Calcluate your home loan - Now that you have located your ideal home what's it going to cost to finance? There are many variables, click here to see what they are and what's in store for you!

Current interest rates - What steps need to be taken so you can get serious about buying a home? Click here to learn the smart way to set yourself up for success!

About points - Many buyers ask what are points and how and when are they used.

• What are points - A charge paid by a borrower for taking out a loan, in which each point is 1 percent of the loan amount. The homeowner must amortize most points over the life of the loan; however, they can deduct the points they pay for acquiring or making improvements to their main residence in the year paid.
• The purpose of points - If you are looking for a low down payment, low-rate loan -- such as an FHA loan, you can often can get into a home with a down payment of 3 percent or less. Conventional loans typically require a down payment of 20 percent. By paying points a buyer desiring a lower down payment can qualify for a low rate loan because the monthly mortgage payments will normally be less than without the points. \
• Saving money on certain loans - A 7 percent loan with 1 point can be cheaper than a 6.5 percent loan with 3 points over about the first five years, According to the Mortgage Bankers Association of America. That's because the points raise the effective rate of the 6.5 percent loan early in the term.
• When it's a good idea to pay points - A lender will generally require less income for a borrower to qualify for a 5.7 percent loan than a 7.5 percent loan. But in order to get the 5.7 loan, more money is required up front (points).
• When points aren't the best choice - If you are going to stay in the home for only about five years, consider an ARM with no points. An adjustable-rate mortgage even in the worst possible scenario, probably would save you money over that relatively short period.

Different financing options - Adjustable rate mortgage (ARM), fixed - which one is for you?

• Fixed Rate - A specified fraction of the loan will be owed to the bank over the course of the loan. The amount does not change and the monthly payment will be the same over the length of the term whether it is 15 years 30 years or some other period of time.
• ARM - This is an adjustable-rate mortgage. The interest rate changes to mirror changes in the credit market. This type of interest rate is very popular. The first-year rate (aka the teaser rate) is usually a couple of percentage points below the market rate. There is also a cap, which is the highest limit for the interest rate. For example if your first-year rate is 5 percent, and you have a five-point cap, then the highest that your interest rate can go is 10 percent. In addition, interest rates are limited to an increase of one or two points a year. Thus, it is important to know how often the rates will change.
• Two-step loans - These loans provide the low rates of an ARM and the stability of a fixed loan. They usually are shown in a 5/25 or 7/23 form. You will see that the two numbers add up to 30 in both cases. This ratio means that in the first five or seven years your interest rate will be fixed, and in the next 25 or 23 years the loan will either become an ARM or a fixed rate loan. The advantage to this is that the initial interest rate is usually lower than a standard 30-year fixed loan.
• Balloon Loans - These are short-term loans that are treated as if they are 30-year loans. The term usually last from three to seven years and the outstanding funds are paid in one mass sum. This loan has lower interest rates and, if you will be moving and selling at the same time your balloon mortgage is due, it might be a good option for you.
• FHA - An FHA, (Federal Housing Administration), loan is a US government insured loan. FHA has historically been the most accommodating loan for buyers who do not fit the mold for income, down payment, or credit that conventional lenders require. The amount a home buyer can borrow on an FHA is limited however.
  VA - If you are a veteran of the US Armed Forces you may qualify for
• VA or CAL VET financing. These programs offer a variety of options that make buying a home a easier for some people. Some features of a VA loan include:no down payment required, the seller can pay all closing costs, there is no mortgage insurance required, it is assumable to a Qualified Buyer, and there are more relaxed standards for income and credit compared to conventional loans. However, the amount of the mortgage is limited with this type of financing.
• CALPERS - If you are an active, inactive, retired, or annuitant member of the California Public Employees System (PERS), Legislators (LRS), or Judges (JRS) Retirement System, CAL PERS may be the best choice for you!

Credit ratings and bankruptcy - Different credit ratings will affect buyer's ability to obtain a low loan rate.

• Credit - People rely on their credit history to be able to get a mortgage and live the kind of life they want to create for themselves and their familites. Here are some pointers about what goes into credit ratings.
• Credit "Scoring" - The score range for your credit score(AKA FICO score) is 325 - 900 points. You will probably need at least a 680 to easily qualify for a mortgage. (You need a 700+ score to get the best unsecured credit cards.)
• Here are the things that make up a "perfect" credit score - A few (say, 3 or 4) revolving credit cards, each with very high lines of credit ($10,000+), and very low carried balances on only 1 (or maybe 2) of them at a time.
  At least one charge card (American Express, Diners Club, etc.).
  All tradelines at least 6 months old, and at least 1 more than 3 years old.
  No derogatory notations.
  Very few inquiries -- no more than 1-3 in a six month period.
  At least one "installment" tradeline in good standing, i.e., a mortgage, auto loan, or student loan.
• Here are the factors which affect the points which are assigned to your credit report - Major derogatory items on your report (bankruptcy, collections, foreclosure, slowpays)
  Time at present job
  Occupation (Professionals are given heavy weight)*
  Time at Present Address
  Ratio of balances to available credit lines (the lower the better)
  Are you a homeowner? (if you are, this is heavily weighted)*
  Number of recent inquiries
  Age (50+ is the best)
  Number of credit lines on your report
  Years you have had a credit in the credit bureau database
• Bankruptcy - If you have had a bankruptcy in the past, most lenders would not even consider you for a mortgage loan, however different people have different experiences obtaining credit after they file a bankruptcy case. As a general rule, most people find it more difficult to obtain long-term credit, such as a home mortgage, shortly after a bankruptcy has been filed. Individuals consider filing a Chapter 13 case because the provisions of Chapter 13 have advantages to some persons who are considering bankruptcy. For example, you might have more equity in a home than can be protected with the exemption for real estate. The Chapter 13 plan could allow you to keep the home. Certain debts which are not dischargeable in Chapter 7.

