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1 |
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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2 |
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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3 |
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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4 |
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.
Perennial Mortgage can help you evaluate your choices and help you make the most
appropriate decision. |
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5 |
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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6 |
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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