San Diego Mortgage FAQ Part 4

When it comes to home loans and mortgages there are always questions those looking for a new home or existing home loan ask especially with all the new San Diego home loan resources available.

Q: Can I afford to buy a home?

A: In today’s economy, we all know that rental property is quite expensive, but jumping into a mortgage loan can be a very scary thought. The first decision is to determine if you can financially afford to buy a home. The way in which to do this is by comparing the cost of renting to the cost of owning a home after taxes.

Q: How much can I afford?

A: The only way to know for sure how much you can afford is by tallying on the expenses you now have that have nothing to do with the rental property such as credit card debt, food, gasoline, etc… Now, estimate other bills such as electricity, gas, and so on. With this figure in mind, along with what you can afford as a down payment, you should have a good idea of the amount of money you can monthly to own a home. You can use all kinds of calculators to provide you with a guesstimate, but talking with a professional loan officer you will receive a better idea as what you can afford.

Q: What does it mean to lock in an interest rate?

A: To lock in an interest rate means that you will have the same interest rate for a specified amount of time. Locking in the interest rate is often suggested when interest rates have not been level for a while or they are going upwards quickly. In most instances, this will guarantee that the interest rate will not change for a period of 30 to 60 days according to your mortgage loan contract.

Q: I don’t understand points.

A: Points are nothing more than one percent of the total amount of the loan. An example would be if the mortgage loan were 100,000, one point would be equal to $1,000. Some individuals choose to pay a point or two in order to achieve a lower mortgage rate, which will save the person money throughout the term of the loan. The IRS considers points to be early paid interest, which can be deducted from your taxable income.

Q: What is "interest rate"?

A: Interest rate is the amount that a lending company charges for to provide a loan.

Q: What is annual percentage rate?

A: Annual percentage rate is the interest for an entire year but it also includes mortgage insurance and other fees such as closing costs and may even include points that are paid at the time of the closing.

Q: What is PMI?

A: PMI also referred to as private mortgage insurance is insurance that will protect the lending company if you default on the mortgage loan. In the majority of cases, this is required by all lending companies when the down payment is not over 20% of the sale price of the home. The PMI will be included in your monthly mortgage payment.

Q: What is HELOC?

A: HELOC is similar to second mortgage loan offering an adjustable interest rate each month. The majority of the time, the money you receive will be placed into an account and you will be using the money similar to the way you would a credit card only that your home is the security. When the term is up, this loan will be just like any other adjustable rate mortgage loan.

Mortgage FAQs

Part 1 | Part 2 | Part 3 | Part 4