An Insider’s Guide to Mortgages

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Whether you are buying a home for the first time, looking for something larger for a growing family or downsizing during retirement, navigating through the maze of paperwork and bank documents is never easy. Luckily, MainSource Bank’s century’s worth of experience allows them to give some answers on common questions regarding mortgages, home loans and refinancing.

LEAD Magazine: How important is a person’s credit rating when looking to buy a home?

MainSource Bank: Creditworthiness is extremely important to a lender as your credit history shows your overall willingness to repay debt and how you are able to manage your existing debt. If there’s some derogatory information in your credit history, then you may need to be prepared to provide a letter of explanation and supporting documentation.

LM: What should you be wary of when shopping for lenders?

MB: There are many options in today’s lending world and a borrower should see what best suits them. Depending on the lender, you can apply for the loan online, face-to-face or by phone. Look for a lender that can help answer your questions and that you feel comfortable working with. Whether you are buying your first home or refinancing for the third time, it is a huge financial investment and you want to work with someone that is reputable and will work hard to help you accomplish your financial goals. You also might consider looking into your bank’s additional products, services and experts to meet all of your financial needs.

LM: What is commonly overlooked during the home-buying process?

MB: Unlike most other purchases, this process has many steps and involves several partners and parties. Providing all required documentation to your bank in a timely manner is critical and will help expedite your mortgage loan process. Check with your mortgage loan officer regarding time frames and processes when you first meet to apply for your loan.

LM: How can you tell if a fixed-rate or an adjustable-rate mortgage is best?

MB: Finding the right type of mortgage that fits your situation can be done by determining how long you intend to stay in your new home. If you think you will be there for only a short period of time, then an ARM might be your best option. However, if you think you will be in your home for a longer period of time, consider a fixed-rate mortgage so you are not exposed to interest rate fluctuations.

LM: Is it worth it to buy discount points to lower the monthly payment?

MB: This, too, depends on how long you plan to stay in your new home and the length of time you are planning to maintain your mortgage loan. Since this situation is unique to each borrower, ask your loan officer to run comparisons to show you the break point on paying points and what period of time you would most benefit from them.

LM: What should you avoid after applying for a home loan?

MB: It’s very important not to add any new debt or increase existing debt as this may have a negative impact on your loan approval. Job stability is a critical piece looked at by lenders. Job changes may also have a negative impact on your loan. Talk to your loan officer immediately if you have any major changes pending which could impact your loan.

LM: What are some techniques for negotiating closing costs?

MB: Even though most bank fees are fixed, there are additional factors that you can control such as credit score and loan to value. These two factors may impact the points you need to pay on a mortgage loan. Higher credit scores and lower debt ratio will help you obtain fewer points and better fees and pricing. Ask your lender about “no closing cost mortgages” and other options for closing costs.

LM: When should you consider refinancing your current mortgage?

MB: Many consumers are told to consider refinancing when interest rates are at least 1 percent lower than their current rate, but there are other factors to be considered. Review your current loan term and decide if you want to maintain the same mortgage term, such as a 15-year fixed or a 30-year fixed amortization, or if you want to change. If your existing loan has private mortgage insurance (PMI), you may want to refinance to reduce or even eliminate the PMI if you have enough equity. If you do have equity in your home, look into refinancing options where you would receive cash to consolidate other debt and use your cash-out for other purchases.