| 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. Paradise Valley Funding Groupcan 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 |
| |
