​Before you start house hunting, it's a good idea to complete the pre-qualification process. Pre-qualification will help you find out what homes are in your price range before you begin your search. To pre-qualify, you will submit some financial information to your loan officer. After reviewing the information, your loan officer can provide you an estimate of the loan amount you should be able to afford. Knowing this amount can also help you negotiate with the seller by proving you are a serious buyer with financing secured. Most lenders use certain formulas to determine how much house you can afford. Your estimated monthly house payment should be around 28 to 30 percent of your total monthly income before taxes. Your total monthly debt includes your house payment, car payment, credit card and any other loans or debts. When added together, your total debt should aim to be no more than 36 to 40 percent of your total income before taxes. We understand that unique circumstances may occur, so contact one of our loan officers today to find out how much you can afford. Here's a chart to help you get a better idea of your situation: 

Maximum Monthly Payment – (PITI)

 

​Gross Annual Income	​House Only	​Total Debt
​$35,000	​$816	​$1050
​$40,000	​$933	​$1200
​$45,000	​$1050	​$1350
​$50,000	​$1167	​$1500
​$55,000	​$1283	​$1650
​$60,000	​$1400	​$1800
​$65,000	​$1516	​$1980
​$70,000	​$1633	​$2100
​$75,000	​$1750	​$2250
​$80,000	​$1867	​$2400
​$85,000	​$1983	​$2550
​$90,000	​$2100	​$2700
​$95,000	​$2216	​$2850
​$100,000	​$2333	​$3000
​$120,000	​$2800	​$3600
​$130,000	​$3033	​$3900
​$140,000	​$3266	​$4200
​$150,000	​$3500	​$4500
​$160,000	​$3733	​$4800
​$170,000	​$3966	​$5100
​$180,000	​$4200	​$5400
​$190,000	​$4433	​$5700
​$200,000	​$4666	$6000​

A Realtor can save you time and assist you in finding your new home by:

• Selecting homes that are within your price range and match your requirements​ for size, location, etc.
• Schedule appointments for you to see homes
• Giving you current prices for houses like the ones you are considering
• Giving you up-to-date information about taxes, school districts and conditions in the area
• Handling negotiations with the price and terms of your offer
• Arranging for a home inspection
• Things to look for in a Realtor​

Many lenders offer a variety of home financing options and will work with you to find your best choice. Although loan rates don't differ much from one company to another, differences in the structure of a loan can result in large savings or costs. Loans can differ in length, prepayment options and processing fees.

Most mortgages are offered for terms of 15, up to 30 years. However, other terms may be available. Your monthly payment changes depending on the term you choose. This means the shorter the term, the less you will pay for your house, but your monthly payments will be higher. It also means the longer the term, the lower your monthly payments will be, but you will pay more for your house over the length of the loan. Your Loan Officer can help you decide which option is best for you.

You can use the chart below to estimate monthly payments with different interest rates and terms. The chart shows the monthly principal and interest for a $1,000 loan. To use this equation, multiply the monthly payment times the number of thousands of dollars you are borrowing. For example, if you have an interest rate of 6.5%, multiply 6.32 (for 30 years) times 100 (for a $100,000 loan). You should end up with an estimated $632 monthly principal and interest payment.

Monthly Payment (Principal & Interest)

​Interest Rate Percent	​15 Years	​20 Years	​30 Years
​2	​6.44	​5.06	​3.70
​2.5	​6.67	​5.30	​3.96
​3	​6.91	​5.55	​4.22
​3.5	​7.15	​5.80	​4.50
​4	​7.40	​6.06	​4.77
​4.5	​7.65	​6.33	​5.07
​5	​7.91	​6.60	​5.37
​5.5	​8.17	​6.88	​5.68
​6	​8.44	​7.16	​6.00
​6.5	​8.71	​7.46	​6.32
​7	​8.99	​7.75	​6.65
​7.5	​9.27	​8.06	​6.99
​8	​9.56	​8.36	​7.34
​8.5	​9.85	​8.68	​7.69
​9	​10.14	​9.00	​8.05
​9.5	​10.44	​9.32	​8.41
​10	​10.75	​9.65	​8.78
​	​	​	​

 

The time it takes to buy a home will vary based on your specific situation. In most cases a home buyer is able to complete the entire process from contract to closing within 45 to 60 days. There is a 120 day limit on the information provided, so after 120 days you may need to provide new or updated documents. Obtaining pre-qualification is helpful in keeping a shorter timeline for buying a home.

