Property Mortgages

Citadel Realty has been in the niche real estate business for a long time and we know how confusing mortgages can be to new homebuyers. We have put together some of the most common things about mortgages that home buyers should know. The following terms are things that you will encounter when you search for the mortgage that is perfect for you. Though this list is a great start on understanding the different mortgages that are out there, there is a lot more to for you to learn. If you are looking for more information on mortgages and about the home buying process, feel free to Contact Citadel Realty.

Types of Mortgages

  • 15-Year Fixed Mortgage loan has fixed payments and is repaid by the borrower making 180 equal monthly payments over a period of 15 years. What is appealing about this loan is that the borrower can expect to make the same monthly payment for the entire term of the loan.
  • 30-Year Fixed Mortgage loan has fixed payments and is repaid by the borrower making 360 equal monthly payments over a period of 30 years. What is appealing about this loan is that the borrower can expect to make the same monthly payment for the entire term of the loan.
  • Buy-Down is a temporary reduction in the rate of a mortgage, as in a three-two-one buy-down. On a 9% fixed-rate loan the first year’s interest will be six percent, the second seven percent, the third eight percent and the fourth through the ending at nine percent. A buy-down is a great option for buyers with extra capital, because it allows them to qualify for a more expensive home than they might otherwise have not qualified for.
  • You might hear about a Convertible Mortgage. The convertible aspect of this mortgage means that you can convert an adjustable rate mortgage into a fixed-rate mortgage for a fee. This can be done without refinancing the loan or changing the terms. Continue reading for more information on adjustable rate mortgages and fixed-rate mortgages.
  • Federal Housing Administration or FHA Loans are great for new home buyers that can only make a low down payment. Mortgages backed by the Federal Housing Administration requires a down payment of about three to four percent of the loan amount which is considerably lower than other loans that the buyer might qualify for.
  • If you are a home buyer you might find that you qualify for a Fixed-Rate Mortgage. With this type of mortgage, you can get a break of about two percent by going with a fifteen-year loan. However, you will be responsible for higher payments. When compared to a thirty-year loan, a fifteen-year fixed-rate mortgage save up to sixty percent of the total interest costs over the life of a loan.
  • Jumbo Loan is a mortgage loan which is larger than the limits set by Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. These loans usually carry a higher interest rate to enhance their value and marketability to investors.
  • VA Mortgage Loan is a long-term, low or no-down payment loan guaranteed by the Veterans Administration. This type of mortgage loan is restricted to those that have served in the military or have other service-related entitlements. A home buyer with a VA loan pays a premium of up to only one percent.
  • Adjustable Rate Mortgages or ARM is an alternative to fixed-rate financing. Initial rates begin at four percent lower. Because of these lower initial rates, these loans can assist buyers in qualifying for a greater loan amount. The federal housing administration has an attractive ARM program that offers more protection to a homeowner. The program offers a one percent annual cap and a five percent life cap.
  • Balloon Mortgage Loans are fixed loans for five to seven years at a lower rate compared to fixed-rate loans. However, the payments from this loan are amortized over the following thirty years. At the end of those five to seven years, these loans are due in full. This mortgage loan program has no pre-payment penalties under the Federal National Mortgage Association guidelines and are based on simple interest calculations.

Additional Mortgage Information

  • You may be looking ahead, wondering when would be the best time to Refinance. Lenders normally recommend refinancing a mortgage when the market rate is one or more percentage points below the rate on the loan. It’s not a good idea to refinance your home if the gap between your current rate and the rates you can get on a new loan are less than one percent wide.
  • Title Search examines local public land records to determine the legal ownership of a property. The title company is responsible for making sure that you are the new free-and-clear owner of the property you are buying. The title company requires an insurance fee that will cover the buyer in the case of a clerical error that results in someone else claiming a lien or right to your property. Empire Title is a premier title company in Colorado with great reviews. You can contact them at 719-884-5300.
  • Your lender may talk about Points. They may also use the terms Loan Origination Fee, Commitment Fee, Discount Fee, or Funding Fee. They are all the same thing—prepaid interest. Each point equals one percent of the loan amount. Home buyers should always make sure that their lender explains the points and interest rates available to them for the loan they choose. For tax purposes, if you are not sure about which points are deductible, then you should contact the individual or firm that prepares your tax return.
  • No home buyer looks forward to those dreaded closing costs, but they are an integral part of the home buying process. Your Closing Costs will probably be anywhere from three to eight percent of the total loan amount depending on the type of loan that you have. If you are doing the math beforehand, eight percent is a reasonable estimate for you to use.