked questions with Mortgage Loan Originator, Millicent Billings. Whether you’re a first-time homebuyer or just looking to refresh your knowledge, this guide will give you the clarity and confidence you need to start your homeownership journey. Let us help you clear up the confusion and get one step closer to making your dream home a reality.
Q: What is an escrow account, and do I need one for my mortgage?
Millicent: An escrow account is a non-interest-bearing account that holds funds for your property taxes and homeowner’s insurance. Rather than paying these expenses in lump sums once or twice a year, your lender collects a portion of these costs along with your monthly mortgage payment and pays them on your behalf.
Having an escrow account ensures these crucial payments are made on time, reducing the risk of late fees or lapses in coverage. While some loan types require escrow accounts, others may allow you to pay taxes and insurance separately – but we highly recommend setting one up for convenience and peace of mind.
Q: Can I pay off my mortgage early without penalties?
Millicent: Yes, you absolutely can! There are no prepayment penalties for paying off your mortgage ahead of schedule. Whether you make extra payments each month or pay off the entire balance early, you can reduce the total interest you pay over the life of the loan and own your home sooner.
Q: What are the benefits of a 15-year mortgage versus a 30-year mortgage?
Millicent: A 15-year mortgage typically comes with a lower interest rate compared to a 30-year mortgage. While the monthly payments are higher, you’ll build home equity much faster and pay significantly less interest over time.
On the other hand, a 30-year mortgage offers lower monthly payments, making homeownership more affordable for many buyers. It provides greater flexibility but results in more interest paid over the life of the loan.
Choosing between the two depends on your budget, long-term goals, and how much you can comfortably afford in monthly payments.
Read our blog to learn more about the different types of mortgage loans.
Q: What is the difference between a cash-out refinance and a traditional refinance?
Millicent: A cash-out refinance allows you to replace your current mortgage with a new one for a larger loan amount. The difference between your existing loan balance and new loan amount is given to you in cash, which you can use for home renovations, debt consolidation, or other financial needs.
A traditional refinance,on the other hand, replaces your existing mortgage with a new one – typically with a lower interest rate or different loan term – but does not provide cash. This option can help you reduce your monthly payments, save on interest, and simplify your finances, especially if you consolidate all your accounts with Robins Financial Credit Union.
Next Steps
Applying for a mortgage doesn’t have to be overwhelming. With the right guidance and answers to your questions, you can approach the process with clarity and confidence. At Robins Financial Credit Union, we are committed to supporting you every step of the way.
- Visit our Knowledge Center to find more informational blogs about the home buying process, various mortgage loans, and what you can expect at your mortgage loan closing.
- Visit our website for a step-by-step guide through the Homebuying Process.
- Tune into our YouTube channel to watch our Buying a Home series.
If you need assistance or have additional questions about applying for a mortgage loan, make an appointment to speak to one of our Mortgage Specialists today!
Read our other blog articles to help you gain the financial knowledge you need to succeed.