Home Center Frequently Asked Questions How are interest rates determined? What is an Adjustable Rate Mortgage (ARM)? How do I know if it's best to lock in my interest rate or to let it float? How much money will I save by choosing a 15-year mortgage rather than a 30-year mortgage? Who should consider a 15-year mortgage? Advantages of a 15-Year Mortgage. Disadvantages of a 15-year mortgage. When can I lock in my interest rate and points? What is rate rock? Are there any prepayment penalties? What are closing costs? What is title insurance and why do I need it? What is Private Mortgage Insurance?

Home Loan Center

Q: How are interest rates determined?
A: Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.

Q: What is an adjustable rate mortgage?
A: An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The trade off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly.

For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years.

Selecting a mortgage may be the most important financial decision you will make and you are entitled to all the information you need to make the right decision. Don't hesitate to contact a Mortgage Loan Officerif you have questions about the features of our adjustable rate mortgages.

Q: How do I know if it's best to lock in my interest rate or to let it float?
A: Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down.

If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock-in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission.

If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking. After you apply, you can lock in by contacting a Mortgage Loan Officer.

Q: How much money will I save by choosing a 15-year mortgage rather than a 30-year mortgage?
A: A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more important - you'll pay less than half the total interest cost of the traditional 30-year mortgage.

However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.

Q: Who should consider a 15-year mortgage?
A: The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.

Q: Advantages of a 15-year mortgage.
A: The 15-year fixed rate mortgage offers two big advantages for most borrowers:

1. You own your home in half the time it would take with a traditional 30-year mortgage.
2. You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates substantial savings for 15-year fixed rate borrowers.

Q: Disadvantages of a 15-year mortgage.
A: The following:

1. The monthly payments for this type of loan are roughly 10 to 15 percent higher per month than the payment for a 30-year.
2. Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the tax advantage of deducting more mortgage interest.

Q: When can I lock in my interest rate and points?
A: You can lock in your interest rate and points as soon as your loan is approved.

Q: What is a rate lock?
A: General Statement

A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan's interest rate and points are guaranteed. Should interest rates rise during that period, we are obligated to honor the committed rate. Should interest rates fall during that period, the borrower must honor the lock.

We currently offer a 30 or 60-day lock-in period. This means your loan must close and disburse within this number of days from the day your lock is confirmed by us.Once we accept your lock, your loan is committed into a secondary market transaction. Therefore, we are not able to renegotiate lock commitments.

Q: Are there any prepayment penalties?
A: None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.

Q: What are closing costs?
A: When you apply for a loan, the lender or mortgage broker is required to give you a Good Faith Estimate (GFE) of settlement service charges you will likely have to pay. If you do not get this Good Faith Estimate when you apply, the lender or mortgage broker must mail or deliver it to you within the next three business days.

Be aware that the amounts listed on the Good Faith Estimate are only estimates. Actual costs may vary. Changing market conditions can affect prices. Remember that the lender's estimate is not a guarantee. Keep your Good Faith Estimate so you can compare it with the final settlement costs and ask the lender questions about any changes.

Q: What is Private Mortgage Insurance?
A: Private Mortgage Insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with a low down payment loan. To purchase a home without mortgage insurance, you would need to make a down payment of at least 20% of the price of the home. On a $200,000 home, you would need to come up with $40,000. With private mortgage insurance, you’re able to purchase a home with much less down.

Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact a Mortgage Loan Officer.