1. How do I know how much house I can afford? Answer
2. What is an APR? Answer
3. What documents do I need to prepare for my loan application? Answer
4. How do I know which type of mortgage is best for me? Answer
5. What does my mortgage payment include? Answer
6. How much cash will I need to purchase a home? Answer
7. What is PMI? Answer
8. How do I start the application process for a mortgage? Answer
9. What are discount points, and should I pay them? Answer
10. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
11. How is an index and margin used in an ARM? Answer

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 an APR?
A : The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees. The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan. Because APR calculations are effected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees. 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 Document-preparation fee Private mortgage-insurance Escrow fee The following fees are normally not included in the APR: Title or abstract fee Borrower Attorney fee Home-inspection fees Recording fee Transfer taxes Credit report Appraisal fee
 
Q : What documents do I need to prepare for my loan application?
A : Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process. Your Property Copy of signed sales contract including all riders Verification of the deposit you placed on the home Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget) Your Income Copies of your pay-stubs for the most recent 30-day period and year-to-date Copies of your W-2 forms for the past two years Names and addresses of all employers for the last two years Letter explaining any gaps in employment in the past 2 years Work visa or green card (copy front & back) If self-employed or receive commission or bonus, interest/dividends, or rental income: Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.) K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.) Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.) If you will use Alimony or Child Support to qualify: Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year If you receive Social Security income, Disability or VA benefits: Provide award letter from agency or organization Source of Funds and Down Payment Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement) Savings, checking or money market funds - provide copies of bank statements for the last 3 months Stocks and bonds - provide copies of your statement from your broker or copies of certificates Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation Debt or Obligations Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation Check to cover Application Fee(s)
 
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. Affinity Group Mortgage can help you evaluate your choices 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 & 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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    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
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    Q : What is PMI?
    A : Private Mortgage Insurance is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Private Mortgage Insurance is generally required for a loan with an initial loan to value (LTV) percentage in excess of 80%. In most cases, this will mean that you will have to pay Private Mortgage Insurance if your down payment is less than 20% of the value of the home you are purchasing or refinancing. The cost of the mortgage insurance is typically added to the monthly mortgage payment
     
    Q : How do I start the application process for a mortgage?
    A : Click on the Get Started Button on the home page
     
    Q : What are discount points, and should I pay them?
    A : Discount points are money that you pay up front on your mortgage in exchange for a lower interest rate. One "point" is equal to 1% of the loan amount, so on a $200,000 mortgage, one discount point would be $2,000. Discount points are tax-deductible, and mathematically, if the interest savings over the life of the loan is greater than the points paid, it can be worth it. A mortgage calculator can help you determine whether discount points are a good idea by comparing the effect of various interest rates on your mortgage.
     
    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).