FAQ

      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 what type of mortgage payment include? Answer
      5.  What does my mortgage payment include? Answer
      6.  How much cash will I need to purchase a home? Answer

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 one easy formula to determine the type of mortgage that is best for you. Your choice depends on a number of factors, including your current financial picture, and how long you intend to keep your house. Equity Loans can help you evaluate your choices and help you make the best 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 to buy a home depends on a number of items. However, three components usually account for the total amount needed to close:
Earnest Money-The deposit that is usually required when you make an offer on the house
Down Payment-A percentage of the cost of the home that is due at the closing
Closing Costs- Costs associated with processing paperwork to purchase or refinance a house