Brought to you by our community’s truly local lender
At Savings Bank of Walpole, our local home loan specialists are here to help make the mortgage process easier. They will be with you every step of the way to answer questions and give you guidance. In the meantime, we thought we’d outline some questions our mortgage team are asked frequently.
As a truly local bank, we have a unique understanding of the market – and all loan decisions are made right here. Just give our Mortgage Lending Assistant, Jessica Weston, a call at (603) 355-1677 and she will get you connected to our team.
Fixed-Rate loans – The interest rate as well as the principal and interest payments stay the same over the term of the loan. However, Taxes and insurance are likely to increase. This type of loan gives you the greatest “payment certainty” for your budget.
Adjustable-Rate Mortgages (ARMs) – Typically an ARM loan has a lower interest rate for the first 5 to 7 years. As a result the principal and interest payments remain the same for the first 5 or 7 years. After that, the interest rate can change each year which results in a change to the principal and interest payments. Typically, the interest rate change is limited to 2.0% up or down per year with a maximum increase (or “cap”) of 6% over the life of the loan. On some ARM loans the first change in rates can go up by as much as the maximum and then be limited each year thereafter. An ARM loan may make sense for someone who plans to sell the house in the first 5-7 years. It may also be a good choice for someone who is comfortable with the risk of the payment going up in 5 or 7 years if market interest rates rise.
Construction Loans – Loans designed for someone who plans to build a home with a contractor (or who is performing the general contractor role himself/herself). Here at SBW, our construction loan features the simplicity of a single closing. You pay interest-only during the first year on the balance of the loan you have used. At the end of twelve months, construction should be complete and you begin to pay both principal and interest on the full loan amount. We have options for a longer construction period. Talk to us!
Land Loans – These loans are designed for someone who wants to purchase land without a dwelling. Often, borrowers will use a land loan to purchase property with the intent to construct a home at a later date. For many people, it’s a nice way to get started on the dream of home ownership!
Manufactured Home (previously called “Mobile Home”) Loans – These loans are designed for a home built on a frame and placed on a slab or foundation. The home must be permanently affixed to land that you own or are buying along with your manufactured home. Some manufactured homes are remodeled with significant additions and may also be eligible for this loan. We’d be happy to discuss your specific situation with you – so give us a call!
Home Equity Loans (HELOANs) and Home Equity Lines of Credit (HELOCs) -- When you live in a home, your equity is tied up in the home itself. You can make use of this value through a home equity lending product. A HELOAN provides you with a single lump sum upfront, and in return you make fixed payments over the life of the loan. A HELOC gives you a revolving credit line to use for large expenses or to consolidate other higher-interest rate debt (such as credit card debt). HELOCs are good if you want the flexibility to borrow as needed over a longer period of time, while HELOANs are a great way to access a one-time lump sum of money. Just remember that either way, your home is used as collateral and these are considered mortgages. Call or come see us and we’ll be happy to help you determine if one of these options makes sense for your situation.
Lenders will look at:
- Your credit score and history as a measure of how well you manage debt obligations. There are different types of scoring models. According to fico.com, as of April 2021, the average “FICO 8” score in the US was 716 with the following distribution; 15.5% scored in the 300-499 range, 9.2% between 600-649, 12.5% between 650-699, 16.4% between 700-749 and 46.4% between 750-850. Credit scores below 620 are considered “subprime”. A higher credit score improves the likelihood of being approved. If you are concerned about your credit score give us a call. We can talk about what we offer and how you might qualify.
- Your gross income to see how much of a mortgage you can afford. A lender will calculate your “DTI” (Debt-To-Income) ratio. There are two DTI calculations. The first DTI takes your housing obligations (principal, interest, taxes, insurance, etc. for a home you may want to buy) divided by your gross monthly income. The second DTI is calculated by dividing the total of all your monthly debts by your monthly gross income. The lender uses these ratios to assess how much you can afford for a loan payment.
- Your cash, savings and investment balances to see the funds you plan to use for a down payment and closing costs, as well as the reserves you will have after closing the loan. The lender will want to know the source of the funds for your down payment in order to understand whether this is an additional debt obligation.
Here at SBW, we highly recommend that you talk with one of our mortgage loan officers to get a mortgage pre-qualification. A mortgage loan officer can discuss your income and assets and “pull” your credit report to see your credit score and credit history. A pre-qualification will give you an idea of how large a mortgage you may qualify for based on the information you provide. A pre-qualification is not a commitment but definitely helps you make an informed decision on proceeding with an application. In addition, providing a home seller with a pre-qualification letter will make your offer to buy a home much more attractive.
Pre-qualification is a non-binding estimate of what you might be able to borrow for your mortgage. Getting pre-qualified before you start house-hunting is a smart move because it shows sellers that you have the borrowing power to back up an offer. Here at SBW, if you want to get pre-qualified we’ll ask you for information about your income, savings, and debts. We may also ask for documents to show your financial history. Once the information has been verified, you will receive a letter (valid for 60 days) stating that you are “pre-qualified” for a mortgage loan of a certain amount. Providing the seller with a pre-qualification letter will make your offer to buy a home much more attractive. If you don’t want to show the seller your full pre-qualification limit, we can provide you with a letter showing a lower qualified amount tailored to your offer so you can negotiate more effectively.
