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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

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 monthly income or 30 to 40 percent of your gross monthly household income. However, you may qualify for a higher amount. The amount 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, at 818-516-0155 or 800 516-0029 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 stable, payments on an ARM loan will likely change over time. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us. We also offer periodic fixed rate term loans, AKA 5 year fixed or 7 year fixed. These are still 30 year fully amortized loans that pay down over time. These are loans that have a fixed rate for 5 or 7 years usually, then convert to an adjustable rate loan. There are safeguards in place for these types of loans such as periodic and life interest rate caps, maximum amounts they can adjust at any given time. These are best for clients with a game plan to utilize this type of loan and move or refinance. There are no prepayment penalties on any of our loans.
 
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). There are others most variable home equity lines are tied to such as Prime rate.
 
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. Joshua Markell-Senior Lender at World of Finance Mortgage can help you evaluate your choices and help you make the most appropriate decision. Call me at 818-516-0155 or 800-516-0029
 
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.
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    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
  • Currently we have Down payments as low as 3% of the purchase price, depending on your credit and cash reserves. A larger down payment is always best but you must work within your means.