FAQs

Can I buy a home if I have less-than-perfect credit?

Yes. Keep in mind that lenders don't just look at your past history, but also at your ability and willingness to pay in the future. At ARC, we may be able to help you buy a home, even if your credit isn't perfect.

Which is better: a fixed or adjustable interest rate?

If you plan to be in your home for more than seven years, you may want to consider a fixed rate mortgage, which offers predictable payments and long-term protection against rising mortgage interest rates. If you plan to be in your home for seven years or less, an adjustable rate mortgage could be attractive. Keep in mind that with an adjustable rate mortgage, your monthly payments have the potential to go up each time your interest rate adjusts.

When should you pay discount points?

When you pay a discount point, you are essentially paying part of your interest to the lender up front. This will lower your interest rate — as well as your monthly payment — over the life of the loan. One discount point is typically equal to 1% of the loan amount. For example, one point on a $100,000 loan would require payment of $1,000 at closing. Generally speaking, the longer you plan to remain in a property or hold your mortgage, the more advantageous it is to pay points. There is no requirement to pay discount points; whether or not you decide to pay points is completely up to you.

What documents will I need to apply for a mortgage?

Traditional loans usually require documents that verify your employment, income and assets, and may include:

  • Your Social Security number
  • Pay stubs for the last two months
  • W-2 forms for the past two years
  • Bank statements for the past two or three months
  • One to two years of federal tax returns
  • A signed contract of sale (if you've already chosen your new home)
  • Information on current debt, including car loans, student loans and credit cards

How much do I need for a down payment?

There is no set amount. In fact, you might be surprised to learn that many first-time homebuyer programs require as little as 3.5% down. Today, there are many loan programs that can be tailored to fit your needs and financial resources. Keep in mind that for down payments of less that 20%, private mortgage insurance may be required.

Which mortgage and homeowners costs are tax-deductible?

Three types of mortgage and homeowners costs may be tax-deductible: discount points, interest paid on a home loan or home equity loan and property taxes. After the year of sale, your mortgage interest and annual property taxes are the only deductible costs. For a refinanced loan, points must be deducted over time. Consult your tax advisor for advice about your situation.

What are the benefits of refinancing?

You may want to consider refinancing if you are interested in paying off high-interest-rate debt, shortening the length of your repayment term for your mortgage or lowering your monthly mortgage payment.

When does it make sense to refinance?

Generally speaking, one or more of the following conditions needs to be present before you should consider refinancing your mortgage:

  • Determine your breakeven point with our Refinance Breakeven Calculator.
  • Mortgage interest rates are falling.
  • Your home has significantly appreciated in market value.
  • You've been making payments on your original 30-year mortgage for less than ten years.

Can I refinance to take cash out of my house?

Yes. ARC offers a variety of options that allow you to tap into your home's equity and take cash out. Consult an ARC Mortgage Specialist for the best cash-out refinancing option for you.

How can I consolidate debt when refinancing my mortgage?

Cash-out refinancing can help homeowners who want to consolidate high-interest, nondeductible debt. Because your mortgage interest rate is likely to be lower than rates on credit cards or other types of bank loans, consolidating debt may reduce your overall monthly debt payments. In addition, your mortgage interest may be tax-deductible, while your credit card interest is not.

The amount you save on loan consolidation may vary by loan. Since a home loan may have a longer term than some of the bills you may be consolidating, you may not realize savings over the entire term of your new loan. In addition, your loan may require you to incur premiums for hazard and, if applicable, flood insurance and mortgage insurance which would affect your monthly payment reduction. Federally Guaranteed Student Loans should not be consolidated because you will lose important federal benefits.

Do I need to have my house appraised in order to refinance?

Yes, in most cases. However, depending on the circumstances, an appraisal may not be required.

How much house can I afford?

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.  Use our calculator to determine How much house you can afford.

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

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.

How is an index and margin used in an ARM?

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).

How do I know which type of mortgage is best for me?

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. An ARC mortgage specialist can help you evaluate your choices and help you make the most appropriate decision. View our mortgage types page for more information.

What does my mortgage payment include?

For most homeowners, the monthly mortgage payments include 4 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.

How much cash will I need to purchase a home

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