Lenders use credit scores and credit reports to review your credit history. It is possible to obtain a mortgage without a credit score. However, we will require more financial documentation to review to understand your history of making timely payments. We will ask for 12 months of bank statements, and 12 months of on time payments for several recurring expenses such as rent, credit cards, auto insurance, cell phone bills, utility bills, etc. If you don’t have a credit score, give us a call and we’ll help you determine your borrowing options.
Loans are available for lower down payment amounts. Sometimes you can have as little as a 3% down payment. However, with less than a 20% down payment, borrowers are required to purchase Private Mortgage Insurance (PMI), which adds to your monthly payment amount on the loan. Be in touch and we’ll happily explain all your options.
PMI stands for Private Mortgage Insurance and is a type of mortgage insurance that protects the lender if you stop making payments. Generally, PMI is required for loans where the borrower down payment is less than 20% of the home’s purchase price or appraised value (whichever is lower).
You can request that your PMI be cancelled once you have paid the loan down to 80% of the purchase price or original appraised value (again, whichever is lower). PMI will automatically be cancelled once the loan has been paid down to 78%.
If you have made significant improvements that raise the value of your home two to five years after closing, you can also request that your lender order an appraisal to see if the PMI may be cancelled (Note: the appraisal must be ordered by the lender and you will need to pay the cost of the appraisal). If your loan balance is less than 75% of the new appraised value, you can request that the lender cancel your PMI.
Mortgage points are the fees a borrower pays a mortgage lender to lower the interest rate on the loan. Points are basically prepaid interest on the loan and paying points is often called a “buy-down” of the rate.
Conversely, some borrowers may choose to receive points in exchange for a slightly higher interest rate on the loan. Those points received may be used to lower other loan fees required to close. This is often called a “buy-up” of the rate.
It is important to know that the points paid or received will be different for an equal rate adjustment.
When considering points, think about how long you expect to have the loan after the loan closing. If you plan to move in 5 years, paying points likely does not make sense. If you anticipate receiving a sum of money (such as an inheritance), and plan to make a large pay-down of the mortgage, then paying points likely does not make sense.
A point is one percent of the loan balance. So on a $250,000 loan a point is equal to $2,500.
Here is an example: A lender might inform you that in order to buy the rate down by 1/8% you’d need to pay one half a point. This means on a $250,000 loan you would pay $1,250 to lower the rate. In this case you would not break even until the end of the 4th year if you paid the points.
Come talk with us and we can explain all your options when it comes to points!
APR is a calculation of the Annual Percentage Rate and is intended to reflect the true cost of borrowing.
The Mortgage APR takes into account adjustments to the stated interest rate, including any points you pay or receive, and fees charged by the lender. Typically, these include origination fees, processing fees, loan administration fees, document preparation fees and settlement fees. PMI premiums, if any, are also included in APR. Fees paid to third parties are typically not included in the APR; for example, title fees, attorney fees, home inspection fees, transfer taxes, appraisal fees, etc.).
The APR is designed to make it easier for an applicant to compare similar loan offers from different lenders. The lower the APR the better.
Mortgage lenders are required to provide an APR when they disclose a rate. When you get a loan estimate the APR must be disclosed and is based on your specific application.
Loan servicing is the function of collecting your mortgage payment each month, recording the interest amount and reducing your balance by the principal amount of your payment. Keeping track of your escrow payments, disbursing escrow funds to pay taxes and insurance as appropriate are also part of loan servicing.
After a mortgage loan is closed, a lender may choose to “sell” the loan to an investor. This means your mortgage could end up being serviced by a completely different lender from the one you chose when you applied for your mortgage.
Here at SBW, however, our goal is to take care of our customers in their entire financial lives – so even if we “sell your loan,” we choose to retain the servicing of mortgage loans we make to our customers. Our team in NH will be available to answer questions and help you whenever you need us. We’re here for you and our community. If you ever have a problem, that really matters.
Loan servicing is important for several reasons.
- You send your mortgage payment to your loan servicer each month.
- Your loan servicer is responsible for keeping track of your payments and your escrow accounts.
- When you have a question about your loan you call your loan servicer.
Everything is fine when you are making your payments until you have a question.
- You think a mistake has occurred with your payment
- You need to update your homeowner’s insurance information
- You want to request removal of PMI
- You don’t understand why your escrow payment changed
- You need to change your address
- You are having trouble accessing your account online.
- You are having financial difficulties
Questions to consider:
Will this loan servicer be easy to contact and speak with someone?
At Savings Bank of Walpole, every loan we originate is serviced locally by knowledgeable people right here in New Hampshire. When you call us, after a short recorded introduction, you are automatically connected to a real, local person -- so you are not caught in an automated voice response system. In addition, your local SBW Mortgage Loan Officer is always willing to help. If you ever have a problem with your loan, that really matters.
- A mortgage broker is a company or person that will take in your loan application and send it to another company for an underwriting decision and closing. The company that underwrites and closes the loan will own your loan and service your loan. They may keep the loan, or more typically, sell your loan and the servicing before you make your first payment.
