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Frequently Asked Questions
Help Section
The following answers addresses the most commonly asked questions. If you
have any questions that aren't listed, just click "Contact Us" on the left. You
can also contact Financial Services Unlimited, Inc. by calling 800-238-9202.
I can't afford 20% to put down on a house?
Assuming you qualify for higher monthly mortgage payments and have excellent
credit history, you may qualify for a reduced down payment loan from 0 -15%
down. However, you may pay a higher interest rate and loan fees (points) than
someone making a larger down payment as the lender has increase loan risk.
What is private mortgage insurance (PMI)?
Private mortgage insurance (PMI) policies are designed to reimburse a mortgage
lender up to a certain amount if you default on your loan. Most lenders require
PMI on loans when the borrower makes a down payment of less than 20%. Premiums
are usually paid monthly or may be financed. With the exception of some
government loans, you may be able to drop the mortgage insurance once your
equity in the house reaches 20% and you've made timely mortgage payments. The
Servicing Lender of your mortgage will have the requirements for canceling
private mortgage insurance.
Can I use some of my IRA or 401(k) plan for a down payment?
Under the 1997 Taxpayer Relief Act, first-time home buyers may withdraw up to
$10,000 penalty free from an individual retirement account (IRA) for a down
payment to purchase a principal residence. This $10,000 is a lifetime limit. The
law defines a first-time homeowner as someone who hasn't owned a house for the
past two years. If a couple is buying a home, both must be first-time
homeowners. Ask your tax accountant for more information, or check IRS rules at
http://www.irs.gov. Another source of down payment money may be is a loan
against your 401(k) plan. Ask your employer or plan administrator if your plan
allows for loans.
What's the difference between a fixed and adjustable rate mortgage?
With a fixed rate mortgage, the interest rate and the amount you pay each month
remain the same over the entire mortgage term, traditionally 15, 20, 30 or 40
years. A number of variations are available, including five- and seven-year
fixed rate loans with balloon payments at the end. With an adjustable rate
mortgage (ARM), the interest rate fluctuates according to the indexes. Initial
interest rates of ARMs are typically offered at a discounted ("teaser") interest
rate lower than fixed rate mortgage. Over time, when initial discounts are
filtered out, ARM rates will fluctuate as general interest rates go up and down.
Different ARMs are tied to different financial indexes, some of which fluctuate
up or down more quickly than others. To avoid constant and drastic changes, ARMs
typically regulate (cap) how much and how often the interest rate and/or
payments can change in a year and over the life of the loan. A number of
variations are available for adjustable rate mortgages, including hybrids that
change from a fixed to an adjustable rate after a period of years.
Is a fixed or an adjustable rate mortgage better?
It depends. Because interest rates and mortgage options change often, your
choice of a fixed or adjustable rate mortgage should depend on: the interest
rates and mortgage options available when you're buying a house your view of the
future (generally, high inflation will mean ARM rates will go up and lower
inflation that they will fall), and how willing you are to take a risk. When
mortgage rates are low, a fixed rate mortgage is the best bet for most buyers.
Over the next five, ten or thirty years, interest rates are more apt to go up
than further down. Even if rates could go a little lower in the short run, an
ARM's teaser rate will adjust up soon and you won't gain much. In the long run,
ARMs are likely to go up, meaning most buyers will be best off to lock in a
favorable fixed rate now and not take the risk of much higher rates later. Keep
in mind that lenders not only lend money to purchase homes; they also lend money
to refinance homes. If you take out a loan now, and several years from now
interest rates have dropped, refinancing will probably make sense.
What is private mortgage insurance (PMI)?
Private mortgage insurance (PMI) policies are designed to reimburse a mortgage
lender up to a certain amount if you default on your loan. Most lenders require
PMI on loans where the borrower makes a down payment of less than 20%. Premiums
are usually paid monthly or can be financed. With the exception of some
government and older loans, you may be able to drop the mortgage insurance once
your equity in the house reaches 22% and you've made timely mortgage payments.
The Servicing Lender will have the requirements for canceling the mortgage
insurance.
Financial Services Unlimited, Inc.
Client Services: 800-238-9202
11950 SW 2nd St. Suite 300
Beaverton, OR 97005
503-626-8910 - Fax
Contact us for more info
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