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How do I know how much house I can afford? Answer |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer |
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How is an index and margin used in an ARM? Answer |
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10/1 ARM, 7/1 ARM, 5/1 ARM, 3/1 ARM, 1 Year ARM Answer |
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How do I know which type of mortgage is best for me? Answer |
| 6. |
What does my mortgage payment include? Answer |
| 7. |
How much cash will I need to purchase a home? Answer |
| 8. |
Interest Only Mortgages Answer |
| 9. |
Graduated Payment Mortgage (GPM) Answer |
| 10. |
What is an FHA loan? Answer |
| 11. |
What if I have “bad credit”?
Answer |
| 12. |
VA Home Loan Entitlement Answer |
| 13. |
VA Loan Adjustment Rates Answer |
| 14. |
Debt to Income Ratio for VA Loans Answer |
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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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10/1 ARM, 7/1 ARM, 5/1 ARM, 3/1 ARM, 1 Year ARM |
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This loan has a fixed initial rate for 10, 7, 5, 3, and 1 years and then adjusts annually for 20, 23, 25, 27, and 1 year. This is a recommended ARM if you plan to be in your home 3 - 10 years. |
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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. 2 Blue Chip Mortgage 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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Interest Only Mortgages |
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Interest only loans are loans in which the monthly payments are interest only and no money is paid toward the principal of the loan. These loans usually are interest only for a specified time early in the loan, from 3 to 10 years. After the allotted time period the loan may convert to a conventional loan and is amortized so that the remainder of the loan will be paid to principal and interest until the end of term.
The main advantage is a lower monthly payment for the initial part of the loan which enables the buyer to qualify for a higher loan amount. This is a good option if the buyer intends to sell before it converts to conventional loan with a higher payment or anticipates an income increase. Otherwise it could be trouble when the higher payments come due and the buyer may have to foreclose. |
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Graduated Payment Mortgage (GPM) |
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A mortgage in which the interest increases over the period of the loan at a pre-determined schedule until it reverts to a fixed rate for the remaining term of the loan. This loan has lower payments in the early part of the loan, gradually adjusts to higher payments, and then levels off until the loan is fully paid.
This is a good choice for young homebuyers because only the lowest initial payment amount is used in qualifying for the mortgage. These young homebuyers can also expect to see their income rise to accommodate the higher mortgage payments later in the life of the loan.
A GPM differs from an adjustable-rate mortgage because the interest rate changes are pre-determined and not dependent on the current market interest rate. |
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What is an FHA loan? |
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An FHA loan is a real estate mortgage. The mortgage is insured by FHA. Since the FHA insures these mortgages, lenders can work with borrowers even when they've had credit problems, accounts forwarded to collections, past bankruptcy filings, or debt-to-income ratios that are higher than normally allowed. |
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What if I have “bad credit”?
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Bad credit” is a very misleading term. With an FHA mortgage, many people who described themselves as having “bad credit” ? but who are now homeowners. The truth is, there are no hard and fast credit score requirements for an FHA loan. If you're concerned about your credit score, it's best to speak to an FHA representatives directly. FHA have programs that can accommodate credit scores starting in the high 400s. |
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VA Home Loan Entitlement |
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Some first-time homebuyers are misinformed as to the workings of a VA Loan. The Veterans Administration does not normally act as a lending agent. Instead, the VA is in the business of guaranteeing the loans of veteran. In most cases, the VA offers a guaranty to those who meet the requirements, the first of which include a good credit rating. If you are considering any kind of home loan, it's best to consult a credit counselor and a financial planner to find out what credit rating you already have and what you can do to improve your credit rating before applying for the guaranty. It's important to know that a VA home loan guaranty is available only if the veteran has the income to handle house payments. A VA loan guaranty is not an automatic benefit. Your financial planner or credit counselor can go a long way towards helping you prepare your personal finances before filling out that home buyer's paperwork. |
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VA Loan Adjustment Rates |
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Veterans who shop around will learn it's possible to get a fixed rate loan, negotiated with the lender of your choice. Another option? The adjustable rate loan, where interest may be adjusted one percent annually, up to five percent over the duration of the loan period. Which to choose? No matter which way you think is best, do your homework, shop around and get the best rate possible. Some make the mistake of taking the first offer that sounds fair, but don't be intimidated by the process. You may be eager to get the "hard part" over with and get into a home. Take some time to research the biggest purchase of your life! When in doubt, consult an expert, a legal advisor or a trusted friend in the real estate business. The more research you do, the better you'll feel at closing time. The VA is in the business of loan guaranty, but the choice of which loan to take is strictly up to you. It's also a good idea to look for businesses who make a habit of cultivating customers who are veterans--you may find their expertise in VA matters quite valuable to reduce unnecessary waiting times on paperwork.
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Debt to Income Ratio for VA Loans |
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To qualify for a VA home loan, you must fall into a certain debt ratio. Your income, credit card debts and the new indebtedness created by the VA mortgage are all tallied up to see where you land in terms of debt. The maximum debt ratio you may have and still qualify for a VA home loan is 41%. This is only one factor used to determine eligibility, the others include your reliable income and credit rating. If you are considering applying for a VA home loan, you may wish to make an appointment with a financial planner and debt counselor to see how you might improve your standing in advance of the application process.
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