Mortgages are critical to most real estate purchases. While paying cash is the ideal, most people are working with OPM (Other Peoples Money) when they buy a home. In the current financial markets, the rules are changing regularly for mortgages, and the best strategy is to find a lender you can trust, and use their expertise to determine what kind of mortgage you should have. The main mortgage types are:
- Conventional – These are typically 20% down (less requires mortgage insurance, which is usually tax deductible)
- FHA – These are only 3.5% down, and are the most popular among down payment constrained borrowers in our current economic situation. FHA mortgages have both prepaid mortgage insurance, as well as monthly mortgage insurance, which is usually tax deductible. FHA also sponsors the unique 203k program, which allows certain rehabilitation costs to be rolled into your loan (especially handy for some foreclosure and short sale properties)
- VA – The program is for eligible veterans and active duty members of the armed forces. It is the only real ‘zero down’ payment mortgage. VA mortgages have prepaid mortgage insurance, called the VA Funding Fee, but no monthly mortgage insurance.
While your lender should assist you in coming up with the actual payments and qualifying amounts you will be working with, this mortgage calculator can give you handy, instant information regarding payments for a given mortgage amount at a given rate.
The following lenders are people I have learned to trust after doing many, many real estate transactions. The buyer is of course free to choose any lender they wish, but be careful to deal with licensed, reputable, experienced lenders. The key to comparing lenders is to compare their Good Faith Estimates for the same time period. Separate quotes on separate days can be completely a function of moving money markets, not differences in quotes. In Colorado, all lenders must now be licensed.