​​Most monthly house payments will include principal, interest, real estate taxes and homeowner’s insurance. This is also known as PITI. Your monthly payment may also include private mortgage insurance (PMI) or Home Owner's Association (HOA) fees. How much you can afford will also depend on the interest rates at the time of buying, as well as the amount of down payment you are able to provide. Both the interest rate and down payment amount can affect your loan principal and interest amounts owed each month. It's important to also consider how much other expenses like utilities, maintenance, and other debts will be when calculating your ideal amount. You can also try out our How Much Home Can I Afford Calculator. ​

​There are many benefits for first-time home buyers beyond owning property. Many first-time home buyers can be eligible for low down payment amounts or assistance programs. Some first-time home buyers may also be eligible to take part in a Mortgage Credit Certificate Program offered by some state and local governments. These certificate programs could allow you to take a federal income tax credit up to $2,000 per year. Another home buyer benefit is the ability to continue to build your net worth by putting money into a home that often keeps or increases in value over time.

Before buying a home, there are a few things you need to know. It’s important to review your credit history, know your how much debt you have and to locate all important paperwork. It’s also important to start saving enough money to cover the down payment and fees. Colonial provides a printable document checklist​ to help you prepare and gather many of the forms and documents you may need. Before meeting with a realtor or viewing any houses, we also recommend doing some research on your own. This allows you to become familiar with nearby school districts, traffic routes and other local resources to ensure you are looking for a location that meets all of your needs. For more information on what to consider before buying a home, check out our checklist on the Do’s and Don’ts when Applying.​

We have a full glossary of terms that help explain each term in more detail, but we've pulled some of the most important ones for you here:

Closing Costs

• These are costs that the buyer of a home has to pay at the end of the home buying process. Closing costs usually include an appraisal fee, title search and lawyer fees. They may also include points, one year of homeowner's insurance or private mortgage insurance, if required. Closing costs are separate from the amount paid toward the down payment.

Escrow

• Escrow is a third-party account that holds the funds and documents that change hands during the buying and selling process. An escrow officer will confirm the items in the purchase contract are complete and then will pay all appropriate parties from the funds.
• After the sale, the lender uses an escrow account to pay the taxes and insurance for the loan.

Homeowner's Insurance

• Homeowner's insurance is also known as hazard insurance. Lenders can require buyers to purchase supplemental hazard insurance to protect against damage, fire and floods.

Points

• Points are finance charges paid to the lender as part of the closing costs. Each point equals 1 percent of your total mortgage loan. Points can be negotiable and are sometimes tied to your interest rate.

Private Mortgage Insurance (PMI)

• Private Mortgage Insurance is insurance the buyer carries to guarantee that the lender is paid off if the buyer fails to pay. This is different than homeowner's insurance and is generally required on all mortgages with less than a 20 percent down payment. For some people, private mortgage insurance may be deductible on federal taxes.

Adjustable Rate Mortgage

• Adjustable Rate Mortgages (ARMs) are loans with an adjustable interest rate that changes periodically to reflect market conditions. This type of loan can fluctuate above and below your initial rate at closing.

Fixed Rate Mortgage

• A fixed-rate mortgage will keep the same interest rate for the life of the loan term. This can only change if the buyer refinances or pays off the balance.

View Glossary ​

A down payment is the difference between the sale price of the home and the loan amount, and is due at the time of closing. Down payments often range from as little as 3.5 percent of the sale price to as much as you are comfortable paying upfront. The larger the down payment, the less interest you will pay on the mortgage. Loans with smaller down payments usually require mortgage insurance at an extra monthly cost.

