Aspire Home Loans: Your Home Loan Specialists -- Where Experience Counts!

Aspire Home Loans

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FAQ

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 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. But, perhaps the better question is, how much of a payment do you feel comfortable making? Once you have identified that amount, we can back into a sales price using a variety of loan programs and/or even property types such as a detached single family residence, a condominium or even a duplex. Another factor that may effect the equation is -- what are the tax benefits to you, if any, of the new home purchase? For first time homebuyers, it may be significant! Give us a call, 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 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 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). A key point to remember when shopping for an ARM where the interest rate changes frequently, e.g., monthly or annually, in addition to comparing the intial interest rate for the loan, be sure to ask what the margin is! You could shop three different lenders for an Option ARM, for example, and they could all quote you a 1% start rate. However, the first lender may have a margin of 2.5%; the second lender could have a margin of 3.0%; and the third lender could have a margin of 3.5%. The margin added to the index value is what is known as the fully indexed rate and that is your true interest rate. In the example just given, lender #3's interest rate is a full percentage point higher than lender #1!

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. Aspire Home Loans can help you evaluate your choices and help you make the most appropriate decision.

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 :	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 However, with the advent of 100% financing, no down payment at all is a possibility. As far as closing costs are concerned, it may be possible to obtain a credit from the seller or lender to cover the closing costs so you have no out-of-pocket expenses. These items should be addressed upfront during the negotiation process for both the home purchase and/or the loan acquisition. This is where we enter the picture to flush out your numerous options and guide you in the right direction bearing in mind your unique goals and objectives.