| 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 is an index and margin used in an ARM? Answer |
| 4. |
How do I know which type of mortgage is best for me? Answer |
| 5. |
What does my mortgage payment include? Answer |
| 6. |
How much cash will I need to purchase a home? Answer |
| 7. |
Why should I buy a home instead of renting? Answer |
| 8. |
What do I need to do to apply for a loan? Answer |
| 9. |
I've heard that my credit score is important in determining what loan programs are available to me. Who determines my credit scores? Answer |
| 10. |
What are my responsibilities during the loan process? Answer |
| 11. |
How long does it take for the lender to approve my loan? Answer |
| 12. |
Once my loan is approved, how long will it take to close? Answer |
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Q
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How do I know how much house I can afford? |
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A
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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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Q
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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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Q
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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. Signature Mortgage LLC can help you evaluate your choices and help you make the most appropriate decision. |
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Q
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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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Why should I buy a home instead of renting? |
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The advantages are many. First, with today's low interest rates, owning a home may actually be cheaper than renting. Not only that, but home ownership allows you to build equity in yourself instead of a landlord. In addition, there are tax incentives to home ownership (i.e. the ability to claim the interest paid on the home as a tax deduction). |
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What do I need to do to apply for a loan? |
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The first step in the process is to complete a loan application. For most loans, along with the application, you will need some or all of the following documents:
1. Pay stubs for the past two to three months.
2. W-2 forms for the past two years.
3. Proof of any other income.
4. Bank ststements for the past two to three months.
5. Tax returns for the past two years.
If the loan is to be used to buy a home (as opposed to refinancing), you will also need:
1. Sales contract.
2. Address and description of the property. |
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I've heard that my credit score is important in determining what loan programs are available to me. Who determines my credit scores? |
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A
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There are three credit reporting agencies. They are:
Experian (888) 524-3666
Equifax (800) 685-1111
TransUnion (800) 916-8800
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What are my responsibilities during the loan process? |
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First and foremost, do not change anything in your financial situation until after the loan has closed. Any changes in your income or the addition of more debt can have an adverse impact on your loan being approved. In addition:
1. Do not overstate your income.
2. Do not overstate how long you have been employed.
3. Do not overstate your assets.
4. Make sure your debts are reported accurately.
5. Be upfront about any past credit issues.
6. Do not provide false supporting documents. |
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How long does it take for the lender to approve my loan? |
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It will take about 1 to 3 weeks for the lender to approve the loan. Often, the lender will ask for some additional supporting documents. The quicker you can supply these documents, the quicker the loan will be approved. |
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Once my loan is approved, how long will it take to close? |
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The closing usually takes place within 2 weeks of loan approval. |
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