Get Answers to Frequently Asked Questions About Buying a Home
Get answers to your questions about mortgage loans, M&T's mortgage lending process and learn the important terms you may hear throughout the process.
What should I expect during the mortgage process?
There are a few key steps during the mortgage process. Understanding what happens during each step will help you prepare and will make the process go more smoothly.
It's important to know how much you can afford to borrow. Pre-approval will help during your home search and seller negotiations.
Your M&T Mortgage Loan Officer will discuss financing options and help you complete a mortgage application when you're ready. After you’ve completed your application, you will receive a Loan Estimate outlining credit and other costs, and transaction terms associated with your loan, and your application will be submitted for processing.
What is mortgage insurance and when is it required?
Mortgage insurance lowers the risk to the lender of making a low down-payment loan to you, so you can qualify for a loan that you might not otherwise be able to get. Typically, borrowers need to pay mortgage insurance when making a down payment of less than 20 percent of the purchase price when purchasing a home or borrowing more than 80 percent of their home’s value when refinancing.
This insurance may enable you to borrow up to 97% of a sales price or home's value. As your equity grows, you may be able to cancel the mortgage insurance depending on the loan product selected.
You can pay for mortgage insurance through monthly payments or a single payment which may be financed into the loan or possibly negotiated for the seller to pay in purchase transactions.
What is Owner’s title insurance?
Title is a document that reflects the legal ownership of a property and the right to use it. A title company checks public and other records to make sure everything is clean with respect to the title of the homeowner’s property. This is called a title search. An Owner’s title insurance policy will protect the homeowner against third party claims not revealed by the initial title search and which arise after the homeowner’s closing. Your Owner’s title insurance protection exists as long as you own the property.
Owner’s title insurance is not required by the lender, but may protect your investment in your property. Your attorney can provide guidance.
Title insurance isn't like your home or auto insurance – you don't have to pay an annual premium. It's a one-time cost typically financed into the loan.
Your Loan Processing Team obtains third-party information (for example, a property appraisal) that is required to complete the transaction. The Loan Processor/Loan Specialist will also work with you to collect any additional documentation you may be required to provide, and then prepares your file for a credit review and decision.
Your loan file documentation will be reviewed, and a credit decision made. If you are approved, you will receive a written Mortgage Commitment that summarizes your mortgage loan and lists any terms and conditions that must be met before or at closing.
Lenders are required to provide the borrower with a Closing Disclosure which reflects the critical financial aspects of your mortgage loan, including purchase price (or payoff balance for refinance, as applicable), loan fees, interest rate, estimated real estate taxes, insurance, closing costs and other expenses, as well as the funds needed for closing. Your Attorney or Settlement Agent provides M&T with the information required to prepare the Closing Disclosure, which you will receive no less than three business days before closing, and most commonly approximately 7-10 business days (mailed or delivered electronically) before closing. It's important to review your Closing Disclosure and ask any questions you may have prior to closing. If you have received these documents and have questions, please contact your loan advisor.
Depending on the state where your property is located, your Settlement Agent or Attorney will confirm the scheduled closing date and time with you and review the funds needed to close (if any). On the closing date, you will sign your paperwork and complete the loan closing.
What happens at the mortgage closing?
Because this is a real estate closing (conveying or mortgaging real property) it will probably happen at a title company, county clerk’s office, or an attorney's office.
Before the closing appointment, you’ll be able to look at many of the documents, so you’ll know about your down payment, first payment, any fees, and the exact dollar amount you’ll need for closing.
At the scheduled closing appointment, the closing agent will review each of the documents you have to sign, one by one, and answer any questions you may have.
Here are the most important documents:
Closing Disclosure: This is the final disclosure of the terms and conditions of your mortgage. It is a breakdown of all your loan fees, real estate taxes and insurance costs, interest rate, monthly payment and your loan’s annual percentage rate (APR).
Note: This is the signed document where you agree to repay your mortgage debt. It will outline the details of your loan, the interest rate and other terms of your loan, including late fees and any penalties you may incur if you miss payments.
