First of all, what is a mortgage? If you’ve never purchased a home before, you probably aren’t familiar with this type of financing. What happens when you start looking for a real estate agent to find your first home in Denver, though?

Learn more about mortgage basics here, and contact Susan Thompson Real Estate to find the home of your dreams.

Mortgage: A Definition

A mortgage is a specific type of loan that can be secured for real estate. Most people will have a mortgage unless they are able to pay for their home in cash.

Mortgage payments are usually set up in monthly installments. You can default on your mortgage if you stop paying it, at which time the lender can take back the property they’ve purchased on your behalf, called a foreclosure.

It is important to note that a mortgage won’t cover the entire cost of the home, as you will be required to make a down payment with money you already have.

Monthly Payments

Your mortgage is broken down into different parts that you will pay down monthly:

  • Principal – This is the amount you borrowed to purchase your home.
  • Interest – This is the additional amount that a lender charges you to borrow money.
  • Taxes – This amount depends on where you live, but it’s property tax based on your city, municipality, or county.
  • Insurance – This includes insurance on your home in case of damages, and it also could include a Private Mortgage Insurance, or PMI, which is often required if your down payment is less than 20% of the house’s value. You will continue to pay a PMI until you’ve paid off 20% of your home.
  • Homeowners Association, or HOA – You may not be required to pay this, but if your property is part of an HOA, you will pay a monthly fee.

It’s important to know the different parts of your mortgage so you understand why rates may change or what can be adjusted, if necessary.

Types Of Loans

Financial institutions offer different types of financing for mortgages, so you’ll be able to find one that’s the best fit for you.

A fixed-rate mortgage has an interest rate that stays the same for the life of the loan. It requires that you are consistent in making your monthly payments and pay the same amount every month.

An adjustable-rate mortgage has more flexibility, with an interest rate that can be adjusted at the three-, five-, and seven-year mark. This type of mortgage gives you lower payment rates in the beginning, but they may increase over time.

Through the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), you may be able to secure a government-guaranteed mortgage. These types of mortgages have specific guidelines to qualify for them, like income restrictions and military status, but usually offer benefits like a lower down payment and other less restrictive requirements.

Check with the FHA and VA to see if you qualify for a mortgage through them.

Standard Forms

When going through the mortgage process, you’ll need to fill out a few different forms: a mortgage application, a loan estimate, and a closing disclosure.

When you apply for your mortgage, you will have to fill out a form called a Uniform Residential Mortgage Application, Form Number 1003 (often just called a 1003). You’ll need to provide six key pieces of information: your name, your annual income, your social security number, the address of the property, the estimated value of the property, and the size of loan you would like.

After the lender has received all of this information, they will create an estimate that includes the loan type, interest rate, and estimated monthly payments. Review the loan estimate carefully, and talk with your lender about making changes if anything doesn’t meet your expectations.

Once you’ve reviewed and accepted a loan estimate, the lender will put together a closing disclosure that includes all of the conditions of your estimate. If there is anything in the disclosure that is different from the estimate, bring it to the attention of the lender to fix.

There are a lot of people you’ll be interacting with when looking for a new home — not just your real estate agent. That being said, your real estate agent may be able to recommend a lender or financial institution to apply for your mortgage. To get started with the home hunt in Denver, contact Susan Thompson Real Estate today.