Here are some answers to some commonly asked questions. We are available to help you with any questions that you might have.  Just call at: (813) 936-2302, fax: (813) 936-2342, or email at info@katrinamadewell.com.

I can't afford 20% to put down on a house?
Assuming you can qualify for higher monthly mortgage payments and have a favorable credit history, you should be able to find a low (0 -15%) down payment loan. However, you may have to pay a higher interest rate and loan fees (points) than someone making a larger down payment.

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 and the foreclosure sale is less than the amount you own the lender -- that is, the amount of your mortgage loan plus the costs of the foreclosure sale. Most lenders require PMI on loans where the borrower makes a down payment of less than 20%. Premiums are usually paid monthly and vary according to your Loan to Value Ratio, as well as the loan program. With the exception of some government and older loans, you can drop PMI once your equity in the house reaches 20% and you've made timely mortgage payments. Most current mortgage loans have self terminating PMI when you have 22% equity. Ask your lender for details on the cost of PMI and requirements for removing it.

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 can 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 is a loan against your 401(k) plan. Ask your employer or plan administrator if your plan allows for loans. If it does, the maximum loan amount under the law is the one-half of your interest in the plan or $50,000, whichever is less. Other conditions, including the maximum term, the minimum loan amount, the interest rate and applicable loan fees, are set by your employer. Any loan must be repaid in a "reasonable amount of time," although the Tax Code doesn't define reasonable. Be sure to find out what happens if you leave your job before fully repaying a loan from your 401(k) plan. If a loan becomes due immediately upon your departure, income tax penalties may apply to the outstanding balance.

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 or 30 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 interest rates in the economy. Initial interest rates of ARMs are typically offered at a discounted ("teaser") interest rate lower than for fixed rate mortgages. 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 may adjust upward soon and you you may not 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 be an option. Adjustable rates are usually favorable if borrowers that know they will be selling, moving, relocating, building another home, etc.  People with credit issues may also be offered and adjustable rate, to allow ample time for repairing and improving derogatory credit items.