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. |
|
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. |
|
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). |
|
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. Premium Mortgage Corporation
can help you evaluate your choices and help you
make the most appropriate decision. |
|
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. |
|
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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