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1. How do I know how much house I can afford? Answer
2. How do I know which type of mortgage is best for me? Answer
3. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
4. How is an index and margin used in an ARM? Answer
5. What does my mortgage payment include? Answer
6. How much cash will I need to purchase a home? Answer
7. Should I pay points in exchange for a lower interest rate? Answer
8. Does Community Bank provide financing for manufactured homes? Answer
9. I haven't found a property to purchase yet.  Can I still apply for a loan? Answer

Q : How do I know how much house I can afford?
A : 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.
 
Q : How do I know which type of mortgage is best for me?
A : 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. Community Bank of New Mexico can help you evaluate your choices and help you make the most appropriate decision.
 
Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
A : 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 us.
 
Q : How is an index and margin used in an ARM?
A : 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).
 
Q : What does my mortgage payment include?
A : 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.  Mortgage insurance may also be a required part of your payment depending on the loan program and amount of equity in your home.
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    Q : How much cash will I need to purchase a home?
    A : 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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    Q : Should I pay points in exchange for a lower interest rate?
    A : Points are considered a form of interest.  Each point is one percent of your loan amount.  You pay them upfront at your loan closing in exchange for a lower interest rate over the life of your loan.

    To determine whether or not it makes sense to pay points, you need to compare the cost of the points to the monthly savings you receive due to a lower interest rate.  Divide the total cost of the points by the amount of monthly savings you would realize with a lower interest rate.  The result is the number of payments you will need to make before you realize any savings.  If you do not plan on keeping your mortgage longer than time period, you may want to reconsider paying points.

     
    Q : Does Community Bank provide financing for manufactured homes?
    A : We do not offer financing for manufactured homes.

    A manufactured home is defined as follows:  Housing units that are factory built with a steel carriage that remains as a structural component and limits the structure to a single story.  These types of manufactured homes are sometimes referred to as mobile homes.  Other factory-built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing are not considered manufactured homes under this definition.

     
    Q : I haven't found a property to purchase yet.  Can I still apply for a loan?
    A : Yes, it is usually helpful to apply for a mortgage loan before you have found a home.  This will help you determine your price range and assist you in a speedy closing once you have decided on your property.  If you apply now, we can work with you to issue a prequalification letter subject to finding a property.  You can use this letter to assure real estate brokers and sellers that you are qualified.  This may also give more weight to any offer you submit to purchase a home.

    When you find a property, let your Mortgage Loan Officer know so that we can complete your loan application and discuss locking in your interest rate.