Money for the down payment can come from your savings, the sale or financing of another house, or a gift from family. Special loan programs may also exist for veterans or first-time home buyers that allow you to put no money down. Your Loan Officer can provide you with more information about down payments and can help you determine what is best for your situation.

Retained servicing means that the lender does not sell the servicing of the loan. In other words, the lender will handle the management of your payments, taxes and insurance rather than selling it to another company after your loan closes. Sometimes lenders will sell loans multiple times, leaving you unsure of who to contact about your taxes or payments. There are several benefits to working with a lender who retains the servicing of your loan after closing:

• You will always know who to call about your mortgage or escrow account. Colonial retains servicing on more than 90% of the loans we make, so we have your mortgage history from year to year. This means we will have records of property tax and insurance payments, if applicable, saving you time and trouble if questions arise.
• Because we know you and your mortgage, we also know when changes to your mortgage account are most beneficial. Plus, we can often streamline the paperwork when it's time to refinance or access your home's equity.

It's important to always consider a lender who retains servicing to ensure reliable service for your loan. After all, this may be the largest financial investment of your life.

Before contacting a Realtor, think about the ideal location and features you want in your home. Writing these items down and providing them to your Realtor can help save time and simplify the house hunting process. Click here​ for a list of items to consider.

You can also download our home evaluation form​ that will help you track the features of homes you look at.​

Pre-qualification is when a loan officer takes a look at a few pieces of information you provide them with. They will be able to provide you with a general idea of how much house you should be able to pre-qualify for, and what monthly payments you can afford.

Pre-approval is more formal than pre-qualification and takes a bit more time. To get pre-approved, you will provide all the paperwork needed for a formal loan request. This includes your credit history, employment, and down payment funds, among a few others. Your loan officer will then verify each document.

Pre-approval is a commitment to lend as long as all circumstances remain the same, but it is not yet a mortgage contract. You can't get the mortgage until the lender can appraise the property and conduct a title search. This happens after your offer to buy a house is accepted. When you formally apply for a mortgage, certain information may have to be re-checked, depending on how much time has passed since you were pre-approved and when you have a contract for a home. Your loan commitment will be subject to the following:

• No adverse change in your credit worthiness or financial condition on which this commitment was based
• Subject to a complete and executed purchase contract and all final additions to the contract
• Subject to an acceptable appraisal

Here are some other benefits of pre-approval:

• It may allow you to lock in your interest rate for a period of time if you already have a property.
• You may be better able to bargain with a seller. When sellers receive an offer from a pre-approved buyer, they know that person can secure the loan.

To get pre-approved, you will need to provide the following information. Complete this section​ to prepare for a meeting with your lender. ​

Once you find the perfect house, your next step is to negotiate what to include in the offer you make. Here are some things that are usually part of an offer:

• Offering Price – This is the price you are willing and able to pay for the home
• Earnest Money - This is part of your down payment that you provide up front to secure an initial agreement with the seller. It shows the seller that you are "in earnest," or very serious about buying. It also protects your offer for a certain period of time while you complete the financing process.
• Contingencies - these are special circumstances such as the completion date for the sale or any repairs the seller must make.
• Items included in the sale – This will be a list of appliances, window treatments, rugs, furnishings, etc. that you and the seller agreed were part of the sale.

To protect yourself, be sure that the final agreement is conditional. This means you can cancel it if you do not secure a loan or if the seller cannot fix any major problems before closing.

Now that you have some of the basic details figured out, follow these steps to formally make an offer:

• Get recent selling prices of similar homes in the area from your Realtor
• Be sure to ask a lot of questions: How long has the house been on the market? Why are they selling? What are its good and bad points? There are no wrong questions at this stage.
• Don't be afraid to check out the neighborhood and talk to neighbors
• Consider the home's resale value
• Tell your Realtor the amount you would like to make an offer for, then they will deliver the offer to the seller
• If the seller rejects your first offer, a second round of negotiations often takes place
• Negotiate the offer price and other items to include in the offer before you sign any formal papers

When the seller accepts your offer, you will sign a purchase agreement. This agreement is a legal contract that covers items like the price, total down payment and closing date. The closing date is when you will sign the closing or settlement agreement that will make the home yours. This date may change if all the necessary paperwork is not finished. The offer also states the type of loan you are applying for and the interest rate, and if the buyer or seller will pay for certain settlement costs.