- A mortgage banker is a company that takes an application, underwrites and closes your loan. The loan and servicing is typically sold to a third party before you make the first payment.
- A portfolio lender is typically a bank that has the ability to keep the loan to earn the interest over the life of the loan. A portfolio lender will take your application, underwrite your loan and typically, retain your loan servicing.
- Savings Bank of Walpole is primarily a portfolio lender. This means one of our own Mortgage Loan Officers (MLOs) will take your application. We underwrite your loan locally and we keep your loan to earn the interest over time. With e your loan will always be serviced locally – so we will be here to answer your questions.
- The exception is for FHA and Rural Development Loans, for which we partner with New Hampshire Housing and act as a mortgage broker.
- Occasionally, we may sell a loan to Freddie Mac. But even if we sell your loan, your loan will continue to be serviced locally by us. If you ever have a problem, you’ll appreciate having that local connection.
When your loan is sold there is an investor that purchased your loan from the lender that closed your loan. Most often when a loan is sold the loan servicing is also sold, sometimes to a different company.
Your loan and loan servicing may be sold several times over the life of your mortgage.
But at Savings Bank of Walpole, we retain the servicing of all our loans -- so you will always make your payment to us and we will always be here to answer your questions.
A home appraisal and a home assessment each deal with the value of a home; while a home inspection deals with the condition of the home.
- Appraisal: An appraisal is typically required by the lender to provide an estimate of the fair market value of the home. The lender will use the appraisal as part of the lending decision. An appraisal is a walk-through and a general assessment of a home, analyzed with the help of nearby comparable sales. It is conducted by a professional state-certified or licensed appraiser. While an appraiser will visit a home in person, the majority of the work will be done in their office, as they compare the home’s features, location, and finishes with other comparable recent sales in the area.
- Assessment: An assessment is a different expression of the value of a home. This is a value determined by the city or town in which the home is located, for the purpose of calculating property taxes. An assessment has no bearing on a mortgage lender’s loan decision.
- Inspection: An Inspection is typically requested by the buyer and is an in-person evaluation of the condition of the home. A licensed home inspector will spend time on site doing a comprehensive review of the home’s condition, both visually and by testing functionality of major systems (items like the roof, the heating, electrical, plumbing, etc.). The inspector will typically provide a report to the buyer on the condition of the home and any areas that may need work. The buyer will consider this report and potentially request items be fixed by the seller before the closing on the purchase of the home. On rare occasions, the lender may ask for a copy of the inspection if a review of the appraisal shows a need.
- A Fixed-Rate mortgage has an interest rate that remains the same for the full term of the loan.
- An Adjustable Rate Mortgage, or “ARM,” has an interest rate that can change over the life of the loan. Typically, an ARM will have an initial fixed rate period of 5 or 7 years during which the rate remains the same. After the initial period the interest rate can go up or down depending on short-term market interest rates.
- Generally, the interest rate change is limited to 2.0% up or down per year with a maximum increase (or “cap”) of 6% over the life of the loan. On some ARM loans the first change in rates can go up by as much as the maximum and then be limited each year thereafter.
- Typically, the initial interest rate on an ARM is lower than a comparable 30-year fixed rate loan because the ARM interest rate is fixed for a shorter period of time.
- Come on in and see us, and we will gladly explain all your options as you decide whether to apply for a Fixed-Rate mortgage or an ARM.
A Jumbo Loan is a mortgage loan that meets the credit quality of Freddie Mac and Fannie Mae, but at a larger loan size than Freddie Mac and Fannie Mae are allowed to purchase.
For 2022, the limit in most NH counties is $647,200; in Rockingham and Strafford counties, the limit is $770,500. Any mortgage above those limits would be considered a Jumbo Loan.
Jumbo Loans may feature different interest rates (and sometimes different fees) versus conventional “conforming” mortgages. Talk to us if your loan fits into the Jumbo Loan category!
The answer depends on your situation and your financial goals.
- Do you want to keep the same loan amount but lower your payment?
- Do you want to increase the size of your mortgage to make improvements or pay down debts?
- Do you want to lower your monthly payment with a longer term loan?
- Do you want to shorten the term and payoff your mortgage more quickly?
These are all examples of what you might want to accomplish.
Thinking about refinancing your current Savings Bank of Walpole mortgage? We may be able to save you money and time with a “loan modification” instead of a refinance.
If you’re considering refinancing any home mortgage, one of SBW’s local home loan specialists will listen to your goals, discuss the variety of loan options available to you and walk you through the process. That’s the benefit of working with a local lender such as Savings Bank of Walpole.
- We are a local mutual savings bank; we only operate in our communities.
- We care about a relationship with you -- not just booking a mortgage.
- We are competitive and we want to serve you and our community; we won’t let a big bank beat our rates!
- We make local underwriting decisions and understand our communities and the local real estate market better than a faraway lender.
- We won’t sell your loan servicing to a company you’ve never even heard of.
- We service your loan right here in New Hampshire with people who will answer the phone when you call.
- When you bank with us, your money stays right here, working in your community.