Frequently Asked Questions
1. How do I know how much
house I can afford?
2. What is the difference between a fixed-rate loan and an adjustable-rate loan?
3. How is an index and margin used in an ARM?
4. How do I know which type of mortgage is best for me?
5. What does my mortgage payment include?
6. How much cash will I need to purchase a home?
Q : How do I know how much
house I can afford?
A : Generally speaking, you can purchase a home
with a value of two or three times your annual household income.
However, the amount that you can borrow will also depend upon your
employment history, credit history, current savings and debts, and
the amount of down payment you are willing to make. You may also
be able to take advantage of special loan programs for first time
buyers to purchase a home with a higher value. Give us a call, and
we can help you determine exactly how much you can afford.
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Q : What is the difference
between a fixed-rate loan and an adjustable-rate loan?
A : With a fixed-rate mortgage, the interest rate
stays the same during the life of the loan. With an adjustable-rate
mortgage (ARM), the interest changes periodically, typically in
relation to an index. While the monthly payments that you make with
a fixed-rate mortgage are relatively stable, payments on an ARM
loan will likely change. There are advantages and disadvantages
to each type of mortgage, and the best way to select a loan product
is by talking to us.
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Q : How is an index and
margin used in an ARM?
A : An index is an economic indicator that lenders
use to set the interest rate for an ARM. Generally the interest
rate that you pay is a combination of the index rate and a pre-specified
margin. Three commonly used indices are the One-Year Treasury Bill,
the Cost of Funds of the 11th District Federal Home Loan Bank (COFI),
and the London InterBank Offering Rate (LIBOR).
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Q : How do I know which
type of mortgage is best for me?
A : There is no simple formula to determine the
type of mortgage that is best for you. This choice depends on a
number of factors, including your current financial picture and
how long you intend to keep your house. Lenders Unlimited, LLC can
help you evaluate your choices and help you make the most appropriate
decision.
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Q : What does my mortgage
payment include?
A : For most homeowners, the monthly mortgage payments
include three separate parts:
- Principal: Repayment on the amount borrowed.
- Interest: Payment to the lender for the
amount borrowed.
- Taxes & Insurance: Monthly payments
are normally made into a special escrow account for items like
hazard insurance and property taxes. This feature is sometimes
optional, in which case the fees will be paid by you directly
to the County Tax Assessor and property insurance company.
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Q
: How much cash will I need to purchase a home?
A : The amount of cash that is necessary depends
on a number of items. Generally speaking, though, you will need
to supply:
Earnest Money: The deposit that is supplied when you make an offer
on the house
Down Payment: A percentage of the cost of the home that is due at
settlement
Closing Costs: Costs associated with processing paperwork to purchase
or refinance a house.
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