Colorado Springs Home Buyers: WHAT'S THE BEST TYPE OF MORTGAGE LOAN FOR YOU?

Question: We are first time home buyers. We have signed a contract to purchase an older home in a nice neighborhood, and the purchase price is $400,000. We have 45 days in which to obtain financing, and have started shopping around with different mortgage lenders. We have two questions. First, the contract states that we will put down 20 percent and obtain a mortgage loan of 80 percent (i.e. $320,000). However, we have begun to realize that there will be significant closing and moving costs, and we would prefer to put down less money. Are we committed to a 20 percent down payment, since that is spelled out in the contract? Second, what kind of loans are available and what's best for us?

Answer: Your first question is easy. Technically (or legally) speaking, you are bound by the terms of the sales contract. You must put down 20 percent -- or $80,000. However, as a practical matter, I suspect that you and your sellers can sign an addendum to the contract which modifies these terms. So long as the amendment (1) will not create any delay in the time you have to go to settlement and (2) will not cause the seller's to spend any more money than was originally called for in the sales contract, this addendum should cause the sellers no problem and indeed it can probably be signed when you actually go to settlement. I suspect that your lender will want to have this addendum in its files.

Your second question is quite difficult to answer, since I do not have any financial information about you. You should discuss these issues with your potential lenders. Ask them to qualify you based on the highest (and the lowest) loan which you are seeking. For example, a "conventional" loan is where you put down 20 percent and borrow 80 percent. In your case, this will require that you put down $80,000. Since you have indicated that this will create a financial strain for you, you can also consider the following options:

an 80-10-10 loan. Here, you will be obtaining two loans. One in the amount of 80 percent (i.e. $320,000) and a second loan in the amount of $40,000. Under this arrangement, you will only have to put $40,000 down when you go to settlement. The 80-10-10 loan was designed to help homeowners avoid the necessity of paying private mortgage insurance (PMI). Lenders want to be sure that should you become delinquent on your mortgage payments, and the lender has to foreclose on the property, that there will be some equity left in the property. The typical benchmark is 20 percent. If you borrow more than 80 percent of the value of the house (called "loan to value ratio") you will be required to pay private mortgage premiums for a long period of time. This PMI is insurance coverage for your lender, which will cover any loss which it incurs should the house be foreclosed upon and the foreclosing price does not cover the entire mortgage balance.

However, since the lender in an 80-10-10 loan is only making a first mortgage (deed of trust) in the amount of 80 percent, no PMI is required. You should understand that you will have to sign a second deed of trust in the amount of 10 percent of the value of the house. This second trust will carry a higher mortgage interest rate than you will get for the first trust. Additionally, the second trust will probably have a shorter due date (perhaps 10 years) than your first trust.

a 90 percent loan. Here, you will borrow $360,000, and sign only one mortgage document. You will still need $40,000 cash at settlement. And private mortgage insurance will be required.

a 95 percent loan. Again, private mortgage insurance will be required, but you will only have to put down five percent (i.e.$20,000).

This is but a small sample of the various loan which are available. There are also variations on these various mortgages. For example:

1. Fixed thirty year. Here, the loan will be amortized over 30 years. Each and every month, you will make the same monthly mortgage payment (although if the lender escrows for taxes and insurance, the amount may change on a yearly basis depending on whether taxes and insurance premiums are increased).

2. Fixed fifteen year. Here, the loan will be amortized over 15 years. This means that although the interest rate will be lower than for a 30 year loan, your monthly payments will be much higher, since you will be paying off the loan in half the time. While some people like the idea of paying off their mortgage early -- and thus saving a lot of interest payments -- I am personally opposed to a 15 year loan. If you have the right to pay off the loan (in whole or in part) without penalty, a thirty loan gives you the right to make payments as if they are based on a 15-year amortization, but you are not obligated to make these higher payments should you decide that your money can be used for other -- and better -- purposes.

