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 manage inflation and interest rates.

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're perceiving that rates are on an upward trend, then you’ll want to consider locking in the rate as soon as you’re able. Before you decide to lock in a rate, make sure that your loan can close within the lock-in period. It won’t do any good to lock in 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’re refinancing, in most cases, your loan could close within 45 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 permission.

If you think rates might drop while your loan is being processed, take a risk and let your rate “float” instead of locking.

An adjustable-rate mortgage (ARM) is a loan that offers a lower initial interest rate than most fixed-rate loans. The trade-off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly. You generally get a lower rate with an ARM in exchange for assuming more risk.

An ARM is the right mortgage choice for a variety of prospective homeowners, particularly if their income is likely to increase in the future or if they plan on being in the home for a short period of time.

The Federal Truth in Lending law requires that 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 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, the APR doesn’t always include all the closing fees. 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.

A lock is an agreement by the borrower and the lender. It specifies the number of days for which a loan’s interest rate and discount points are guaranteed. Should interest rates rise during that period, we’re obligated to honor the committed rate. Should interest rates fall during that period, the borrower must honor the lock.

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.

We don’t charge a fee for locking in your interest rate.

Gifts are an acceptable source of down payment, as long as 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.

Prior to closing, we will verify that the gift funds have been transferred to you by obtaining a copy of the banking receipt or deposit slip to verify you’ve deposited the gift funds into your account, or we will get a copy of the check payable to the title company.

Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by the Federal Emergency Management Agency (FEMA). We use a third-party company that specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner’s insurance doesn’t protect you against damages from flooding.

The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure you’ll be protected from financial losses caused by flooding.

Yes, you can borrow funds to use as your down payment! Please note that any loans that you take out must be secured by an asset 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’re planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application, so we can count the payment.

Yes, applying for a mortgage loan before you find a home may be the best thing you could do! If you apply for your mortgage now, we may be able to issue an approval subject to you finding the perfect home. We may also issue a pre-approval letter, which would help to assure real estate agents and sellers that you’re a qualified buyer. Having a pre-approval for a mortgage may give more weight to any purchase offer you make.