Ridgewood Savings Bank

To determine the value of the property you are purchasing or refinancing, an appraisal will be required. An appraisal report is a written description and estimate of the value of the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.

The appraiser will create a written report for us and a copy will be sent to you with your written commitment letter.

After the appraiser inspects the property, they will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called "comparables" and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.

As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration.

If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value.

Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept.

It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract will the appraised value be very different.

As soon as we receive your appraisal, we'll update your loan with the estimated value of the home. As a standard practice we will provide a copy of your appraisal along with your written commitment letter.

Since the value and marketability of condominium properties is dependent on items that don't apply to single-family homes, there are some additional steps that must be taken to determine if condominiums meet our guidelines.

One of the most important factors is determining if the project that the condominium is located in is complete. In many cases, it will be necessary for the project, or at least the phase that your unit is located in, to be complete before we can provide financing. The main reason for this is, until the project is complete, we can't be certain that the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.

In addition, we'll consider the ratio of non-owner occupied units to owner-occupied units. This could also affect future marketability since many people would prefer to live in a project that is occupied by owners rather than renters.

We'll also carefully review the appraisal to insure that it includes comparable sales of properties within the project, as well as some from outside the project. Our experience has found that using comparable sales from both the same project as well as other projects gives us a better idea of the condominium project's marketability.

Depending on the percentage of the property's value you'd like to finance, other items may also need to be reviewed.

Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you've found the perfect home.

The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.

However, appraisers are not construction experts and won't find or report items that are not obvious. They won't turn on every light switch, run every faucet or inspect the attic or mechanicals. That's where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.

Accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.

Licensed appraisers who are familiar with home values in your area perform appraisals. We order the appraisal promptly after the application deposit is paid. Generally, it takes 10-14 days before the written report is sent to us. We follow up with the appraiser to insure that it is completed in a timely manner. If you are refinancing the appraiser will contact you to schedule a viewing appointment. If you are purchasing a new home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home.

Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can't stop floods. Floods can happen anytime, almost anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 are intended to protect you from financial losses caused by flooding.

We use a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner's insurance doesn't protect you against damages from flooding.

At the present time we do not offer financing on this type of property.

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 Period

With most ARMs, the interest rate and monthly payment are fixed for an initial time period such as five years, seven years or ten 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.

Index

Our ARM 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.

Margin

To determine the interest rate on an ARM, we'll add a pre-disclosed amount to the index called the "margin." 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 Caps

An 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.

Prepayment Penalties

Depending on the initial term of the ARM product you select, you may have to pay a prepayment penalty if you prepay your mortgage.

Contact a Mortgage Consultant

Selecting 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 Mortgage Consultant if you have questions about the features of our adjustable rate mortgages. Use the "Contact Us" button at the bottom of the home page.

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 payment 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.

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. Fees for things like appraisals, title work, and document preparation are generally 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.

A 15-year fixed rate mortgage gives you the ability to own your home free and clear of the mortgage in 15 years. And, while the monthly payments are somewhat 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.

Who Should Consider a 15-Year Mortgage?

The 15-year fixed rate mortgage is generally 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 Mortgage

The 15-year fixed rate mortgage offers two big advantages for most borrowers:

• You own your home free of the mortgage 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 10 percent to 15 percent higher per month than the payment for a 30-year.
• Because you'll pay less total interest on the 15-year fixed rate mortgage, your possible mortgage interest tax deduction will not be as large. Consult your tax advisor regarding the deductibility of interest.
• Use 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.

Depending on the loan product selected there may be a prepayment penalty .

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 objectionable 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 and that transfer of title takes place efficiently and correctly.

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 usually 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 within policy limits. 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 covered by the title policy will be borne by the title company within policy limits, and that the odds of a claim being filed are slim indeed.

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. Low down payment mortgages are becoming more and more popular, and 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. 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 Mortgage Consultant.

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!

You can request a pre-qualification before you find a home and that may be the best thing you could do! If you qualify, we'll issue a pre-qualification letter which may help finding the perfect home. We'll issue a pre-qualification letter online instantly to those who qualify. You can use the pre-qualification letter to assure real estate brokers and sellers that you are a qualified buyer. Having a pre-qualification for a mortgage may give more weight to any offer to purchase that you make.

When you find the perfect home, you'll simply call your Mortgage Consultant to complete your application. You'll have an opportunity to lock in our great rates and fees then and we'll complete the processing of your request.

Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers.

Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.

There are many factors that go into making a credit decision and we always look at the total financial picture of the applicant(s) during the underwriting process.

There is no charge to you for the credit information we'll access with your permission to evaluate your request for pre-approval online. However, you will be charged for a credit report if you decide to submit the application. You will be asked to pay the fee at that time.

Whether you're purchasing or refinancing, we're certain you'll find our personal service to be outstanding.

