|
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? |
|
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 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). |
| |
|
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 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. Your M&T Mortgage loan professional can help you evaluate your choices and help you make the best decision for you. |
| |
|
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 & 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. |
| |
|
Q
:
|
How much cash will I need to purchase a home? |
|
A
: |
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 |
| |
|
Q
:
|
When should I refinance? |
|
A
: |
Refinancing when interest rates are low can save you hundreds of dollars every month and thousands of dollars in interest over the life of your loan.
The main reasons to refinance are to lower your monthly payment, minimize interest expense, consolidate debt at a lower rate, reduce the term of your mortgage to build equity faster, or to take cash out for a major purchase or home improvement. A mortgage refinance also offers you the advantage of tax deductibility that most other debts do not. Please consult your tax advisor.
A key assumption for refinancing is how long you will be in your house. For example, assume your current balance is $100,000 with a rate of 8.75% and 20 years left on your term. If you finance $2,500 in closing costs into your new loan amount of $102,500 at a rate of 6.75% and a new 20 year term, you will save more than $25,000 in interest expense and recoup your closing costs in approximately two years. In addition, you'll lower your monthly payment by over $100. And, if you keep your payment the same, your loan will pay off in 15 years with a total interest savings of more than $50,000.
You may also want to consider M&T's innovative Bi-Weekly Mortgage. Here's how it works. Simply pay half your monthly mortgage payment every 2 weeks, and you'll save $36,000 in interest on a $100,000 mortgage. And you'll pay it off seven years sooner. You can save even more on larger loan amounts.
Even people with less-than-perfect credit can refinance at rates that are often significantly lower than other outstanding debts. By consolidating debts into a mortgage you can reduce both interest expense and monthly debt payments.
We would be happy to discuss your particular situation in detail to see if refinancing may make sense for you. |
| |
|
Q
:
|
What is the difference between Government and Conventional Loans? |
|
A
: |
Government loans, such as FHA, VA, RHS, and SONYMA (New York State only) are typically designed for first-time homebuyers and buyers qualified for special financing assistance. Government financing includes features such as 100% financing, easier qualifying and closing cost assistance. Conventional loans offer higher loan amounts, lower rates, and require more cash to close. Please call us to find out about a wide array of Government and Conventional loans available at M&T. |
| |
|
Q
:
|
What are some of the ways of estimating the value of a home? |
|
A
: |
A good place to start is to look at recent sales of comparable properties in the neighborhood. Some times you can get this information online or through real estate agents. You can take this information and estimate price per square foot, year built, proximity to the house selected and size of the lot. For multi-unit properties, you can look at price per unit or the house of the price divided by the annual rental income. You can do a comparative market analysis by looking at all of the above ratios for the houses that are currently on the market.
An appraisal can provide you with a value of the home based on the opinion of a certified professional. An appraisal combines the most recent market analysis with such factors as square footage, kitchen size, number of bathrooms, floor plan, design, landscaping, proximity to public transportation and highways, lot size, neighborhood, school district and the quality of construction. An appraisal would cost you in the $250 to $300 range. |
| |
|
Q
:
|
What is Loan-To-Value? |
|
A
: |
The loan-to-value is your loan amount divided by your property value. For example, the loan-to-value on a $100,000 house with a $75,000 loan amount is 75%. |
| |
|
Q
:
|
What are Points? Can they help me? |
|
A
: |
Be sure to ask what points accompany the mortgage interest rate. A point equals 1% of the mortgage amount. Paying points lowers the interest rate but increases closing costs. For example, a point on a $90,000 mortgage is $900 and could reduce the interest rate by .25%. In this example, you will break even on paying one point in just under 3½ years. Please note that loan sizes and prevailing interest rates will impact the break-even point. If lowering your closing costs is important, you should explore zero point options with your M&T mortgage consultant. |
| |
|
Q
:
|
What is an APR? |
|
A
: |
The annual percentage rate (APR) is designed to measure the true cost of a loan, inclusive of select fees associated with obtaining the loan, as defined by The Federal Truth-in-Lending Act. It creates a level playing field for lenders and consumers. It prevents lenders from advertising a low rate and hiding fees.
The Federal Truth in Lending Act requires mortgage companies to disclose the APR. Typically the APR is found next to the rate.
Example: 30-year fixed:8% 1 point 8.107% APR
The APR does NOT affect your monthly payments. Your monthly payments are a function of your interest rate and the length of your loan. A 15-year loan may have a lower interest rate than the 30-year loan, but could have a higher APR, since the loan fees are amortized over a shorter period of time. The APR is designed to measure the true cost of a loan. The following fees are generally included in the APR:
-
Points - both discount points and origination points
-
Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
-
Loan-processing fee
-
Underwriting fee
-
Private Mortgage Insurance |
| |
|
Q
:
|
What is a rate lock? |
|
A
: |
To close a mortgage loan you have to lock in an interest rate. There are four components to a rate lock:
- Loan program
- Interest rate
- Points
- Length of the lock - the longer the length of the lock period, the higher the points or the interest rate
|
| |
|
Q
:
|
What are credit scores? |
|
A
: |
Your credit score is an indication of your payment habits. There can be mistakes on your credit report. You should make an effort to correct these mistakes. You can review your credit record by ordering a copy of your credit report by any of the following credit reporting agencies:
Equifax: 800-685-1111
Experian: 800-422-4879
Trans Union: 800-888-4213 |
| |
|
Q
:
|
If my credit history is not perfect, am I still able to buy a home? |
|
A
: |
In most cases you will still be able to buy a home, even if you do not have a perfect credit history. Little oversights such as a late payment once or twice in a couple of years can be overlooked if the rest of the financial picture looks good. Even people with more serious issues may be able to obtain a loan.
