FAQ MORTGAGE

General Mortgage Questions

How much down payment will I need?

The minimum down payment required depends on the mortgage program you select. Usually at least 3% is required. If you put down less than 20% on your rate may be subject to our Low Down Payment Rate Adjustment.

If you are concerned about having enough money to purchase a home often time there are options for rolling your closing costs into either your interest rate or your loan amount. You will still need to come up with money for your down payment but this will help reduce the amount of additional money that you will need to bring to close.

Can I be pre-approved for a loan before I’ve found a property?
The best time to look for a mortgage is before you look for a house. By getting pre-approved now, you will know exactly what you qualify for before you begin shopping. Realtors and sellers will know you are a serious buyer because your financing is already arranged. This may be an advantage when making an offer. Your current income, debt and credit history is considered in order to pre-approve you and determine the amount for which you qualify.

Can I be pre-approved for a loan if I have credit problems?

If you are concerned about your credit, or have other questions about credit, go to our Home Buying Process page and read through Understanding Credit for more information.

Where do I go to Apply for a Loan?

• Mortgage companies
• Banks
• Credit unions
• Nonprofit community development and housing organizations
• Local, state, and federal programs

Do I need to sell my existing home before I apply for a new mortgage loan?

Absolutely not! You can apply for a new mortgage loan before you sell your current home. However, depending on your income and debt levels, you may need to sell your current home before you can close on your new home.

Why is an appraisal necessary? Can I use the tax value of the home?
Appraisals compare the current market value of your home to other homes in your area that have recently been sold. Tax values can sometimes be higher or lower and may not reflect the actual appraised value of the home. A current appraisal is necessary for the lender to justify the loan amount you've requested and is often required by secondary investors. You should not, however, rely on the appraisal for assurance about the condition of your home or as a guarantee of the value of your home.

How is the appraisal obtained?
After you have reserved your funds, a date and time for the property appraisal will be arranged. You will be asked to provide a contact name after you have reserved your funds. The appraiser will call the contact person you list for access to the property. If you are purchasing a home, you can list either your real estate agent or the seller's agent.

Who can tell me what my property taxes will be?
The seller and/or your Realtor should provide you with the current taxes for the property. Property taxes are reassessed from time to time, so this amount may change. If you would like to confirm what your taxes would be, you can contact the countyRecording Office.

What is a Good Faith Estimate?
Required by federal law, the Good Faith Estimate (GFE) is a written list of the estimated closing costs associated with your mortgage transaction, including the lender's charges along with the local closing agent's charges and fees. It also includes estimated amounts for real estate property taxes and homeowner's insurance.

What is a Truth-in-Lending statement?
Required by federal Law, the Truth-in-Lending statement provides detailed information about the total charges that you will incur over the life of the loan. It includes the Annual Percentage Rate (APR), the amount of interest you'll pay, the amount financed and schedule of payments, the total of your payments, and late payment charges.

What is a HELOC?
A Home Equity Line Of Credit is a secure line of credit using the available equity in the applicant's residence as collateral.

How do interest only products work?
A customer pays interest only payments for the first three, five, seven, or ten years of the loan. During the Interest Only period, the loan will be re-amortized at the remaining principal balance each month, allowing the customer to benefit from any principal curtailments made during the interest only timeframe.

After the fixed interest only period, the loan payments become fully amortized payments of both Principle and Interest for the remaining term. During this time, the interest rate adjusts every year, based on the one-year LIBOR (London Interbank Offered Rate) index plus a margin.

Why is the Annual Percentage Rate (APR) different from the interest rate?

The annual percentage rate is intended to reflect the total cost of your mortgage loan. To calculate the APR, lenders consider the interest rate on your mortgage loan, the term of the loan, and other loan fees such as closing costs, points, etc. Your monthly payment is calculated based on the mortgage note rate, not the APR. The APR will be higher than your interest rate, especially if you are paying any points.

To be used as a valid evaluation tool the APR must be loan specific. The actual APR will show up on the Truth-in-Lending statement that you will see once you have submitted your information and reserved your funds. When comparing loan programs based on APR make sure you ask each lender their criteria for determining the APR.

Rates and Costs

How often do interest rates change?

Interest rates change regularly with the fluctuation of the market. Once you lock or protect your rate, it will not increase as long as you close and fund your loan on or before the rate expiration date.

What is Rate Protection?
Rate protection gives you the opportunity to take advantage of a decreasing interest rate market with the confidence that if the market increases, you are protected. A cap is added to your interest rate. The capped rate is the maximum interest rate you will pay, even if rates increase, as long as you close and fund your loan by the lock expiration date.
However, if rates drop, you will have a one-time option to lock in at a lower rate. To do this, simply call your processor on the day you would like to lock in the lower rate. See your lender for additional information regarding Rate Protection.

What is Rate Float?
By opting to float, you have not selected or committed to any rate and point combination. Therefore, your ultimate rate is subject to both up and down market fluctuations until you decide to either rate-protect or lock your rate. See your lender for additional information regarding Rate Float.

What is Rate Lock?
By locking in your rate, you have committed to the rate and point combination that has been presented to you. Once you lock your rate, the rate and point combination will not change regardless of what happens with interest rates as long as you close on or before the rate lock expiration date.

When can I lock my rate?

If you have a contract on a property and meet the requirement of your lender. See your lender for additional information regarding Rate Float.

What if interest rates go down after I lock my rate?

Once you lock the rate, it cannot be changed. For that reason, it's important to consider carefully the timing of your rate lock. If you follow the market or plan to watch it closely, be sure you're comfortable with the trends you see before you lock. You may want to consider our rate protection program to help safeguard against changes in interest rates.

What happens if my loan does not close before the rate lock expiration date?

When you lock your interest rate, you are guaranteed to receive that rate as long as you close and fund your loan by the specified expiration date. If your loan closes and funds after this date, you are no longer guaranteed your locked interest rate. Instead, you will receive the higher of the current market rate or your locked rate. Please note that you cannot receive a lower rate by allowing your lock to expire.

What are points?

Points are a percentage of the loan amount paid at closing that affect your interest rate. For instance, on a $90,000 loan, 1 point = 1% or $900. How it works is that if you pay points, you buy down the rate. Alternatively, in exchange for a higher rate, the lender pays points to offset your closing costs. These are considered negative points. Negative points may be a wise option if you have limited funds to use at closing. Points are also disclosed as discount points. Whatever the name, they are itemized on your Good Faith Estimate and are typically paid at closing.

Are discount points tax deductible?

In many cases they are. Contact your tax preparer or the IRS to obtain a qualified opinion and the best expert advice.

If I'm short on cash, do I have options to help with my down payment and closing costs?

There are a number of options that may help you if you do not have much cash to purchase a home. You can look into low down payment programs. These programs may require as little as 3% for a down payment.  If you meet the criteria, you may be offered the option to roll your closing costs into either the loan amount or the interest rate.

If you choose the loan amount option, the amount due at closing will be added to your loan amount. The amount due over the life of the loan will increase but the amount you need to bring to closing will decrease.

If you choose the interest rate option, then the rate for the life of the loan will increase, as will your monthly payment, but the amount of cash you need to bring to closing will decrease.

You can also consider negative points. This means that in exchange for a higher rate, some lenders will contribute funds toward your closing costs.