A fixed rate mortgage is a loan where the principal and interest payments (P&I) never change over the life of the loan, since the interest rate never changes. An Adjustable Rate Mortgage (ARM) has an interest rate that will change at various intervals during the life of the loan depending on the ARM chosen ie: 3/1, 5/1; therefore, the principal and interest payment will change periodically

Typically the starting rate for an (ARM) is lower than for a fixed rate mortgage. This results in the starting payments on an ARM being less than for a fixed rate mortgage on the same amount. It also means that you might qualify for a larger loan since this decision takes into account your current income and payment until the first adjustment.

Your ARM might also be less expensive over a long period as compared to a fixed rate if interest rates remain steady or move lower.

While an ARM has several advantages, you need to weigh the risk that an increase in interest rates would have on your monthly expenses. Several questions you should ask yourself are:

Is it likely that my income will increase enough to cover a higher mortgage payment if interest rates go up?
Will I have additional debts in the near future, such as for a new car?
How long do I plan on owning this home?
Can my payments increase even if interest rates generally do not increase?

How can I get pre-qualified for a mortgage?

Pre-qualifying for a mortgage is easy and convenient. You can contact a Loan Originator from our lending team.

Your Loan Originator will review your income and credit information and tell you how much of a mortgage you can afford.

What information do I need to complete my mortgage application?

Typically, we need:

W2s from the past 2 years plus pay stubs to cover the most recent 30 days;
the past 2 most recent statements regarding assets (savings, checking, 401K, etc.);
current monthly obligations including creditor name, account number, payment, and balance;
If self-employed, you will also need the last 2 years federal income tax returns.
Depending on your individual circumstances, additional information may also be required.

How long before I know if my mortgage is approved?

Generally, we are able to approve a loan within 4-6 weeks. By providing all the information that is required at application time, the timeframe will be shorter than 4-6 weeks.

Can I lock my interest rate at time of application?

Yes, only if the bank has received a copy of your appraisal and you have received a copy of your Good Faith Estimate. Monson Savings Bank allows you to lock your interest rate for 45 days by paying 1% of your loan amount. We also need to have received your completed application and have signed a rate lock agreement in order to lock your rate. This fee is credited to you at time of closing.

Do you require a structural or termite inspection on the property?

We do not require a structural or termite inspection on the property unless the appraiser indicates that there could be an issue and suggests an inspection be performed. The cost of the inspection is the responsibility of the borrower.

Can I use my own attorney to close the loan?

Yes. Monson Savings Bank has an open list of attorneys, therefore, you can choose your own attorney to handle the closing.

What are "closing costs"?

Closing costs are the fees that you will pay to obtain your mortgage and can vary from lender to lender. Typically, the fees are paid to either the Bank, third parties such as the attorney, appraiser, etc., and the city or town where the property is located. We will provide you with a Good Faith Estimate (GFE) after you have submitted your application. This GFE estimates the fees you will be required to pay for the mortgage.

What is a point and should I pay it to obtain a lower rate?

Each point is equal to one percent (1%) of the loan amount. On a $100,000 mortgage, the point would be $1,000. Typically points are paid to reduce the interest rate. For example,paying a point might have an interest rate ¼% lower than paying no points. This means that it will cost you more at closing to go with the one-point loan, but your monthly payment will be less.

To determine if you should pay points or not, you should take the following into consideration: 1) how long will you be in the house? 2) will you recoup the cost of the point before you either sell the house or refinance the loan; 3) can you afford the higher mortgage payment if you don’t pay the point?

One of our Loan Originators will be happy to provide the information necessary for you to make the right decision.

What does APR mean?

APR means Annual Percentage Rate. The APR represents the actual cost of obtaining the loan, expressed as a percentage rate, by including some closing costs in the APR calculation . The APR is a tool to compare actual costs of the loan between lenders. Your principal and interest payment is based on the actual interest rate, not the APR. However, do not depend solely on the APR in choosing the mortgage that is right for you. Other factors should also be taken into consideration in choosing your mortgage.

What is a "Good Faith Estimate"?

A Good Faith Estimate (GFE) is an important document that estimates the closing costs you will have to pay to obtain the loan. It will be provided to you when you submit your application, or within 3 business days.

What is a Truth-in-Lending Disclosure?

The Truth-in-Lending Disclosure (TIL) is an important document that estimates how much the loan will cost over the life of the loan. The Finance Charge represents the interest that you will have paid, and the Total of Payments includes the total interest and principal that will have been paid over the life of the loan.

What are "CAPS"?

“Interest Rate Caps” are associated with Adjustable Rate Mortgages (ARM’s), and limit how much the interest rate can increase or decrease. There are two types of Caps: 1) Periodic or Review Caps limit how much the interest rate can increase or decrease at each adjustment period; 2) Lifetime Caps limit the amount the interest rate can increase or decrease over the life of the loan. For example, Caps of 2% and 6% mean that the interest rate will not change more than 2% at each review period and 6% from the start rate over the life of the loan.

What is Private Mortgage Insurance (PMI)?

Private Mortgage Insurance is insurance that protects the bank in case of default. It is required when the down payment is less than 20%. The monthly cost will vary based on several factors including the type of mortgage you have and the amount of your down payment. Our Loan Originators will be happy to assist you in choosing the PMI plan that will meet your needs.

What does "Escrow" mean?

Escrow payments are additional monies collected each month in addition to the principal and interest payments. Escrow payments can include real estate taxes, insurance, and PMI if necessary. These payments are collected and “escrowed” by the bank until they are due. When the payments are due, the bank will disburse the funds from your escrow account. If you are financing less than 20%, we will require your real estate taxes to be escrowed along with PMI. We do not escrow for Home Owner's insurance.

What is Title Insurance?

Title Insurance protects the bank and/or the owner of the property in case there is a deficiency in the title to the property. Title insurance to protect the bank is mandatory while title insurance for the owner is optional. Discuss with your attorney if you should purchase an owners title policy.

What is Home Owners Insurance?

Home Owners insurance protects you for losses or damage to the house, its contents, and personal liability. You will be required to provide an insurance binder naming the bank as mortgagee plus if you are purchasing the home, and receipt for the first years premium. Home Owners Insurance is required by law. We do not escrow for Home Owners insurance.

How can I obtain a copy of my credit report?

If you are a Massachusetts resident, you are entitled to one free copy of your credit report annually from each of the three major credit bureaus. The information can be found at www.annualcreditreport.com

Can I make additional payments on my mortgage?

You may make additional payments to your principal at any time. There is no prepayment penalty if you pay the loan off early.

If my loan is sold, will the terms of my mortgage change?

No, the terms of your mortgage will not change even if your loan is sold. You will be notified who the new servicer is on your mortgage and what address your payments should be sent to.