Your Loan Officer can help determine your basic monthly payment for every home you are interested in. This is often called PITI, which stands for Principal, Interest, Taxes and Insurance. You should also consider other costs like Home Owners Association (HOA) fees, utilities, maintenance and other bills. You can use this form provided by the CFPB to estimate the costs for each home you are considering to come up with a realistic idea of your monthly total.​

Colonial is here to process your loan as efficient as possible. It's important to provide accurate information and all documents on time when your loan officer needs them. Otherwise, you can further delay the loan. Your loan officer will need a lot of information for your home loan, so it's a good idea to begin gathering the documents you need ahead of time. Click here​ for a list of items you may have to provide. This list will apply for both you and your co-applicant if you are applying with one.

Your loan officer may ask for other documents as needed depending on your unique situation. We keep all the information you provide highly confidential as it is only used only for the purposes of underwriting your loan.​

​After approval of your application, a licensed title company will perform a title search on the property. This step will uncover any possible problems with the legal ownership of the property. Possible problems include disputes by outside parties about the ownership of the property, the size of the property, and so on. For example, there may be an unknown heir, a secret spouse or a faulty land survey. Title searches are usually set up by the buyer's Realtor or lawyer. If the title company does not find any problems in the search, the title company will issue title insurance. Having title insurance will guarantee the property is as it is stated in recorded deeds, surveys and other documents. You may pay a title insurance premium when you buy the house. However, you will not have to pay another title insurance premium unless you refinance.

Besides having a home inspector's report and title insurance, you can further protect yourself with a homeowner's warranty. This warranty will cover any repairs to the structure, systems and some appliances for a certain time. A homeowner's warranty is useful when buying an older home or one that has been vacant for a long time. The seller may offer the warranty with the sale. If not, you can buy a warranty yourself. Your Realtor or Loan Officer should be able to provide a recommendation based on your needs.

Mortgage rates can fluctuate frequently. By locking in pricing, you can guarantee the current rate before it expires or increases. However, the locked in rate is only good for a certain amount of time.

There are a handful of mandatory and optional fees that can come up during the home buying process. The fees you will incur will adjust according to your unique circumstance. The primary fees you should be aware of include:

• Inspection
• Appraisal
• Lender closing
• Title and escrow closing
• Attorney
• Pre-paid escrow setup
• Warranty
• Home owners association (HOA)

After your offer is accepted, your loan application will be reviewed. At the same time, these steps must be taken:

Appraisal:

• An evaluation of the property's value. An appraiser will visit the house and review recent selling prices of similar homes in the area. You typically pay the appraisal fee at closing or before.

Inspection:

• An evaluation of the property to find out if there are any problems that could change the property value. The inspection helps you determine if there are any items that you want the seller to repair before they sign the final contract. The buyer usually hires the inspector, so it is important to hire someone who is trustworthy and experienced. Your Realtor or Loan Officer can refer you to an inspector. We suggest you go to the inspection if possible to walk through the house together to see firsthand what is wrong or right with the house. Here's a Home Apprais​al and Inspection Checklist for items the inspectors should check throughout the entire house.
• Most areas also require a termite inspection. If termites are found, you must have proof that the house has been treated and that any termite damage has been repaired. This is usually the seller's responsibility.​

Yes. Although the qualifying process should remain the same, there will be more steps. The process for renovating or building includes more steps to allow for builder or contractor involvement since many of the costs were based on estimates. The final amount will vary based on the actual cost for work completed.

Your Loan Officer will determine your preliminary prequalification status. They will also provide you with a checklist of documents needed for final loan approval. After you receive the checklist, it's important to review the list and return each document on time. After your loan officer receives all items, your loan process will start and underwriting can begin.

