Closing costs generally range from 2% to 3% of your loan amount. Closing costs can be divided into three main categories:
Lender fees. Fees can include origination, points, application, credit report, and appraisal.
Third-party fees. These fees vary by state and the company you select to close your loan. They can include fees for closing, title exam, title insurance and recording.
Pre-paid items. These are items collected at the time of closing but are not really considered costs (for example, interest, taxes, and hazard insurance).
You'll be provided with an estimate of your closing costs soon after your application has been received. These estimates will change if you change the product type or loan amount. If this should occur, be sure to ask how the changes will impact your closing costs.
The amount of home you can afford is based on the amount of mortgage loan you can comfortably support. Generally, the amount of mortgage you qualify for is based on three factors:
Your monthly payments as a percentage of income.
How much cash you have for the down payment and closing costs.
Fixed-rate mortgage. You pay the same interest rate and same monthly payment of principal and interest for the duration of the mortgage. The most common are 30, 20 and 15 years. Fixed-rate mortgages are best if you plan on being in your home for a while.
Adjustable-rate mortgage (ARM). The interest rate stays fixed for an initial interest rate period, which ranges from 1 to 7 years. Then the rate will adjust up or down annually for the life of the loan based on a specified index. An ARM is a good option if you believe interest rates will go down over the next few years or if you plan on staying in your home 5 to 7 years or less.
Combination loan. A loan where you receive a first mortgage combined at the same time with a . This option may help you avoid the costs of private mortgage insurance (PMI) and/or the higher rate of a jumbo loan with as little as 10% down. The most popular combinations are 80-10-10 (80% first, 10% second, 10% down), 80-15-5 (80% first, 15% second, 5% down).
A 15-year mortgage allows you to own your home in half the time of a conventional mortgage with a 30-year . Although payments are higher with a 15-year mortgage, you'll save thousands of dollars in interest and build equity faster.
Are there any special programs for first-time homebuyers?
Bank of America offers special mortgage programs for individuals who meet certain income requirements, who are financing property in certain census tracts, or who meet other special requirements.
Lower down payments than most other financing options so you won't need as much cash to buy a home.
Income tax reduction. In the early years of a mortgage, most of your monthly payment covers interest on the mortgage. In most cases, the mortgage interest (and property tax) is deductible from your taxable income, lowering your overall tax bill.
Therefore, your after-tax cost of home ownership may be lower than renting. There may be tax implications if you later sell the home at a profit. Consult your tax advisor for more information.
Tax deductible borrowing power. As your home increases, you can borrow against it for almost any need with a home equity loan or line of credit.
Because your home equity loan or line of credit is backed by the equity in your home, you may be able to deduct that interest from your taxable income. This could lower your final tax bill. See a tax professional for complete details.
Should I get prequalified for a mortgage before I shop for a home?
Getting prequalified for your mortgage is an important step before you shop for a home. It tells you how much home you can buy and makes applying for your mortgage easier. A mortgage prequalification can also give you additional leverage with a seller in negotiating the best possible terms of the sale.
How long will it take to get prequalified for a mortgage?
You can get a response in minutes when you prequalify for a mortgage. There are five easy steps involved in the prequalification process with an easy form to complete.
Can I complete a prequalification form I've already started?
Yes. You can return anytime to complete your prequalification form with Check Your Application, a service of Bank of America. All you do is sign in using your e-mail address and the password you selected when you started the form.
What do I do if I forget my password to complete my mortgage prequalification form?
It's easy to get a new password. All you do is give us your Social Security number. We'll e-mail you a new password to the e-mail address you provided in your prequalification form.
Upon completing a prequalification form, you will receive a loan offer and interest rate quote. If you accept, and want to lock in the rate quoted online, call the number shown on the acceptance screen within one hour. Or, a Bank of America loan consultant will contact you by telephone within 48 business hours to verify information you submitted in your prequalification form and to offer the option to lock in a current rate.
In addition to the principal and interest payment on your mortgage loan, you may elect to impound additional funds each month in an impound/escrow account to pay for property taxes and insurance. With some mortgage programs, impounding for taxes and insurance may be required.
Having an impound/escrow account allows you to put aside a small portion each month toward the costs of insurance and property taxes. You send the additional funds each month when you make your mortgage payment. Bank of America holds the money in an impound/escrow account and makes the payments from the account when they are due.
It's easy to follow your mortgage activity, manage your account online and even register for free automatic payment from any checking or savings account with Service My Mortgage, a service of Bank of America.
Customers have several automated payment options online. Bank of America offers online bill payment and presentment though the Bank of America Bill Pay service or through any of over 400 bill payment services.
When will I receive my year-end statement of interest paid for tax purposes?
Year-end interest-paid statements (IRS Form 1099) are mailed out by the end of January. You should expect to receive your statement in early February. Contact us if you do not receive it by February 15.
if you do not receive it by February 15.