|
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
:
|
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. Premier Financing can help you evaluate your choices and help you make the most appropriate decision. |
| |
|
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 do I decide between and ARM and a fixed rate mortgage? |
|
A
: |
ARMs make a lot of sense for people who do not intend on being in their homes for a long period of time. Monthly savings on ARM products can be significant. This loan should be considered if you are planning to move within five years. The ARM is a higher risk loan because it will adjust after the initial fixed period. You will need to decide if the initial savings justify giving up the security of a fixed rate product. Fixed rate products offer a fixed interest rate and payment amount for the term of the loan. The most common types of fixed rate products are amortized over 15 or 30 years. These loans offer customers the peace of mind and stability of knowing there will be no surprises with a rising interest rate or payment amount in the future. Talk with an Alerio representative to discuss options and decide which loan product is best for you. |
| |
|
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 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
|
| |
|
Q
:
|
How does a LIBOR based loan differ from a 15 or 30 year fixed rate loan? |
|
A
: |
The LIBOR, or London Interbank Offer Rate is the most widely used index for short term, adjustable rate mortgage products. It is the rate at which major international banks borrow funds from other banks in the London Interbank Eurodollar market. The Eurodollar market has been around for over 40 years. The LIBOR index fluctuates according to market activity, and thus can be a volatile index. Fixed rate loan products are based upon the 10 year Treasury Index, which is a longer term index. The Treasury Index does not fluctuate as much as the LIBOR index because it is based over a longer term. |
| |
|
Q
:
|
What fees are included in closing costs? |
|
A
: |
All lenders are required to provide a "Good Faith Estimate" that gives an estimate of any/all fees associated with your loan. Most fees are standard but amounts will fluctuate depending on the loan program, the value of your home, or lender used. Fees you will see on a Good Faith Estimate are: A. Bank Fees Loan Origination/Discount Points Credit Report Processing fee Underwriting fee Application fee Document preparation Flood certification B. Title Fees Closing/Escrow fee Title insurance C. Miscellaneous Fees Recording fees Prepaid interest Insurance/Tax reserves for escrow When comparison shopping for a loan, the (A) Bank Fees are the most important fees to compare on the Good Faith Estimate. The Bank Fees should be carefully reviewed to see which lender has the best offer. The loan origination fee and/or discount points may vary, so it is important to discuss the listed fees with your lender. It is not always best to go with the lender offering less cost. Some borrowers choose to pay higher origination fees or discount points to buy down the rate, while other borrowers opt for a higher note rate with less origination fees. The title and miscellaneous fees listed are fees not determined by the bank, but by third party title and escrow companies. These are set fees that won't vary much from lender to lender. Other fees may be incurred depending on the state of residence or if the transaction is a new purchase or a refinance. For example, in some eastern states, lawyers are required to review contracts and attend closings. Attorney fees are typically several hundred dollars. Property inspections and appraisals are other out of pocket costs paid by borrowers that should be figured in, though they are usually paid prior to closing the loan. Closing costs must be considered when refinancing or purchasing a new home, especially if you are purchasing and only have a designated amount of money to put toward the down payment and other closing costs. |
| |
|
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
:
|
What is credit and why is it important? |
|
A
: |
Your credit is a reflection of not only your consumer spending habits, but is also information on where you work and live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. In today's society good credit is the cornerstone to financial wellness. Without the security of having good credit, you are placing yourself at a big disadvantage. Many of the primary and recreational purchases made are done so using credit: homes, cars, boats, motorcycles-just to name a few. Your ability to purchase items using credit are severely restricted if you experience credit difficulties. In general, your credit reflects your reputation for integrity and trustworthiness in buying or borrowing. |
| |
|
Q
:
|
What is a FICO score? |
|
A
: |
