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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(ARM)? Answer
3. How is an index and margin used in an ARM? Answer
4. Why would I pay Points when other lenders offer "No Point" loans?  Answer
5. What about a No Point/No Fee Loan? 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. 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(ARM)?
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 the sum of the index rate and a margin specified by the terms of your loan. Commonly used indices are the One-Year Treasury Bill, The Monthly Treasury Average (MTA), the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).  The adjustment period may be One, Three, Six, or Twelve Month frequencies.
 
Q : Why would I pay Points when other lenders offer "No Point" loans? 
A : Loan Points are generally a fee represented as a percentage of the loan amount.  For example, 1 Points on a $200,000 is $2,000.  On a given day, the rate offered on a 30 year Fixed Rate loan may be 6.5% with no points, but the rate may be 6.125% with 1 point.  The no point loan would be sensible if the homeowner only kept the loan for short term, say 2 years.  If the intentions were to keep the loan long term, such as more than 5 years, it would be financially beneficial to pay the point.  Contact us for further details.  
 
Q : What about a No Point/No Fee Loan?
A : The main benefit is that you have no transactional loan costs. Say you refinanced in June, and rates significantly lowered in September.  You could refinance again to lower your payment and rate without incurring additional debt to your loan balance.  The disadvantage is the rate obtained with a No Point/No Fee loan is higher than the current market rate.