We understand that you may have many questions about mortgage lending so we have prepared some frequently asked questions for you. Of course we recommend you contact one of our professionals for a more in depth discussion about what to expect when buying or refinancing.
Question: How much can I spend or borrow on a home?
Answer: Generally speaking, you can purchase a home with a value of five or more times your annual household income. However, the amount that you can borrow will also depend upon your credit history, current debts, the amount of down payment you are willing to make, property tax, and the cost of home insurance / condo fees. 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 so we can help you determine exactly how much you can afford.
Question: Do I need a Realtor?
Answer: Purchasing or selling a home can be challenging and we would recommend using a professional. If you are buying, a buyer’s realtor can be invaluable during negotiations. You will not, as a general rule, pay for the services of a “buyer’s broker” (a realtor which has agreed by contract to act on behalf of your best interests instead of the seller’s interests.) Realtors are also familiar with the market and are adept at knowing how to structure an offer in a way that is more likely to be accepted. If you are selling, we would recommend listing your house with a competent realtor – this gives your house the maximum exposure on the market. We work with a number of realtors throughout MA and NH and would be happy to make suggestions for you.
Question: Do I need an Attorney when buying a home?
Answer: The short answer is yes. Purchasing a property is one of the largest lifetime decisions and for most people this only occurs several times before retirement. An attorney can give you peace of mind in negotiating the terms of your sales contract and any last minute issues that may arise. We would be happy to recommend several attorneys for you.
Question: Online lenders seem to advertise very low rates. Why not use one of these?
Answer: Well, there are too many reasons to list here. Here are a few: Some advertised rates come with high costs. Bear in mind that those ads come with heavy advertising costs which must be paid for somehow. We offer some of the best rates available – many times without closing costs. Secondly, we believe clients deserve better than a call center environment. Our personal approach to lending is intended to provide you with an enjoyable experience while at the same time utilizing the latest in technology.
Question: What is the difference between a fixed-rate loan and an adjustable-rate loan?
Answer: 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.
Question: How is an index and margin used in an ARM?
Answer: 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. Two commonly used indices are the One-Year Treasury Bill and the London InterBank Offering Rate (LIBOR).
Question: How do I know which type of mortgage is best for me?
Answer: 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. Atlantic Home Lending, Inc. can help you evaluate your choices and help you make the most appropriate decision.
Question: What does my mortgage payment include?
Answer: 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 these costs will be paid by you directly to the City Tax Assessor and property insurance company.
Question: How much cash will I need to purchase a home?
Answer: The amount of cash necessary depends on a number of factors. In general, you will need to have sufficient funds to cover:
– Earnest Money: The deposit that is given when you execute an offer and a subsequent purchase & sales agreement.
– Down Payment: A percentage of the cost of the home that is due at closing.
– Closing Costs (if applicable): Costs associated with processing and closing a loan. One of our professionals can walk you through all the details.