How do I know how much house I can afford?
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.
What is the difference between a fixed-rate loan and an adjustable-rate loan?
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.
How is an index and margin used in an ARM?
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 are the One-Year Treasury Bill and the London InterBank Offering Rate (LIBOR).
How do I know which type of mortgage is best for me?
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. Hippo Financial can help you evaluate your choices and help you make the most appropriate decision.
What does my mortgage payment include?
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.
How much cash will I need to purchase a home?
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
What is a Pre-approval?
Pre-approval allows you to get approved for a specific loan amount prior to finding the home you want to purchase. The loan is underwritten and the lender commits to a specific loan amount. Pre-approval can provide a great advantage with a homeowner or realtor if someone else is interested in the same home simultaneously. Also, if you’re thinking about refinancing and want to payoff creditors or take cash out — but not sure you’d qualify – you can apply for a pre-approval and potentially save on the cost of getting an appraisal on your home until you know if you qualify.
What information do I need to provide when I apply?
When you’re ready to apply, you need the most current information on your:
- Monthly/annual income
- Monthly debt payments
- Total debt
- A total of your assets
- Your Social Security Number
- Employment information and verification (e.g., W-2, pay stub, etc.)
Can I pay my loan off early or pay extra each month?
Yes, you can make principal payments at anytime during your loan term or pay the loan in full. You can also pay a set amount each month above the normal payment due or make lump sum payments periodically. Use our loan calculators to see how fast you can eliminate your debt.
How long will the loan process take?
The loan approval and funding time frames vary depending on the type of transaction and the complexity of your personal finances. On average, the process can take from 14 to 45 days
Is there a cost to apply? If so, how much?
Initially the only fee collected will be for the cost of a credit report. All other up-front fees such as an appraisal or application fee that may apply to your request will be disclosed to you as part of the application process and collected following your receipt of the early Truth-in-Lending disclosure and your approval to continue with the application. Appraisal cost will vary based on the size and value of your home.
What is a jumbo loan?
A jumbo loan is a conventional loan that exceeds the maximum agency (Fannie Mae, Freddie Mac) mortgage amount guidelines for a conventional loan. Jumbo is first loan 417,001- 3,000,000.
What is a conventional loan?
A conventional loan is a fixed rate loan over a specific time frame. It’s secured by a mortgage or deed of trust with an acceptable loan-to-value (LTV) ratio range and is not guaranteed by VA or insured by FHA, FMHA or State Bond agencies. Conventional Loan is loan amount less than 417,000. For FHA please check your county for the allotted loan size.
What is an origination fee?
The origination fee is charged by the lender, typically 1% of the loan amount you borrow. It’s used to cover expenses during the process of the loan.
What are closing costs?
Closing costs are fees and expenses that both buyer and seller must pay at closing. They generally include:
- Origination fee
- Discount point(s)
- Appraisal fee
- Credit report
- Title search
- Recording fees
- Settlement fees
- Lender/borrower title policy
- Tax cert
- Flood cert
- Prepaid items such as escrows, taxes and insurance
- Other costs described in the HUD I at settlement