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Q : |
How do I know how much house I can
afford? |
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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. |
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Q : |
What is the difference between a
fixed-rate loan and an adjustable-rate
loan? |
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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, 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. |
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Q : |
How do I know which type of mortgage is
best for me? |
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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. HomeLenders of the Shoals, Inc.
can help you evaluate your choices and
help you make the most appropriate
decision. |
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Q : |
How is an index and margin used in an
ARM? |
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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). |
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Q : |
What does my mortgage payment include? |
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A : |
For most
homeowners, the monthly mortgage
payments include three 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.
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Q : |
How much cash will I need to purchase a
home? |
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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
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