Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase.

Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.

An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type that offers a lower initial interest rate than most fixed rate loans. The tradeoff is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly.

Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off. You get a lower rate with an ARM in exchange for assuming more risk.

For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years.

Here's some detailed information explaining how ARM's work.

Adjustment Period

With most ARMs, the interest rate and monthly payment are fixed for an initial time period such as one year, three years, five years, or seven years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years.

Index

Our ARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal. If the index rate moves up so does your mortgage interest rate, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down your monthly payment may decrease.

Margin

To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin." If you're still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.

Interest-Rate Caps

An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:

1. Periodic or adjustment caps, which limit the interest rate increase or decrease from one adjustment period to the next.

2. Overall or lifetime caps, which limit the interest rate increase over the life of the loan.

As you can imagine, interest rate caps are very important since no one knows what can happen in the future. All of the ARMs we offer have both adjustment and lifetime caps. Please see each product description for full details.

Negative Amortization

"Negative Amortization" occurs when your monthly payment changes to an amount less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs we offer allow for negative amortization.

Prepayment Penalties

Some lenders may require you to pay special fees or penalties if you pay off the ARM early. We never charge a penalty for prepayment.

Contact a Mortgage Specialist

Selecting a mortgage may be the most important financial decision you will make and you are entitled to all the information you need to make the right decision. Don't hesitate to contact a Mortgage Specialist if you have questions about the features of our adjustable rate mortgages.

Points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them, up front, 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 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.

The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees in addition to the interest rate determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these upfront costs over the entire loan term.

Also, unfortunately, the APR doesn't include all the closing fees and lenders are allowed to interpret which fees they include. Fees for things like appraisals, title work, and document preparation are not included even though you'll probably have to pay them.

For adjustable rate mortgages, the APR can be even more confusing. 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. Look at total fees, possible rate adjustments in the future if you're comparing adjustable rate mortgages and consider the length of time that you plan on having the mortgage.

Don't forget that 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.

Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down.

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. Before you decide to lock, make sure that your loan can close within the lock-in period. It won't do any good to lock your rate if you can't close during the rate lock 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 any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission.

If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking. After you apply, you can lock in by contacting your Mortgage Specialist.

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, and more important - 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. It still makes sense to use a 30-year mortgage for most people.

Who Should Consider a 15-Year Mortgage?

The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.

Advantages and Disadvantages of a 15-Year Mortgage

The 15-year fixed rate mortgage offers two big advantages for most borrowers:

? You own your home in half the time it would take with a traditional 30-year mortgage.

? You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed rate borrowers.

The possible disadvantages associated with a 15-year fixed rate mortgage are:

? The monthly payments for this type of loan are roughly 10 percent to 15 percent higher per month than the payment for a 30-year.

? Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.

Are there any prepayment penalties charged for these loan programs?

None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.

General Statement

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.

Lock-In Agreement

A lock is an agreement by the borrower and the lender and 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.

When Can I Lock?

Please contact us at 508-234-8112 or Toll Free at 800-578-4270 to discuss your rate lock options.

Fees

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

Lock Period

We currently offer a 15, 30, 45 and 60 day lock-in periods. This means your loan must close and disburse within this number of days from the day your lock is confirmed by us.

A home loan often involves many 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, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. We take quotes very seriously. We've completed the research necessary to make sure that our fee quotes are accurate to the city level - and that is no easy task!

To assist you in evaluating our fees, we've grouped them as follows:

Third Party Fees

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

Third party fees are fees that we'll collect and pass 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 variances in third party fees from lender to lender since 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. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee, or courier/mailing fees.

Taxes and other unavoidables

Fees that we consider to be taxes and other unavoidables 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 that you won't have to pay it. It probably means that the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.

Lender Fees

Fees such as points, 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.

Required Advances

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 mortgages have payment due dates of the 1st 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.

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.

Whether or not you must purchase mortgage insurance depends on the size of the down payment you make. 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 to be a required advance.

If you've ever purchased a home before, 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 especially 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 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. 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 that the odds of a claim being filed are slim indeed.

First of all, let's make sure that we mean the same thing when we discuss "mortgage insurance." Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower's death. Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending. Low down payment mortgages are becoming more and more popular, and by purchasing mortgage insurance, lenders are comfortable with down payments as low as 3 - 5% of the home's value. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were 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.