To begin credit repair you must first understand what a FICO score is. A FICO score is your credit rating. Your credit score (FICO) helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due. Most lenders base approval on them. Credit scores analyze a borrower's credit history considering numerous factors such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay debt. Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home. Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics. |
| |
|
Q
:
|
How can divorce affect my credit? |
|
A
: |
If you are considering divorce or separation, pay close attention to the status of your credit accounts. Many married couples open joint accounts or accounts in which a spouse is an authorized user. Outstanding balances on joint or authorized user accounts at the time of a divorce are the responsibility of both you and your spouse. Often times couples sign a divorce decree which states financial responsibilities for each person after the divorce is final. If one person does not hold up their end of the decree and defaults on payments, the creditors will come after the other divorcee. Creditors will correctly tell you they are not parties to divorce decrees and will insist both people are still legally responsible for paying off joint accounts. If you have a joint account, it is important to make those payments so your credit won't suffer. If you are going through a divorce you many want to close joint accounts or reopen the accounts as individual accounts. If you are in need of credit repair caused by a divorce, contact Alerio today to become educated of all your options. |
| |
|
Q
:
|
What is PMI? |
|
A
: |
PMI is private mortgage insurance. If you are putting down less than 20 percent on the purchase price of a home, lenders typically require you pay private mortgage insurance for their protection if you default on your mortgage payment. When you close on the purchase of your home you may be required to pay up to a year's premium of PMI, which could equate to several hundred dollars or more. The amount you will pay in PMI will depend on a few factors. The type of loan you obtain can affect the amount you will pay in PMI. In general, ARMs (adjustable rate mortgages) have higher premiums than do FRM's (fixed rate mortgages). The amount of your loan will also affect the PMI payment. The more you borrow, the more you will pay in PMI. Finally, the loan to value (LTV) is the amount of your loan as compared with the value of your home. The higher the LTV, the more you will pay for PMI because there is greater risk to the lender you could default on your mortgage. The good news is, PMI is not permanent. As soon as it can be proven to the lender you have 20 percent equity built up in your home, PMI will be discontinued. (Equity is the difference between what you owe on your home to its value.) You will build equity in your home if your property value increases, by paying down the balance of your loan, or by making improvements to your property (such as an addition or modernizing a kitchen or bathroom). To terminate PMI, you will need to have an appraisal to prove the current market value to the lender. If it will save you hundreds of dollars, it is a wise investment to spend two or three hundred dollars on an appraisal to eliminate PMI. To avoid paying PMI, you could also explore your options for 80-10-10 or 80-20 financing. |
| |
|
Q
:
|
How does the Premier Financing loan process work? |
|
A
: |
A qualified broker or loan officer will work with you to determine the best loan and interest rates available to you after they review your personal information and your credit report. You will receive a list of the documentation needed to complete your loan and once this is completed your final loan papers will be signed by you and you will have a date when the loan will be completed. |
| |
|
Q
:
|
How long will it take to close the loan once I accept an offer? |
|
A
: |
Typically the process may take anywhere from 2-4 weeks, although each offer may vary. The sooner you are able to verify the information that you provided on our website to your loan officer the quicker your loan will be processed. The standard information that is usually required is: Pay stubs, W2s, tax returns for the last two years (potentially), bank account numbers and details of your long-term debt (credit cards, auto loans, child support, etc.), and home appraisal. If you are self employed you may also be required to provide financial statements for your business. Lenders want specific information. For example, the origin of your down payment will be queried. |
| |
|
Q
:
|
What are your rates? |
|
A
: |
The rates are different for each lender and may fluctuate daily. Unfortunately we have no authority in this decision, as it is the decision of the lender. However, rest assured that by filling out our quick application form you will be offered the best rates for your specific situation. |
| |
|
Q
:
|
Will Premier Financing share or sell my information? |
|
A
: |
Your privacy and the security of your personal data is an important concern of ours. Under no circumstances will Premier Financing sell or share any personal information about you to or with any person or organization other than our accredited broker/lender network, or as may be mandatory by law or court order. |
| |