Mortgages - Purchase - Refinance

Inquiries made as a result of applying for a mortgage do affect your credit report. Generally, you can expect an inquiry to lower your score by 2 pts (+/-1). However, many states treat multiple inquiries made by multiple lenders within 30 days as one inquiry.

What is the difference between the interest rate and the annual percentage rate (APR)?
The interest rate is the contractual rate that you agree to pay for your mortgage loan. This rate is used to calculate the interest portion of your monthly mortgage payment. Annual percentage rate (APR) includes your interest rate and factors in the prepaid finance charges to give you an average yearly rate. APR can be a good tool to use when you're comparison shopping for rates.

What if rates change before I close on my home loan?
Many lenders offer a 60-day commitment that locks in your interest rate from the date that you apply. If the rate goes up before closing, you will retain the rate you obtained at the time of application. If the interest rate goes down, you can revise to the new lower rate by paying a nonrefundable revision fee at least ten days before closing.

Longer rate locks are also available (up to two years in the case of construction loans). To obtain this longer commitment, you must typically make a deposit with the lender a fee equal to 1% of the loan amount immediately after loan approval. This fee will be applied toward your down payment and closing costs, provided that you do not reviseor cancel your loan (in which case the fee will not be refunded to you). If interest rates should rise within that eight-month period, you will retain the interest rate in effect at the time you applied for your loan.

What costs are involved in getting a mortgage?

Down Payment: Money that's due up front on the home purchase. It will decrease the amount of money you need to borrow. You can put down as little as 3%, although many people put down between 10% and 20%. For example, if you buy a home for $100,000 and have $10,000 for the down payment, you're putting 10% down and will have to finance $90,000 with a mortgage.
Private Mortgage Insurance (PMI): This is insurance provided by a private company that protects lenders against loss in case a borrower defaults on the mortgage loan. Generally, you do not have to pay PMI if you have a down payment of 20% or more.
Closing Costs: These include fixed costs (application fee, loan origination fee, document preparation fee and escrow fee) and variable costs (fees for appraisal, credit report, flood zone determination, doc. stamps, intangible tax, state Endorsement, pest inspection, recording fees, survey and final review). Closing costs vary by lender.
Prepaid Interest: This amount varies, depending on when your mortgage loan is filed with the county recorder's office. You will be charged interest from the date the mortgage loan is filed to the end of the month. That can be between one day and 31 days of interest. For example, if your mortgage loan is filed on the 15th of the month, you would be charged for 13-16 days of interest in escrow (depending upon the month when it was filed). Your first mortgage payment would be due on the first day of the second month following the recording of your mortgage . For example, if your mortgage loan is recorded on January 15, you would pay 16 days of interest when the loan is closed. The first monthly payment would be due March 1.
Title Insurance: An insurance policy that protects the buyer, mortgagee or other party from financial losses resulting from problems or defects with the property's title.
Points: This is a one-time charge that you can choose to pay in order to lower the interest rate on your loan. Each point is equal to one percent of your loan amount. For example, if your loan amount is $90,000, then one point is equal to $900. You can select zero, one, two or three points to pay on your fixed rate loan. Each additional point lowers your interest rate a little more.
Tax Reserves: If the ratio of your loan to the value (LTV) of your property is greater than 80%, lenders requires that your real estate taxes be collected monthly with your mortgage payment. Your real estate taxes are held in escrow until your municipality requires payment. Your lender will then issue payment for your real estate taxes on your behalf. The number of months to be held in escrow to set up the tax reserve will be based on when the loan is filed and when the next tax bill is due. The dollar amount collected each month for the tax reserve will be based on the last available tax bill. If you prefer to pay your own real estate taxes and have a loan-to-value ratio of less than 80%, lenders may consider your request on an individual basis.

Does it make sense for me to refinance?
What to consider:
1. Have interest rates gone as low as you think they will in the near future? Check articles in The Wall Street Journal , the business section of newspapers, and business magazines for expert opinions on economic trends.
2. Compare your existing interest rate with current market rates.
Is there enough of a difference to warrant paying the closing costs and points associated with refinancing?
3. Do you plan to remain in your home long enough to recapture the costs involved in refinancing? Even though there are up-front costs involved in refinancing, you will save money over time because your new interest rate is lower.

How can I apply additional funds towards the principal balance of my mortgage loan?
You may make additional principal payments in one of two ways. The first way being to send your lender a check. Include with this check a short note referencing your account number and requesting that the funds be applied to the principal balance of your mortgage loan. The second way would be to apply a set amount of funds each month to the principal of your mortgage loan. To do this, you may make arrangements with your local branch office to have the funds automatically withdrawn each month from your Third Federal checking account.

Can I pay my own property taxes?
Lenders will generally allow you to pay your own property taxes once you have gained 20% equity in your home.

Can I have PMI (Private Mortgage Insurance) removed from my mortgage loan?
Many lenders will allow you to discontinue PMI payments once you have obtained 20% equity in your home without refinancing. In such cases, you will need to send a written request to your lender to have your file reviewed. In order for your insurance to be cancelled, you need to have maintained a good payment record over the previous two years and have no secondary debt held on the property.

Can bi-weekly payments save me money?

By making 26 bi-weekly half- payments you are effectively making 13 whole mortgage payments a ayear, and paying off your mortgage more quicly that way, saving you interest costs. However, many lenders and 3rd-party companies offer this plan for a cost. Be careful that the cost of the plan isn't more than you are hoping to save!