Lending Options For Fort Collins Home Buyers

Common Types of Mortgages

It seems everyday you hear or read about the scope of foreclosures occurring in our nation’s housing market. What you may not have read or heard about is the hundreds individuals and families financing their Loveland and Fort Collins area home purchase with very little fanfare. Why? Because interest rates remain very attractive, plus, our Front Range towns and communities have been insulated from the wild swings in property values experienced by those areas hit hard by mortgage foreclosures.

Mortgage Types 101

Now that you have located that perfect Fort Collins home it is very important you have a basic knowledge of the types of available mortgages you can select to finance your next home or condo purchase. Negotiating for the “right” type of mortgage and the absolute best rate is essential. In addition, we recommend you feel completely comfortable with your choice of mortgage lending consultant as well. This article will help bring you up to speed on the most popular types of loans in use for today's real estate market.

Fixed Rate Level Payment Mortgage

Probably the most popular mortgage in use today is the fixed interest rate level payment loan. As the name implies, the payments are “fixed” for the term or life of the loan. Depending on your personal situation, you may want to finance your purchase for 15 years or you can opt for a 30 year loan. It is possible for the monthly payments to rise or fall slightly only because the mortgage escrow account may need to be periodically adjusted to offset increases (or decreases) in property taxes and hazard insurance premiums.

Also remember a fixed rate loan will be fully amortized over the life of the loan. This means a portion of each payment will “defeat” the loan (principal and interest). In the early years of the fixed rate loan more monies will be paid toward the interest while the latter years more of the payment will defeat the principal.

A home buyer can choose a conventional loan, a FHA loan or if the buyer is a military veteran and has remaining entitlement, the Vet can choose to finance their purchase with a VA loan. Your lender will explain the key benefits of each source of financing.

Adjustable or Variable Rate Mortgage

Often called an “ARM”, adjustable rate mortgages can be a sound financing solution if you anticipate an increase in your income, or if there is a drop in mortgage rates. Another consideration is how long you plan to live in your Fort Collins home. If it’s only for a short time, an ARM might be right choice for you.

Remember – Your ARM Interest Rate Can Go Up or Go Down

As the name implies, the interest rate of a variable rate loan can go up or go down depending on the economic indicator the interest rate is tied to. What dictates the movement of an interest rate of your ARM is tied to an economic index like the Treasury Bill. An ARM also has what are called periodic caps and life of loan caps. The periodic cap limits the amount of change an interest rate can go up or down in the period (normally annually). Most ARMs also have life of loan caps that limit the amount that the loan rate can go up or down over the life of the mortgage. There are even ARMs that can be converted to a fixed rate loan after a certain period of time.

Important Consideration about ARMs

One key consideration- if you select an ARM, it is important you be prepared for mortgage rates and monthly payments that may be higher at the end of your loan term than when you first started making payments. For a more definitive explanation of the adjustable rate mortgage, we suggest you check with a trusted lending consultant.

Which Type of Mortgage Works Best for You and Your Fort Collins Home Purchase?

Say you’ve just found that perfect home in Fort Collins and you’re ready to select a mortgage. At first glance, the array of mortgage options can be overwhelming. Choosing the right loan depends on your specific financial situation and other factors. Those factors include the amount of risk you are willing to take, the stability of your income, your reoccurring debt, and the length of time you plan to live in your Fort Collins home. If you would like help determining which mortgage is best for you, contact us today. We will help you by suggesting several local, professional lenders who specialize in financing homes and properties in the Front Range region.To get started with your Berthoud, Firestone, Fort Collins, Frederick, Greeley, Johnstown, Longmont, Loveland, Platteville, Wellington, or Windsor property search, contact us for your initial home buying analysis today.