Home appraisals- Some lenders may want to have an appraisal.

• What is an appraisal? - An appraisal is an objective supported opinion of value of an adequately described piece of property made by an appraiser who has sufficient knowledge, training and experience to accurately estimate its value
• Lender required - Most lenders are required by federal and state laws and current banking regulations to obtain an appraisal for most loans secured by real estate.
• The appraiser is to be impartial and accurate - The most important thing an appraiser can do when previewing is to look at the house as if empty: four walls, floors and a roof.They are supposed to not let the current owners' furniture and decor influence them.
• Formal report - In their appraisal, which is a detailed and time consuming report, appraisers use comparable sales together with information about the property being appraised, its neighborhood and community along with the local and national economy, to support the appraised value.
• Appraisers must be licensed or certified - As of Jan. 1, 1993, all appraisals made for mortgage loans from federally insured lenders and other federally related transactions must be made by a licensed or certified appraiser.
• Importance for the home owner - If you are buying a house with the owner carrying the paper (loan), it is well worth the cost to hire an appraiser to make sure you don't pay more than it is worth.
• Include in the purchase contract - For your protection many real estate agents will write in a purchase contract: this contract is contingent upon the property appraising for the sales price.

Protection through escrow and title insurance - What do these things have to do with your mortgage?

• It's also in your best interest - The lender will require title insurance and for the transaction to go through escrow, but it's also in your best interest to protect your investment in your property.
• What is escrow? - The definition of escrow is: Money or documents, such as a deed or title, held by a third party until the conditions of an agreement are met. For instance, pending the completion of a real estate transaction, the deed to the property will be held "in escrow."
• Title Insurance- This is a policy that insures against errors in the title search, essentially guaranteeing you and your lender's financial interest in the property. It checks for any defects, liens or encumbrances on the property that may affect the rights of ownership, possesion or use of the property. It is issued after a complete examination of the public records. It also insures against such things as forgery, fraud, missing heirs or divorce actions. Keep in mind that the required title insurance protects the lender. You may want to take out an owner's title insurance to protect yourself. You may be able to lower the cost of title insurance if the home you're buying hasn't been owned for a long time by the seller. The insurer may be willing to give you a re-issue rate, hence lower a premium, if there have been no claims against the title since the previous title search was done. If both you and the seller are getting title insurance, you can save by using the same title insurance firm. The cost will be lower since the insuror researches the property only once for both of you
• Escrow - At closing you may have to put aside money into special escrow accounts to cover other costs associated with buying a home, such as private mortgage insurance (PMI), property taxes and homeowner's insurance. This will ensure that taxes and insurance premiums on the property are paid on time. Federal law limits the amount of "cushion" to two months of escrow payments. Be sure to ask the lender what escrow payments will be required at closing. Some mortgage companies may waive escrow requirements if you pay more points or a higher interest rate.

Figures for the basis of loan calculations: GDP, treasury securities and more - OK so what are these factors and how do they affect the cost of my mortgage?

• Factors affecting the rates charged by lenders -Interest rates on residential mortgages and U.S. Treasury securities can be influenced by monthly changes and the longer-term trend changes of economic indicators. There are many variables that can influence the rates on long-term debt instruments, but an understanding of key economic indicators can provide clues to the future direction of interest rates.
• Gross Domestic Product - The gross domestic product (GDP) - the output of goods and services produced by labor and property located in the United States - is the most important economic indicator published. A larger-than-expected quarterly increase or increasing trend is considered inflationary, causing concern the Fed might need to intervene and raise interest rates in order to slow growth. Conversely, a negative growth, or economic downturn may cause the Fed to lower interest rates to stimulate the economy and increase the growth rate.
• Treasuries and Mortgage Rates -Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms (1-, 3-, and 5- year ARMs, e.g.) are pegged to shorter-term securities. So when bond yields drop, typically, conventional mortgage rates fall as well. Conversely, when yields rise, so do mortgage rates. Why? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.
• Ecomomic Indexes - If you're deciding which index is better you should understand that there probably is no such thing as a "good" index or a "bad" index. Each index has its advantages and drawbacks, and is used in different situations. Generally, a loan tied to a lagging index (COFI, e.g.) is better when rates are rising. Leading index loans, like those tied to CMT, are best during periods of declining rates.
• What is an "Index" - A published measure of economic conditions usually relative to other financial instruments such as Treasury notes or Treasury bills. The lender uses a particular index to calculate the interest rate on an adjustable rate mortgage (ARM) by adding a fixed margin to the index.
• The most common indexes are:
  Constant Maturity Treasury (CMT)
  Treasury Bill (T-Bill)
  12-Month Treasury Average (MTA)
  11th District Cost of Funds Index (COFI)
  Certificates of Deposit (CD) Indexes
  Prime Rate