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| Q: |
Can I still borrow money if my credit
is not that good? |
| A: |
Yes, just about anyone can borrow
money using their house as collateral. The interest rate will be higher depending on just
how bad your credit score is.
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| Q: |
How much closing costs should I expect
to pay for a mortgage? |
| A: |
The average closing costs equal
between 2 to 3% of the principal amount of the loan. However, there are some mortgage
programs that allow you to roll the closing costs into the principal amount of the
mortgage so that you are actually "financing" the closing costs. Some closing
costs are paid by the seller and that needs to be negotiated prior to closing.
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| Q: |
Should I use a "Broker" or
just go to a bank? |
| A: |
There are several cases where the bank
may not have the best mortgage program for your particular needs. If you use a
"Mortgage Broker", he or she will have access to several lenders including
banks, S&L's and other investors and can find the right program to fit your need.
Sometimes this will cost a broker's "fee", but the savings in interest rate or
amout of down payment or discount points may make up for that fee. It would not hurt to
try both for quotes.
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| Q: |
Do I have to put 20% down on the house
before I can get a good mortgage rate? |
| A: |
Not necessary so. There are several
lenders that will allow you to place 5% to 15% down as long as you either have great
credit or are willing to purchase "Private Mortgage Insurance" which will pay
off the loan if you default. The "PMI" usually cost between .5% to 1% of the
principal amount of the loan and is paid monthly along with your monthly P&I.
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| Q: |
Why do some mortgage lenders advertise
"No Closing Costs" or very low closing costs? |
| A: |
There are certain costs to process,
file, impliment and pay government fees when a loan is issued by any lender. These costs
have to be paid by someone. Therefore, if a lender tells you that there are no closing
costs then those costs have to be paid out by the lender. The lender will then increse the
interest rate on the loan to recop those costs so you can see that not paying closing
costs up front will usually cause you to pay for them over the life of the loan in higher
interest rates.
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| Q: |
I keep seeing these ads and fliers for
very low interest rates in the 1.5% to 2% area. Why so low and do they stay that low? |
| A: |
There are many lenders who are
advertising a very low "Into" or "Start Rate" interest rate that is
very low. This rate is usually attached to an "Adjustable" rate mortgage which
means that the rate will be low for the first period of time up until the first date that
the interest rate adjusts. As example, if the adjustable mortgage has an adjustment period
of 6 months, that means the rate will change every 6 months. This means that the low rate
will be good for the first 6 months and then adjust. You need to ask the lender what the
interest rate would be if the adjustment period were tomorrow instead of 6 months from now
to get an idea of what the rate is going to be after the "into" period.
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