Buying or Refinancing a Home?

Seven do-it-yourself tips for choosing and managing a mortgage

Do you have a mortgage loan or are you in the market for one? With new disclosures and other consumer protection rules, and fluctuations in interest rates, it’s good to review some key strategies to keep costs down for your home loan.

“Since a mortgage may be the largest and most complex financial obligation you will ever enter into, be sure to do your homework before and after you commit to a loan,” said Jonathan Miller, a Deputy Director in the FDIC’s Division of Depositor and Consumer Protection.

Here are tips on keeping borrowing costs low and thinking ahead about issues that might arise.

For Anyone Looking for a Mortgage

  1. Remember that loan programs can change and lenders’ policies may vary, so research new opportunities before applying for a mortgage. For example, more lenders are beginning to offer borrowers the chance to obtain a mortgage with a smaller down payment. Why is that happening?
    1. Fannie Mae and Freddie Mac will now buy mortgages from lenders that have down payments as low as 3 percent. This change could lead to more lenders lowering their down payment requirements for borrowers. But be careful. Making a smaller down payment typically means you will pay higher monthly mortgage payments and have greater borrowing costs over the long run.
    2. Also, in January 2015, the U.S. Department of Housing and Urban Development (HUD) announced a cut in Federal Housing Administration insurance premiums on mortgages with low down payments. This change will make the FHA’s low down payment loans more affordable.
  2. Don’t be shy about shopping around for a home loan. The Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency recently released the results of a survey showing that nearly half of the consumers who took out a mortgage to buy a home in 2013 did not shop around before applying. “Failing to shop means money lost for consumers,” the CFPB said. “Consumers who consider the product offerings of multiple lenders or brokers may save substantial sums.”

    As part of the announcement, the CFPB launched an online toolkit called “Owning a Home” ( to help consumers as they shop for a mortgage and make smarter decisions on home loans.

    It’s best to compare offers from several different lenders before making a final decision. And keep in mind that you do not have to use a lender suggested by your real estate agent or anyone else involved in your home purchase.

  3. Understand the pros and cons of adjustable-rate mortgages. Also known as ARMs, these mortgage loans generally start out with low introductory rates for a certain time period. A low rate may be appealing, but be sure you know how much that rate could rise, when, and under what circumstances. By law, the lender must disclose this information to you. When the lender considers your ability to repay the loan, it must take into account possible rate hikes during the first five years of the loan.

    “You also shouldn’t assume that you will have the option to refinance an ARM or sell your home to escape higher payments later on,” said Elizabeth Khalil, a Senior Policy Analyst at the FDIC. “Mortgage interest rates have been low over the past few years, but they may be higher in the future, meaning that refinancing your ARM may not significantly lower your payments. This is also a reason to think seriously about a fixed-rate loan, which may be somewhat more expensive but has predictable payments.”

    Whether it’s a fixed or adjustable rate, be sure you understand all the terms of any loan you are considering before you decide whether to take it. If you have questions, consider consulting with a HUD-approved housing counseling agency (see contact information at the end of this article) or an attorney.

  4. Watch for new mortgage disclosures. The CFPB has developed new disclosures that, by law, lenders will be required to use beginning on August 1, 2015. For most new mortgages and refinancings, four previously required disclosures of settlement costs and key loan terms (including the “Good Faith Estimate” provided within three days of applying for a mortgage and the “HUD-1 Settlement Statement” of actual costs at closing) will be replaced by two new forms intended to provide clearer and more useful information to consumers. The CFPB has detailed information about the new disclosures at
  5. Consider how a mortgage could affect you in retirement. Carrying significant mortgage debt can create payment problems for retirees living on a fixed income. Some consumers may even delay retirement due to mortgage debt. “Even if you’re many years from retirement, consider now how long you intend to carry a mortgage, have a plan for paying it off, and be sure that timeframe lines up with your goals for career and retirement,” said Kathleen Keest, also an FDIC Senior Policy Analyst.

