Q: How do I know how much 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 you can borrow will also depend upon your employment history, credit history, current savings, debts, and the 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. Call us, and we can help you determine how much you can afford.

Q: What is the difference between fixed and adjustable loans?

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 rate changes periodically, typically in relation to an index. While the monthly payments you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. Each type of mortgage has advantages and disadvantages, and the best way to select a loan product is by talking to us.

Q: How are 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 you pay combines the index rate and a pre-specified margin. 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) are three commonly used indexes.

Q: How do I know which type of mortgage is best for me?

A: There is no simple formula to determine the type of mortgage best for you. This choice depends on many factors, including your current financial picture and how long you intend to keep your house. Paramount Mortgage Company can help you evaluate your options and help you make the most appropriate decision.

Q: What does my mortgage payment include?

A: 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 and Insurance: Monthly payments are typically made to a particular escrow account for 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.

Q: How much cash will I need to purchase a home?

A: The amount of necessary cash depends on several items. Generally speaking, though, you will need to supply:

Closing Costs: Costs associated with processing paperwork to purchase or refinance a house

Down Payment: A percentage of the cost of the home that is due at settlement

Earnest Money: The deposit that is supplied when you make an offer on the house

Home Inspection Costs: You can opt for a pest / dry rot inspection or whole house inspection when purchasing a new home to ensure there is nothing wrong with the home that may not be visible during your initial walk-through.