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Loan Programs, Rates, and Fees

What is a fixed rate mortgage?
What is an adjustable rate mortgage?
Is a fixed rate or adjustable rate mortgage better?
How much money will I save by choosing a 15-year loan rather than a 30-year loan?
Is comparing APRs the best way to decide which lender has the lowest rates and fees?
Should I pay points in exchange for a lower interest rate?
How do I know if it’s best to lock in my interest rate or to let it float?
Are there any prepayment penalties charged for these loan programs?
What is your Rate Lock Policy?
When can I lock?
Tell me more about closing fees and how they are determined:
What is title insurance and why do I need it?
What is the maximum percentage of my home’s value that I can borrow?

What is a fixed rate mortgage?

A fixed rate mortgage is a home loan with steady interest rates and monthly payments that do not change throughout the life of the loan. Fixed rate mortgages are available in varying terms from 10 to 30 years.

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What is an adjustable rate mortgage?

An Adjustable Rate Mortgage, or ARM, means the interest rate adjusts on a regular schedule to correspond to current rates, usually once or twice a year. The interest rate and payments rise and fall with the index, such as the Treasury Bill rate, Prime rate, or LIBOR. ARMs come with an interest rate cap that limits the total amount your rate can change over the life of the loan.

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Is a fixed rate or adjustable rate mortgage better?

No one loan product is objectively better than another. The best mortgage for you depends on a variety of factors, including your financial situation and housing goals. Generally speaking, adjustable rate mortgages (ARMs) offer lower initial interest rates than fixed rate loans, but also have the potential to fluctuate every month, every six months, or every year, depending on the type of adjustable mortgage you get. An ARM therefore may be more attractive to homeowners who plan to sell their home in the timeframe before the adjustable rate surpasses a fixed-rate loan. On the other hand, homeowners who plan to remain in their home, or who want more stability in their rate and monthly payments, may find a longer-term 15, 20, or 30 year fixed rate more attractive. A fixed interest rate provides homeowners with a stable mortgage payment that does not change. Ask one of our Home Loan Lenders about First Bank Financial Centre’s adjustable, short term fixed, and long term fixed rate loan programs to see what can best help you with your individual goals.

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How much money will I save by choosing a 15-year loan rather than a 30-year loan?

A 15-year fixed rate mortgage gives you the option to own your home free and clear in 15 years, unless you refinance before paying the loan in full. 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 importantly - 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.

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Is comparing APRs the best way to decide which lender has the lowest rates and fees?

The Federal Truth in Lending Act requires all financial institutions disclose the Annual Percentage Rate (APR) when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring some of the closing fees charged at closing be included, in addition to the interest rate, to determine the cost of financing over the full term of the loan. For adjustable rate mortgages, the APR can be complicated. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments. You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that's best for you. The APR doesn't include all the closing costs. Consider the total fees, possible rate adjustments in the future if you are comparing adjustable rate mortgages, and consider the length of time you plan on having the mortgage. Don't forget the APR is an effective interest rate - not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.

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Should I pay points in exchange for a lower interest rate?

Points are considered a form of interest. A point is equal to one percent of the loan amount. You pay them at your loan closing in exchange for a lower interest rate. 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 monthly payments savings 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.

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How do I know if it’s best to lock in my interest rate or to let it float?

Mortgage interest rate movements are as hard to predict as the stock market. 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 to do so. Before you decide to lock, make sure your loan can close within the lock-in 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 a second mortgage on your home that won't be paid off with this loan, allow some extra time since we'll need to contact that lender to get their permission to originate your new loan as a first mortgage. You may want your rate to “float” instead of locking. After you apply, you can discuss locking in your interest rate by contacting your Home Loan Lender.

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Are there any prepayment penalties charged for these loan programs?

None of the loan programs shown on our Website have prepayment penalties, meaning you have the ability to prepay your loan and refinance if rates fall. If you do not qualify for a Website program, our Home Loan Lenders will review alternative programs that are available to you. If a loan program with a prepayment penalty is offered to you, you will also be offered the same loan without a prepayment penalty so you can compare rates and decide which option is best for you.

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What is your Rate Lock Policy?

General Statement

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

Lock-In Agreement

A lock is an agreement by 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 locked rate.

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When can I lock?

Within 24 to 48 hours of submitting your on-line application, a Home Loan Lender will contact you to discuss interest rate and lock options.

Fees

We do not charge a fee for locking in your interest rate.

Lock Period

We currently offer lock-in periods of 30, 45, 60, and 90 days. This means your loan must close and disburse within this number of days from the day your lock is confirmed by us.

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Tell me more about closing fees and how they are determined:

A home loan often involves fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker should be able to give you an estimate of their fees.

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What is title insurance and why do I need it?

If you've ever purchased a home, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan, or you are refinancing, you may be wondering why you need another insurance policy.

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 function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests 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 types of policies are issued at the time of closing for a one-time premium, 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 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. Once a title policy is issued, 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. They are also responsible to cover 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; say a fire, accident, or theft. 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.

Buying a home is a big step emotionally and financially. With title insurance you are assured that any valid claim against your property will be borne by the title company, and the odds of a claim being filed are unlikely.

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What is the maximum percentage of my home’s value that I can borrow?

The maximum percentage of your home’s value depends on the purpose of your loan, how you use the property, and the loan type you choose.

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