|
|
Frequently Asked Questions |
|
|
|
What is involved in the online mortgage application?
Click here for an overview of the online mortgage application process. |
|
|
What are the differences between Pre-Qualification, Pre-Approval, and Loan Commitment? Although they are related, the three terms each signify a different level of approval from a lender.
Pre-Qualification:
Loan pre-qualification does not typically include an analysis of your credit report or an in-depth look at your true ability to buy a home. You can be pre-qualified by a lender, by a real estate agent or you can do it yourself. The term means that someone has taken a general look at your income and expenses and plugged them in to a debt-to-income ratio formula. Pre-qualifying yourself before you start looking for a home gives you a general idea of the price range you can afford. It will not guarantee an interest rate for you, and that factor and others affect the monthly payments a bank will allow you to make. Pre-Qualifying for a mortgage is easy and convenient – just contact a Scituate Federal Savings Bank Loan Officer and arrange for an appointment at a time and place convenient for you.
Pre-Approval:
When you are pre-approved for a mortgage, it means a lender has looked closely at both your credit report and your income and determined that you qualify for a loan. The lender will tell you the maximum amount of loan it will make, which loan programs you qualify for, and will discuss the interest rates it will offer for different types of loans.
Applying for a Pre-Approval for a mortgage is easy and convenient – just contact a Scituate Federal Savings Bank Loan Officer and arrange for an appointment at a time and place convenient for you. When you’re pre-approved, you can go shopping for a home with confidence about your buying power, but it still isn’t a guarantee that the lender will approve the loan.
Loan Commitment:
Scituate Federal Savings Bank issues a loan commitment after it has approved both the house and you. A home appraisal must meet our lending guidelines, which usually includes a stipulation that the home must appraise at or higher than the sales price. |
|
|
What information do I need to supply in support of my mortgage application?
You should bring as much financial information as possible. Typically, your loan officer will ask for:
- Copies of your most recent Bank Statements including but not limited to Checking, Savings, Mutual Funds, IRA’s and Stock Portfolio’s & 401K’s.
-
Copies of your last two (2) years complete Federal 1040’s including W-2’s. If self-employed, please include 1120’s and Profit & Loss Statement;
-
Copies of your most recent pay stub;
If you currently rent, copies of your last twelve (12) months canceled rent checks (front & back) as well as your landlord’s name & address;
-
Copies of current leases or tenancy at will for all rental properties as well as copies of current Real Estate tax Bills & Current Mortgage Statements;
-
If this is a Purchase, we need a fully executed copy of the Purchase & Sales Agreement and a copy of any cancelled check(s) representing the Purchase & Sales Deposit(s);
-
If this is a Refinance of an existing Mortgage please include a copies of your Quitclaim Deed or Original Owners Certificate of Title, the most recent real estate tax bill, your mortgage statement and equity loan statement (if applicable).
-
If the property is a Condominium, we will need a copy of the Master Deed, the Condominium Declarations and By-Laws, a Completed Condominium Questionnaire & Statement of Insurance, and the most recent annual voted Condominium Budget. |
|
|
What is the difference between Fixed-Rate Mortgage and an Adjustable-Rate Mortgage (ARM)?
A fixed rate mortgage is a loan where the interest rate charged and therefore, principal and interest payment, never change during the life of the loan. An Adjustable Rate Mortgage (ARM) is a loan where the interest rate and thus the monthly payment can change periodically. The changes in the interest rate are tied into the market rates that exist at the time the rate is subject to change.
Initial ARM rates are generally lower than fixed rates, but can adjust upward if interests rates go up. There is a predefined cap, which defines how high the interest rate can adjust at each adjustment and cumulatively over the term of the loan.
Fixed rate mortgages are beneficial to those who are on a fixed income, (adverse to interest rate change) and those who prefer fixed payment schedules.
ARMs are advantageous for those who do not plan to stay in their home for a long time, for those borrowers who do not qualify at higher fixed interest rates, and those who can financially handle fluctuating payments. |
|
|
Fixed vs. ARM, which should I choose?
Typically the starting rate for an Adjustable Rate Mortgage (ARM) is lower than for a fixed rate mortgage. This results in the starting payments on an ARM being less than for a fixed rate mortgage on the same amount.
Your Adjustable Rate Mortgage might also be less expensive over a long period as compared to a fixed rate if interest rates remain steady or move lower.
Against these advantages, you have to weigh the risk that an increase in interest rates would lead to higher monthly payments. In order to assess the risk you need to consider the following questions:
-
Is it likely that my income will increase enough to cover a higher mortgage payment if interest rates go up?
-
Will I have additional debts in the near future such as for a new car?
-
How long do I plan on owning this home?
-
Can my payments increase even if interest rates generally do not increase? |
|
|
How do Adjustable-Rate Mortgages (ARMs) work?
There are many types of (ARMs), but all have some common features.
One common feature of ARMs is an interest rate change that occurs after a stipulated number of payments have been made. The interest rate can increase or decrease depending on how the new interest rate is calculated. Typically, the interest rate change is based upon a predetermined index value and a margin. If a mortgagor currently has an interest rate that is pending adjustment, the new rate would be calculated by adding the current index rate and a margin. For example, if the mortgagor’s current rate were 6.000% with a 2.000% margin, the new rate would be determined by adding the current index rate (5.000% as an example) to the margin. In this example, the new interest rate would be 7.000%.
