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โ Frequently Asked Questions
What is an amortization schedule? +
An amortization schedule is a table showing each periodic payment on a loan. It breaks down how much of each payment goes toward principal and interest, and shows the remaining balance after each payment.
How do extra payments affect my loan? +
Extra payments go directly toward the principal balance, reducing the amount of interest you'll pay over the life of the loan. Even small extra payments can save thousands in interest and shorten your loan term significantly.
What's the difference between APR and interest rate? +
The interest rate is the cost of borrowing the principal amount. APR (Annual Percentage Rate) includes the interest rate plus other loan costs like origination fees, closing costs, and insurance, giving you the true annual cost of the loan.
Should I choose a 15-year or 30-year mortgage? +
A 15-year mortgage has higher monthly payments but saves significant interest over the loan's life. A 30-year mortgage has lower monthly payments, providing more flexibility, but costs more in total interest. Choose based on your budget and financial goals.
What credit score do I need for the best rates? +
Generally, a credit score of 740+ qualifies for the best rates. Scores of 620-739 can still get loans but at higher rates. For FHA loans, scores as low as 580 may qualify. Auto loans are available at various credit levels but rates vary significantly.
What is PMI and when is it required? +
PMI (Private Mortgage Insurance) is typically required when your down payment is less than 20% of the home's value. It protects the lender if you default and usually costs 0.5-1% of the loan amount annually. It can be removed once you reach 20% equity.
How much can I afford to borrow? +
A general rule is that your monthly housing payment shouldn't exceed 28% of gross monthly income, and total debt payments shouldn't exceed 43%. However, consider your lifestyle, savings goals, and emergency fund when determining affordability.
What are points and should I pay them? +
Points are fees paid to lower your interest rate. One point equals 1% of the loan amount and typically lowers the rate by 0.25%. Points make sense if you plan to keep the loan long enough for the monthly savings to exceed the upfront cost.