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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 |
| 7. |
How long can I lock my Interest Rate? Answer |
| 8. |
What new changes do I need to know when qualifing for a Purchase or Refinance? Answer |
| 9. |
How will these new fees affect the interest rates I qualify for? Answer |
| 10. |
What can I do to increase my credit scores so I don't have to pay these fees? Answer |
| 11. |
What advice can you give when shopping for interest rates? Answer |
| 12. |
How are Lenders/Brokers compensated on my mortgage? Answer |
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Q
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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. 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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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. Your Town Mortgage can help you evaluate your choices and help you make the most appropriate decision. |
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Q
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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 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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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, 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 a home |
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How long can I lock my Interest Rate? |
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Lenders allow rate locks from 12 days to 180 days. The further out you lock the interest rate the higher the cost will be because of the uncertainty of where mortgage rates will be in the future. |
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What new changes do I need to know when qualifing for a Purchase or Refinance? |
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There are many but here are a few tips for Massachusetts homeowners:
For Fannie Mae conventional Purchases and Refinancing;
- The maximum Loan to Values are being reduced by 5% in most areas.
- Fees increased for most credit scores and LTV'S above 60.01%.
- Debt to Income ratios are being reduced.
- Cash reserves are being increased.
- Down payments for investment properties being increased.
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How will these new fees affect the interest rates I qualify for? |
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These new costs will be paid by you in points, originations fees or increased interest rates. "Your Town Mortgage" will help you decide the best solution for keeping these costs low or removing them entirely. |
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What can I do to increase my credit scores so I don't have to pay these fees? |
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Your credit score reflects many things but here are a few tips:
- Make your payments on time.
- Reduce your credit card balance by 50 to 75% or less of the maximum limit.
- Increase your credit line versus your balance owed.
- Reduce the amount of open accounts to five (5) or less.
- Visit MyFico.com on our Resources page for more tips on what you need to know.
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What advice can you give when shopping for interest rates? |
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We can write a whole page on this subject but we'll try to keep it brief. Consumers believe that when the Federal Reserve drops the Fed Funds rate that mortgage rates also drop and this is not the case. Mortgage rates change daily based on a variety of economic reports distributed weekly that affect the 10 Year Bond pricing which affects daily Mortgage rates. Visit our Resources page for a link to this report or visit Bloomberg.coms economic calender.
Rates can change up through 4 pm Monday-Friday when the Bond Market closes. If you choose to lock your rate after the Bond Market closes, you have from 9 pm to 11 pm each evening depending on the lender. Consider these facts that affect your daily quote:
- Is it No Points and No Origination fees.
- No Points and No Closing Costs.
- What is the lower middle credit score of all borrowers.
- Is it Cash Out, Owner, Non-Owner and the Loan To Value.
- What are the new fees for my scores, for cash out, 2-4 units and LTV.
Always keep in Mind: Does the cost of your purchase/refinance justify the time you expect to live there. |
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How are Lenders/Brokers compensated on my mortgage? |
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The Mortgage business can be very confusing when it comes to rates, points, and closing costs. Mortgage rates are delivered to the market in "Wholesale" and "Retail" pricing. Every daily 0 (zero), points interest rate has a profit margin behind it of 1.5%-2.5%, (retail), of your loan amount, known as Yield Spread Premium (YSP) for Brokers, and/or Service Release Premium (SRP) for Lenders. Some lenders/brokers charge Origination Fees on their no points quote.
Mortgage Brokers work with many Lenders through their "Wholesale Divisions" and receive daily rates at a discount. We set our rates below retail, so the YSP the lender pays us is less but provides a lower rate to our customers.
At "Your Town Mortgage" we strive to provide a competitive rate and value for our customers. We don't charge Origination Fees or Points on your Purchase or Refinance. Our upfront disclosure form will advise you of our compensation paid by our wholesale lenders. Please contact us for further details on how you can benefit on your next transaction. |
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