The Colorado Springs Mortgage Authority
There are various complexities when dealing with mortgages. From understanding which loan program is right for you, to learning the in’s-and-out’s of private mortgage insurance, refinancing, what is needed for VA appraisals, FHA loan limits, the differences between home equity and HELOC, and so much more. As a mortgage broker in Colorado Springs, the Reichert Mortgage Team has gathered the most popular questions our team receives so you may continue your mortgage education.
A mortgage is the type of loan you get to finance the purchase of a home. A mortgage allows you to buy your home by borrowing funds from a bank or other mortgage lender using the home itself as collateral. You could say it is like purchasing your home on credit and just like a credit card, you make payments each month to your mortgage lender. These monthly payments will include principal, interest, property taxes, homeowner’s insurance and in some cases, private mortgage insurance.
Mortgage principal is the amount you paid for your home. If you purchase a home for $220,000, then your principal is $220,000.
Mortgage interest is the amount you pay to your mortgage lender for the use of that lender’s funds. In other words, the price you pay for borrowing funds to purchase your home.
The taxes you pay in your monthly mortgage payment are property taxes. Property taxes are assessed by your local Tax Assessor annually and paid for on a monthly basis as part of your mortgage payment.
Homeowner’s insurance is required and included in your monthly mortgage payments. This insurance protects the home from losses, damages and liability from accidents, and consequently, protects the lender’s investment.
Your monthly mortgage payment may include a cost for Private Mortgage Insurance, or PMI. If you have a conventional loan and did not put a 20% down payment toward the purchase of your home, a PMI premium will be a part of your monthly payment. This insurance protects the lender in the case of a foreclosure.
Collateral is the asset that secures a loan. In the case of a mortgage, collateral is the home you are financing. If you as the borrower fail to make monthly mortgage payments and default on your loan, the mortgage lender may then take possession of the home via foreclosure.
If a borrower of a mortgage does not make the agreed to monthly payments, the property can enter foreclosure, legal proceedings in which the bank can retrieve their collateral; the home that was used to secure the loan.
Both a mortgage lender and mortgage broker can help you obtain a loan to purchase your home. A mortgage lender is the financial institution that will loan you the funds to buy your home. A mortgage broker is the middle-man that connects you with a wide variety of different lenders.
It is a great idea to get pre-approved or pre-qualified for a mortgage loan before shopping for your home. This pre-approval process allows you to determine how much home you may qualify for. A lender will make a commitment to lend you a certain amount of money so you know the maximum you are able to spend when looking for your home.
A home appraisal is a report by a trained and licensed professional that estimates the market value of a home; how much the home is worth. The appraisal takes into account the home and property and includes sales data from comparable or similar homes. The appraisal justifies the amount you pay for a home and the amount a lender will lend.
A home inspection is conducted by a qualified and trained professional in which the inspector examines the current condition of a home by visually identifying the quality and safeness of the structure and systems, and those areas that may require repair or maintenance. A home inspection is a vital part of the home buying process protecting the investment of both buyer and lender.
Your credit score is a number that describes your overall credit rating. Your credit score is an indicator of your financial health and how well you manage your credit, those monies you have previously borrowed. Your score is a reflection of how you have historically made your payments to creditors, if you have made your payments on time, and if you have any outstanding accounts or loans you have defaulted on.
The market value of a home is the price that both a seller and buyer will likely agree upon.
A non-exhaustive list of mortgages:
Fixed-rate mortgages – The interest rate on a fixed-rate mortgage remains constant. These mortgages are attractive when current rates are low. Your monthly payment will remain the same throughout the term of your loan.
Adjustable-rate mortgages – An Adjustable Rate Mortgage is a mortgage whose interest rate is adjusted periodically based on the terms of the mortgage. Consequently, your monthly payment will differ as the interest rate changes, either higher or lower.
Government-insured loans – Loans that are insured by the federal government. Two examples are VA and FHA loans.
VA Home Loans are specifically designed to benefit active and retired military when purchasing a home. This $0 down loan program makes home ownership much more accessible to veterans and their families, and it includes several benefits like approval for lower credit scores, no requirements for mortgage insurance, and even has lower interest rates as compared to FHA and Conventional loans.
An FHA insured loan is secured by the US Federal Housing Administration provided by an FHA-approved lender. If the borrower does not pay this loan back, the FHA will pay the lender instead. In order to do this, the FHA loan requires an upfront mortgage insurance premium of 1.75%. FHA mortgages require a down payment of as little as 3.5%, making it an easier loan to obtain.
Yes, you may have multiple mortgages for your home, investment properties or vacation properties.
The Reichert Mortgage Team is dedicated to ensuring that you have all of the information needed to make an informed decision when obtaining a mortgage. Whether you are a first-time homeowner or a seasoned veteran moving to a new location we want to help you along your home purchase journey. Our team of expert mortgage brokers are committed to helping. That’s why we provided our FREE education resources helping you to understand the basics of fixed-rate mortgages and so much more.
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The Reichert Mortgage Teams Mortgage Calculators
Buying a home can raise a lot of important questions. How much can I afford, how much will my monthly payment be, should I rent or buy a home? Check out our mortgage calculators answer these questions as well as many more.
How Can The Reichert Mortgage Team Help?
As an experienced mortgage broker in Colorado Springs, it is our true passion to connect with current and prospective homeowners to connect unique needs with the best possible rates available. Our vast experience with various home loan programs allow us to find the proper situation for every individual need all while providing guidance, kindness, and expertise.