FAQ
1. How do I know how much house I can afford? Answer
2. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3. How do I know which type of mortgage is best for me? Answer
4. What does my mortgage payment include? Answer
5. How much cash will I need to purchase a home? Answer
6. What are Points? Answer
7. What are Closing Costs? Answer
8. What are Prepaids & Escrows? Answer
9. How much will Closing Costs, Prepaids & Escrows be? Answer
10. What is a Seller's Assist or a Seller's Concession? Answer
11. How is an index and margin used in an ARM? Answer
12. What is PMI or MIP? Answer

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 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. We 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.
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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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    Q : What are Points?
    A : 1 Point is 1% of the Loan Amount. Points are usually charged when the Borrower wants a lower interest rate than the Broker can offer on a loan with no Points.
     
    Q : What are Closing Costs?
    A :

    Closing Costs or Settlement Costs are charges that are incurred in the purchase or refinance or your house. Closing costs include: Appraisal, Title Insurance, Title Search and Examination Fees, Survey, Attorney Fees (if you choose to use one) Lender Fees, Broker Fees, Credit Report, Flood Certification, Recording Fees for the Mortgage and if it's and purchase the deed must also be recorded.

     
    Q : What are Prepaids & Escrows?
    A :

    Prepaids: Items that are required to be paid by in advance by the Lender, such as, Interest from the day you close until the end of that month, the first year of your Homeowners Insurance Premium, Taxes for the next quarter.

    Escrows: Reserves that are deposited with the Lender. Many people pay their property taxes & homeowners insurance along with their monthly mortgage payment. This is called escrowing the taxes and insurance. If you put less than 20% down (or if refinancing… you have less than 20% equity in your home) most lenders will require that you escrow your taxes and insurance. If you escrow the lender will required a portion of the yearly total to be deposited with them at closing to begin your escrow account.

     
    Q : How much will Closing Costs, Prepaids & Escrows be?
    A :

    These costs will vary depending on the purchase price of the house, property taxes, whether or not you are escrowing as well as other factors. The range can be from 3%-6% of the purchase price or loan amount. At the time of application we will go over these costs in detail and give you a Good Faith Estimate of these costs as they apply to you particular purchase or refinance.

     
    Q : What is a Seller's Assist or a Seller's Concession?
    A : The seller may give back a portion of their proceeds from the sale to help pay for the Buyer's closing costs. This is considered a Seller's Concession. How much of a concession that can be given is determined by the type of loan product the borrower is approved for, 3%-6% of the purchase price is the average allowed concession.
     
    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 : What is PMI or MIP?
    A : PMI is Private Mortgage Insurance. MIP is FHA's Mortgage Insurance Premium.On a Purchase, if less than 20% is put down or on a refinance if there is less than 20% equity, Mortgage Insurance is required. Mortgage Insurance protects the Lender in case of default on the loan.