Interest rate is the contractual rate that you agree to pay for your mortgage loan. This rate is used to calculate the interest portion of your monthly mortgage payment. Annual percentage rate (APR) includes your interest rate and factors in the prepaid finance charges to give you an average yearly rate. APR can be a good tool to use when you’re comparison shopping for rates.
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.
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. Webb Mortgage Group can help you evaluate your choices and help you make the most appropriate decision.
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.
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.
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.
PITI stands for principal, interest, taxes, and insurance. It is basically your monthly payment.
Principal is the actual amount of your loan. If you borrowed $200,000, the principal is $200,000. Every time you make a monthly payment you're paying a part of the principal and reducing the amount you owe on the home and increasing the part that you own (your equity.)
Interest is the amount that the lender charges you for borrowing the money (a percentage of the principal). Interest can change your monthly payments when interest rates change if you have an adjustable rate mortgage.
Property taxes are made on real estate generally at county level and used to fund schools, road work, police and municipal services. Property taxes vary by county and are part of the equation that determines your mortgage payment.
Homeowner's insurance may be collected by your lender and paid to your insurer.
With an interest-only loan, a borrower's payments consist only of the interest on the mortgage, not the principal, over a fixed term. As a result, these loans offer low payments during the initial interest-only term. However, at the end of this term, the borrower must pay off the principal and any additional interest in either a lump sum or in larger regular payments.
Interest-only loans allow borrowers to purchase a more expensive home than they could otherwise afford and maintain increased cash flow compared to fully amortized mortgages. However, since much larger payments are required when the interest-only period ends, borrowers should be confident that their income will increase significantly.
Mortgage brokers specialize in finding lenders and originating loans. They're paid on commission to match homeowners, who need to borrow, with lenders, who want to loan. Some mortgage brokers handle loan processing and take loan applications, obtain credit reports, and order the title reports and appraisals.
However, mortgage brokers do not underwrite the loan - they sell the loan to an investor. Essentially, mortgage brokers arrange funding for buyers by connecting them with sellers, and because they work with multiple lenders as opposed to being an employee of one lender, they can usually find very competitive rates.
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