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How do I know how much house I can afford? |
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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. |
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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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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. |
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How is an index and margin used in an ARM? |
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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). |
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How do I know which type of mortgage is best for me? |
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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. Amber can help you evaluate your choices and help you make the most appropriate decision. |
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What does my mortgage payment include? |
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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. |
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What are the fees and costs associated with doing a loan with Investco? |
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At Investco, we pride ourselves on the fact that we do not have additional junk/administrative fees. All third party fees (abstracting, appraiser, attorney, county recording fees, etc) will not be marked up and will be listed on your Good Faith Estimate (GFE). The GFE outlines fees that should be involved at your closing. |
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How much cash will I need to purchase a home? |
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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 |
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Why did my real estate agent refer me to you? |
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A high quality real estate agent knows that the key to a successful transaction means TEAMWORK with a professional mortgage banker. Any experienced real estate agent could tell you horror stories about times when a client made a poor choice of mortgage company, and ended up with big surprises at the closing table, or worse, no closing taking place at all! A good real estate agent will form relationships with trusted individuals who have proven themselves time and time again, so that they know you will be given the excellent service that you deserve. It is important to know that your real estate agent is NOT given any compensation or "kickbacks" for referring you to a mortgage banker. As mortgage professionals, we desire more referrals, both from you and your real estate agent, so consider the extra motivation this provides for us to take great care with your satisfaction! |
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Why should I use a real estate agent? |
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First and foremost, because you need an experienced professional working on your behalf. The realtor's commission is not paid by the buyer, but by the seller of the home being purchased, and it is in each party's best interest to have professional representation. As a seller, profits are generally maximized by having an experienced realtor market and sell your home, rather than deal with the headaches of trying to do it all on your own. |
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Why and how do interest rates change? |
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Many people are surprised to learn that rates change on a daily and sometimes hourly basis. Interest rates fluctuate in response to changes in the financial markets. The bond market is generally a good indicator of the general trend of interest rates. |
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What does "prequalified" mean? |
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It is an approximate opinion as to the potential loan you are qualified for. The information requested for this pre-qualification can be obtained over the phone, in person, or via the internet to Investco. We then take this un-verified information along with your credit report, compare it with lenders' guidelines for the best loan estimate. |
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What does preapproval mean? |
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For all practical purposes, a preapproval is a credit approval. Many lenders will ask for the following before giving a formal pre-approval:
- Completed loan application
- Written verification of all information from your employer, debtors, financial institutions, credit reports, tax returns, etc.
In some cases, credit approval can be issued without the above listed documentation in its entirety and the process could take as little as 15 minutes.
(Much of the above can be completed online for your convenience.) |
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What happens once I am preapproved? |
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You are ready to buy a home! Remember that it is very important to inform us of any changes in the financial information that was provided at the time of approval, as it may make a change in the amount or type of loan that you can qualify for. |
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When should I consider refinancing? |
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The old rule of thumb was at least 2%, but this is no longer the case. Many different individual factors need to be analyzed to determine if refinancing is right for you, such as the length of time you intend to stay in your home, or the type of loan you currently hold. We have many options available to our clients, including discounted closing costs and limited documentation requirements. We are always happy to provide a recommendation to you for your particular circumstances. |
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What is an origination fee? |
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Typically, it is 1% of your loan amount, and works exactly like a discount point. You can avoid all or part of this fee by paying a higher interest rate. In the Des Moines area, rates are typically quoted assuming this 1% origination fee. |
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What is mortgage insurance? |
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This is generally required in one form or another when the down payment is less than 20%, and protects the lender in the event of loan default. The lower the down payment, the higher the risk for the lender, and thus the higher the monthly premium. Depending on your particulars, there are ways in which mortgage insurance can sometimes be avoided at purchase, or dropped altogether at some point in the future. |
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What does it mean to "lock in" a rate? |
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A lock-in, also called a rate-lock or rate commitment, is a lender's promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed. Usually you are able to lock in the interest rate and number of points that you will be charged when you file your application, during processing of the loan, when the loan is approved, or later
A lock-in that is given when you apply for a loan may be useful because it's likely to take your lender several weeks or longer to prepare, document, and evaluate your loan application. During that time, interest rates may change. But if your interest rate and points are locked in, you are protected against increases while your application is processed. This protection could affect whether you can afford the mortgage. However, a locked-in rate could also prevent you from taking advantage of price decreases (i.e. interest rates going down). It is important to recognize that a lock-in is not the same as a loan commitment, although some loan commitments may contain a lock-in. A loan commitment is the lender's promise to make you a loan in a specific amount at some future time. Generally, you will receive the lender's commitment only after your loan application has been approved. This commitment usually will state the loan terms that have been approved (including loan amount), how long the commitment is valid, and the lenders conditions for making the loan such as receipt of a satisfactory title insurance policy protecting the lender. |
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How long does it take from preapproval to closing? |
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This varies from borrower-to-borrower as it does from lender-to-lender. However, we typically are able to get loans closed within one to four weeks of preapproval. |
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How can I speed up the approval process? |
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There are certain things you can do to speed up the approval process and avoid 'last minute' changes or problems. When you first meet with your lender, be sure to bring as much requested information and documentation as possible. Be sure to respond promptly to your lender's requests for information while your loan is being processed. Offer to help contact others such as employers who may need to provide documents and other information for your loan. It is also helpful to keep notes on your contacts with the lender so that you will have a record of your conversations. |
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Why is an appraisal necessary? And who orders the appraisal? |
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Appraisals are the lenders way of verifying the worth of your property or the property you are purchasing. Lenders will typically lend money on the lesser of the two; either the appraised value, or the purchase agreement (whichever is the lesser of the two). Investco will order the appraisal for you. |
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Escrows, how do they work and does the lender have to control the escrow account? |
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Escrow accounts include certain items, usually property taxes, homeowners insurance, and private mortgage insurance, that are collected with your Principal & Interest payment for your mortgage. The lender will hold these additional dollars in escrow/trust to pay these bills when due on your behalf.
You can elect to pay those above listed items directly and not escrow, but some lenders may have some limitations, restrictions, or an extra cost attached to it. We will research the lenders to abide by your objectives. |
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What questions haven't I asked? |
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Feel free to email or call us and we will be more than happy to assist you on any questions. If we do not know the answer personally, we have the resources to get answers for you. |
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