Mortgage/Deed of Trust: This document states you’ve pledged your real property to your lender as security for your debt. In other words, if you can't pay the mortgage, your lender can assume ownership.
What is the Loan Estimate?
The Loan Estimate is a federally required notice that provides the consumer with good-faith estimates of credit costs, other costs and transaction terms pertaining to of obtaining the mortgage loan for which you have applied. These estimated costs and transaction terms include information such as loan amount, interest rate, monthly principal and interest payment, closing costs details, taxes, other costs and basic loan information, estimated cash to close.
I'm selling a home to buy one. What documents do I need?
If you're selling your existing home — and need the proceeds of that to fund the purchase of your new home — you'll need to provide your Closing Statement from the sale. Sometimes, these are called settlement documents. You receive these papers at the closing of your sale, and they verify that you have paid your old mortgage in full (if you had one) as well as show the amount of proceeds you are entitled to (if any).
Be prepared for purchase contingencies. That means if you have someone ready to buy your home, but they pull out, you can get your deposit back from the other home you are buying.
If you're closing on your old home on the same day as your new home, that is ok. We will just ask you to bring your settlement paperwork with you to your new home's closing. Make sure that the documentation from your sale shows the anticipated proceeds necessary to be used toward your new purchase.
What is an appraisal?
Appraisals are an estimate of a property's fair market value. Having a certified and unbiased third party determine the value helps ensure your home isn't over-or under-valued. It also allows the lender to calculate how much you can borrow based on the loan program you have selected.
Professional appraisers follow guidelines for assessing a home's value. When appraisers conduct property appraisals, they prepare an extensive, official document that includes a written assessment of the home, the neighborhood, and typically photographs and measurements.
Appraisers research the age and sales history of the subject property, and then look at comparable homes (“Comps”) in your area. Comps are recently sold homes, located in the same or nearby neighborhood(s), with similar features such as square footage, number of bedrooms, size of the lot, etc.
Depending on your home and your loan program, the appraisal might include an inspection of the interior of the home, or it might just be an assessment of the exterior along with recorded sales history in the area.
As a borrower, you will receive a copy of the appraisal if one was obtained.
Do I need both an appraisal and home inspection?
Home inspections and home appraisals sound similar, but they have very different purposes.
Property appraisals are an estimate of a property's fair market value and look at the big picture of what affects a home's value which is not just the condition of the home but also the market and neighborhood sales activity. While a leaking roof or foundation issues can affect value, they are not the sole consideration for an appraiser. The lender will advise if your mortgage loan application will require a Property Appraisal.
A Home Inspector is generally a construction expert. Identifying deferred maintenance and health & safety issues are more in line with home inspections. While these issues might not affect a home's value immediately, these problems can worsen over time.
Home Inspections give buyers confidence that the home they are buying has been well maintained. While the lender does not require an inspection, it is recommended that you get one. It is your chance to ask questions, get answers and, possibly, negotiate repairs or a lower sales price with a seller.
Will I receive a copy of my home appraisal?
Yes, as the borrower you will receive a copy of the home appraisal if one was obtained.
How long does a property appraisal report take?
The property appraisal is a thorough review of your new home. It takes a few days to schedule at the start of your transaction and may include a physical inspection of the subject property, the neighborhood, sales trends and more. Typically, you can expect to receive a final report within 10-14 days of order.
What happens when the appraisal is more than the sales price?
If your new home is appraised for more than the purchase price, it will not change the amount you borrow. Lenders look at sale prices and appraisals, then use the lower of the two to determine your down payment and loan program eligibility.
When your new home appraises for more than your purchase price, that's instant equity. You can feel more confident when you move in knowing that you immediately own more of your home.
How are real estate closing costs determined?
Fees, closing costs, and taxes can vary from state to state and lender to lender. We want to ensure you get an accurate estimate as early as possible. Here are the most common groups of costs:
- Third-party fees: Appraisals, credit reports, settlement/closing services, lender’s title insurance, surveys, tax service reporting, flood certification and possibly other services are required for your real estate transaction. Fees for these services are typically borrower expense, but in some instances can be negotiated to be paid by a seller or financed into the loan on refinance transactions.