If you'll be purchasing a home but haven't found the perfect one yet, complete our application and if you qualify, we'll issue a prequalification for a mortgage loan now with no obligation!

Yes, you can borrow funds to use as your down payment! However, any loans that you take out must be secured by an asset that you own such as a 401k account or real estate. If you are planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application.

Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. However, based on your entire financial situation, we may not need full copies of your tax returns.

We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need at least one, and sometimes a full two-year history of self-employment to verify that your self-employment income is stable.

Once we have reviewed your application we will determine what documentation will be required.

In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.

Once we receive your application, we will determine what documentation will be required.

We will ask for copies of your recent social security award letter, pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter.

If you own rental properties, we'll generally ask for the most recent year's federal tax return to verify your rental income. We'll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won't be counted against your rental income.

If you haven't owned the rental property for a complete tax year, we'll ask for a copy of any leases you've executed and we'll estimate the expenses of ownership.

Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.

Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.

Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.

Typically, income from a second job will be considered if a one-year history of secondary employment can be verified.

Having changed employers frequently is typically not a hindrance to obtaining a new mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We'll also look at your income advancements as you have changed employment.

If you're paid on a commission basis, a recent job change may be an issue since we'll have a difficult time of predicting your earnings without a history with your new employer.

If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0."

Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.

If your loan request is for more than 80% of the purchase price, we'll need to verify that you have at least 5% of the property's value in your own assets.

Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account.

If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the settlement or closing statement you'll receive at the closing to verify that your current mortgage has been paid in full and that you'll have sufficient funds for our closing. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that's the case, we'll just ask you to bring your settlement statement with you to your new mortgage closing.

Congratulations on your new job! If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location.

If your employment is with a new employer, complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. We'll sort out the details after you submit your loan for approval to determine the documentation required.

Yes, it should be included. Generally, a co-signed debt is considered when determining your qualifications for a mortgage. We can ignore the monthly payment of the co-signed debt if you can provide verification that the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last six months along with a letter from them explaining their responsibility for the debt.

Yes. All student loans , including those that are in deferment, must be included in the installment debt.

If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we will generally require that two years have passed since the bankruptcy or foreclosure has been released. It is also important that you've re-established an acceptable credit history with new loans or credit cards.

Installment debt requires that you make payments on a regularly scheduled basis. Liabilities such as an auto loan, auto lease , student loan or credit card debt fall into this category. Do not include payments on other living expenses, such as insurance costs or medical bill payments. Other than auto leases, we'll include any installment debts that have more than 10 months remaining when determining your qualifications for this mortgage.

In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend that you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Mortgage Consultant. We'd be happy to provide any information necessary.

The most important documents you will sign at closing are the note and mortgage, sometimes called the deed of trust. Unless there are special circumstances, these documents are usually prepared one to two days before your closing. Other documents are prepared by the closing agent the day before or the day of your closing. If you would like copies of the completed documents to be sent to you after they are prepared, please contact your Mortgage Consultant.

If you won't be able to attend the loan closing, contact your Mortgage Consultant to discuss other options. If someone you trust is able to attend on your behalf, you may be able to execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we're able to mail you the documents in advance so that you can sign them and forward them to the closing agent.

The closing generally takes place at the offices of the Bank's Attorneys. We have several convenient locations from which to choose when scheduling your closing.

Automated monthly payments are available. At the loan closing an automated payment application will be provided. Simply return it at your earliest convenience to enroll in the automated payment program.

During the closing you will be reviewing and signing several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have regarding the loan papers or you can feel free to contact your Mortgage Consultant if you prefer.

To help avoid any surprises at closing, contact your attorney a few days before closing to review your final fees, loan amount, first payment date, etc.

The most important documents you will be signing at the closing include:

HUD-1 Settlement Statement

This document provides an itemized listing of the final fees charged in connection with your loan. If your loan is a purchase, the settlement statement will also include a listing of any fees related to the transaction between you and the seller. If this loan will be a refinance, the settlement statement will show the pay off amounts of any mortgages that will be paid in full with your new loan. Most items on the statement are numbered according to a standardized system used by all lenders. These numbers will correspond to the numbers listed on the Good Faith Estimate that will be provided in your application package. This document is also commonly known as the closing statement and both the buyer and seller must sign this document.

Note

This is the document you sign to agree to repay your loan. The note will provide you with all of the details of your loan including the interest rate and length of time to repay the loan. It also explains the penalties that you may incur if you fall behind in making your payments.

Mortgage / Deed of Trust

This document pledges a property to the lender as security for repayment of a debt. Essentially this means that you will give your property up to the lender in the event that you cannot make the mortgage payments. The Mortgage restates the basic information contained in the note, as well as details the responsibilities of the borrower. In some states, the document is called a Deed of Trust instead of a Mortgage.