Frequently asked questions



Below are some frequently asked questions to assist with your home purchase planning.



Question - How do I know how much house I can afford?


Generally speaking, you can purchase a home with a value two to three times your annual household income. However, the amount you can borrow will depend on your employment history, credit history, current savings, debt and the amount of down payment you will be making.



Question - 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. Depending on the type of adjustable rate loan you have, the rate is can only increase a specified amount according to how it is structured.



Question - What does my mortgage payment include?


For most buyers, the monthly mortgage payment includes three items.


Principal - Repayment on the amount borrowed


Interest - Payment to the lender for the amount borrowed


Taxes & Insurance - Monthly payments are normally held in an escrow account by your mortgage servicing company for items such as hazard insurance and property taxes. The servicing company will pay your taxes bi-annually to your city or town tax assessor and insurance as agreed with your provider.



Question - How much cash will I need to purchase a home?


The amount of cash necessary depends on a number of items. Generally speaking, you will need to supply:


Earnest Money - The deposit supplied when you make an offer on a home


Down Payment - A percentage of the cost of the loan


Closing Costs - Costs associated with appraisal, attorney fees, title insurance and processing fees


Question - How Can I improve my credit score?


1. Pay your bills on time. On time payments count toward 30% of your total credit score.


2. Keep your total credit card usage under 20%. 30% of your score is based partially on available credit.


3. Do not close credit lines even if you are no longer using them. Closing a line of credit will lower your overall credit limit and could result in lowering your score. To keep lines active, use the card twice per year.


4. Check your credit report yearly for accuracy. By federal law, your are permitted to check your credit report once per year from each of the three credit reporting agencies for free at http://www.annualcreditreport.com