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FAQ Details

Should I consider an online mortgage?
  • Whether you should consider an online mortgage depends on what you value most. Generally, borrowers considering an online mortgage rank convenience and speed as top priorities when financing a home purchase.

    Many banks with brick-and-mortar locations also serve as online mortgage providers, giving buyers the option to complete the process remotely or in person. When choosing whether an online mortgage is right for you, it comes down to personal preference. Get started with an online application today.

Do I have to pay a mortgage insurance premium?
  • Whether or not you need to pay a mortgage insurance premium (MIP) depends on the terms of your loan. Down payment amounts dictate the need for mortgage insurance premiums, which influence monthly payments — and the amount due at closing. All Federal Housing Authority (FHA) mortgages require borrowers to pay an upfront mortgage insurance premium, known as UFMI, at closing in addition to an annual premium for the life of the loan. The upfront premium costs 1.75% of the loan amount, and the annual mortgage insurance premium runs between 0.45% to 1.05%.

    If you made a down payment of less than 10%, you’re responsible for paying the annual premium in monthly installments over the life of the loan. If you put down over 10%, the requirement to pay the annual premium ends after 11 years. 

What does a mortgage loan officer do?
  • A mortgage loan officer works for a bank or mortgage company and assists customers who apply for a home loan. Mortgage loan officers stay updated on the latest mortgage news and use their expertise to evaluate and authorize approval of mortgage loans. Mortgage loan officers help customers choose loans that best fit their financial situation and then help them complete the application process. Mortgage loan officers also serve as a borrower’s main contact throughout the home loan process.

How much does it cost to refinance a mortgage?
  • On average, refinancing a mortgage costs homeowners approximately $3,000. However, the actual cost to refinance a mortgage depends on the loan amount, county of residence and several other factors. Closing costs typically include lender fees, a home appraisal and title services. Lenders may offer lower-cost refinancing options, which feature a higher interest rate with fewer upfront fees compared to a conventional mortgage.

What is the difference between a jumbo mortgage and a balloon mortgage?
  • There are a few differences between a jumbo mortgage and a balloon mortgage such as length of term, interest rates and payment terms.

    A jumbo mortgage is a type of home loan used to finance properties that are significantly more expensive than the average home. Jumbo mortgages are generally reserved for affluent buyers who purchase a home worth more than $548,250. On average, interest rates and down payments are higher, and jumbo mortgages are generally paid off in equal monthly payments. They can have 15- to 30-year terms.

    Balloon mortgages typically carry lower interest rates and monthly payments than jumbo loans. Unlike a jumbo mortgage, balloon mortgages require borrowers to pay off the remainder of their loan as a lump sum payment at a predefined time, typically toward the end of the term. A balloon mortgage can last from three to 30 years. 

What is mortgage amortization?
  • Mortgage amortization is the process by which a home loan is separated into a series of fixed monthly payments. Mortgage amortization can help borrowers calculate how much of their payments are being put toward interest and principal.

What are the differences between home construction loans and typical mortgages?
  • Home construction loans and typical mortgages have several distinct differences. Though both types of loans can be used to secure financing for a home, lenders generally require home construction loan borrowers to make larger down payments. Lenders also typically have more stringent credit requirements for borrowers seeking a construction loan than for those applying for a typical mortgage.

    The repayment term can also vary between the two home loans. Some home construction loans must be paid off in a year or less, depending on the type of loan the buyer secured, and standard interest rates are generally higher as well. 

What are the pros and cons of an adjustable rate mortgage?
  • An adjustable rate mortgage (ARM) on a home loan comes with a flexible interest rate that changes over the life of the loan. Some ARMs offer initial fixed interest rates for three, five or seven years and then adjust over the remainder of the loan term. Compared to a fixed rate mortgage, an ARM mortgage offers a lower initial interest rate, but after the fixed rate period ends, monthly payments typically fluctuate up or down, depending on the market.

What is an escrow account in a mortgage?
  • In relation to a mortgage, an escrow account is a fund that contains money designated to cover certain monthly expenses including property taxes and homeowner’s insurance. Taxes and insurance represent the two primary elements of what is held in an escrow account by the lender, which pays those bills on the borrower’s behalf. Financial lenders generally require an escrow account for mortgage loans, although escrow can sometimes be waived if a borrower pays a down payment of at least 20%.

How do I go about getting a mortgage?
  • The process of getting a mortgage can differ by lender. To apply for a mortgage, look for lending institutions with the best rates and terms to meet your financial needs. The lender will collect information about your income, employment, assets, credit score, and debt information before pre-approving you for a loan. Once your offer has been accepted on a home, you’ll work with the lender throughout the mortgage process until the final closing day.

