Home Buying 101

At EC Mortgage Lenders, we’re happy to help you get started on the journey of buying your first home.

Here are a few tips to get you started.

How to know what you can afford

There is never a concrete answer for this question because every homebuyer is different. A good rule of thumb is that you can afford a home that is valued at two or three times your annual household income, but it’s also important to keep in mind that the amount you can borrow will vary based on employment and credit history, current savings and current debts. You also have to ask yourself some questions: How much are you willing to pay on a down payment? What size monthly payment can you afford? Is a 15- or 30-year mortgage a better option for you? There are also special loan programs available for first-time buyers to purchase a home with a higher value.

How to decide which mortgage is best for you

Since no two homebuyers are the same and everyone’s situation is different, there is really no one set formula to find out what kind of mortgage is best for you. Like the question about how much you can afford, the kind of mortgage that suits you best is based on many factors, like your current financial situation and how long you intend to keep your house. Our lenders can analyze your choices and your situation to help you choose which mortgage is right for you.

How to navigate your mortgage payment

Generally, your mortgage payment is broken down into three parts: the principal, which is repayment on the amount borrowed; interest, which is repayment to the lender for the amount borrowed, and taxes and insurance, which are normally made into a special escrow account for things like hazard insurance and property taxes. This escrow account is sometimes optional. If you choose, you can pay fees directly to the County Tax Assessor and property insurance company.

How to know how much cash you need

Like other aspects of your mortgage, this depends on a number of factors. Generally, however, you need to have three things: earnest money, which is the deposit that is supplied when you make an offer on the house; down payment, a percentage of the cost of the home which is due at the time of settlement; and closing costs, which are costs associated with processing paperwork to purchase or refinance a house.

What is the difference between a fixed-rate and adjustable-rate loan?

In a fixed-rate mortgage, the interest stays the same through the life of the loan. In an adjustable-rate mortgage (ARM), the interest will change regularly, usually in relation to an index. Both types of mortgages have their advantages and disadvantages, and it’s best to talk to your lender to see which type is right for you.

What is an index, and how is it used in an ARM?

An index is an economic indicator used to set the interest rate for an ARM. Usually, an index rate is combined with a pre-specified margin to come up with the interest rate that you pay. Three indices that are common are the One-Year Treasury Bill, the Cost of unds of the 11th District Federal Home Loan Bank, and the London InterBank Offering Rate.