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How do I know how much house I can 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.
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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 your broker.
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How do I determine my own credit status?
Know where you stand: A Guideline for determining your Credit Status
You may use the following categories as a general guideline in evaluating your own creditworthiness. Please note that these are general
guidelines only-other factors will often be included in the loan approval or credit evaluation process:
Excellent Credit
- Credit scores of 680 and above.
- At least 5 trade credit lines (credit cards, auto loans, mortgages) have each been open for at least 24 months.
- All accounts have been paid as agreed.
- No public records of bankruptcy, foreclosure, serious past due accounts, or collections within the last 10 years.
- Low current credit balance relative to maximum available credit limit.
- Minimum number of credit inquiries.
Good Credit
- Credit scores between 650-679
- At least 5 trade credit lines (credit cards, auto loans, mortgages) have each been open for at least 24 months.
- Most accounts have been paid as agreed, with only occasional late payments.
- No public records of bankruptcy, foreclosure, serious past due accounts, or collections within the last 10 years.
- May have significant current credit balance relative to maximum available credit limit.
- Several recent credit inquiries.
Fair Credit
- Credit scores between 610-649
- At least 3 trade credit lines (credit cards, auto loans, mortgages) have each been open for at least 24 months.
- Most accounts have been paid as agreed, with only occasional late payments.
- No public record of bankruptcy, foreclosure, serious past due accounts, or collections within the last few years.
- May have significant credit balance relative to maximum available credit limit.
- Several recent credit inquiries.
Poor Credit
- Credit scores 530-609.
- One or more accounts have not been paid as agreed.
- May have had a bankruptcy, foreclosure, serious past due accounts or collections.
- High number of recent credit inquiries.
- Proportion of revolving balances to revolving credit limits is too high.
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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
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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. CapWest Mortgage can help you evaluate your choices and help you make the most appropriate decision.
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What does my mortgage payment include?
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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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
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