3. Finally, there are a number of adjustable rate mortgages -- called "ARMS" -- which carry different rate adjustment periods. These adjustments can be made on a yearly basis, or once every three-five-seven or even ten years. Keep in mind, that the smaller the adjustment period, the lower the interest rate will be.

4. Balloon notes. Here, your loan may require that you pay monthly mortgage payments based on a 30-year amortization. However, at the end of a fixed period (for example 7 or 10 years) the entire balance then outstanding will become due and payable. This kind of loan is typically more common for commercial or investment loans, but you should be aware that balloon loans do exist -- and you should make sure that your loan will not suddenly become due (i.e. balloon) after a number of years.

You should contact two or three mortgage lenders and ask the following questions:

• what kinds of loans do you have available?
• what are the rates for each loan?
• based on our financial situation, can we qualify for any or all of the various loans?
• is there a pre-payment penalty if we decide to refinance early, and if so, how much is the penalty?
• can we pay our real estate taxes and homeowner's insurance premiums directly, or will you require that we escrow. This means that the mortgage lender will collect, on a monthly basis, one-twelfth of the real estate tax and one-twelfth of the annual insurance premium. When the tax and the insurance comes due, the lender will make these payments on your behalf. However, when a lender requires these escrows, this means that your monthly mortgage payment will be higher. This is referred to a PITI (payments of Principal, Interest, Taxes and Insurance).

You are entitled to get information giving you an estimate of what you will have to pay when you go to settlement. You are also entitled to get full disclosures of the mortgage interest rate for your loan. For more information, go to theConsumer Financial Protection Bureau (CFPB) website and search "Know Before You Owe".

Shopping for a mortgage loan is time-consuming, tedious and often confusing. However, it is your money at stake and you don't want to make a drastic mistake which will haunt you for years to come.

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Selling? What Is Your Home Worth?

9 Reasons To Buy A Home In Colorado Springs Right Now

Buying a house is like having a baby: there's no absolute perfect time to do either.

The down payment-interest rate-economic factors-qualification quadrangle can be so confusing. Rising rates, loosening requirements, down payment options, buyer's markets, seller's markets - what does it all mean to you if you want to buy a home? The truth is that while the banks might have a magical formula to determine your mortgage-worthiness, determining if the time is right really comes down to three main questions:

Do you want to buy a home?
Are you financially prepared?
Is your credit where it needs to be?

If yes, then go for it. Here are nine reasons to do it now.

1. Prices are good. According to the latest S&P/Case-Shiller report, home prices are still gaining, but have slowed. "The 10-City Composite gained 5.5% year-over-year and the 20-City 5.6%, both down from the 6.7% reported for July," they said. "The National Index gained 5.1% annually in August compared to 5.6% in July." This is good news if you were afraid that big price gains would put homeownership out of reach and also bodes well for your long-term equity once you purchase.

2. Rates are low. "Imagine paying over 18% interest on a 30-year fixed mortgage. It's almost unthinkable. But that was the reality for home buyers in October 1981 -- a year when the average rate was almost 17%," said Yahoo Finance. "The average rate has been 5.18% since the start of this country's history," making today's rates, which hover around historic lows at 4%, sound even better.

3. Loan requirements are softening. They're not approaching the look-the-other-way-and-stamp-it-approved levels that led to the market crash, but the overly tough restrictions that followed have loosened. "Major lenders are making adjustments," said The Street. "Wells Fargo has lowered the minimum FICO score for borrowers applying for loans insured by the Federal Housing Administration to 600 from 640." They also count JPMorgan Chase's lowered loan-to-value "standards in certain markets for both jumbos and conforming mortgages." For buyers that can mean an easier road to loan approval, even without a ton of money upfront and perfect credit.

4. FHA loans make it even easier for first-time buyers. If your credit is less than stellar and you don't have a large down payment, an FHA loan can get you in the door. Credit scores can be as low as 620 to qualify and only 3.5% down is required. Whether you've never bought before or have been out of the market for a few years, an FHA loan can be your answer.

