First Bank and Trust - 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.	What does my mortgage payment include? Answer
6.	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 debt service obligations, 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 lower down payment. Total monthly payments, including housing and other debt service should generally not exceed 41% of your gross monthly income. Housing expenses, including principal, interest, insurance and taxes, should usually not exceed 29% of your gross monthly expenses. Give one of our friendly loan officers a call, and we'll 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 never changes during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, 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 discussing your unique situation and needs with one of our friendly loan officers.

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. The index we commonly use is the One-Year U.S. Treasury rate, adjusted to a constant maturity.

Q :	How do I know which type of mortgage is best for me?
A :	This choice depends on a number of factors, including how long you intend to keep your home, the amount of down payment that you currently have and your family needs. First Bank and Trust Co. can help you evaluate your choices and make the most appropriate decision.

Q :	What does my mortgage payment include?
A :	For many homeowners, the monthly mortgage payments include three separate components: 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 you will pay the real estate taxes directly to the County Tax Assessor and the premiums directly to the property insurance company.

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 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 Prepaid Items: Escrow amounts to cover property taxes and insurance