Reunion Mortgage - Frequently Asked Questions

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1.	How do I know how much house I can afford? Answer
2.	What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3.	How is an index and margin used in an ARM? 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.	Do I need mortgage insurance? Answer
8.	Can I pay my property taxes and insurance separate from my mortgage payment? Answer
9.	What types of fees will I pay? Answer
10.	How much of my payment is tax deductible? Answer
11.	What is an "APR"? Answer
12.	How long will it take to process my mortgage? Answer
13.	Do I have to live in the house or can I rent it out? 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 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. Reunion Mortgage Inc. 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.

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 :	Do I need mortgage insurance?
A :	If you provide a downpayment of 20% or more, you will not need mortgage insurance. If your downpayment is less than 20%, you will need to make monthly payments for mortgage insurance along with your loan payment.

Q :	Can I pay my property taxes and insurance separate from my mortgage payment?
A :	No, you must have an impound account, meaning that your property taxes and/or mortgage insurance must be paid with your monthly loan payments.

Q :	What types of fees will I pay?
A :	You will receive a Good Faith Estimate at the very beginning of the loan process, which includes details of all the fees that will be required for your loan. These fees can include an appraisal fee, tax fees, underwriting fees, title fees, and advance payments for interest and insurance.

Q :	How much of my payment is tax deductible?
A :	Generally, all of the interest paid and some of the fees will be tax deductible. You should consult a tax professional for advice regarding your specific tax situation.

Q :	What is an "APR"?
A :	The Annual Percentage Rate (APR) is an interest rate reflecting the yearly cost of a mortgage. This Rate is generally higher than the note rate and advertised rate, because it includes other costs. The APR allows you to better compare mortgages.

Q :	How long will it take to process my mortgage?
A :	If you provide all the requested information right away (e.g. pay stubs, bank statements), we should be able to finalize your mortgage within 30 days.

Q :	Do I have to live in the house or can I rent it out?
A :	Your loan needs to match your intent for the house. If you are planning to live in the house, you will need an owner-occupied loan. If you plan to rent it out, you will need to purchase it with an investment loan. Once you obtain the appropriate loan, you can use the house accordingly.