5. Fewer buyers around the holidays means less competition for you and more negotiating power. "Sellers who are actively looking to sell their homes during the holiday months -- namely, October through December -- are serious about shedding the weight of their residences," said US News. "This often works in favor of savvy buyers looking to get a deal on discounted homes. Having less competition on the buyer's side can mean lower prices on homes, in addition to fewer counter-offers to compete against."

6. Rates are predicted to rise. "The Mortgage Bankers Association expects the average rate on a 30-year, fixed rate mortgage to rise slowly to 5.1 percent by the end of 2015," said the Washington Post. If you want to take advantage of low rates, now is the time.

7. Pent-up demand could zap affordability. "The housing market is about to get even more competitive," said Yahoo. "The pent-up demand of younger professionals, who moved back in with their parents during the recession, is about to explode. This eager subset of buyers will create some steep competition for homes, especially if they have been saving up to make larger down payments or high ticket offers. If the current homes on the market have more potential buyers, bidding wars develop, and the purchase prices are driven up.

8. "Buying is cheaper than renting in most markets," said Housingwire. With a little knowledge of loan options and low down payment programs, you can easily flip the switch from renter to homeowner.

9. Because you want to buy a home. There really is no more compelling reason than that. You want it. So make it happen.

Contact Charonda Wills, Sellstate Alliance, at 719-930-4653 or visit www.CharondaWills.com

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Mounument CO Home Sellers: Ramp Up Your Homes Curb Appeal Then Sell!

Curb appeal is one of the most important factors in selling a home, and one of the most difficult to quantify, but one thing is certain -- homes sell for more money when they have it.

It's common knowledge that drive-up first impressions count. Buyers want to be charmed and excited about a property as a whole. A clean, tidy front yard, front walk swept of leaves and snow, pavers laid safely and evenly, and an attractive frame of landscaping set the tone for a positive buyer experience.

On closer inspection, buyers can see that the trim has been freshly painted and that you've put out a cheery new welcome mat by the front door. So how much more work do you need to do to win buyers over?

Since 2003, replacement costs have generated more value at resale than remodeling, according to the latest Remodeling Magazine 2014 Cost vs. Value report. That's good news for sellers who want to ramp up their home's curb appeal.

In fact, the five projects with the best cost to value ratios were all directly related to curb appeal: Midrange roofing replacement rose 5.9% over last year, while midrange garage door replacement was up 5.6%. The 20-gauge steel replacement entry door was up 5.4% and vinyl siding replacement rose 3.2%. In the upscale category, the fiberglass replacement entry door was up 1.7%.

Exterior projects such as these are crucial to any home's integrity, says the National Association of REALTORS^®(NAR.) "These projects also do not require expensive materials and they have the added bonus of instantly adding curb appeal," says the trade organization.

The quality of materials may also make a difference in resale. For example, a wood deck addition returns 80.5 percent of costs, while a composite deck addition returns only 68.0 percent. A steel entry door returns 101.8 percent of its cost, while a fiberglass replacement door returns only 72 percent of its cost.

While it may seem counterintuitive to pay $100 and only get $72 back at resale, updating is the best way to help a property maintain its appeal to future homebuyers.

"Resale value is just one factor among many that homeowners need to take into account when making a decision to remodel," advises the NAR. "The desirability and resale value of particular remodeling projects also varies by region and metropolitan area."

If you're planning to update your home for resale, ask your real estate professional for guidance. He or she can tell you which improvement projects will provide the most upon resale in your market.

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What Is Your Home Worth?

Homeownership just makes alot of sense!  If this is your DREAM ... I can help!  Call/text me at 719-930-4653 or email me at Charondasellhomes@gmail.com and let's talk about your goals and let's work together to achieve them!  Now is a great time!