Your loan officer will verify that each document is correct when they receive your completed application. They will then prepare everything to be delivered to underwriting for review. Underwriting will then make a decision based on your credit and collateral, and may need to request more documents. When underwriting approves your application, it is then prepared for closing. During closing, your lender will provide you with a Closing Disclosure (CD) six business days before your closing date. This will be a summary of the loan, showing the terms and cash needed to close. You should compare the CD to the latest Loan Estimate (LE) you received, and talk to your Loan Officer if you have any questions about any changes.

Closing is when you and the seller will sign all remaining documents, money will exchange hands and the home becomes yours. This exchange usually takes place at a title company or lawyer's office.

Before closing, be sure to review all documents and your purchase agreement. You should also do a final walk through of the property. You will want to make sure the seller made all agreed upon repairs and they did not change or remove any other items from the agreement.

After your application is approved, your final paperwork will go to the closing department where they will determine final amounts and payments. The final amount determined will be given to you in order for you to prepare the funds for transfer. Sometimes these funds will need to be a certified check or wired electronically.

When you complete a formal loan application, your Loan Officer will give you a disclosure package that will include:

A Loan Estimate (LE)

• The Loan Estimate is a new form that combines the previous Good Faith Estimate and early Truth in Lending disclosures. You will receive the LE no later than three days after submitting your application.

A Closing Disclosure (CD)

• The new Closing Disclosure paperwork combines the former HUD-1 and final Truth in Lending disclosures. You will receive the CD at least three days before closing.​​

​​For more information on this process and these documents, please see the Home Loan Toolkit provided by the CFPB​

Your lender will evaluate your application on a combination of factors. The property and property value determined by an appraiser or appraisal report will be part of the evaluation. They will also review your credit score, credit history, employment history and income stability. The lender will also review your debt to income ratio and savings reserves. This list is just a few of the items evaluated during the application process. The evaluation will also include information on all co-applicants included with the application.

According to the Consumer Financial Protection Bureau, if you intend to proceed with a particular mortgage application, you must take the next step and tell the lender you want to move forward with the application for that loan. This is the step known as intent to proceed. The lender is required to honor the terms of the Loan Estimate for only 10 business days. If you decide to move forward more than 10 business days after you receive a Loan Estimate, the lender can revise the terms and estimated costs and provide you with a revised Loan Estimate. 

If you would like to read more about their explanation of intent to proceed, please visit the CFPB's website.

If your contract has changed in any way, your realtor should create a sales contract addendum that all parties need to sign. Your realtor will be able to help you with this process.

The best way to help your loan close on time is to stay in touch with your Loan Officer. It's also important to keep all communication between each other timely and clear.

With the extended time needed to fulfill new guidelines, the following tips can also be helpful:

• If possible, choose electronic delivery of all loan documents

• Even though you have ten days to decide whether to proceed at the costs estimated in your LE, you must tell the lender to move forward. As soon as you finish shopping and are comfortable with your choice of loan, you need to let your loan officer know right away.

• After you decide to move forward with a lender, you should provide any documents needed to complete the loan as soon as possible.

• If you receive a revised Loan Estimate with increased estimated costs, be sure to read it carefully and ask questions. Your loan officer can answer any questions early in the process to help keep your timeline on track.

• It's also important to work closely with your real estate agent and the seller's agent. This will ensure all home inspections, reports and other contract contingencies are clear as early in the process as possible.

• Make sure you and your real estate agent tell your lender about any changes to the transaction that may impact the loan or the closing.

• Ensure you sign all contract addendums and return them as quickly as possible.

Your account will be available for you to review and make payments online at www.ServiceHomeLoan.com.

In addition to monthly payments by check, bank draft and online at www.ServiceHomeLoan.com, we offer other special payment programs to help you manage your money:​

• ​Convenience Pay Plan – Allows you to make smaller installments rather than one large payment
• Monthly Draft Plan – Find out how to set up monthly automated drafts

Homebuyer Privileges® - a program of discounts, rebates and special offers to help you save on the things you need most for your home