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- How do I know how much house I can
afford?
- What is the difference between a
fixed-rate loan and an adjustable-rate loan?
- How is an index and margin used in
an ARM?
- How do I know which type of mortgage
is best for me?
- What does my mortgage payment include?
- 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.
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. International Mortgage Investors
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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