For Current Homeowners

  1. Keep an eye on the servicing of your loan. The entity that collects your payments and performs other duties for your mortgage lender, perhaps including responding to inquiries and initiating foreclosure actions against delinquent borrowers, is referred to as the loan servicer. It may or may not be the same company from which you got your loan, and it may be replaced by another servicer over the life of the loan, perhaps multiple times. By law, you must receive advance notice when the servicing of your loan is transferred to a different company. And under new rules, you cannot be charged a late fee if an overdue payment to the new servicer is received within 60 days after the transfer of duties.

    “If your loan servicer changes, carefully review your account to confirm that your payments are being accurately credited,” suggested Senior Policy Analyst Glenn Gimble. “Also by law, prior to closing on your loan you must receive a disclosure about how often the lender transfers servicing. The answer may influence your decision to accept a loan from this lender or to choose a different lender, maybe one that services its own loans.”

  2. Research the potential risks and benefits of home equity products. A loan secured by a homeowner’s “equity” in a home can be an economical way to borrow money because the interest rate is typically low and, for many people, the interest paid will be tax deductible. Generally, the equity is the current appraised value of a home minus what is owed on the mortgage. “As home values rise in a number of areas, home equity products are again becoming more popular, but it’s important to keep in mind that, just like with a mortgage, your home is at risk of loss if you fail to pay the loan,” cautioned Gimble.

    There are two basic types of home equity products. One is a one-time loan for a lump sum, typically with a fixed monthly payment. The other is a home equity line of credit (HELOC), which allows homeowners to borrow money one or more times up to an approved credit limit, usually at a variable interest rate.

    Also, some HELOCs have low introductory interest rates that can reset at a higher rate. The federal banking agencies have issued guidance to financial institutions on the importance of early notice to borrowers about impending rate resets and making help available to those facing rate increases that could be difficult to pay. See the Winter 2013-2014 edition of FDIC Consumer News ( for more on HELOCs and rate resets.

Reprinted from FDIC Consumer News Winter 2015

About Union State Bank

Honesty, integrity, commitment; hometown values that are our way of doing business. At Union State Bank our mission is to be the preferred, locally owned bank committed to providing exceptional service to achieve long lasting customer relationships. The Union State Bank has been serving the banking needs of our community since 1911, when the Farmers and Merchants State Bank was formed in Kewaunee, Wisconsin. The Bank’s slogan was "A Bank of the People, By the People and For the People - A Bank For All The People," and invited the community "if you are not a customer, become one, and we assure you that your interests will be protected in every legitimate manner." In 1934 the Farmers and Merchants State Bank consolidated with the Dairyman’s State Bank, which was located across the street, and the Union State Bank was formed. It was reported in the local paper that "The union of two banks is particularly for the benefit of depositors. All the experience, ability and training gained through many years of banking service is combined here primarily for your protection. The confidence that has been cultivated over past years is now being strengthened." We have continued to grow through the years, and slogans used include "Union State Bank, where rail and water meet" and "Union State Bank, the bank and a half, we give you our all and then some." We currently have four locations. We have two offices located in Kewaunee, Wisconsin which is along the shores of Lake Michigan, approximately 20 miles east of Green Bay. We also have an office in Green Bay, Wisconsin and an office in Two Rivers, Wisconsin. Our main office is located at 223 Ellis Street in Kewaunee. Our second Kewaunee location was established in 1996 and is in the Piggly Wiggly grocery store. Our Green Bay office was established in 1987 and in September of 1999 we completed an addition to that location. In April 2004 we opened our office in Two Rivers. Originally situated inside the Pick 'n Save grocery store, the Two Rivers office was relocated to a brand new building at 2221 Lincoln Avenue on April 21, 2009. We have certainly grown and changed over years, but one thing remains constant - our commitment to our customers. We are proud to be the only independent bank in Kewaunee, which allows us the ability to offer a wide array of services that are designed to meet the individual needs of our customers. We offer full-service banking from an experienced, dedicated staff of full-time employees. We still believe in the "personal touch," and enjoy getting to know our customers. Even though we are a small, locally owned bank, we offer the latest in technology services, including our website and 24-hour account access via our "Union Access" line. We are proud of our long history of high-quality, personalized service, and invite you to become a customer of Union State Bank. See how "We Make the Difference" for you.
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