- Lender fees: These are fees associated with the work a lender performs to prepare, process, and fund your mortgage loan.
- Property tax, insurance, and such: You might need to pre-pay some items that are due in the future. The most common are:
- Escrow Impounds: If you elect to set up an escrow account, you will have a deposit due for taxes and/or homeowner's insurance at the time of closing. These deposits ensure money is available for your property taxes and homeowner's insurance when they come due. To learn more about escrow accounts, visit our Escrow FAQ page.
- Per Diem Interest: Most mortgages are due on the 1st of every month. If you close your loan on the 20th, you need to pay for the days of interest that accrue until your first payment is due.
When will I find out how much I will need for closing costs?
At the time of your mortgage application, you will receive a Loan Estimate – a federally required notice that provides details of the estimated cost of obtaining a mortgage loan and the terms of the mortgage loan for which you have applied. This document will provide an estimate of the cash needed to be brought to closing (if any).
No later than three days before closing, you will get a detailed Closing Disclosure that breaks down the total and final closing costs. This allows you to gather your funds and confirm the details of your loan. You will know the exact amount you need to bring to closing.
What are points?
Points (also called “discount points”) are generally an amount paid at mortgage closing to lower the interest rate charged on your loan. Points may also be charged to pay for special loan products or features. Each point is equal to 1% of the loan amount. By paying points, you can potentially lower your interest rate and monthly payment amount over the term of your loan. Points vary by loan program, occupancy, # of units and market conditions. Paying points to lower your interest rate is optional.
What is the Annual Percentage Rate (APR)?
APR is a calculation expressing the total cost of credit as a yearly percentage. An APR must be provided to the borrower under the Federal Truth in Lending Act. APR calculation is standardized across the industry. It is a powerful tool at your disposal to help you compare our costs with other lenders.
It includes upfront costs (prepaid interest) and any other finance charges associated with obtaining the loan. Other charges included in your APR calculation are mortgage insurance (if required) and other prepaid finance charges, such as origination fees and prepaid interest. The APR is calculated by spreading these charges over the life of your loan, which results in a rate that is typically a bit higher than your interest rate.
How are interest rates determined?
Your individual interest rate is determined by adjustments made to the base rate. These adjustments are driven by your credit score, loan purpose, occupancy type, loan-to-value, any discount points purchased and other factors, including loan product type.
Interest rates fluctuate. Inflation, retail inventory, consumer activity and employment determine what interest you pay on your mortgage loan. With a healthier economy more money becomes available, pressure on inflation increases and rates, generally, go up.
The Federal Funds Rate is what banks charge each other to loan money. That translates to other lending transactions, such as credit cards, auto loans and mortgages.
The Federal Reserve can change the rate up to eight times a year at Federal Open Market Committee meetings. When rates change, the Fed buys or sells government treasury bonds to change the level of money available to the financial markets and the public. This means a constantly changing table of base interest rates for mortgages.
How do I know if it's best to lock my interest rate or let it float?
Interest rates change daily. Our expert loan advisers will help determine your best option. They will make sure your loan is set to close within your lock period based on your purchase contract closing date.
When can I lock my mortgage interest rate?
When you work with M&T, you can lock your interest rate once you complete your mortgage application, or any time afterwards up until we are ready to prepare your closing documents.
Should I pay discount points to get a lower rate?
By using discount points, you get a lower interest rate for the life of your loan. A discount point is equal to 1 percent of your loan amount. For some borrowers, the option is clear: they pay the point (or points) and then enjoy the reduced rate for years.
To help you decide, compare the lower cost of your monthly payments with the cost of the discount points. You'll see how many months it takes you to break even. If you're able to save, it might be worth going for it.
Credit Considerations When Applying for a Mortgage
Why is my credit history important?
Credit history is considered when applying for a mortgage loan. Your credit score, also known as a FICO® score, helps determine the types of home loans you can qualify for and affects your interest rate. To assess creditworthiness, lenders review your score to see how you've handled past credit obligations. This is a good indication of how you will handle them in the future. A higher credit score may help you qualify for a better interest rate and a lower down payment.
