Affordable Housing Loans & Rural Development
How are interest rates determined?
Interest rates fluctuate based on changes in the yield of mortgage backed securities, most commonly referred to as Fannie Mae, Ginnie Mae and Freddie Mac securities. Changes in the 30 year interest rates closely follow changes in the yield of the 10 year United States Treasury Bond as well as changes in yields of mortgage backed securities. Interest rates on mortgages fluctuate daily and often, within a given business day.
What is an adjustable rate mortgage?An adjustable rate mortgage, or an "ARM" as they are commonly called, is a loan type 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.Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It's a trade-off. You get a lower rate with an ARM in exchange for assuming more risk. For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan on being in the home for three to five years.Here's some detailed information explaining how ARM's work:Adjustment PeriodWith most ARMs, the interest rate and monthly payment are fixed for an initial time period such as one year, three years, five years, or seven years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years (the initial adjustment period) but can change every year after the first five years.IndexARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal. If the index rate moves up so does your mortgage interest rate, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down your monthly payment may decrease.MarginTo determine the interest rate on an ARM, a pre-disclosed amount called a margin will be added to the index. If you're still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.Interest-Rate CapsAn interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:1. Periodic or adjustment caps, which limit the interest rate increase or decrease from one adjustment period to the next.2. Overall or lifetime caps, which limit the interest rate increase over the life of the loan.As you can imagine, interest rate caps are very important since no one knows what can happen in the future. All of the ARMs we offer have both adjustment and lifetime caps. Please see each product description for full details.Negative Amortization"Negative Amortization" occurs when your monthly payment changes to an amount less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs we offer allow for negative amortization.Prepayment PenaltiesSome lenders may require you to pay special fees or penalties if you pay off the ARM early. We never charge a penalty for prepayment.Contact a Loan OfficerSelecting a mortgage may be the most important financial decision you will make and you are entitled to all the information you need to make the right decision. Don't hesitate to contact a Loan Officer if you have questions about the features of our adjustable rate mortgages.
Should I pay discount points in exchange for a lower interest rate?Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them, up front, at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.To determine whether it makes sense for you to pay discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you actually begin to save money by paying discount points. If the number of months it will take to recoup the discount points is longer than you plan on having this mortgage, you should consider the loan program option that doesn't require discount points to be paid.If you'd prefer not to make this calculation the "old-fashioned way," we have a discount points calculator! – insert as hyperlink
Is comparing APRs the best way to decide which lender has the lowest rate and fees?The Federal Truth in Lending law requires that all financial institutions disclose the 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 up front costs over the entire loan term.Also, unfortunately, the APR doesn't include all the closing fees and lenders are allowed to interpret which fees they include. 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.
How do I know if it's best to lock in my interest rate or to let it float?
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 have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock in period. It won't do any good to lock 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 are refinancing, in most cases, your loan could close within 30 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 their permission.
If you think rates might drop while your loan is being processed, you may take a risk and let your rate "float" instead of locking. After you apply, you can lock in by contacting your Loan Officer.
How much money will I save by choosing a 15-year loan rather than a 30-year loan?A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more important - you'll pay less than half the total interest cost of the traditional 30-year mortgage.However, if you can't afford the higher monthly payment of a 15-year mortgage don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.Who Should Consider a 15-Year Mortgage?The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.Advantages and Disadvantages of a 15-Year MortgageThe 15-year fixed rate mortgage offers two big advantages for most borrowers:You pay off your home in half the time it would take with a traditional 30-year mortgage.You save more than half the amount of interest of a 30-year mortgage. Lenders usually offer this mortgage at a slightly lower interest rate than with 30-year loans - typically up to .5% lower. It is this lower interest rate added to the shorter loan life that creates real savings for 15-year fixed rate borrowers.The possible disadvantages associated with a 15-year fixed rate mortgage are:The monthly payments for this type of loan are roughly 30% to 50% greater per month than the payment for a 30-year.Because you'll pay less total interest on the 15-year fixed rate mortgage, you won't have the maximum mortgage interest tax deduction possible.In a low interest rate environment, it’s important to consider your other financial goals in life before prepaying low interest debt. Consider the “time value of money” principle.Compare Them YourselfUse the "How much can I save with a 15 year mortgage?" calculator in our Resource Center to help decide which loan term is best for you. – insert hyperlink
When can I lock in my interest rate and discount points?In a refinance scenario, you typically lock-in your interest rate at the time you make application to refinance.Because most homebuyers apply for “pre-approval” when shopping for a new home, it’s important to understand that your interest rate cannot be locked until you enter into a contract to purchase a new home and set a closing date that is within 60 days.
Is there a fee charged or any other obligation if I complete the online application?
There's no cost at all for completing our application. You may wish to pay the cost of the appraisal online with a credit card. Once we order an appraisal on your behalf, you are responsible for that cost.
Are there any prepayment penalties charged for these loan programs?
None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.
What is your Rate Lock Policy?
The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.