M&T Mortgage can help people with less-than-perfect credit, including self employed borrowers, investors and homeowners with limited equity. M&T Mortgage can help you buy a home even if you have a past bankruptcy. We may even be able to help homeowners avoid bankruptcy by refinancing* their mortgage and consolidating their debt.
For more information, please call your M&T Mortgage professional.
* Refinancing to reduce your total monthly payments may lengthen your repayment term or increase your total interest expense. M&T may be acting as a mortgage broker arranging alternative mortgage loans made by unaffiliated lenders.
|
| |
|
Q
:
|
Can my loan be sold? |
|
A
: |
Your loan can be sold at any time. There is a secondary mortgage market in which M&T Mortgage, like most lenders, frequently buys and sells mortgages. This secondary mortgage market results in lower rates for you. A secondary lender buying your loan assumes all terms and conditions of the original loan. As a result, the only thing that changes when a loan is sold is to whom you mail your payment. If your loan is sold, M&T Mortgage will notify you and inform you who your new lender is, and where you should send your payments. |
| |
|
Q
:
|
How much cash will I need to close on my mortgage? |
|
A
: |
To close on a mortgage, you will need cash for three items: closing costs, downpayment and prepaid items. When you're looking for a mortgage, it is important to compare the variables that contribute to your mortgage costs.
1. Closing costs pay expenses that include the house appraisal, credit report, title insurance and bank underwriting fees.
2. Down-payment amounts can vary and typically range from 2-1/4% to 20% depending on the financing you choose and the amount of cash you have available for a down-payment. For example, if you purchase a home for $100,000 and your loan amount is $80,000 then your downpayment is $20,000 which is 20% down on your purchase.
3. Prepaid items include taxes, insurance and interim interest. People often wonder why they need a full year of taxes at closing. Property taxes are usually paid in advance and when you purchase a home you will need to reimburse the seller for taxes they have prepaid. For example, if taxes are due in January and you purchase a home in July, the seller has paid the taxes through December and you will need to reimburse the seller for taxes paid from August through December. In addition, an escrow account will need to be established to fund taxes for January through July to ensure sufficient funds are available when January taxes are due. |
| |
|
Q
:
|
What is PMI? Do I need Private Mortgage Insurance (PMI)? |
|
A
: |
PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage-insurance companies. It enables M&T Mortgage to accept lower down payments than we would normally accept. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment.
The cost of PMI increases as your down payment decreases. Example: The cost of PMI on a 10% down payment is less than the cost of PMI on a 5% down payment. Your PMI premium is normally added to your monthly mortgage payment.
On government loans you are required to pay a Mortgage Insurance Premium for the life of the loan in addition to an up-front mortgage insurance premium. |
| |
|
Q
:
|
What is title insurance? What does it buy me? |
|
A
: |
Title insurance protects your and Lender's interests. Title insurance is a one-shot premium that you pay to cover the risks occurring prior to your policy date. Title insurance protects you against loss resulting from previously unreported land title defects, such as errors in the recording of legal documents, liens, deeds by minors, claims by missing heirs and forgeries.
Title insurance pays for any lawsuit arising from other claimants to your real estate property. Title insurance companies try to resolve the title problem or reimburse you for losses that threaten your ownership of real estate. The coverage remains in force from the date you buy the policy to the date you sell the property. Title insurance covers the value of the purchase price for the buyer and the value of the mortgage for the lender.
In short, a title insurance policy covers on-record and off-record risks, the marketability of your title and the costs of defending your property title. The result is that you protect the most important investment you will ever make with title insurance. |
| |
|
Q
:
|
How much cash will I need to close on my mortgage? |
|
A
: |
To close on a mortgage, you will need cash for three items: closing costs, downpayment and prepaid items. When you're looking for a mortgage, it is important to compare the variables that contribute to your mortgage costs.
1. Closing costs pay expenses that include the house appraisal, credit report, title insurance and bank underwriting fees.
2. Down-payment amounts can vary and typically range from 2-1/4% to 20% depending on the financing you choose and the amount of cash you have available for a down-payment. For example, if you purchase a home for $100,000 and your loan amount is $80,000 then your downpayment is $20,000 which is 20% down on your purchase.
3. Prepaid items include taxes, insurance and interim interest. People often wonder why they need a full year of taxes at closing. Property taxes are usually paid in advance and when you purchase a home you will need to reimburse the seller for taxes they have prepaid. For example, if taxes are due in January and you purchase a home in July, the seller has paid the taxes through December and you will need to reimburse the seller for taxes paid from August through December. In addition, an escrow account will need to be established to fund taxes for January through July to ensure sufficient funds are available when January taxes are due. |
| |