Mortgage Frequently Asked Questions

 

1. What is the difference between fixed rate and variable rate mortgages?
2. How do adjustable rate mortgages work?
3. Why do lenders evaluate my credit?
4. What is Private Mortgage Insurance?
5. How do I pay for PMI?
6. What is Union Savings Bank's mortgage lending area?
7. What happens if I make a large principal payment?
8. How is my rate determined?
9. Will my mortgage have a prepayment penalty?
10. Are current interest rates available on this site?
11. Do I need to apply for a mortgage now?
12. Who can answer questions not addressed here?
13. What are escrow accounts and how much do I need in my escrow account?

1. What is the difference between fixed rate and variable rate mortgages?

A fixed rate mortgage is a loan where the principal and interest payment never changes during the life of the loan.

A variable rate mortgage is a loan where the interest rate can change periodically. The changes in the interest rate are tied into the market rates that exist at the time the rate is subject to change.

Initial ARM rates are generally lower than fixed rates, but can adjust upward if interest rates go up. There is a predefined cap which defines how high the interest rate can adjust.

Fixed rate mortgages are beneficial to those who are on a fixed income, (adverse to interest rate change) and those who prefer fixed payment schedules.

Adjustable rate mortgages are advantageous for those who do not plan to stay in their home for a long time, for those borrowers who do not qualify at higher fixed interest rates, and those who can financially handle fluctuating payments.

2. How do adjustable rate mortgages work?

There are many types of adjustable rate mortgages, but all have some common features.

One common feature of adjustable mortgages is an interest rate change that occurs after a stipulated number of payments have been made. The interest rate can increase or decrease depending on how the new interest rate is calculated. Typically, the interest rate change is based upon a predetermined index value and a margin. If a borrower currently has an interest rate that is pending adjustment, the new rate would be calculated by adding the curent index rate and a margin. For example, if the lender's current rate was 6.000% with a 2.000% margin, the new rate would be determined by adding the current index rate (5.000% as an example) to the margin. In this example the new rate would be 7.000%.

The maximum amount the interest rate can change during any adjustment period is usually fixed. This maximum adjustment is called the cap. Adjustable rate mortgages also have a lifetime cap, preventing the interest from exceeding a predetermined rate.

3. Why do lenders evaluate my credit?

When a lender is underwriting your loan, credit history is one of the most important factors in that process. Your credit history will show the debts you owe and your ability to pay them. This helps the lender decide how likely you are to repay your obligations.

4. What is Private Mortgage Insurance?

If the relationship of your mortgage to the value of your property is greater than 89.9% for loan amounts of $417,000 or below, or 80.0% for loan amounts above $417,000, you will be required to purchase insurance provided by a private mortgage insurance company. This insurance is used to protect the lender in the event you default on the mortgage.

5. How do I pay for PMI?

Premiums may be set up to be paid monthly from an escrow account or can be paid up front as a closing cost, financed in your mortgage amount.

6. What is Union Savings Bank's mortgage lending area?

The lending area is generally the western one third of Connecticut and the eastern most counties of New York state that are contiguous with the Connecticut border. In the online application if the zip code of the property address does not appear in the drop down choice list, the property is outside our mortgage lending area.

7. What happens if I make a large principal payment?

A large lump sum principal payment could have the effect of reducing the term of your mortgage. You may request that we adjust your monthly principal and interest payment based on the reduced principal balance and the remaining term.

8. How is my rate determined?

• You make the decision to lock or float your interest rate. You can lock your interest rate for 60 days anytime during processing by paying a rate lock fee. The rate lock fee is applied to any loan discount fees due at closing or refunded to you if the mortgage program you select does not have a loan discount fee.
• If you choose not to lock in a rate, your interest rate will be set by the bank within three business days prior to closing at the prevailing market rate.

9. Will my mortgage have a prepayment penalty?

We do not assess a prepayment penalty on any of our residential mortgage loan programs.

10. Are current interest rates available on this site?

We update our fixed and adjustable rates each weekday in the early afternoon.

11. Do I need to apply for a mortgage now?

No, although we hope that you apply with Union Savings Bank, you are under no obligation to do so.

12. Who can answer questions not addressed here?

Along with these FAQs, we offer customer support. email or call toll-free 877-235-4446 during the following business hours (Eastern Standard Time)

Monday to Wednesday	8 AM to 5 PM
Thursday	8 AM to 6 PM
Friday	8 AM to 7 PM
Saturday	8:30 AM to 1

13. What are escrow accounts and how much do I need in my escrow account?

Escrows are payments made by a borrower to a lender for the purpose of paying the borrower’s taxes, private mortgage insurance, insurance, and other payments associated with home ownership. The lender is responsible for the timely disbursement of escrow funds to pay the borrower’s bills as they come due.

Usually, a lender collects funds for placement into the borrower’s interest bearing escrow account with the lender’s periodic payment for principal and interest. An escrow account has sufficient funds if there is enough to pay all bills when they come due.

It is common practice for lenders to hold an escrow cushion for a borrower. The cushion is kept by the lender to assure that if the cost of any escrowed item were to increase in the future, there would be sufficient funds to pay all bills as they come due.