Home Loan FAQs
Rates and Fees
- What is an origination fee?
The amount charged for services performed by Hutchinson Credit Union.
- What are lender fees?
Lender's fees are fees that offset the cost of producing the loan. They may be referenced by different names, such as, processing fees or underwriting fees.
- How are rates determined?
Rates are determined by the bond market and other financial indicators. These rates can change daily or even more than once within the same day.
- How can I compare rates and fees when shopping for a mortgage?
When comparison shopping, look at points, fees and the Annual Percentage Rate (APR). The APR includes the fees that are charged on your loan. Although one lender may have a slightly lower rate, they may charge more fees, and hence have the same APR as a lender with the slightly higher rate.
- What is the difference between APR and interest rate?
The APR (annual percentage rate) reflects the cost of your mortgage loan as a yearly rate. It also incorporates the cost to obtain the loan, such as discount fees and loan origination fee. The interest rate is the actual note rate.
- Why is the Annual Percentage Rate (APR) on the Truth-in-Lending disclosure higher than the rate shown on my mortgage note?
The rate reflected on the APR shows the cost of the credit as a yearly rate. This rate is generally higher than the rate stated on your mortgage note because, in addition to the interest rate, APR includes other costs such as origination fee, loan discount points, pre-paid interest, and mortgage insurance. The APR allows you to compare the total cost of financing your loan among various lenders.
- What is prepaid interest?
This is the interim interest that accrues on the mortgage loan from the date of the loan closing to the beginning of the period covered by the first monthly payment. For example, if your closing date is scheduled for June 15, the first mortgage payment is due August 1. We will calculate a per-day interest amount that is collected at the time of closing. This amount covers the interest accrued from June 15 to July 1.
- What is the difference between 'locking in' an interest rate and 'floating'?
If you are concerned that interest rates may rise during the time your loan is being processed, you can "lock in" the current rate for a short time, usually between 30 and 180 days. When you "lock in" to an interest rate, you are guaranteed that rate for that agreed upon length of time. The benefit is the security of knowing the interest rate is fixed if interest rates should increase. If you are locked in and rates decrease, you will not usually get the benefit of the decrease in interest rates. If you choose to "float" or defer "locking in" an interest rate, your rate will fluctuate with the market and will be subject to both upward and downward trends in the market. The benefit to floating a rate is if interest rates were to decrease, you would have the option of locking into a lower rate.
The Application Process
You can typically apply for a pre-approved mortgage prior to signing a purchase agreement for a home. A pre-approval can also add to your negotiating strength when you are ready to make an offer on a home.
- How do I apply for a mortgage?
We can take your application in person, by phone, or online. An application typically takes 30-60 minutes.
- How do I determine which mortgage product will meet my needs?
Everyone's situation is different. Most people will benefit from either consulting by phone or in person with a mortgage professional who is committed to discovering your needs, and helping you match those needs with a suitable home loan.
- What documents will typically be requested when I make application for a first mortgage loan?
We may request: W2's, paystubs , bank statements, and the purchase contract on the home you are buying. Depending upon your situation, other documents may also be needed.
Approval & Closing
- How long does it take to obtain loan approval?
Depending on your credit history, down payment, and the loan program selected, we can usually approve you immediately.
- How long will it take to close if I applied for my mortgage through a "pre-approval" program?
If you applied through a "pre-approval" program and were approved, we can usually close within 2-3 weeks after a purchase contract has been signed.
- If I refinance my existing loan with you, will I have to pay all the closing costs again?
Typically, yes, as there is a cost to process any new loan application. This cost may include fees paid to third parties, such as the appraisal provider and the title and closing providers.
- Can you include my closing costs in the loan amount?
On a purchase transaction, you typically cannot finance your closing costs into the loan amount. However, we have several special programs under which you may be able to finance some, or all, of the costs. If you are refinancing, you may be able to refinance some, or all, of your closing costs.
- How quickly can you close on my home loan?
We can usually close 2 to 3 weeks after you have agreed on a purchase contract for a home. If you need more time, you can take as long as you need, while still closing prior to any rate lock expiration dates.
- Do you require title insurance?
Yes, a Mortgagee's Title Insurance Policy will be required on purchase transactions.
- What homeowner's insurance requirements will I need to meet at closing?
We will require a one-year paid receipt for homeowner's insurance policy for at least the amount of the mortgage at the loan closing.
- What is title insurance?
Title insurance provides the lender and the buyer (if you purchase owner's coverage) with coverage for losses resulting from specific title defects listed in the policy. In cases where land and property have changed hands over time, there is always the possibility an error has occurred. If an error has occurred, it may be that someone else may be in title to or have an interest in the property, that improvements encroach on property lines or that other similar problems may exist. In these scenarios, if you do not have title insurance you could lose your investment in your home.
- Private Mortgage Insurance
Private Mortgage Insurance is required to all loans exceeding 80% Loan to Value.
- What is PMI and why is it required?
Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default. If you make a down payment of less than 20%, even if you have a good credit profile, lenders generally require private mortgage insurance.
- What is the minimum down payment required by a lender in order to eliminate PMI?
Typically, on a primary residence, the minimum that you need to put down to eliminate PMI is 20%. If you are putting less than this down, but wish to avoid PMI, your lender may have alternative products and pricing options they may offer in lieu of PMI.
- How much does mortgage insurance cost?
The cost of PMI is divided into two parts. The first part is a payment made at the time of closing. The second is an ongoing payment made each month with your principal and interest payment.
- What is an escrow account?
An escrow account is typically established at the time you close your mortgage loan. This account is held by us for the future payments of recurring items relating to the mortgaged property, such as real estate taxes and insurance premiums, as they become due. We may require you to pay an initial amount for each of those items to start the reserve account at the time of closing. Depending upon the amount of your down payment, we may permit you to waive our escrow account and pay expenses yourself.
- Are there any limitations on how much lenders can collect from a borrower for the borrower's escrow account?
Lenders and servicers are required to follow the standards set forth in the Real Estate Settlement Procedures Act (RESPA) and applicable state law. RESPA and some states set limits on the amount which can be collected by the lender or servicer to pay for escrow items, such as property taxes and insurance, and place a cap on the amount of the reserve. Reserves are funds that a servicer may require a borrower to pay into an escrow account to cover unanticipated disbursements which will need to be made before the borrower's payment is available in the escrow account. There are limits on the additional amounts that can be collected as reserves.