What Determines Interest Rates?

When you’re shopping for a mortgage, you want to get the best possible interest rate – but how do you do that?

What Determines Interest Rates?

Your credit score and the market typically determine what interest rates you’re eligible for when you apply for a mortgage loan. However, there are a few things you can do to change your rate.

Here’s why interest matters so much. A $100,0000 loan with a 5 percent interest rate will cost you $93,256 in interest payments – but if you had a 4.5 percent interest rate, you’d pay $82,407 in interest over the life of your loan. That’s a savings of $10,849.

How to Lower How Much You Pay in Interest

Improve your credit score. The higher your credit score is, the lower your interest rate will be.
Pay points. Discount points are equal to 1 percent of the loan amount, and in many cases you can use them to buy down your interest rate.
Put down more money. The higher your down payment is, the less you have to borrow – and your down payment is tied to the interest rate you’ll get.
Shorten the term of your loan. Your loan is shorter, so you’ll end up paying less money in interest.

Are You Buying a Home for Sale in Aspen?

Call us at 970-429-8275 or get in touch with us online to tell us what you want from your next home. We’ll begin searching Aspen real estate listings right away. If you’re selling, get your free Aspen real estate market update and find out how we can help you sell your home quickly and at the best price.

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What is a Balloon Loan?

A balloon loan is an option you may have when you’re buying a home in Aspen – but what is it, and why do people use them?

What is a Balloon Loan?

A balloon loan is a kind of loan that doesn’t fully amortize over its lifetime. At the end of the loan, a balloon payment is required – and that balloon payment has to cover the remaining principal balance.

They’re often a bit attractive to short-term borrowers, including investors, because they often have lower interest rates than those with longer terms.

Sometimes these balloon loans have “reset” options. At the end of the period of the loan, the borrower has the option to reset the interest rate based on what’s happening on the market that day.

Are You Buying a Home in Aspen or the Surrounding Communities?

We’d love to help you find your dream home here. Call us at 970-429-8275 or contact us online to let us know what you’re looking for so we can start searching right away.

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Fixed Rate vs. Adjustable Rate Mortgages

If you’re buying a home, you’ll have plenty of options when it comes to financing – and one of them will include choosing between a fixed rate and an adjustable rate mortgage.

What is a Fixed Rate Mortgage?

A fixed rate mortgage is one in which your interest rate remains the same over the lifetime of your loan. Your payments will never change, no matter what new buyers are facing on the market, unless you refinance.

What is an Adjustable Rate Mortgage?

An adjustable rate mortgage is one in which your interest rate fluctuates each year, usually on or near the same date. Your payments can go up or down, but that’s only after an initial fixed rate period (which is usually between 5 and 10 years).

Which One is Right for You?

You should talk to your lender about your choices and see which type of loan is best for your financial circumstances. You have the right to compare loan terms and packages, as well, so call as many lenders as you’d like to find one that’s willing to give you the most competitive rates possible.

Are You Buying a Home in Aspen or the Surrounding Communities?

We’d love to help you find your dream home here. Call us at 970-429-8275 or contact us online to let us know what you’re looking for so we can start searching right away.

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What Are Mortgage Fees?

Whether you’re buying a luxury home in Aspen, a ranch in Basalt, or a condo in Snowmass, you’re most likely going to take out a mortgage.

Mortgages aren’t free, however, so you’ll always find mortgage fees tacked on. (If you want to learn more about mortgage fees and what they pay for, talk to your lender or your Aspen Realtor®.)

Mortgage fees are amounts required by lessors and lenders who close the sale of your recently-mortgaged home. These fees include such items as attorney fees, appraisal costs, insurance, and sums required for land surveying.

Average mortgages fees in the United States vary from $3,000 to upwards of $5,000, or between 2 and 5 percent of a home’s cash purchase price.

Are You Buying a Home in Aspen or the Surrounding Communities?

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Mortgage Term Glossary for Aspen Homebuyers

If you’ve never bought a home before, you’re going to be introduced to the world of mortgage lingo – and some of it is downright confusing.

