Understanding
Rates & Fees

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. More importantly, you'll pay less than half the total interest cost of the traditional 30-year mortgage.

Many borrowers find the higher payment out of reach and choose a 30-year mortgage. To most, it still makes sense to go with a 30-year mortgage. Since our loans do not have any pre-payment penalty, you can always make extra principal payments to save interest and accelerate the maturity of your loan.

Points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them upfront at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing; however, you will have lower monthly payments over the term of your loan.

To determine whether it makes sense for you to pay points, you should compare the cost of the points to the savings on monthly payments created by the lower interest rate. Divide the total cost of the points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you actually begin to save money by paying points. If the number of months it will take to recoup the points is longer than you plan on having this mortgage, you should consider the loan program option that doesn't require points to be paid.

The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.

A lock is an agreement between the borrower and the lender that 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.

Once we have the necessary application paperwork, a copy of the sales contract and have preliminarily underwritten your loan, you are eligible to lock. Otherwise, your loan officer will contact you for the lock after we have reviewed your documentation and credit package.

We currently offer numerous options from a 30-day to a 60-day lock-in period. This means your loan must close and disburse within the specified 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.

To assist you in evaluating fees, we've grouped them into four categories: third-party fees, taxes and other unavoidable fees, lender fees and required advances.

Fees that we consider third-party fees include the appraisal fee, credit report fee, settlement or closing fee, survey fee, tax service fees, title insurance fees, flood certification fees and courier/mailing fees.

We will collect third-party fees and pass them on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee; a credit bureau is paid the credit report fee; and a title company or an attorney is paid the title insurance fees.

Typically, you'll see some minor variations in third-party fees from lender to lender. A lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. Some lenders absorb minor third party fees such as the flood certification fee, the tax service fee and courier/mailing fees.

Fees that we consider to be taxes and other unavoidable fees include state/local taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don't quote you fees that include taxes and other unavoidable fees, don't assume you are free of paying those fees. The lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.

Fees such as an origination charges, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible.

This is the category of fees that you should compare very closely from lender to lender before making a decision.

You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.

One of the more common required advances is called "per diem interest" or "interest due at closing." All of our mortgage payments are due on the first of the month. If your loan is closed on any day other than the first of the month, you'll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we'll collect interest from June 15 through June 30 at closing. This also means that you won't make your first mortgage payment until August 1. This type of charge should not vary from lender to lender and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed. It is simply a matter of when it will be collected.

Escrow - If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.

Mortgage Insurance - If your loan requires mortgage insurance, up to two months of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.

Homeowner's Insurance - If your loan is a purchase, you'll also need to pay for your first year's homeowner's insurance premium prior to closing. We consider this a required advance.

Mortgage insurance makes it possible for you to buy a home with a down payment of less than 20 percent. Mortgage insurance protects the lender against the additional risk associated with low down payment lending. Low down payment mortgages are becoming more popular, and by purchasing mortgage insurance, lenders are comfortable with down payments as low as 3-5 percent of the home's value. It also provides you with the ability to buy a more expensive home than you might have been able to afford if a 20 percent down payment was required.

The mortgage insurance premium is based on loan-to-value ratio, type of loan and amount of coverage required by the lender. Usually, the premium is included in your monthly payment and one to two months of the premium is collected as a required advance at closing. However, we also offer single-premium policies that accrue significant savings, compared to a monthly plan. Your loan officer can calculate a break-even point. Depending on how long you plan to stay in the home, a single premium plan can save you hundreds of dollars.

You may be able to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount: below 75 to 80 percent of the property value. Recent federal legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78 percent of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your lender.

The answer is simple: the purchase of a home is most likely one of the most expensive and important purchases you will ever make. You and your mortgage lender want to make sure the property is indeed yours: that no individual or government entity has any right, lien, claim, or encumbrance on your property.

The role of a title insurance company is to make sure your rights and interests to the property are clear and that transfer of title takes place efficiently and correctly. This ensures that your rights as a homebuyer are fully protected.

Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders and others who have an interest in real estate transfer.

Title companies typically issue two types of title policies:

1. Owner's Policy: This policy covers you, the homebuyer.
2. Lender's Policy: This policy covers the lending institution over the life of the loan.

Both policies are issued at the time of closing, if the loan is a purchase. If you are refinancing your home, you probably already have an owner's policy that was issued when you purchased the property, so we'll only require that a lender's policy be issued.

Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or, more likely, the information contained in the company's own title plant.

After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. If any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights once the company issues a title policy. The title company is also responsible for covering losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.

The fact that title companies try to eliminate risks before they develop makes title insurance significantly different from other types of insurance. Most forms of insurance assume risks by providing financial protection through a pooling of risks for losses arising from an unforeseen future event. On the other hand, the purpose of title insurance is to eliminate risks and prevent losses caused by defects in title that may have happened in the past.

This risk elimination has benefits to both the homebuyer and the title company. It minimizes the chances that adverse claims might be raised, thereby reducing the number of claims that have to be defended or satisfied. This keeps costs down for the title company and the premiums low for the homebuyer.