|
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
:
|
What is the difference in Pre-approval vs. Loan Approval |
|
A
: |
• Pre-approval -- This is a more in-depth (and more useful) version of pre-qualification. When you get pre-approved for a mortgage loan, the lender will actually start to verify your financial background. This is what sets it apart from pre-qualification. They will request a variety of documents from you, such as tax records and bank statements. They will also check your credit score. The pre-approval process gives you a more accurate idea of how much you can borrow.
• Approval -- This is the final approval by the lender. It takes place after you have chosen a home and made an offer. In order to reach this stage, you would need to give your mortgage company a copy of the purchase agreement. You'll also go through an extensive underwriting process that could take up to 30 days. The lender will probably require a home appraisal as well.
|
| |
|
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. Mortgage First of Augusta 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 borrowedInterest: Payment to the lender for the amount borrowedTaxes & 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 houseDown Payment: A percentage of the cost of the home that is due at settlementClosing Costs: Costs associated with processing paperwork to purchase or refinance a house |
| |
|
Q
:
|
Benefits of a Pre-Approval |
|
A
: |
Every home buyer should get pre-approved for a loan (unless you're paying cash for the house). You could spend days or weeks looking at houses in a certain price range, only to find out that you're qualified for a lesser amount. When you start with the pre-approval, you'll have a pretty good idea what you can afford -- or what the Lender says you can afford, anyway.
Additional list of benefits:
•Getting pre-approved for a mortgage helps you identify any problems you have (too much debt, a low credit score, etc.). The sooner you can find about these issues the more time it will give you to correct them.
•Real estate agents will be more willing to work with you. If you were an agent, would you spend hours out of your day to help someone who hadn't spoken to a lender yet? This is why most agents will only work with buyers who have a pre-approval letter.
•Sellers will take you seriously. Put yourself in the seller's shoes for a moment. Imagine you get two offers from potential buyers. One has been pre-approved already and has a lender lined up. The other buyer hasn't even spoken to a mortgage lender yet. If the offers were for the same amount, which one would you take? This is especially important in an active market, where multiple offers are a reality.
•It also helps you narrow the field when house hunting. Once you know how much the lender is willing to offer, you can shop within that price range.
As you can see, this process helps you in several ways. No, it's not a commitment from the lender. You can't get that until you've actually found a house. But it's the next best thing. It gives you a pretty good idea what they'll be willing to lend you, when the time comes. So you can shop accordingly.
|
| |