The Importance of Talking to a Lender About Mortgage Options

For many people, investing in Colorado Springs real estate is one of the most significant decisions they’ll make. Owning real estate not only provides a sense of security and stability but can also be a source of pride and accomplishment. However, the process of securing the right mortgage and finalizing all the closing details can be tricky to navigate, especially for first-time buyers. If you’re in the market for a new home and want to make sure you do everything you can to make a strong investment, use this guide to help you find the perfect mortgage option for your goals.

If it’s your first time browsing Denver homes for sale, you’ll need to know all about mortgage lenders, what they are, and how they play a role in the buying process. A mortgage lender is an institution or individual that provides the necessary financing to purchase a home. Lenders offer a wide range of services, including loan application processing, underwriting, and loan origination. They can also advise buyers about the different types of mortgage options, repayment terms, and interest rates available to them. Lenders ultimately play a crucial role in ensuring buyers get a mortgage that aligns with their financial goals and budget.

As a buyer, it can be tempting to go with the first lender you come across, but taking the time to research and compare lenders can keep you from agreeing to a loan that doesn’t meet your needs. You’ll want to factor in your lender’s reputation, experience, and reviews. Take into consideration the interest rates and fees they offer and how closely they work with their clients.

There are several mortgage options available for buyers in the Colorado Springs real estate market, each with its own features and benefits. The most common types of mortgages are fixed-rate, adjustable-rate, and government-insured mortgages. Fixed-rate mortgages are so named for their consistent interest rate. For the duration of the loan, your interest rate will never change, and this is an attractive option for many buyers as it provides predictability and stability in their monthly payments. Adjustable-rate mortgages, conversely, have fluctuating interest rates that can increase or decrease over time. These mortgages are more flexible but also less predictable. While your interest rate may go down, it could also increase, leading to higher monthly payments. Finally, government-insured mortgages, such as FHA loans and VA loans, have specific requirements and are backed by the government, making them more accessible to certain groups, like veterans or first-time homebuyers.

When choosing a mortgage, the following factors can impact your monthly payments, interest rate, and the overall cost of the loan. So before you settle on one option, think through these key points.

The interest rate reflects the cost of borrowing money and will significantly impact your monthly payments. While you can choose between fixed-rate and adjustable-rate mortgages, you can also shop around to see what types of rates are offered by different lenders. If you’re a first-time homebuyer, you may want to look into low-interest first-time buyer programs offered in the Denver area.

The payment term refers to the total amount of time you’ll be paying off your loan. Some buyers choose to pay their loans off faster through a 15-year mortgage, while many opt for the standard 30-year option. Keep in mind that a shorter payment term will result in higher monthly payments but less interest over time, while a longer payment term will result in lower monthly payments but more interest.

Mortgage buydowns are another option to consider, which requires buyers to pay an upfront fee to their lender in exchange for a lower interest rate on their loan. The lender uses the fee to create a fund that subsidizes the borrower's monthly mortgage payments for a set period of time, typically the first two or three years of the loan. This results in lower monthly payments for the borrower during the buydown period, which can make homeownership more affordable and manageable.

The pre-approval process is the next step you’ll take once you choose a lender and settle on the type of mortgage you’re looking for. It involves a thorough assessment of your financial situation to determine how much you can afford to spend on a home. During pre-approval, you’ll submit pay stubs, tax returns, and bank statements for the lender to review. Once the review is complete, your lender will typically issue a pre-approval letter outlining the maximum amount you are pre-approved to borrow. Buyers should always keep in mind that they can sometimes be pre-approved for a loan amount that exceeds their budget and that it’s wise to continue searching for homes that fall within their financial parameters.

If you already have a mortgage, there are several ways you can reduce your monthly payments or pay off your loan faster. Refinancing is the most common and involves replacing your current mortgage with a new one that has updated terms. You may negotiate with your lender to reduce your interest rate, pay off your loan over a shorter term, or a combination of the two. You can also make extra payments, whether you choose to pay more each month or simply make one extra payment a year. Additional payments are a great way to reduce your total loan and save you money in interest over the long run.

If you put down less than 20 percent on your home during closing, you likely signed on for private mortgage insurance (PMI). However, once you’ve built up 20 percent equity, you can remove PMI to lower your monthly payments. And, if you have the extra space, you can also consider renting out a part of your home to generate extra income to put toward your mortgage. At the end of the day, it’s always worthwhile to explore your options if it means potentially reducing your current mortgage.

If you're in the market for a new home in the greater Denver area, work with a seasoned real estate expert like Kathi Donivan.  Kathi can make recommendations for trusted local lenders in the area who you can talk to about your loan options.  With years of experience in the Denver and Colorado Springs markets, Kathi can help you find the perfect home and the right lender for your needs, guiding you through everything from pre-approval to final closing negotiations. Contact Kathi Donivan today to take the first step toward an investment you can be proud of.