resources | answers to your questions

Ques-1: WHAT TYPES OF LOAN PROGRAMS DO YOU PROVIDE?

There are different types of mortgages and loan programs available out there , including fixed rate, adjustable rate, FHA, VA, First-Time-Buyer, Foreign National to name a few.  We work with lenders that offer a variety of programs.  After learning about your specific needs and reviewing your qualifications, we will be able to recommend the loan program that best suits you. 

Ques-2: WHAT IS DIFFERENCE BETWEEN THE INTEREST RATE AND THE  ANNUAL PERCENTAGE RATE (APR)?

The interest rate depends on the size of the loan amount and your credit history.  While, the APR is the annual rate charged for borrowing which  includes the interest rate plus all other lender fees incurred over the term of the loan.  Because the APR includes lender fees, you can easily compare rates (APR) offered by other lenders . 

Ques-3: WHAT WILL BE MY MONTHLY PAYMENT?

Your monthly payment will be PITI plus Ongoing Costs.  PITI is Principal, Interest, Taxes and Insurance.  A big chunk of your monthly payment will go towards Principal and Interest (PI).  Most of the PI is applied to Interest during the early years of the mortgage.  The Property Tax (T) and Homeowner Insurance (I) pieces are usually added to the monthly payment by some banks as they will actually make the tax and insurance payment on your behalf.  Additionally, you should budget for ongoing costs such as repairs and maintenance.  We will work with you to calculate your estimated monthly payment making sure that it is within your budget and qualify you for a mortgage loan. 

Ques-4: HOW LARGE A DOWN-PAYMENT WILL I NEED?

 Typically 3-30% of the cost of the house.  It is important to note that the interest rate and hence your monthly payment depends on the size your down payment.  You may also have to pay PMI if your down payment is less than 20%.  Some government backed loans (VA, FHA, USDA) allow for down payment as low as 3%.  If you have more questions. 

Ques-5: WHAT ARE MORTGAGE OR DISCOUNT POINTS?

 Discount points are fees the borrower can pay the lender in exchange for a lower interest rate and consequently lower monthly payments.  Buying one point will cost you 1% of your mortgage amount (or, $1,000 or every $100,000).  If you plan on staying in your home for a long time, buying points may be a good option for you.  

 Ques-10: WHAT'S THE DIFFERENCE BETWEEN FIXED RATE AND ADJUSTABLE RATE MORTGAGE?

With a fixed rate mortgage, the interest rate and the amount you pay each month remain the same over the entire life of the mortgage.  Clients who plan to keep their home for a long period of time will find a Fixed Rate Mortgage an excellent way to lock in an interest rate for the life of the loan.

With an adjustable rate mortgage (ARM), the interest rate fluctuates per the financial indexes. Initial interest rates of ARMs are typically offered at a discounted ("teaser") interest rate lower than fixed interest rate. Over time, when initial discounts are filtered out, ARM rates will fluctuate as general interest rates go up and down. Different ARMs are tied to different financial indexes, some of which fluctuate up or down more quickly than others. To avoid constant and drastic changes, ARMs typically regulate (cap) how much and how often the interest rate and/or payments can change in a year and over the life of the loan. Several variations are available for adjustable rate mortgages including hybrids that change from a fixed to an adjustable rate after a period of years.   Examples 5/1 and 7/1 where the interest rate and monthly payment remains fixed for the first 5 or 7-years and changes every year thereafter. 

 Ques-11: IS FIXED RATE MORTGAGE BETTER THAN ADJUSTABLE RATE MORTGAGE?

It depends. Because interest rates and mortgage options change often, your choice of a fixed or adjustable rate mortgage should depend on: the interest rate; mortgage options available when you're buying a house; your  view of the future (generally, high inflation will mean ARM rates will go up and lower inflation that they will fall); how long you plan on keeping the house; and how willing you are to take a risk.

When mortgage rates are low, a fixed rate mortgage is the best bet for most buyers. Over the next several years, interest rates are more likely to go up than to go further down. Even if rates could go a little lower in the short run, an ARM's teaser rate will adjust up soon and you won't gain much. In the long run, ARMs are likely to go up, meaning most buyers will be best off to lock in a favorable fixed rate now and not take the risk of much higher rates later. 

Keep in mind that lenders not only lend money to purchase homes; they also lend money to refinance homes. If you take out a loan now, and several years from now interest rates have dropped, refinancing will probably make sense.