A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan's interest rate and points are guaranteed. Should interest rates rise during that period, we are obligated to honor the committed rate. Should interest rates fall during that period, the borrower must honor the lock.
We do not charge a fee for locking in your interest rate.
We currently offer lock periods from 30 to 60 days without a fee. This means your loan must close and disburse within the number of days from the day your lock is confirmed by us. A longer lock period generally results in a higher interest rate.
Once we accept your lock, your loan is committed into a secondary market transaction. Therefore, we are not able to renegotiate lock commitments.
Tell me more about closing fees and how they are determined.A home loan often involves many fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker should be able to give you an estimate of their fees, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. We take quotes very seriously. We've completed the research necessary to make sure that our fee quotes are as accurate as possible.To assist you in evaluating our fees, we've grouped them as follows:Third Party FeesFees that we consider third party fees include the appraisal fee, the settlement or closing fee, the survey fee, title insurance fees and courier/mailing fees.Third party fees are fees that we'll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee and a title company or an attorney is paid the title insurance fees.Typically, you'll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. In some transactions we absorb minor third party fees such as the flood certification fee, the tax service fee or credit report fees.Taxes and other unavoidablesFees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don't quote you fees that include taxes and other unavoidable fees, don't assume that you won't have to pay it. It probably means that the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.Lender FeesFees such as discount points, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible.This is the category of fees that you should compare very closely from lender to lender before making a decision.Prepaid ExpensesYou may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.One of the more common required advances is called "per diem interest" or "interest due at closing." All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you'll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we'll collect interest from June 15 through June 30 at closing. This also means that you won't make your first mortgage payment until August 1. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed. It is simply a matter of when it will be collected.If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.If your loan requires mortgage insurance, up to two months of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.If your loan is a purchase, you'll also need to pay for your first year's homeowner's insurance prior to, or at the time of, closing. We consider this to be a required advance.
What is title insurance and why do I need it?
If you've ever purchased a home before, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan or you are refinancing, you may be wondering why you need another insurance policy.
The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours: That no individual or government entity has any right, lien, claim, or encumbrance on your property.
The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.
Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer. Title companies typically issue two types of title policies:
1) Owner's Policy. This policy covers you, the homebuyer.
2) Lender's Policy. This policy covers the lending institution over the life of the loan.
Both types of policies are issued at the time of closing for a one-time premium, if the loan is a purchase. If you are refinancing your home, you probably already have an owner's policy that was issued when you purchased the property, so we'll only require that a lender's policy be issued.
Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or, more likely, the information contained in the company's own title plant.
After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.
The fact that title companies try to eliminate risks before they develop makes title insurance significantly different from other types of insurance. Most forms of insurance assume risks by providing financial protection through a pooling of risks for losses arising from an unforeseen future event, say a fire, accident or theft. On the other hand, the purpose of title insurance is to eliminate risks and prevent losses caused by defects in title that may have happened in the past.
This risk elimination has benefits to both the homebuyer and the title company. It minimizes the chances that adverse claims might be raised, thereby reducing the number of claims that have to be defended or satisfied. This keeps costs down for the title company and the premiums low for the homebuyer.
Buying a home is a big step emotionally and financially. With title insurance you are assured that any valid claim against your property will be borne by the title company, and that the odds of a claim being filed are slim indeed.
Buying an Owner's Policy is your option. The Lender's Policy specifically covers the lender's interest that may not always be the same as the owner's interest.
What is mortgage insurance and when is it required?
First of all, let's make sure that we mean the same thing when we discuss "mortgage insurance." Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower's death. Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending. By purchasing mortgage insurance, lenders are comfortable with down payments as low as 3 - 5% of the home's value. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.
The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. Usually, the premium is included in your monthly payment and one to two months of the premium is collected as a required advance at closing.
It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount - below 75% to 80% of the property value. Recent Federal Legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your Loan Officer.
What is the maximum percentage of my home's value that I can borrow?
The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, and the loan type you choose, so the best way to determine what loan amount we can offer is to complete our online application.
How do I get $4,000 of down payment assistance?Grant funds have been allocated to assist low-to-moderate income borrowers with down payment assistance when buying a primary residence located inside of a low-to-moderate income census tract.
- Low-to-moderate income borrowers may receive up to $2,000 in subsidy assistance.
- Homebuyers purchasing inside of a low-to-moderate income census tract may receive up to $2,000 in subsidy assistance.
- Borrowers that meet both eligibility criteria may receive up to $4,000 in subsidy assistance that does not have to be repaid if the borrower maintains the subject property as their primary residence for five years.
- The IBERIABANK Subsidy Grant is available for markets that are considered full assessment areas.
- A limited amount of grant funds are available annually on a first-come-first-serve basis.
IBERIABANK major assessment areas:
Arkansas: Fayetteville, Little Rock
Florida: Ft Myers, Naples, Orlando, Palm Beach - Broward, Sarasota
Louisiana: Lafayette, New Orleans
Texas: Dallas, Houston