FAQs

Home Buying
Refinancing
 

How much cash will I need for closing costs?

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.

 
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How much home can I afford?

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.
  • Your credit history.
 
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What types of mortgages are available?

  • 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 terms 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 second mortgage. 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).

Learn about mortgage choices.

 
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What are the benefits of a 15-year mortgage?

A 15-year mortgage allows you to own your home in half the time of a conventional mortgage with a 30-year term. Although payments are higher with a 15-year mortgage, you'll save thousands of dollars in interest and build equity faster.

 
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Are there any special programs for first-time homebuyers?

There are 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.
  • Competitive interest rates.
  • Manageable payments for every budget.
  • Reduced closing costs and mortgage loan fees.

Other restrictions may apply.

 
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What are the tax advantages of owning 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 equity 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.

 
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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.

 
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What is an impound/escrow account?

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.

 
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Can I get a loan if I'm not a U.S. citizen or if I live outside the country?

Yes. As long as the property you are buying or refinancing is in the United States.

 
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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.

 
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Should I refinance my mortgage?

There are generally three reasons to refinance:

  • Lower your monthly payments.
  • Pay off your mortgage faster.
  • Take cash out of your property.

Interest rates and the term of your mortgage can affect your decision.

 
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What are the various closing costs involved in refinancing?

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 actual 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. They include items you pay whether or not you refinance (for example, interest, taxes, and hazard insurance).

All together, closing costs typically range 2% to 3% of your loan amount. You'll be provided with an estimate of your closing costs soon after your application has been received. Any prepayment penalty on a loan being refinanced will increase the amount required to close. If there is enough equity in the home, the closing costs may be included in the new loan amount to keep your out-of-pocket costs to a minimum. The estimated closing costs 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.

 
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How much equity do I need to refinance?

Most refinance loan programs require at least 10% equity in your home to refinance.

 
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Can I combine my first and second mortgages (equity line or loan) when I refinance?

If it has been at least 12 months since you secured the second mortgage (or had a withdrawal on an equity line) and still have 10% equity in the home, you may be able to consolidate it with the first mortgage.

 
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Can I refinance if my home is currently for sale?

You can refinance as long as your home has not been for sale within the last six months.

 
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Will a prepayment penalty affect my refinance?

Prepayment penalties on your existing mortgage could make refinancing more costly. Check the details of your current loan agreement and be sure to factor in the cost of any prepayment penalty when you consider the benefits of refinancing.

 
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Do I need to get an appraisal when I refinance?

Yes. However, some banks will not require you to do so if you are a current customer.

 
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How does a refinance closing work?

The refinance closing is handled the same way your loan was closed when you first purchased your property. After your loan is approved, you'll receive copies of documents you'll need to sign at closing. Depending on where you live, the closing takes place at the office of a closing agent or it could involve a meeting where all related parties are present.

 
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