Before you begin shopping for the best rates on loans, have a peek at this mortgage term glossary.

Mortgage Term Glossary for Aspen Homebuyers

Adujstable-Rate Mortgage

An adjustable-rate mortgage is a loan that has an initial fixed-rate period. After that period expires, your rate may change up to once a year; it could go up, or it could go down.

Amortization

Amortization is the term lenders use to refer to the reduction of debt over the term of the loan. When you pay down the principal – the actual amount you borrowed – you’re amortizing.

Appraisal

An appraisal is simply a written estimate of a property’s value.

Closing Costs

Closing costs are the expenses you’ll incur to buy the home, but they don’t include the home’s sale price.

Deed

A deed is a legal document that transfers ownership rights to a property.

Earnest Money

Your earnest money is the cash you put down on a home to show the seller that you’re really going to buy it. When you close on the home, the earnest money you put down goes toward how much you owe the lender.

Fixed-Rate Mortgage

A fixed-rate mortgage is one of the most common types of mortgages. The interest rate doesn’t change over the term of the loan (a 30-year loan will have the same interest rate in 30 years as it did when you opened it, no matter what the market does).

Points/Discount Points

Points, sometimes called discount points, are fees that you pay your lender at closing to lower your interest rate. For example, if you’re approved to buy a home with a 5 percent interest rate, you may be able to pay points to decrease it to 4.5 percent (or lower). Typically, one point equals one percent of your loan amount.

Principal

The principal is the balance you owe on your loan, not counting the interest.

Private Mortgage Insurance

Commonly called PMI, private mortgage insurance is the insurance you’ll have to buy if you’re putting down less than 20 percent of the home’s purchase price.

Title Search

A title search is a search for liens and other encumbrances that could affect your ownership of the home after you buy it.

Underwriting

Underwriters are the people who determine what risks are associated with giving you a loan. They’re the ones who come up with the terms and conditions of loans; they evaluate each loan on a case-by-case basis.

Are You Buying a Home in Aspen?

We’d love to help you find the perfect home for sale in Aspen.

If you’re thinking of moving to Aspen or any of the surrounding communities, we’d love to help you find your dream home. Give us a call at 970-429-8275 or get in touch with us online. If you’re selling, get your free Aspen real estate market update and find out how we can sell your home quickly and at the best price.

While you’re here you can also browse our:

What is a Mortgage Buydown?

If you’re thinking about buying a home in Aspen, you need to plan for the future, too—and that means getting to know different types of financing options and determining what could work in your favor.

If you haven’t heard of a mortgage buydown, now is the time to become familiar with it; it’s a technique used by many savvy investors and homeowners.

What is a Mortgage Buydown?

A mortgage buydown is a way to pay off your mortgage loan and watch the total balance become smaller with each payment. A smaller mortgage balance indicates that your equity is growing, even if your home is appreciating in value very slowly (or barely at all).

Features of a Mortgage Buydown

A mortgage buydown is simple and straightforward. It works because the payments are reduced, and they’re calculated with a lower interest rate over a specific period of time.

It’s a bit like a subsidy in that you’re putting away a certain amount of money and using part of it each month to help pay your mortgage payment.

Could a Mortgage Buydown Work for You?

Talk to your lender to find out whether a mortgage buydown could be fiscally favorable for you.

Are You Moving to Aspen?

If you’re thinking about moving to Aspen, we’d love to help you find your next home.

Call us at 970-429-8275 or contact us online to tell us what you’re looking for so we can begin searching right away.

Hot Aspen Homes for Sale

Use the links below to find homes for sale in Aspen that meet your needs.

From Renter to Buyer: Are You Ready?

If you’re currently renting your home but you’re ready to make the transition to official homeowner, congratulations!

However, there are a few things you need to know before you kiss your apartment goodbye and replace it with a single-family home of your own.

How Much Does it Really Cost to Own a Home?

