Mortgages

To determine the value of the property you are purchasing or refinancing, an appraisal will be required. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.

After the appraiser inspects the property, they will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called "comparables" and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.

As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration.

Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept.

We certainly don't expect that you'll default under the terms of your loan and that a forced sale will be necessary, but as the lender, we'll need to make sure that if a sale is necessary, it won't be difficult to find another buyer.

We'll review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we'll want to make sure that there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we can't see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.

We'll also make sure that the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell.

As soon as we receive your appraisal, we'll update your loan with the estimated value of the home and send you a copy.

Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you've found the perfect home.

The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.

However, appraisers are not construction experts and won't find or report items that are not obvious. They won't turn on every light switch, run every faucet or inspect the attic or mechanicals. That's where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.

Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can't stop floods. Floods happen anytime, anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding.

We use a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner's insurance doesn't protect you against damages from flooding.

Licensed appraisers who are familiar with home values in your area perform appraisals. We order the appraisal as soon as the application deposit is paid. Generally, it takes 10-14 days before the written report is sent to us. We follow up with the appraiser to insure that it is completed as soon as possible. If you are refinancing, and an interior inspection of the home is necessary, the appraiser should contact you to schedule a viewing appointment. If you don't hear from the appraiser within seven days of the order date, please inform your Mortgage Specialist. If you are purchasing a new home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home.

An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The interest rate can change periodically, usually in relation to an index, and the monthly payment can go up or down accordingly.

For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to seven years.  There are special features to City National Bank ARM products such as no PMI, no Fannie Mae loan level pricing adjustments and our $500 off Borrower Paid Closing Cost Coupon, that may make one of our ARM products the best product for you. Our Champion Mortgage does not require a down payment. 

Here's some detailed information explaining how our adjustable rate mortgages work:

Adjustment Period

We have 3/3, 5/5 and 7/1 Arm products.  The interest rate and monthly payment are fixed for an initial time period of three, five or seven years. After the initial fixed period, the interest rate can change every 3, 5 or 1 year/s. 

Index

Our ARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal.  Our ARM Disclosure will provide more details. 

Margin

To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin." 

Interest-Rate Caps

An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:

1. Periodic or adjustment caps, which limit the interest rate increase or decrease from one adjustment period to the next. Our caps are 2%.

2. Overall or lifetime caps, which limit the interest rate increase over the life of the loan. Our lifetime cap is 4%.

Selecting a mortgage may be the most important financial decision you will make and you are entitled to all the information you need to make the right decision. Don't hesitate to contact a Mortgage Specialist if you have questions about the features of our adjustable rate mortgages or our fixed rate products. Our ARM disclosure is available under the Disclosure Tab.

Points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them, up front, at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.

To determine whether it makes sense for you to pay points, you should compare the cost of the points to the monthly payments savings created by the lower interest rate. Divide the total cost of the points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you actually begin to save money by paying points. If the number of months it will take to recoup the points is longer than you plan on having this mortgage, you should consider the loan program option that doesn't require points to be paid.

If you'd prefer not to make this calculation the "old-fashioned way," we have a points calculator!

The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees in addition to the interest rate determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up front costs over the entire loan term.

Also, unfortunately, the APR doesn't include all the closing fees and lenders are allowed to interpret which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you'll probably have to pay them.

For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments.

You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that's best for you. Look at total fees, possible rate adjustments in the future if you're comparing adjustable rate mortgages, and consider the length of time that you plan on having the mortgage.

Don't forget that the APR is an effective interest rate--not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.

There's no cost at all for completing our application. 

Our City National Bank loan programs do not have penalties for prepayment. You can pay off your mortgage any time with no additional charges.

General Statement

The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan's interest rate and points are guaranteed.  If interest rates rise or fall during that period, there is no change to the committed rate. 

When Can I Lock?

Once your loan application is completed, a Mortgage Specialist will work with you on locking in the rate.

Fees

We do not charge a fee for locking in your interest rate.

Lock Period

We currently offer 60 day lock-in periods. This means your loan must close and disburse within this number of days from the day your lock is confirmed by us. 

Lock Changes

Once we accept your lock, your loan is committed into a secondary market transaction. Therefore, we are not able to renegotiate lock commitments.

A home loan often involves many fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. These fees vary from state to state and also from lender to lender.

On many of our City National Bank ARM products we offer a $500 off Borrower-Paid Closing Cost Coupon.  Ask you City National Bank Mortgage Loan Specialist if your loan qualifies for the coupon.  If the answer is yes, we will pay up to $500 of the qualified closing costs when your loan closes.

