Your Home Loan Questions Answered

Whitefish Credit Union is Montana's trusted go-to destination for all things home loans. We're here to support you every step of the way, whether you're a first-time homebuyer embarking on your homeownership journey or a seasoned individual seeking to refinance your current mortgage.

We get it—buying a home can feel like a whirlwind of excitement mixed with a little bit of uncertainty. That's why we've put together this handy guide to answer the most common questions we hear from our fantastic members.

So, grab your favorite beverage, and let's answer your burning questions about home loans!

Eligibility and Approval Process

The amount you can borrow for a home loan depends on various factors, such as your income, credit score, and debt-to-income ratio. Generally, lenders follow guidelines that allow you to borrow up to a certain percentage of your income. We recommend completing our quick loan prequalification to determine your specific case's loan amount.

2. What is the minimum down payment required for a home loan?
Conventional loans typically require a down payment of around 3-5%, while Federal Housing Administration (FHA) loans may require as little as 3.5% down. However, there are also programs available that offer zero or low down payment options for eligible buyers. Whitefish Credit Union offers a wide range of home loan options, from first-time homebuyer to land construction loans that meet a variety of down payment budgets. Plus, we don’t charge private mortgage insurance (PMI) even if you don’t put 20% down!

3. How does my credit score impact my ability to get a home loan? 
Your credit score is a significant factor in determining your eligibility for a home loan. Lenders use your credit score to assess your creditworthiness and determine the interest rate for which you qualify. The higher your credit score is, the better terms you'll receive on your loan, including lower interest rates and possibly a lower down payment requirement.

4. What documents do I need to apply for a home loan?
Common documents typically include proof of income (such as pay stubs or tax returns), employment verification, bank statements, identification (such as a driver's license), and information about any other assets or debts you may have. You can get started with a home loan application and save your progress as needed while you find the necessary documentation.

5. What is the difference between pre-qualification and pre-approval for a home loan?
Pre-qualification is an informal estimate of how much you may be able to borrow based on the basic financial information you provide to a lender. It does not involve a thorough review of your financial documents or credit history. Pre-approval, on the other hand, is a more comprehensive process where the lender verifies your financial information and creditworthiness to provide a conditional commitment for a specific loan amount. You’ll find options for both through our online home loan portal.

The timeline for getting approved for a home loan can vary based on the type of loan you're applying for and the complexity of your financial situation. The approval process can take anywhere from a few days to a few weeks. There may be expedited options for certain types of loans if you need it completed faster to meet a specific deadline.

Home Loan Terms

Whether you're taking your first steps into homeownership, seeking financing for a higher-priced property, or envisioning the construction of your dream home, we have you covered. Our range of offerings encompasses first-time homebuyer loans as well as jumbo loans tailored for properties exceeding $850,000, ensuring you have the financial power to secure your dream property. Additionally, our construction and land loans offer the perfect solution for those looking to build their ideal home from the ground up. Learn more about WCU home loans and the benefits of choosing us as your lender.

Fixed-rate mortgages offer a set interest rate for the entire term of the loan, providing stability and predictability in your monthly payments. Adjustable-rate mortgages (ARMs) have an initial fixed interest rate for a certain period, after which the rate adjusts periodically based on market conditions. This can result in fluctuating monthly payments. Use our mortgage calculator to get a better idea of what your monthly payments could look like!

Several factors can influence your mortgage interest rate:

1. Credit score: A higher credit score typically qualifies you for a lower interest rate.
2. Down payment: A larger down payment may result in a lower interest rate.
3. Loan term: Shorter loan terms often come with lower interest rates.
4. Market conditions: Economic factors and the overall interest rate environment can impact mortgage rates.

Points are fees paid to the lender at closing in exchange for a lower interest rate. Each point typically costs 1% of the total loan amount. Whether you should pay points depends on how long you plan to stay in the home and whether you have the funds available to pay upfront.

