We know you have questions...

We have compiled a list of questions that are often asked by our customers. If you have additional questions that are not addressed here, please call one of our knowledgeable mortgage specialists for the answer! You can also check our "Mortgage ABCs," a glossary of common words you will find throughout the mortgage process.

Q. What is Amortization?

A. Amortization is the repayment of a mortgage loan through monthly installments of principal and interest calculated to retire the loan at the end of a fixed period of time. Amortization is usually described in months, such as 360, 240, etc. The longer the term, the longer it takes for the principal to decrease however, a customer can speed up the amortization of the mortgage by making extra payments toward principal. Use this calculator to see what a difference these extra payments can make.

Q. What is an ARM (Adjustable Rate Mortgage) and is it right for me?

A. An ARM is a mortgage loan which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan. This is also called a variable rate mortgage. There are many different types of ARM options in the industry, such as 3/1, 5/1, 7/1, 10/1, 6 month, etc. Since they are amortized over a 30-year period, you can enjoy low monthly payments. These are ideal if you don't anticipate staying in your home for many years.

Q. Why do I need an Appraisal?

A. An appraisal of real estate is a key ingredient in determining the value of the property. A lender views the appraisal very critically to ensure its reasonableness, comparing the subject property to other comparable sales in the vicinity. As the appraiser compiles data pertinent to the property, consideration is given to the site, location and amenities, as well as the physical condition, construction and age of the property. The amount of mortgage you will be approved for is closely tied to the appraisal.

Q. What is Escrow and why do I need it?

A. Escrow is an item of value, money or documents deposited with a third party to be delivered upon fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Q. What are Points? Do all loans have them? Are there ever "good" points?

A. One point is an amount equal to one percent of the principal amount of a mortgage. One point based on a $100,000 mortgage is equal to $1,000. Some borrowers want a lower interest rate than they qualify for and are willing to "pay points" to secure a lower fixed rate.

Q. What are Prepayment Penalties? Do they apply to all loans?

A. If you choose to prepay the loan earlier than originally intended, a prepayment penalty may apply. The borrower pays the lender for the privilege of paying the loan earlier than originally intended. Your original loan acceptance documents will state if such a penalty exists on your particular loan.

Q. What is Private Mortgage Insurance?

A. Private Mortgage Insurance (PMI), also called Mortgage Insurance is insurance which protects mortgage lenders against loss in the event of default by the borrower. This allows lender to make loans with lower down payments and is typically required with less than 20% of a down payment.

Q. Why should I get homeowners insurance before the actual closing?

A. Most lenders require proof of homeowners insurance (also called hazard insurance). Be sure to contact your insurance agent to start the process of having coverage on your new property. Your agent will want a copy of the appraisal to validate certain information. After your agent has reviewed the appraisal, an estimate can be generated. Upon your approval, a policy can be put in place. Your payment for the first year's premium will be required by the lender in order to proceed with the loan.

Q. Should I refinance?

A. Some advantages of refinancing are possibly lowering your monthly payment, shortening the term of your original loan, drawing equity from your home for educational and/or recreational expenses, rolling closing costs (including points for lower interest rates) into the monthly mortgage payment, using equity to pay off higher interest loans such as credit card debt and using your current home's equity to purchase investment properties.