It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount - below 75% to 80% 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% of the original property value, however this applies only to Single Family Residences that are Owner Occupied. If you have any questions about when your mortgage insurance could be cancelled, please contact your Mortgage Specialist.

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, so the best way to determine what loan amount we can offer is to complete our online application!

A credit score is one of the pieces of information that we'll use to evaluate your application. Financial institutions have been using credit scores to evaluate credit card and auto applications for many years, but only recently have mortgage lenders begun to use credit scoring to assist with their loan decisions.

Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.

Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.

Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won't be paid as agreed.

Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a customer.

An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing.

But don't overreact! The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don't limit your mortgage shopping for fear of the effect on your credit score.

There is no charge to you for the credit information we'll access with your permission to evaluate your application online. You will only be charged for a credit report if you decide to complete the application process after your loan is approved.

Yes, you can borrow funds to use as your down payment! However, any loans that you take out must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it's a perfectly acceptable source of funds. If you are planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application.

We take full advantage of an automated underwriting system that allows us to request as little information as possible to verify the data you provided during your loan application. Gone are the days when it was necessary to verify every piece of data collected during the application. The automated underwriting system compares your financial situation with statistical data from millions of other homeowners and uses that comparison to determine the level of verification needed. In many cases, a single W-2 or pay stub can be used to verify your income or a single bank statement can be used to verify the assets needed to close your loan.

Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. However, based on your entire financial situation, we may not need full copies of your tax returns.

We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need at least one, and sometimes a full two-year history of self-employment to verify that your self-employment income is stable.

In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.

If you haven't been receiving bonus, overtime, or commission income for at least one year, it probably can't be given full value when your loan is reviewed for approval.

We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don't have an award letter, we can contact the source of this income directly for verification.

If you're receiving tax-free income, such as social security earnings in some cases, we'll consider the fact that taxes will not be deducted from this income when reviewing your request.

Generally, only income that is reported on your tax return can be considered when applying for a mortgage. Unless, of course, the income is legally tax-free and isn't required to be reported.

If you own rental properties, we'll generally ask for the most recent two years federal tax return to verify your rental income. We'll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won't be counted against your rental income.

If you haven't owned the rental property for a complete tax year, we'll ask for a copy of any leases you've executed, and we'll estimate the expenses of ownership.

Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.

Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.

Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.

Typically, income from a second job will be considered if a two-year history of secondary employment can be verified.

Having changed employers frequently is typically not a hindrance to obtaining a new mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We'll also look at your income advancements as you have changed employment.

If you're paid on a commission basis, a recent job change may be an issue since we'll have a difficult time of predicting your earnings without a history with your new employer.

If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0." You will need to provide a copy of your diploma and/or transcripts.

Unfortunately, if you are purchasing a home, we'll have to use the lower of the appraised value or the sales price to determine your down payment requirement.

It's still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but our investors don't allow us to use this "instant equity" when making our loan decision.

Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.

If your loan request is for more than 80% of the purchase price, with certain programs and products we'll need to verify that you have at least 5% of the property's value in your own assets.

Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank statement to verify that you have deposited the gift funds into your account. An executed gift letter will need to be provided as well. We will provide you with the gift letter to be signed.

If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the settlement or closing statement you'll receive at the closing to verify that your current mortgage has been paid in full and that you'll have sufficient funds for our closing. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll just ask you to bring your executed settlement statement with you to your new mortgage closing and provide an unexecuted copy prior to.

Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location.r closing. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll just ask you to bring your executed settlement statement with you to your new mortgage closing and provide an unexecuted copy prior to.

If your employment is with a new employer, complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. We'll sort out the details after you submit your loan for approval.

Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt doesn't affect your ability to obtain a new mortgage, we'll leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification that the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last twelve months.

If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we will generally require that two to four years have passed since the bankruptcy or foreclosure. It is also important that you've re-established an acceptable credit history with new loans or credit cards.

An installment debt is a loan that you make payments on, such as an auto loan, a student loan or a debt consolidation loan. Do not include payments on other living expenses, such as insurance costs or medical bill payments. We'll include any installment debts that have more than 10 months remaining when determining your qualifications for this mortgage.