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 the following: 1) your employment history, 2) credit history, 3) current savings and debts, and 4) the amount of down payment you are willing to make. Additionally, if you are a first time homebuyer, there are special loan programs available to assist you in purchasing a home with a higher value. Give us a call, and FMG can help determine exactly how much you can afford.

Q: What is the difference between a fixed-rate loan and an adjustable-rate loan (ARM)?
A. - Fixed-Rate Mortgage: The interest rate stays the same for the duration of the loan.
- ARM: The interest changes periodically, typically in relation to an index.
- The biggest difference between these two loans is the stability of the loan payment due, depending on which loan product you choose. With the fixed-rate, the monthly payments are relatively stable versus payments on an ARM loan that will likely change. Each mortgage loan type has advantages and disadvantages affixed, so the best way to select the loan product best for your financial position is to speak with us directly.

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: 1) One-Year Treasury Bill, 2) Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and 3) London InterBank Offering Rate (LIBOR).

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. The choice depends on a number of factors; including, your current financial picture and for how long you intend to keep your home. FMG can help you evaluate your available choices, but ultimately you, the customer, are the only one who can make the decision most appropriate for you.

Q: What does my mortgage payment include?
A. For most homeowners’, the monthly mortgage payments are comprised of three separate parts: 1) Interest: Payment to the lender for the amount borrowed; 2) Principal: Re-payment on the amount borrowed; and 3) 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: 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 due at the time of settlement; and
Closing Costs: Costs associated with processing paperwork necessary to purchase, or refinance a house.