By law, you are entitled to one free credit report per year. Visit annualcreditreport.com or contact any of the following credit reporting agencies:
What factors impact my credit score?
Credit scores typically represent your credit risk to a lender, or the likelihood you will pay your bills on time. We will need your credit score for the mortgage loan application process. This is a number between 300 and 900 that assesses your ability to take on and repay debt.
There are dozens of factors that go into determining your credit score. Some that may affect credit scores include your total debt, the types of accounts you have, the number of late payments, how long you've had the accounts and others.
Will pulling a credit report cost me anything?
Knowing your credit score is part of getting pre-approved. When M&T Bank conducts a credit check for your mortgage pre-approval, there's no charge for accessing the information.
Once you’re pre-approved and determine how much you can afford, it's your choice to move forward with us and complete the loan. If you do choose to proceed with M&T, we'll add the cost of the credit report as part of your total closing costs.
How can I improve my credit score?
Credit bureaus gather data and then provide a score that determines your creditworthiness. When qualifying for a mortgage, we consider credit scores as well a repayment history.
The credit bureaus provide information about what impacts your credit score and ways to improve your score.
Applying for a Loan
What is debt-to-income (DTI) ratio?
DTI is the percentage of your gross monthly income that goes toward paying housing and debts. It is one way that mortgage lenders measure a borrower's ability to manage monthly payments and repay debts.
For example, if your mortgage payment and other monthly debts equal $1,000, and your monthly gross income is $4,000, your DTI is $1,000 divided by $4,000, or 25%.
What is loan-to-value (LTV) ratio?
LTV is a comparison between the amount of your mortgage loan and lesser of the appraised value of your property or purchase price (if purchase transaction), typically expressed as a percentage. For example, if you are refinancing $80,000 for a house that is appraised at $100,000, your LTV is 80%.
Will my second job income be considered?
Yes, second-job income may be considered in the mortgage application process.
Typically, employment and income are verified through a few sources: pay stubs, tax returns or W-2s. Any of these sources show you've earned the money, the duration of the employment, and what you might earn in the future.
The length of time you have had a second job will be taken into consideration. Also, the nature of some second jobs is more transitory (it may be seasonal or more subject to layoffs), so this might be taken into consideration. If you fall into this category, talk to your M&T Bank loan adviser and they can help you determine what documentation you will need to provide.
How is retirement income considered for my mortgage application?
You are still eligible to get a mortgage now that you have retired. Instead of providing pay stubs in the mortgage application process, you will provide copies of pension check stubs, Social Security deposits and/or bank statements to verify income to be qualified to afford the monthly mortgage payment of your new home.
Depending on your situation, we might need paperwork to verify how long your pension (or similar income) will continue. For Social Security income, typically, you can complete the income verification process with a copy of your award letter.
If you are receiving tax-free Social Security income, we may also be able to take into account the fact that taxes are not deducted from your income when we calculate your eligibility.
Should I show pending student loans as installment debt?
Many homebuyers are still paying off student loans. That won't necessarily stop you from getting a mortgage. M&T works with you to understand your student loan debt and when your repayment starts as well as the amounts expected toward repayment. This helps us determine what you can afford.
Are there special requirements for buying a condo?
Buying a condominium is similar to buying a single-family home, but there are differences.
You will want to understand the health of the Condominium community. It is advised that you review the governing documents for the Condominium Association, assess the sales history of the neighborhood and confirm the percentage of occupied rental properties on site.These factors are important because common areas and homeowner groups impact the value of your potential new home.
A lender will review similar condominiums in your neighborhood, but also look outside the community to verify that price and value are stable.
Finally, if the condominium is new, we will also verify whether the construction is complete. When it is finished, we can best assess the value of the property.
What is an installment debt?
Installment debt is a loan that you make recurring payments on. Car loans, student loans and debt-consolidation loans are all types of installment debt. Insurance payments or medical bills, as well as typical living expenses that you are billed for—are not installment loans.
How is my monthly payment calculated?
Monthly mortgage payments are primarily determined by three factors: the amount of the loan, the term (in years), and the interest rate. The loan amount is how much money is borrowed. The term is the amount of time you have to pay it back. Interest Rate is the amount the lender charges for loaning you the money.
