FAQ

Frequently Asked Questions

percetage FAQ

Purchasing a new home can be confusing.  Asking questions and doing research can help you understand the entire home buying process from start to finish, including all the terminology used and when to be realistic about housing expectations. We put together this page of frequently asked questions to assist everyone understand the process of purchasing a new home.

We’ve also put together a very comprehensive list of Mortgage & Lending Definitions which can be very useful as you begin the process of purchasing a home.

Q: What is an Adjustable Rate Mortgage?

A: An Adjustable Rate Mortgage (ARM) is a mortgage loan in which the interest rate is adjusted based on a variety of circumstances. The problem that some people have with Adjustable Rate Mortgages is making the payments. A person may be able to make the payments at the initial interest rate, but when the interest rate increases due to changes in the market, the person may no longer be able to afford the mortgage payment at the higher interest rate.

Q: What is an Interest Only Mortgage?

A: An Interest-Only mortgage is a mortgage loan in which the buyer is only paying the interest. The period of only paying the interest is generally set to a certain number of years (the number varying depending on the lender and the circumstances). When the term of the interest-only loan is over, the buyer has paid $0 on the actual loan amount – the buyer has only paid the interest. At this point, the buyer can do another interest-only loan, or possibly re-finance and get a principal and interest loan, in which the buyer is paying BOTH the principal and the interest at the same time.

Q: What is APR?

A: APR is the annual percentage rate. It describes the interest on a loan over a period of one year, rather than the monthly interest rate.

Q: Can an interest rate be locked in? If yes, are there risks involved?

A: Yes, an interest rate can be locked in, just ask your lender. There are risks with both locking in and NOT locking in your rate when purchasing a house. The market changes daily, as do interest rates. If you are looking at a rate that you know is fairly low, many people would say to lock it in, because interest rates do not change in giant leaps and bounds over short periods of time. The risk with locking in is that if you lock in and it goes down, you are locked. But if you are locked in and it goes up, you are locked at the lower rate. Whether or not to lock in your rate is a judgment call and depends on the situation and the stability of the market the weeks prior to closing on your house.

Q: Will my credit score affect the amount of my loan?

A: Yes. Your credit score always affects your ability to get a loan. It will affect the overall amount you are able to get the loan for. It is always wise to monitor your credit score. The Fair Credit Reporting Act guarantees you access to your credit report once a year FOR FREE. It is highly suggested that you take full advantage of that EVERY YEAR, regardless of whether or not you intend to make large purchases. It is always beneficial to know your credit score. For your free yearly report, go to AnnualCreditReport.com and see where you stand.

Q: My real estate agent said I could just knock out a wall. Can I do that?

A: Maybe knocking out a wall to make a home better suited to your needs is possible. The real question here is do you want to? Many walls in homes can be knocked out to change the flow of the home or enlarge a room, but how each wall needs to be knocked out is a different topic entirely. Some walls are structural and can’t just be cut out to tie two rooms together. Knocking out a structural wall can be costly and take time, as it may require plans before starting, inspection along the way, and inspection upon completion. While it is fun to imagine all the different things you could do to a home, always keep in mind that it is every real estate agent’s job to sell houses, even if that means selling you on a future project that may never be completed. If possible, find a house that has as many things from your Housing Checklist as possible without any modifications.

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