How do I refinance my mortgage?
  • You can take several different paths to refinance your mortgage. First, you need to determine your goal: Do you want to lower your interest payments, shorten the loan term, drop mortgage insurance or free up cash?

    Next, you should shop for the best mortgage refinance rate for your goals. A loan officer can help you determine the best options for refinancing your mortgage. Next, you’ll need to select your lender. Once you lock in your interest rate, it’s time to close on the loan, which is a similar process to closing on your original mortgage.

    Whatever your financial needs, an experienced mortgage loan officer can guide you through the process of how to refinance a mortgage.

Should I refinance my mortgage?
  • If you’re wondering when to refinance your mortgage, compare current mortgage rates to your existing mortgage rate. If you can lock in a significantly lower rate and still save money after closing costs, that’s when you should consider refinancing a mortgage. You should also evaluate refinancing based on how much longer you intend to stay in your home. When mortgage rates drop significantly, refinancing your home mortgage can allow you to lower your monthly payments, shorten the loan term or borrow cash against your equity while securing a better interest rate on your home loan.

How do I find the right mortgage solutions?
  • First Merchants Bank’s online mortgage center helps homebuyers evaluate and find the best mortgage solutions based on their lifestyle, budget and goals. Our mortgage loan officers guide you through every step of the borrowing process, so you can confidently choose a better mortgage that fits your financial needs. Popular mortgage solutions include 30-year and 15-year fixed rate mortgages, adjustable rate mortgages and construction loans.

What are mortgage points? Are they worth the cost?
  • Mortgage points are an optional, one-time fee you pay your lender at the closing to reduce your mortgage interest rate. One mortgage point costs 1% of the mortgage loan amount. While mortgage points increase closing costs, a lower interest rate over the life of the home loan reduces monthly mortgage payments and the amount of interest paid. To really know if mortgage points are worth it, we recommend comparing the cost of the points at closing with the amount of anticipated savings in interest paid. This anticipated savings varies based on the amount of time you plan to stay in the home or whether you plan to refinance in the near future.

How long will I be paying off my mortgage?
  • The length of time it takes to pay off a home mortgage depends on the specific loan terms. First Merchants offers several mortgage solutions, including a 15-year mortgage and a 30-year fixed mortgage. Shorter mortgage terms typically come with a higher monthly payment, but the homebuyer pays less interest over the life of the loan.

    Homebuyers also generally have an option to select an adjustable rate mortgage, which includes an interest rate that adjusts with the marketplace. Adjustable rate loans typically start off with lower interest rates, but they increase with time. 

What do I need to know as a first-time homebuyer?
  • As a first-time homebuyer, you’ll need to take a few steps before you figure out how much you can afford to spend on your first home mortgage, and then get pre-approved for a mortgage loan. First Merchants Bank offers an online mortgage calculator, as well as an online pre-approval application process, both of which are designed to be quick and convenient. You also need to decide how much you can afford for a down payment, which may determine whether you choose conventional financing or an alternative, low down payment option.

What is a mortgage?
  • The definition of a mortgage corresponds to a type of loan used to finance the purchase of a home or other real estate. House mortgage payments, paid monthly, consist of the principal balance, interest, insurance and taxes. A percentage of each payment goes toward paying the interest versus the principal, but as time goes on, more of your money goes directly toward paying off the principal. A standard mortgage typically offers either a 30-year or 15-year term for a fixed rate loan. Stretching payments over a longer period of time reduces monthly payments but increases the interest rate.

What is the difference between a mortgage broker and a mortgage lender?
  • A mortgage broker works on your behalf to find a mortgage bank, so you can secure a home loan. By contrast, a mortgage lender approves you for a home loan and lends you the money to buy a home. Whether you choose to work with a mortgage broker or directly with a mortgage bank, ensure you’re getting the best loan terms and interest rates available to you. Also, carefully examine any fees or additional costs the broker or lender may charge.

What is a home equity line of credit and how does it work?
  • The definition of a home equity line of credit, also known as a HELOC, is a loan that allows you to borrow against the equity of your home. A HELOC provides flexibility, because unlike borrowing and paying interest on one large lump sum, you decide how much you need and pay interest only on what you use. A home equity line of credit typically offers a lower interest rate than other loan products.

What is a home equity loan and how does it work?
  • A home equity loan is defined as a specific one-time lump sum loan with fixed monthly payments. Home equity loans are commonly used by borrowers to cover major expenses, such as home remodeling, or to consolidate debt. To secure a home equity loan from a lending institution, you as the borrower use your home as collateral. A home equity loan can be borrowed from a lender before or after you pay off the mortgage. To qualify, the property must hold equity, which determines the minimum and maximum loan amounts available.