Application Information    

Your monthly mortgage payment typically is made up of four components: principal, interest, taxes and insurance, together known as PITI. The principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. The interest is the fee charged for borrowing money. You can determine the amount of principal and interest by using our Mortgage Payment Calculator.

Taxes refer to property taxes your community levies which are generally based on a percentage of the value of your home. The lender usually collects 1/12th of the yearly property tax bill each month. The lender collects taxes in advance and places the money in an escrow fund.

Lenders won't let you close on your home loan if you don't have hazard insurance to cover your home and your personal property against losses from fire, theft, bad weather and other causes. The insurance amount is collected and paid much like the taxes. Each month 1/12th of the insurance bill is collected and stored in an escrow account until the bill is due. Even if you pay cash for your home, it is a good idea to buy hazard insurance in the event your home is damaged or destroyed.

Principal and interest comprise the bulk of your monthly payments in a process called amortization, which reduces your debt over a fixed period of time. With amortization, your initial monthly payments are largely interest, and as the loan matures, a greater portion of your payment is allocated toward the principal.

 

Mortgage escrow accounts are special accounts set up in which money is held to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items.

Escrow accounts ensure that these items are paid in a timely fashion. They guarantee that there is always enough money to pay these bills when they are due so that the homeowner avoids the risk of lapsed insurance coverage or delinquent taxes. With escrow accounts, homeowners do not have to worry about coming up with several large, lump sum payments, each with different due dates, throughout the year.

With escrow accounts, unexpected increases are taken care of. It is the responsibility of the financial institution to allow for possible increases in tax or insurance premiums. Financial institutions typically cover shortages when tax or insurance payments increase. It is very common for financial institutions to pay taxes and insurance premiums when they are due even though all the money for these bills has not yet been collected from the homeowner.   The escrow payment will be adjusted at a later date to compensate for any overage or shortage in the escrow account.

 

The loan approval process generally begins with an initial interview where you and a mortgage professional discuss the potential loan. You will need to provide us with information to verify your income and long term debts.

You may prefer to talk with Cleveland State Bank before house hunting to determine in advance how much you can afford and the mortgage amount for which you can qualify. This step is called pre-qualification and can save you time and trouble by making certain you are looking in the correct price range.

To complete the 1003 Mortgage Application, you will need to gather the following items:

 

Click HERE for list of required documents.  

 

When a lender makes a decision about a mortgage application, they consider two basic factors: 1) your ability and 2) your willingness to repay the loan.

Ability to repay the mortgage is determined by verifying your current employment and analyzing your total income. Lenders prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. Your proposed monthly payment and current debt will be compared to your monthly income.

Willingness to repay is influenced by how you have paid previous loans and by examining how the property will be used. Willingness can be gauged by your credit report and previous commitments to pay rent and/or utility bills. There is also a greater tendency to stick with your payments if you live in a house as opposed to a rental property or vacation home.

It is important to remember that there are no set rules and each applicant is handled on a case-by-case basis. Many applicants come up a little short in one area, but make up for it with other strong points. These compensating factors may include a large down payment, solid employment, extensive educational background or overall financial health.

For applicants who need to make a lower down payment, mortgage insurance is protection for the lender in case you stop making payments. This allows low and moderate income families to become homeowners with low down payment programs.