To assist you in evaluating our fees, we've grouped them as follows:

Third Party Fees

Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, title insurance fees, flood certification fees, and courier/mailing fees.

Third party fees are fees that we'll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee, and a title company or an attorney is paid the title insurance fees.

Taxes and other unavoidables

Fees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose.

Lender Fees

Fees such as points, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible.

This is the category of fees that you should compare very closely from lender to lender before making a decision.

Required Advances

You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.

One of the more common required advances is called "per diem interest" or "interest due at closing." All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you'll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we'll collect interest from June 15 through June 30 at closing. This also means that you won't make your first mortgage payment until August 1.

If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.

If your loan is a purchase, you'll also need to pay for your first year's homeowner's insurance premium prior to closing. 

The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours: That no individual or government entity has any right, lien, claim, or encumbrance on your property.

The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.

Title companies typically issue two types of title policies:

1) Owner's Policy. This policy covers you, the homebuyer.

2) Lender's Policy. This policy covers the lending institution over the life of the loan.

The Owner's Policy is optional - you decide if you would like to purchase coverage.  The Lender's Policy is required on all of our Fixed Rate Products.  We do not typically require Lender's Title Insurance on our ARM products. 

Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or, more likely, the information contained in the company's own title plant.

After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.

The purpose of title insurance is to eliminate risks and prevent losses caused by defects in title that may have happened in the past.

We do not require Mortgage Insurance (PMI, MI) on our ARM products.  It is required on fixed rate loans with a loan to value above 80%. 

Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending.  It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.

It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount - below 75% to 80% of the property value. Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your Mortgage Specialist.

The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, and the loan type you choose, so the best way to determine what loan amount we can offer is to complete our online application!

The simple rule of thumb for determining if it makes sense to refinance is to analyze the amount that it will cost you to refinance compared to the monthly savings you'll have by reducing your payment. By dividing the cost of refinancing by the monthly savings you can determine how many monthly payments you'll have to make before you've recaptured the initial refinance cost. If you plan on staying in your home longer than the recapture time it may make sense for you to refinance.

To fully analyze whether it's the time to refinance you'll have to look deeper. The remaining term of your current loan must also be considered, as well as your tax bracket. Our refinance calculator can help you determine if it's the right time to refinance.

We define manufactured housing as housing units that are factory built with a steel undercarriage that remains as a structural component and limits the structure to a single story. These types of manufactured homes are sometimes known as mobile homes. We do not consider other factory-built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing, to be manufactured housing. If your home is one of these types, please complete the application indicating that your home is a single family home.

In order to qualify for our loan programs a manufactured home must meet the following requirements:

• A manufactured home is any dwelling built on a permanent chassis and attached to a permanent foundation system.
  
  
• Be a one-family dwelling that is legally classified as real property.
  
  
• The towing hitch, wheels, and axles must have been removed and the home must be permanently attached to a foundation system that meets state and local codes as well as the manufacturer’s requirements.
  
  
• Foundation system must be appropriate for the soil conditions for the site and meet local and state codes.
  
  
• The land on which the manufactured home is situated must be owned by you. We do not provide financing for manufactured homes located on rented or leased land.
  
  
• Must have been built in compliance with the Federal Manufactured Home Construction and Safety Standards that were established June 15, 1976. Generally, compliance with these standards will be evidenced by the presence of a HUD Data Plate that is affixed near the main electrical panel of the home or in another readily accessible and visible location.
  
  
• Must be at least double-width, 24 feet wide, and have a minimum 600 square feet of gross living area. Must be acceptable to typical purchasers in the market area.

FHA charges an Upfront Mortgage Insurance Premium (Upfront MIP) for all FHA purchase transactions to financially support the FHA program. This fee is typically 1.5% of the principal loan amount. .Although the Upfront MIP can be paid in cash at closing, it is generally financed so that the cash required at closing is as reasonable as possible.

In addition to the Upfront MIP, Monthly Mortgage Insurance may also be required and included in the total payment. The Monthly Mortgage Insurance premium can range from .25% to .5% of the loan amount depending on the down payment, loan term and property type.