The maximum amount the interest rate can change during any adjustment period is usually fixed. This maximum adjustment is called the cap. ARMs also have a lifetime cap, preventing the interest rate from ever exceeding a predetermined rate.
|
|
|
|
"Caps" are associated with Adjustable Rate Mortgages (ARMs). Caps limit how much the interest rate can increase or decrease. Periodic Caps limit the increase or decrease per adjustment period, whereas a lifetime Cap limits the amount the rate can increase over the life of the loan. For example, Scituate Federal Savings Bank’s ARM programs stipulate that the interest rate on an ARM can increase or decrease up to 2% per adjustment period, but not more that 4% over the life of the loan. |
|
|
Can I lock my interest rate at time of application?
Contact your Loan Officer and he/she will review the rate lock options available to you depending on the loan type. |
|
|
In order to obtain my mortgage, do you require any tests on the property?
Scituate Federal Savings Bank typically does not require any inspections for residential mortgages. It is not uncommon for a homebuyer to require certain tests and inspections as part of the purchase and sales agreement. However, if there is an apparent concern regarding the property, test(s) may be required by the Bank. |
|
|
Can I use my own attorney?
Scituate Federal Savings Bank assigns an attorney to protect the interest of Scituate Federal during the loan process. This attorney will check the title to the property, prepare the loan documents and handle the loan closing. The costs for these services are part of the closing costs associated with the loan. The Bank will allow you to select your own attorney, at your own expense, to represent you at the closing. |
|
|
What are "closing costs"?
Closing costs are costs that you will incur in the process of obtaining your mortgage. They typically include fees such as (but not limited to) points, (if applicable), credit, flood certification, appraisal, legal, title insurance, plot plan, recording fees, tax service and hazard insurance service fees. Additionally, at closing, there are escrows for property taxes and Private Mortgage Insurance, if applicable. |
|
|
What other costs will be included in my monthly bill beside the principal and interest?
In addition to principal and interest, an escrow payment for property taxes and Private Mortgage Insurance (if applicable) will be included in your payment. |
|
|
How can I obtain a copy of my credit report?
The three major credit bureaus can assist you in obtaining a copy of your credit report. There are many websites that can provide that information, such as annualcreditreport.com. |
|
|
|
A point is the equivalent of 1% of the loan amount. For example, if the mortgage were $100,000.00, 1 point would be $1000.00. Usually interest rates are offered in combination with 0, 1, or 2 points. If you choose to pay 1 or 2 points, your interest rate will usually be lower. For example, rates that might be offered are 6.25% and 0 points, 6.00% and 1 point or 5.75% and 2 points. |
|
|
|
APR means Annual Percentage Rate. This should not be confused with your mortgage interest rate. APR is the yield the lender calculates on your mortgage when it takes into account other prepaid finance charges you will pay at closing, such as points, prepaid interest, flood certification, tax and hazard insurance service fees. Your actual monthly payments are based on the mortgage interest rate, not the APR |
|
|
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance is usually required when your down payment is less than 20%. It protects the Bank against loss if the borrower defaults on the loan. The monthly cost will vary depending upon the type of mortgage you have, the PMI product, and the amount of your down payment |
|
|
Can I obtain PMI by myself?
No. The Bank arranges for PMI coverage on your loan. PMI products vary. When you apply for your loan, ask the Loan Officer what options are available. |
|
|
What is a “Good Faith Estimate”?
A Good Faith Estimate will contain estimates of all costs that are associated with closing your loan. It must be provided to you within 3 business days of your mortgage application. |
|
|
If my loan is sold, will the terms of my mortgage change?
The terms of your mortgage will not change even if your loan is sold. |
|
|
|
Escrow payments are additional payments paid each month for the purpose of taxes, insurance, and PMI if necessary. The Bank collects these payments from you on a monthly basis and is responsible for making timely disbursements of escrow funds to pay these bills. |
|
|
Where do I make my payment?
You can make your payments by any of the following methods:
-
Arrange for a direct withdrawal of your payments from your Scituate Federal Savings Bank deposit account.
-
Save valuable time and sign up for online banking and bill pay – making your payment is then just a click away – 24 / 7.
-
Return the payment by mail - be sure to allow enough time so that it is received for processing by the due date.
-
Stop by any of Scituate Federal Savings Bank’s convenient branch locations. |
|
|
Will I receive a monthly statement, or will I use a coupon booklet?
You will receive a monthly statement. |
|
|
Can I make additional payments on my mortgage?
Yes, you may make additional principal payments on your loan at any time. |
|
|
|
Flood Insurance is a type of real property insurance coverage to protect against losses arising from floods. The National Flood Insurance Reform Act of 1994 requires all properties located in a Special Flood Hazard Area to carry flood insurance for the life of the loan. |
|
|
How do I know if my property is in a Special Flood Hazard Area?
During the processing of your application, the Bank will notify you if your property is in a Special Flood Hazard Area. You will receive a letter and a Disclosure of Flood Hazards form. |
|
|
How much flood insurance coverage am I required to carry on my residential property?
You will be required to carry enough to cover our mortgage with you or 100% of the replacement cost (maximum $250,000 for single residential buildings). |
|
|
What if I refuse to obtain flood insurance on my property?
The Bank’s policy is that we will not schedule a closing without written acknowledgement that the borrower has obtained or is in the process of obtaining flood insurance. |
|
|
What if I refuse to carry the flood insurance for the life of the loan?
If the borrower refuses to carry flood insurance for the life of the loan, the Bank is required by law to purchase the insurance and may charge the borrower for the cost of the premiums and any fees incurred by the Bank in purchasing the insurance. |
|
|
What if I am not in a flood zone at the time of origination, but later my property is determined to be in a Special Flood Hazard Area, am I required to purchase flood insurance?
Yes, during the life of the loan, if your property is determined to be in a Special Flood Hazard Area, you are required by law to obtain flood insurance for the life of the loan. In addition, if your loan is determined to no longer be in a Special Flood Hazard Area, the Bank will notify you |
|
|
|
|
