The Patterson Company- 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.	How much cash will I need to purchase a home? 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. You can choose an ARM that are fixed for 1 year 3 years, 5 years, 7 years or 10 years. While the monthly principle and interest payments that you make with a fixed-rate mortgage can't not change, payments on an ARM loan can (and most will) change after the entail period fixed period. The rate on ARM will change every year after the entail fixed rate time period. 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. The Patterson Company can help you evaluate your choices and help you make the most appropriate decision.

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. (These funds will be credited to your total cost of payment and closing costs.) 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. Purchase closing costs typically average between 2.5% and 3% of the total purchase price. Remember that sellers can and often do help with the closing costs. Be sure to check with Realtor when making the offer wether or not you are asking for the seller to pay closing costs.