FAQ

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.

The Annual Percentage Rate (APR), is the cost of your credit expressed as an annual rate. Because you may be paying loan discount points and other prepaid finance charges at closing, the APR disclosed is often higher than the interest rate on your loan. This APR can be compared to the APR on other loan programs to give you a consistent means of comparing rates and programs.

The APR is computed from the amount financed and is based on what your proposed payments will be on the actual loan amount credited to you at settlement. In a $50,000 loan with $2,000 prepaid finance charges, a 30 year term, and a fixed interest rate of 12%, the payments would be $514.31 (principal and interest). Since the APR is based on the amount financed ($48,000), while the payment is based on the actual amount given ($50,000), the APR (12.553%) is higher than the interest rate.

The finance charge is the cost of credit expressed in dollars. It is the total amount of interest calculated at the interest rate over the life of the loan, plus prepaid finance charges and the total amount of any required mortgage insurance charges over the life of the loan.

The “amount financed” is the loan amount applied for, minus the prepaid finance charges. Prepaid finance charges include items paid at or before settlement, such as loan origination, commitment or discount fees (points), adjusted interest, and initial mortgage insurance premium. The Amount Financed is lower than the amount you applied for because it represents a net figure. If your loan is approved in the amount requested, you will receive credit toward your home purchase or refinance for the full amount for which you applied.

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.

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.

The amount of cash that is necessary depends on a number of items. Generally, 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.

Soon after you have applied for your mortgage, you will receive a “Truth-in-Lending Disclosure.” The APR (Annual Percentage Rate) is not your actual interest rate. The APR is simply the net yield to the lender. It includes your interest, discount fees and other costs that you pay up front. Your mortgage note at closing will reflect the actual interest rate you will pay.

Including a co-borrower on your loan request may or may not affect your chances of finding a loan. We will consider your credit report, income, assets, debts and other information as well as that of your co-borrower. Before you decide whether or not to include a co-borrower on your loan request, consider your combined financial picture.

We accept loan applications through online forms, mail, email or fax. American Homestar Mortgage is committed to superior customer service. Our many application options save you the time of coming in to our offices.

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