Yes, our construction/perm loan has a down payment as low as 16% and the lot equity may serve as a source of down payment.  There is no private mortgage insurance on this product.   The construction period can be up to 9 months, and your payment is interest only during the construction phase.  Once the home is finished, the loan will convert to a 7-year, 5-year or 3-year adjustable rate mortgage. There are a lot of details involved in construction loans so this product is not available on line.  Just give your  local, experienced City Mortgage Specialist a call and he or she can explain the details and help you get started. 

The City Start Mortgage is a portfolio ARM loan program designed to meet the needs of first-time homebuyers with low-to-moderate income who are buying a primary residence located in City National Bank's designated lending locations.  A Mortgage Specialist can go over the guidelines with you and see if you qualify for this product.    

Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.

Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.

Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won't be paid as agreed.

Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a customer.

An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing.  

The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don't limit your mortgage shopping for fear of the effect on your credit score.

There is no charge to you for the credit information we'll access with your permission to evaluate your application online. You will only be charged for a credit report if you decide to complete the application process after your loan is approved.

In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.

If you haven't been receiving bonus, overtime, or commission income for at least two years, it probably can't be given full value when your loan is reviewed for approval.

Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. 

We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need at least a full two-year history of self-employment to verify that your self-employment income is stable.

We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don't have an award letter, we can contact the source of this income directly for verification.

If you're receiving tax-free income, such as social security earnings in some cases, we'll consider the fact that taxes will not be deducted from this income when reviewing your request.

Yes, applying for a mortgage loan before you find a home may be the best thing you could do! If you apply for your mortgage now, we'll issue an approval subject to you finding the perfect home.   You can use the pre-qualification letter to assure real estate brokers and sellers that you are a qualified buyer. Having a pre-qualification for a mortgage may give more weight to any offer to purchase that you make.

When you find the perfect home, you'll simply call your Mortgage Specialist to complete your application. You'll have an opportunity to lock in our great rates and fees then and we'll complete the processing of your request.

If you own rental properties, we'll generally ask for the most recent two year's federal tax returns to verify your rental income. We'll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won't be counted against your rental income.

If you haven't owned the rental property for a complete tax year, we'll ask for a copy of any leases you've executed and we'll estimate the expenses of ownership.

Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.

Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.

Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.

Typically, income from a second job will be considered if a two-year history of secondary employment can be verified.

First, you'll complete our online application!

The application will ask you questions about the home and your finances and takes less than 20 minutes to complete.

Your Mortgage Specialist will order a credit report and review your application.  We'll give you a call and go over the products, qualifying guidelines, and other important information. Your Mortgage Specialist can mail your application package, send it electronically or meet you in person at one of our branches. 

Application Package

The application package contain papers for you to sign and a list of items that we'll need to verify the information you provided about your finances during the online application.

We'll order the appraisal from a licensed appraiser who is familiar with home values in your area. The appraisal fee will be collected prior to ordering the appraisal and you'll receive a credit for the amount paid on the Closing Disclosure.  A pest inspection is required on purchase transactions.  Property, well and/or septic inspections may be required under certain circumstances. A title examination will also be ordered.  

We'll contact you to coordinate your closing date

Once all the approval conditions have been satisfied, your loan will be moved to our closing department.  One of our Mortgage Closers will work with you and the settlement agent to complete the final steps to close your loan.  Your loan can typically close 5-7 business days after moving to the closing department.  The closing will take place at the office of a title company or attorney in your area who will act as our agent.

If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0."

Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.

If your loan request is for more than 80% of the purchase price, we'll need to verify that you have at least 5% of the property's value in your own assets.

Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account.

If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the settlement or closing statement you'll receive at the closing to verify that your current mortgage has been paid in full and that you'll have sufficient funds for our closing. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll just ask you to bring your settlement statement with you to your new mortgage closing.

Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location.

If your employment is with a new employer, complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. We'll sort out the details after you submit your loan for approval.

Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt doesn't affect your ability to obtain a new mortgage we'll leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification that the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last six months.

Any student loan that will go into repayment within the next six months should be included in the application. If you are not sure exactly what the monthly payment will be at this time, enter an estimated amount.

If other student loans are reflected on your final credit report, which will not go into repayment in the next six months, we may need to ask you for verification that repayment will not be required during this time period.

An installment debt is a loan that you make payments on, such as an auto loan, a student loan or a debt consolidation loan. Do not include payments on other living expenses, such as insurance costs or medical bill payments. We'll include any installment debts that have more than 10 months remaining when determining your qualifications for this mortgage.

The closing will take place at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller will also be at the closing to transfer ownership to you.

During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have.  You can also contact your Mortgage Specialist if you have additional questions.