In addition to your mortgage loan (and the one-time earnest money deposit you’ll need to put down before your mortgage even begins), you’ll have to shell out for certain expenses each month… and this is all after you find a home you love and you’ve taken all the steps you need to take to ensure that you’re buying the right place.

The actual costs of homeownership include:

You’ll have to pay property taxes based on the county in which you live.
Homeowner’s insurance. You’ll pay insurance premiums to the insurance company of your choice; this type of insurance is typically required by lenders, because it protects their investment in your home.
Homeowners association dues. If your new neighborhood has a homeowners association, or HOA, you’ll more than likely have to pay HOA dues or fees each month. Each HOA is different, and you’ll find them in subdivisions, neighborhoods, and condo complexes.

What Can You Do to Financially Prepare for Homeownership?

Aside from saving up 20 percent of your new home’s purchase price as a down payment (unless you’re using a VA loan or some types of FHA loans), you can begin working on your credit score now. The higher your score, the better interest rates you’ll get—and the more likely lenders are to work with you.

Are You Buying or Selling a Home in Aspen?

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What is an Adjustable-Rate Mortgage?

Navigating the world of lending—particularly home lending—is tough (and it’s often confusing, too).

Nonetheless, if you’re like most people, you’ll have to take out a mortgage loan to pay for your new home in Aspen, Basalt, Carbondale or the surrounding communities.

And that means you’ll hear all kinds of financing lingo; you may even be offered an adjustable-rate mortgage, or ARM, when you apply for a loan.

So what is an adjustable-rate mortgage, and how can you tell if it’s right for you?

What is an Adjustable-Rate Mortgage, or ARM?

An adjustable-rate mortgage is a loan featuring monthly payments that can fluctuate as interest rates change.

It sounds simple, doesn’t it?

There’s more to it than that.

Most ARMs have an initial fixed-rate period. During that time, your interest rate won’t change. Typically, after that fixed-rate period, you’ll have a longer period during which the rate changes at certain intervals.

Pros and Cons of Adjustable-Rate Mortgages

Everyone has his or her own reasons for choosing the type of loan they end up using—and it’s extremely important that you go to your financial adviser if you’re not sure what’s right for you.

You’ll have to weigh the pros and cons of adjustable-rate mortgages on your own, or with the help of a professional who works for you (rather than for your lender) to determine what’s best. We can provide you with information so you can make the best possible decision, so here’s what you need to know:

The initial interest rate is often lower with an adjustable-rate mortgage than it is with a comparable fixed-rate mortgage.
After your fixed-rate period ends, your monthly payments can go up if interest rates rise.
After your fixed-rate period ends, your monthly payments can go down if interest rates go down.
Interest rates are unpredictable; that means you don’t know what your mortgage payment will be in a year, in 10 years, or in 29-and-a-half years, when the house is nearly paid off.

There are several types of ARMs, including 3/1, 5/1, 7/1, and 10/1. In each of those, the first number refers to the duration of the introductory rate (so in a 3/1 ARM, your introductory rate would last for one year). The second number refers to how often the interest rates can change, in years (so in a 3/1 ARM, your interest rate could change every one year).

Are You Buying or Selling a Home in Aspen?

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4 Things You Need to Know About Mortgage Loans

If you’re like most people, you’ll need to take out a mortgage loan to purchase a home in Aspen.

But how much do you really know about mortgage loans? Could you define the standard terms that lenders use, and do you know the ins and outs of borrowing?

4 Things You Need to Know About Mortgage Loans

When it comes to mortgage loans, it’s tough to keep tabs on what’s what—laws change, and so do many lenders’ practices over time.

Some things stay the same, though, so it’s a good idea to gather as much knowledge as you can so you’re an informed consumer when you buy your next home.

Know the “lingo.”

Loan amount: how much you borrow.
Mortgage rate: how much you pay in interest.
Term: the number of years it takes to repay a mortgage loan.
Locking: the term used by lenders when they guarantee you a certain interest rate.
Closing costs: lender fees and amounts of money you must pay to others when you purchase your home.

Mortgage rates change quickly.