Loan-to-value (LTV) ratio is the ratio of the loan amount to the appraised value of the property. A lower LTV ratio indicates a lower risk for the lender, as the borrower has more equity in the property. A higher LTV ratio typically requires private mortgage insurance (PMI) and could result in a higher interest rate or stricter loan terms. Not at Whitefish! Save thousands of dollars and avoid PMI by choosing WCU as your home loan lender. We never require PMI, even if your down payment is less than the standard 20%.

Making Payments

Closing costs typically include fees for services rendered during the homebuying process, such as appraisal fees, loan origination fees, title search fees, title insurance, attorney fees, recording fees, and prepaid expenses like property taxes and homeowners insurance. Whitefish Credit Union saves you more money since we choose not to charge origination fees and many other common expenses that you’ll find at banks.

Mortgage insurance is a type of insurance that protects the lender in case the borrower defaults on the loan. If you make a down payment of less than 20% on a conventional loan, you’ll most often be required to pay for private mortgage insurance (PMI). Federal Housing Administration (FHA) loans require PMI. Whitefish Credit Union highly values its members and does not require PMI, which can save tens of thousands of dollars off the life of your loan. 

Some mortgage loans may have prepayment penalties, which are fees charged if you pay off your loan before a certain period, usually within the first few years of the loan term. It's essential to review your loan documents carefully to understand if there are any prepayment penalties associated with your loan. Our local Montana team members are more than happy to walk you through specific penalty terms.

If you miss a mortgage payment, your lender will typically assess a late fee and may report the delinquency to credit bureaus, which can negatively impact your credit score. You could eventually lose your home if you continue to miss payments and your lender initiates foreclosure proceedings. At Whitefish Credit Union, we are actively involved in our Montana communities and greatly value our members. Let us know if you’re experiencing difficulty making payments and we can find an adjusted solution.

During the home appraisal process, a licensed appraiser evaluates the property to determine its fair market value. The appraiser considers factors such as the property's condition, location, size, and comparable sales in the area. The appraisal is used by the lender to ensure that the property is worth the amount being borrowed.

Escrow accounts are accounts held by a third party, usually the lender, to manage payments for property taxes and homeowners insurance on behalf of the borrower. Each month, a portion of your mortgage payment goes into the escrow account to cover these expenses when they come due. The lender then pays the taxes and insurance on your behalf. Escrow accounts help ensure that these expenses are paid on time and can help you budget for them by spreading the costs out over the year.

Special Circumstances

Having student loan debt or other existing debts doesn't necessarily disqualify you from getting a home loan. Lenders will consider your debt-to-income ratio, which compares your monthly debt payments to your gross monthly income. If your debt-to-income ratio is within acceptable limits and you meet other eligibility criteria, you may still be able to qualify for a home loan. Start a home loan application today to learn your options at Whitefish Credit Union.

Yes, there are several first-time homebuyer programs and incentives available, depending on your location and financial situation. These programs may offer down payment assistance, grants, or tax credits to help make homeownership more accessible. Montana residents are welcome to contact our team of home loan experts to discuss our first-time homebuyer loan and savings. 

Construction loans are ideal for those wanting to finance the construction of their home. They typically have different terms and requirements than traditional mortgages and may involve a process called "construction-to-permanent" financing, where the loan transitions into a permanent mortgage once the construction is complete.

Yes, you can refinance your home loan! It involves replacing your current mortgage with a new one to take advantage of lower interest rates, reduce your monthly payments, or change the terms of your loan. It may be a good idea to refinance if you can secure a lower interest rate, shorten your loan term, or switch from an adjustable-rate to a fixed-rate mortgage. Consider your financial goals and how long you plan to stay in the home before refinancing.

Have a Different Home Loan Question?

We understand that the decision to buy a home or refinance an existing mortgage is a significant one, and we're here to make the process as smooth and stress-free as possible. Our dedicated team of experts is ready to provide personalized guidance and support. Don't hesitate to get in touch with us today to start your journey towards homeownership! Ask us any questions along the way so you feel confident and empowered at every step.