 Ques-12: WHAT IS THE PURPOSE OF A MORTGAGE LOAN ESCROW ACCOUNT?

An escrow account is an account that’s set up to collect funds in advance for making payments in the future.  Often, some lenders/banks require that an escrow account is setup and maintained by the lender/bank from which they will pay your property taxes and/or homeowner’s insurance premiums. Other items like mortgage and flood insurance may also be included.   Your property tax and homeowner insurance is included in your monthly mortgage payment and posted to your escrow account.  The lender/bank makes the payment from your escrow account to the government and insurance company on your behalf.  

 Ques-17: WHY PURCHASE/OWN YOUR HOME? 

Owning your own home is one big part of  living the "American dream" for many reasons including:

• security against rent increases and/or non-renewal of lease by landlords
• mortgage interest provides a tax shelter to reduce your taxes
• accumulate equity in your pocket and not your landlord's
• freedom to renovate, paint, entertain and keep your pets, all at your discretion

However, purchasing a home can be a sometimes challenging experience. We are here to help you smoothly navigate the loan financing process and avoid the pitfalls.  Our 20+ years experience and expertise in the industry qualify us to assist you in finding the home loan financing program that is best suited for you. We take into account all of your needs, finances and credit history to help you qualify for the right home loan program.   

 Ques-18: WHAT REFINANCE OPTIONS ARE AVAILABLE? 

•  RATE & TERM REFINANCE - When you choose a rate-and-term refinance, your new loan will be very similar to your old mortgage. The only factors that change are the interest rate, the length of the loan, or both.  For example, you refinance your 30-year fixed-rate mortgage at 5.5 percent into a new 30-year fixed rate mortgage at 4 percent.  This interest rate reduction is the most popular type of refinance, especially when mortgage rates are dropping. 

• CASH-OUT REFINANCE -  If you’re interested in pulling equity out of your house, this is probably the type of refinance loan for you. A cash-out refinance might reduce your interest rate or shorten your loan term. But its main effect is that it will increase your loan balance.  When you have a cash-out refinance, a new mortgage is written to cover the total amount of the balance owed on the old mortgage plus the amount of extra cash you requested based on the equity available in your home.  So you walk out of the closing with extra cash in hand.  With a cash-out refinance, you’re typically required to maintain at least 20 percent equity in your home. 

• CASH-IN REFINANCE -  As you might’ve guessed, a cash-in refinance is the opposite of a cash-out refinance.  With this type of refinancing, you will add to the equity you’ve already accrued in your house by putting more money towards the principal.  Another way of thinking of it is you’re making a larger down payment on your refinance loan.  If you’re looking to reduce your interest rate, a cash-in loan could help you gain access to rates you wouldn’t have initially qualified for. 

 Ques-19: WHAT IS HOME EQUITY? 

Home equity is one of the great reasons to own your home instead of renting.   Home equity is a homeowner's interest in a home.  When you own your home the equity in your home grows as the market value increases.  It is that equity you can tap into to help you meet some of  life's major and unexpected expenses.   

Put another way, home equity is the portion of your property that you truly “own.” You're certainly considered to own your home, but if you borrowed money to buy it, your lender also has an interest in it until you pay off the loan.   The equity is the only part the you "truly own".

Home equity is typically a homeowner’s most valuable asset. That asset can be used later in life, so it’s important to understand how it works and how to use it wisely. 

 Ques-20:COMMON QUESTIONS ABOUT BUYING A HOME 

[a] Can I buy a house while unemployed?  - Generally speaking, NO.   However, you may be able to get a mortgage if you’re unemployed but you have a documented offer of employment that indicates how much you’ll be earning once you start the job. 

[b] Can I buy a house with student loans? -  YES, you can buy a house with student loans. However, those student debt will be used to calculate your debt-to-income ratio.

[c] Do you have to be married to buy a house? - NO, but having an additional (spouse/partner) income gives you bigger buying power.

[d] Do I need a real estate agent to buy a house? - NO, real estate agents are “free” for home buyers; the seller typically pays their commission.  However, its important to understand that the real estate broker is the agent for and works directly in the interest of the seller.  

[e] Do I get a tax break for buying a home? - YES, the interest you pay on the mortgage loan amount can be used to reduce your tax liability, commonly known as a tax shelter.