Mortgage rates are low right now, but there’s always some fluctuation. A rate you hear in the morning may not even be the same that afternoon.

Lenders are all different.

All lenders charge different rates and fees. There are no regulations that require different lenders to offer the same interest rates (there are plenty of other laws governing them, though), so what one bank offers you, another may balk at.

You can still get a loan with a low down payment.

If you’re using a VA loan, you don’t need a down payment at all. If you’re using a certain type of FHA loan, you probably won’t need 20 percent of the home’s selling price as a down payment. The point is that low-down-payment loans are still available, and if you need to find a lender who can help you, just ask us; we’ll point you in the right direction.

Are You Buying a Home in Aspen?

Call us at 970-429-8275 or get in touch with us online to tell us what you want from your next home. We’ll begin searching Aspen real estate listings right away.

While you’re here, you can also browse our:

What You Need to Know About Earnest Money

When you purchase a home, there’s a certain “order of operations” that you go through. Once you make an offer and the seller has accepted it, it’s time to put down earnest money.

But what is earnest money, and what does it have to do with escrow—and what else do you need to know about it?

What is Earnest Money?

Like the name implies, earnest money is money that you put down to show that you’re serious about purchasing a home. It’s a good faith gesture, and the money is held in escrow until you close. At that point, your earnest money deposit is applied to the balance of your down payment.

Naturally, as with just about everything else in a home purchase, the amount of money you put down as an earnest money deposit is negotiable. However, if you put in an amount that is significantly lower than what would be considered customary, the seller might not be very pleased.

What to Know Before Putting Down an Earnest Money Deposit

Before you put money down, make sure you know the property and you have discussed your intentions with your Realtor®. It’s a good idea to have the home thoroughly inspected before you hand over an escrow deposit—and that you talk to your Realtor about contingencies that will get you your deposit back if something terrible comes out of the inspection.

In most cases, it’s best to have a contingency that ensures you get your deposit back if the property appraises for less than the purchase price or if something falls through with your funding, too.

You’ll also need to review all the property disclosures with your Realtor before you get serious about purchasing any home.

Are You Buying a Home in Aspen?

Call us at 970-429-8275 or get in touch with us online to tell us what you want from your next home. We’ll begin searching Aspen real estate listings right away.

While you’re here, you can also browse our:

What Determines Interest Rates?

How to Lower How Much You Pay in Interest

Are You Buying a Home for Sale in Aspen?

What is a Balloon Loan?

Are You Buying a Home in Aspen or the Surrounding Communities?

Search Aspen Real Estate Listings by Price

What is a Fixed Rate Mortgage?

What is an Adjustable Rate Mortgage?

Are You Buying a Home in Aspen or the Surrounding Communities?

Search Aspen Real Estate Listings by Price

Are You Buying a Home in Aspen or the Surrounding Communities?

Mortgage Term Glossary for Aspen Homebuyers

Adujstable-Rate Mortgage

Amortization

Appraisal

Closing Costs

Deed

Earnest Money

Fixed-Rate Mortgage

Points/Discount Points

Principal

Private Mortgage Insurance

Title Search

Underwriting

Are You Buying a Home in Aspen?

What is a Mortgage Buydown?

Features of a Mortgage Buydown

Could a Mortgage Buydown Work for You?

Are You Moving to Aspen?

Hot Aspen Homes for Sale

How Much Does it Really Cost to Own a Home?

What Can You Do to Financially Prepare for Homeownership?

Are You Buying or Selling a Home in Aspen?

What is an Adjustable-Rate Mortgage, or ARM?

Pros and Cons of Adjustable-Rate Mortgages

Are You Buying or Selling a Home in Aspen?

4 Things You Need to Know About Mortgage Loans

Know the “lingo.”

Mortgage rates change quickly.

Lenders are all different.

You can still get a loan with a low down payment.

Are You Buying a Home in Aspen?

What is Earnest Money?

What to Know Before Putting Down an Earnest Money Deposit

Are You Buying a Home in Aspen?