Mortgage 101


All About Interest

Interest is the monthly cost you pay on the unpaid balance of your home loan. An Annual Percentage Rate (APR) includes both your interest rate and any additional cost or prepaid finance charges such as the origination fee, points, the initial private mortgage insurance, underwriting and processing fees. (Your actual fees may not include all of the items above.) The APR is a universal measurement that will assist you in comparing the cost of mortgage loans offered by different mortgage lenders.

A home buyer should evaluate not only the interest rate on their loan, but also the closing costs that must be paid to obtain the loan. Our experienced mortgage bankers will walk you through your various options, and will make sure that you fully understand all of your costs of obtaining home financing.

One of the most attractive features of home ownership is that interest paid on most home mortgages may be tax deductible*. This feature, along with the fact that, although not guaranteed, most homes increase in value over time is what can make home ownership such an attractive investment. Consult your tax advisor regarding the deductibility of mortgage interest for your personal financial situation.

*As always, consult a tax advisor for details on determining deductions on your income tax.

What is Equity?

Simply put, equity is the difference between your home’s value, and your mortgage balance. If your home is worth $150,000, and your mortgage balance is $110,000, then you have $40,000 in equity. Your equity benefits you in a number of ways:

  • Equity is an asset. Just like a bank account, stocks, or bonds, your equity has value as an asset. For certain types of financing, lenders consider your equity when making approval decisions. The terms of your financing may improve based on your assets.
  • You can borrow against your equity. This is a great source of financing, especially when used properly. Such uses may be home improvement, paying down more expensive debt such as credit cards, or purchasing another asset, such as a vacation home. Keep in mind, that you are using your home as security for the loan. Click here for valuable information concerning the use of your home for collateral.

Bank of America has a variety of lending options for borrowing against the equity in your home. Contact one of our experienced mortgage bankers to explore the possibilities.

Bad Credit?

Many people have run into unavoidable circumstances that can have a negative impact on credit.

A person with a less than perfect credit report can be viewed as a riskier candidate for home financing. In many cases, mortgage financing will still be available, but rates and fees may be higher, due to greater risk.

Your best defense is preparation. Here are some things that you should do, if you are concerned about your credit:

  • Know your credit.   We are always willing to work with you and give you an honest assessment of your credit. It is advisable that you review your credit for accuracy as soon as possible, and we can help you do that. If you would like to review your credit report before meeting with us, you can obtain a copy for free at www.annualcreditreport.com. This is the designated website where consumers can obtain the credit report as generated by the three major bureaus for no charge.
  • Dispute errors on your report with the three major bureaus. Even if data on your credit report is inaccurate, it can still have a negative impact on your credit score. The three major credit bureaus are Equifax, Experian, and TransUnion. Click on the names of the bureaus to get specific instructions on how to dispute inaccurate information on your credit report.
  • Keep open communication with your creditors. Bad credit will not simply go away if ignored. In fact, lack of communication may cause a creditor to assume that you do not intend to pay your debt to them If you are having difficulty paying your monthly obligations, call your creditors. Many creditors have dedicated departments designed to assist their customers through difficult situations.

We're to help you. Even if your current credit situation suggests that home financing may not be available right now, we’d still like to hear from you.