Mortgage FAQ's

Ask your Hometown Bank mortgage associate for a written mortgage pre-qualification before you start looking at homes. You want to know what you can afford, and sellers prefer pre-qualified buyers. This gives you an advantage over non pre-qualified homebuyers and may be the differentiating factor that closes the deal.

Always get the seller to sign a written contract that details every point of agreement. There is no such thing as a guaranteed verbal agreement, and "we shook on it" will not protect your rights.

Rates alone don't tell the whole story. A reputable lender will provide you with a Loan Estimate (LE) of all loan fees within three business days of receiving your accepted offer and application. The total cost of your loan includes the rate plus any fees and both discount and origination points, all of which should be broken down individually. Watch for hidden obligations and terms such as

• prepayment penalties
• escrow impound requirements
• short-term rate locks
• high down payments

Research your home insurance options as soon as the seller accepts your purchase offer since you don't want to first think about this at your closing.

Allow plenty of time to close your loan. There are many elements to a real estate transaction. Do not terminate your rental agreement or reserve that moving van until you know your move-in date.

The right lender may not be the one you already know and trust. Do your homework, check rates and available programs.

Determine when you will break even. Divide the transaction cost by your monthly savings. This will calculate the number of months you would have to stay in your home to break even. Compare that to how long you want to stay.

Rates alone don't tell the whole story. A reputable lender will provide you with a Loan Estimate (LE) of all loan fees within three business days of receiving your application.

Read what you're signing. Closing documents contain many confusing terms. You should receive a Closing Disclosure (CD) at least three days prior to the closing date of your loan.

Supply your lender with requested documents right away. Delays can cost you time and money.

Refinance your first mortgage before applying for a second. Lenders take into consideration the combined total of first and second loans when refinancing the first. Getting a second mortgage could cause your refinance request to be turned down. Some programs let you apply for both first and second mortgages at the same time.

This depends on many factors. The primary reason customers refinance is to save money. They obtain a lower interest rate that, in turn, lowers their monthly payment. Or, they shorten the term of their loan, which reduces the total interest they would pay over time. When considering refinancing for a lower interest rate, compare the difference in monthly payments to the expenses incurred by refinancing. This will determine the number of months to recapture the expenses. Generally speaking, if you plan to be in the home longer than the time period it takes to recapture the expenses, consider refinancing.

If the above tips don't help you come up with an answer, contact your local Hometown Bank loan officer. No matter your reasons for wanting to refinance, having a trusted partner in your corner will ensure you make an informed decision.

The APR measures the "true cost of a loan" and can help when comparing different loan programs among competing lenders. It is expressed as an interest rate that is the sum of your mortgage rate plus other costs associated with your loan. The APR does not determine your payments.

Lenders are required by law to state the APR in their rate advertising. While the APR can help you compare loans, a loan estimate is more reliable.

PMI protects lenders from costs associated with foreclosure. It is typically mandatory when purchasing a home with less than a 20 percent down payment. The alternative to paying PMI would be to come to your closing with a higher down payment.

The more you put down on a home, the less your monthly PMI premium, and vice versa. PMI is a part of your monthly mortgage payment.

Lenders use this credit score to help determine the odds that borrowers will meet their financial obligations. This score is based on a formula that consolidates a borrower's credit history into a single value. Higher numbers indicate a better credit risk.

FICO scores are based on several factors, including length of time a person's credit has existed, residency, late payments, bankruptcies, collections and more.

Credit scores are computed by three individual credit bureaus – Experian, Trans Union and Equifax. Some lenders choose to use the middle of the three scores, but there are no established rules regarding which score a lender will base a loan on.

Borrowers receive a guaranteed interest rate before closing a mortgage loan. This rate lock includes four components:

• the loan program under which they're borrowing
• the interest rate
• any points being paid to obtain the loan
• the term of the lock

Longer terms mean higher points or interest rate, as the lender takes a risk by allowing you to lock in a rate. In the event rates increase, the lender still must honor the original rate promised.

If you're up-to-date with your mortgage payments but believe you are ineligible to refinance because your home's value has dropped, the Home Affordable Refinance Program (HARP) may be just what you need to refinance your loan. This federal program helps Americans secure a mortgage they can better afford.

To be eligible for HARP

• Loan must have been acquired by Fannie Mae/Freddie Mac on or before May 31, 2009.
• Homeowner must be current on mortgage payments at the time of application with no more than one late payment over the last 12 months.
• Homeowner must receive the benefit of either a lower interest rate, amortization, monthly payment or a more stable mortgage product.

Things to keep in mind

• A cash out – receipt of additional funds on the loan to pay off other debt – is not available.
• If your mortgage has a fixed-rate and is backed by Fannie Mae or Freddie Mac, there is no maximum loan-to-value ceiling.
• PMI (private mortgage insurance) may still be required.
• Applicants may be able to forgo the appraisal.

Steps to refinance through HARP 

1. Find out if your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
• Fannie Mae1-800-7FANNIE (7 a.m. to 7 p.m. CST)
• Freddie Mac1-800-FREDDIE (7 a.m. to 7 p.m. CST)
2. The sites above should indicate if your loan was originated on or before May 31, 2009.
3. Contact a Hometown Bank mortgage loan officer:
• Email: Mortgages@HTBWI.com
The HARP Program will remain in effect until Dec. 31, 2013 for loans originally sold on or before May 31, 2009.