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What are the costs associated with the construction of my home? |
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There are several costs related to home building. Some of the costs are as follows: 1. On-site costs. This is generally the cost of construction materials and labor. Your contractor should give you a fixed price in your contract which reflects the above. 2. Off-site costs generally involve the paper that leads to the construction. These costs are architect’s fees, engineering fees, soils reports, city or county permits and fees, and builder overhead/supervision. Additional costs include the closing costs of your construction loan and special insurance requirements. Some construction loans include on-site costs, off-site costs, loan closing costs, interest reserve, contingency reserve and lot purchase or value. |
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When will I have to make loan payments on my construction loan? |
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Depending on your construction lender, you may not have to make any payments out of pocket during the construction period. Your lender may include an interest reserve within your loan amount. Depending on how quickly you use your construction funds, there may be sufficient funds within the construction loan to carry you through the entire construction period. |
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How do I know how much house I can afford? |
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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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What is the difference between a fixed-rate loan and an adjustable-rate loan? |
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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 is an index and margin used in an ARM? |
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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? |
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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. ConstructionLoans.com can help you evaluate your choices and help you make the most appropriate decision. |
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What does my mortgage payment include? |
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For most homeowners, the monthly mortgage payments include three separate parts: Principal: Repayment on the amount borrowedInterest: Payment to the lender for the amount borrowedTaxes & 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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Why is my credit so important to obtaining a loan? |
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Your credit report is an electronic record of your credit activities. These activities range from borrowing to buy a car or a home to applying for a loan or credit card. That's right -- every time you apply for a credit card or other loan, it registers as an inquiry on your credit report.
More importantly, a credit report is a record of how you use credit and how much of it you have available. If you're late in making a monthly payment, that too shows up on your credit report.
Whether a lender is evaluating your loan request or a card company is considering to give you a credit card, you can count on an evaluation of your credit report to influence its decision.
Unfortunately, some of us mismanage credit and pay the price: Information remains on a credit report for years and may hurt the chance of getting additional credit. Sometimes, credit reports omit steps that borrowers have taken to improve their credit, or contain errors.
In this educator, we take a look at how to manage your credit -- how to apply for it, how to use it wisely and how to monitor your credit report for accuracy. We help you to understand your credit rights and how to repair your credit.
Along the way, we provide some useful links to tools, or analyzers, to help you budget, calculate card payments and evaluate the trade-offs in paying down card debt or saving. |
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