COMMONLY ASKED MORTGAGE QUESTIONS

While it may seem overwhelming or incredibly complex, at its core, home mortgages are relatively simple: in essence, you’re looking to borrow a large sum of money and your lender wants to make sure you can actually pay it.

Yes, a lot goes on in the course of the actual loan process that can leave you with a dizzying amount of questions, but if you grasp the basics, the rest will seem a bit easier to understand.

1.) HOW DO I KNOW WHAT SIZE HOUSE I CAN AFFORD?  In simple terms, you should be able to purchase a home that’s valued at two or three times your annual income; however, the actual amount you’ll be able to borrow will depend upon a few other factors such as your job status, credit history, owed debts, savings, and the amount of money you’re willing to use for your down payment. 

2.) WHAT IS THE DIFFERENCE BETWEEN A FIXED-RATE LOAN & AN ADJUSTABLE-RATE LOAN?  With a fixed-rate mortgage, the interest rate stays the same throughout the life of the loan.  With an adjustable-rate mortgage (ARM), the interest rate will change periodically based upon an index.  In short, fixed-rate monthly payments will remain stable, while adjustable-rate monthly payments will likely change.

3.) HOW DO I KNOW WHICH MORTGAGE IS BEST FOR ME?  There is no cut-and-dry formula that will completely determine which mortgage option is the best for your present situation.  Several factors come into play that include your current financial standing, how long you intend to keep your home, and what the current housing market looks like.

4.) WHAT WILL MY MORTGAGE PAYMENT INCLUDE?  Most monthly mortgage payments actually include three components:

-Principal—Repayment on the actual amount borrowed

-Interest—Payment to the lender for fronting the money for your loan

-Taxes & Insurance—Generally covers things like hazard insurance and property taxes

5.) HOW MUCH CASH WILL I NEED TO PURCHASE A HOME?  The actual number you will need can vary; however, you will generally need money to cover:

-Earnest Money—The initial deposit when you make an offer on a home

-Down Payment—A percentage of the cost of the home which is expected upon settlement

-Closing Costs—Processing costs for the paperwork needed to purchase or refinance a home

Pam Wright, OnQ Financial | www.onqfinancial.com | 404-445-1033