1. 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.
2. 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.
3. 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).
4. 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. Associates Home Loan of Florida can help you evaluate your choices and help you make the most appropriate decision.
5. 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.
6. 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
7. How much are closing costs?
a. Closing costs are determined by the total amount of the loan. Typically closing cost are between 4% and 10% depending on which loan product is used.
8. Is there a prepayment penalty associated with a home loan?
a. There are no prepayment penalties for homes that are owner occupied.
9. Will I need to purchase home owners insurance?
a. Yes, Home owners insurance is required for all owner occupied homes.
10. What amount of debt to income is required to qualify for a loan?
a. We can make loans up to a debt to income ratio of 55%. This is calculated by adding together all monthly debt and dividing the total into the monthly income amount.