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How do I know how much house I can afford? |
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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. |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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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. |
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How is an index and margin used in an ARM? |
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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). |
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How do I know which type of mortgage is best for me? |
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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. Americas Mortgage Link, Inc can help you evaluate your choices and help you make the most appropriate decision. |
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What does my mortgage payment include? |
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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. |
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How much cash will I need to purchase a home? |
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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 |
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What is the difference between a Fixed Rate Vs. Adjustable Rate Mortgage? |
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Fixed-Rate Loans The most common mortgage loan is the 30-year fixed-rate loan because the interest rate does not changeover the life of the loan. Most homeowners prefer this type of loan since they know that their monthly mortgage payment will remain steady over the years. A 15-year fixed loan is becoming more popular because it reduces your time horizon on the loan, allowing you to decrease dramatically the amount of interest you'll pay over the life of the loan. Generally these loans will carry a higher rate of interest since the lender is giving up their opportunity to make more money in an economy where the interest rate is rising.
Adjustable-Rate Loans The median length of stay in a home is only 8.2 years (1998 U.S. Census data), so if you plan on staying in the new home for a short period of time, you may want to consider alternative financing to the traditional fixed-rate loan. Adjustable-rate loans offer a lower interest rate for a set period of time. The interest rate on these loans can be adjusted annually or you can see them listed as "3-1", "5-1", "7-1" or many other variations. For example, under a "7-1" adjustable rate loan, the loan will stay fixed for the first seven years and then reset each year thereafter. This means that the loan will stay fixed for the first seven years. Then in the eighth year, the rate is adjusted based on current market conditions, which is usually based on the one-year Treasury Index.
Initially, the interest rates on adjustable rate mortgages can be anywhere from one to three percentage points below the conventional fixed mortgage, and then typically adjusted annually after the fixed term expires. If you only plan to stay in the home for seven years, then this may be the perfect loan for you. You'll need to watch out if interest rates start to rise; you may find yourself paying more than the traditional 30-year fixed.
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