What is loan amortization?
Amortization is the process of paying off your mortgage through scheduled monthly payments of principal and interest. M&T does not charge any prepayment penalties so you could pay off your mortgage sooner by paying a little more towards principal each month.
What is P&I Payment?
P&I stands for principal and interest that makes up your monthly mortgage payment. If you elect to make only a P&I payment, you (the borrower) will need to cover taxes and insurance on your own rather than including it as part of your monthly payment.
What is a PITI Payment?
Typically, monthly mortgage payments are broken down into four parts: Principal, Interest, Real Estate Taxes, and Homeowner’s Insurance (PITI). Insurance can also include flood insurance, when applicable. If property taxes and homeowner's (and/or flood) insurance are included in your monthly payment, you will not have to worry about saving to pay these annual bills. Rather, each month a portion of your annual tax and insurance costs will be collected in an escrow account and M&T will process those payments for you as needed.
How does an escrow account work?
A mortgage escrow account allows borrowers to pay ongoing property tax and homeowner's insurance costs as part of their monthly (or bi-weekly) mortgage payments. These additional funds accumulate in a tax & insurance escrow account managed by M&T Bank. M&T Bank will pay the real estate property taxes, homeowner's insurance, and any required mortgage insurance on your behalf from your escrow account when those items become due.
What is not included in my monthly mortgage payment?
Without an escrow account, the cost of property taxes and homeowner's insurance are not included in your monthly mortgage payment. Aside from that, another cost typically not included in your mortgage payment is Home Owner Association (“HOA”) dues – common with condominiums and planned unit developments (PUDs).
Will my mortgage payment amount change over the life of the loan?
Depending on your mortgage program, monthly payments may change. This most commonly occurs with adjustable rate mortgages (ARMs). After the initial fixed-rate term ends, the interest rate can change up or down depending on market conditions – meaning your monthly payment may increase or decrease. For instance, if after the fixed term, interest rates are lower than they were when you first bought the home, you'll likely be looking at lower monthly payments.
Payments on fixed rate mortgages typically do not change unless you have an escrow account with annual property taxes and homeowner's insurance included in your monthly payments. As your annual property tax and insurance costs change, the amount needed to cover these costs in your monthly payment changes as well. If these costs increase, you can opt to either have your future payments adjusted to cover the difference or pay the difference in full to maintain the lowest possible payment.
Should I make extra mortgage payments?
Extra payments to your mortgage principal loan balance can reduce your overall interest costs and shorten the term of your loan. Whether you are making one extra full payment or just a small amount each month, make sure to contact your lender to let them know you're making an extra principal payment, so your funds are correctly applied.
When is my payment due?
Monthly mortgage payments are due on the 1st of every month. Bi-Weekly mortgage payments may differ in due dates. Typically, you will also have a grace period, meaning as long as your payment is received by the last day of your grace period you will not see a late fee or receive a late payment notice. Check your loan documents for specifics to your loan.
When is my mortgage payment considered late?
Your mortgage payment is considered late if it is paid 30 or more days after your official due date.
What is a prepayment penalty?
A prepayment penalty is a fee that lenders may charge if you pay your loan off or refinance prior to a pre-determined date.
None of the mortgage programs we offer at M&T Bank have penalties for any type of prepayment. You will be able to pay your mortgage off at any time, without any additional charges.
After I pay off my mortgage, when can I expect to receive my lien release/mortgage discharge?
Your lien release or mortgage discharge will be mailed to the address we have on file 10 business days after the loan is paid in full.
How do I notify M&T of the death of a mortgage borrower?
Please send us with the following documentation:
- A legible copy of the death certificate with a visual seal
- A copy of the Letters of Testamentary appointing an Executor of the Estate, if applicable
Documentation can be sent in the following ways:
PO Box 1288
Buffalo NY, 14201
- Fax: 1-866-409-4652
- Email: firstname.lastname@example.org
If you now have an ownership interest in the property as a result of the death, learn how to apply to be confirmed a successor in interest here.