Mortgage Payment Components: Taxes and Insurance

mortgage payment components taxes insurance

In part one of this two-part blog series, we went over some basics on the important components involved in a standard mortgage payment. While the final number involved in your monthly payment is the most important broad consideration for any mortgage borrower, understanding the various factors that contribute to this eventual tally is also a vital task.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to help with any of these basic areas for our clients as they look to understand any part of their mortgage or home loan options. We’re proud to offer many mortgage programs specifically for first-time borrowers who have not been through this process before, and might need our assistance with some of these areas. Today’s part two of our series will go over a couple other important components of a standard mortgage payment to be aware of.

Tax Component

Another important section of your mortgage payment will be for property taxes, which are in place due to your jurisdiction and are used to fund various public services like trash collection and others. In many cases, property taxes will be collected as part of your payment each month, then held in a separate escrow account until the end of the year – this means you’re paying single payments instead of one large lump sum at the end of the year.

In addition, this escrow format usually involves the lender covering the difference if the final tax amount comes out higher than expected, then billing you for it in future payments. This also helps the borrower avoid a tax lien. For those who do not have 20% of the purchase price available for a down payment, lenders will often require this escrow format as a way of protecting them from a huge property tax bill if there’s a foreclosure. FHA loans, in addition, will require escrow accounts be used.

Insurance Payments

Finally, there are two types of insurance that might be found as part of your mortgage payment:

  • Homeowners’ insurance: In many cases, homeowners’ insurance and flood insurance will be collected by lenders and placed in escrow. This may lead to more favorable terms if you agree on this. A lender cannot require you to use a particular insurer here, but they can require that such insurance be carried.
  • Private mortgage insurance (PMI): In cases where you are paying less than 20% down for your home, private mortgage insurance must be maintained until a certain amount of the loan has been paid off. PMI protects the lender from potential risks.

For more on the components involved in your mortgage payment, or to learn about any of our mortgage rates or other home loan solutions, speak to the staff at Altius Mortgage today.

Mortgage Payment Components: Principal and Interest

mortgage payment components principal interest

While there are a number of components involved in any mortgage situation, from mortgage rates to various mortgage programs and term lengths, the eventual goal of borrowers and lenders alike is to arrive at a simple number: A monthly mortgage payment. This is the amount borrowers pay over the life of their mortgage, and it contains a few specific areas where your money will go toward as you make payments.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a wide range of mortgage options, from first-time homebuyer programs like FHA loans to numerous options for mortgage refinancing if you’re in need. We help make things simple for our clients, including laying out all the factors that will be involved in their upcoming mortgage payment that create the final number they’re paying each month. What are these elements, and how does each impact your equity and long-term finances within the mortgage? This two-part blog will go over each important component of your mortgage payment.

Principal Balance

The simplest and most straightforward area you pay money toward in a mortgage is your principal balance, which just refers to the actual amount of the mortgage loan itself. Each mortgage payment you make should contain at least some amount of principal balance, but this amount will actually increase as the mortgage goes on – this is because you’re paying down more interest earlier on, and also means you can’t simply divide your principal by your total number of payments to know how much of it has been paid off.

Now, there are certain situations where you might be able to pay down your principal balance faster than your schedule anticipates. If you have the funds available, speak to your lender about adding a bit extra to each payment, or making an extra payment once or twice a year that can be applied fully to your principal balance. Over a period of several years, this can make a major impact.

Interest Paid

The other major component that most are well aware of in a mortgage payment is your interest, which is defined by the percentage of the total loan you’re paying as an incentive to the lender for loaning you this money. As we noted above, you’ll generally begin by paying more interest early in the mortgage, but will then pay less as the loan goes on.

As you may have guessed, shorter loans will come with higher interest rates. In addition, your rates may be higher if your loan amount is higher, or if your credit score is lower than average.

For more on the various components of your mortgage payment you’ll be paying each month, or to learn about any of our mortgage rates or home loan services, speak to the staff at Altius Mortgage today.

No-Appraisal Mortgage Loans: Benefits, Eligibility and More

no-appraisal mortgage loans eligibility

In part one of this two-part blog series, we went over some basics on a relatively rare and unique situation in homebuying, but one that does take place: The no-appraisal mortgage loan. This type, where the home is not appraised in a typical fashion ahead of sale, are not common on residential properties, but may still happen in certain situations.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to offer a wide range of home loan options, from numerous programs for first-time homebuyers to options for mortgage refinancing and several other areas. What might be some of the benefits of considering a no-appraisal loan in unique circumstances, how can you figure out if you’re eligible for this to begin with, and which other factors should you be considering before moving forward? Here are some basics.

Benefits of No-Appraisal Loans

For those who are eligible and fit the criteria, the primary benefit of a no-appraisal loan is cost savings. Homebuyers are generally the ones who are responsible for the costs of an appraisal, which tends to cost several hundred dollars at minimum – when no appraisal is necessary, this is a cost that’s avoided.

In addition, no appraisal often allows mortgage situations to close faster. There’s no more need to schedule and appraiser, work around their schedule, plus wait multiple days for their report. In fact, one of the most common instances where this no-appraisal format is considered is when a quick closing date is required by both parties within the mortgage situation.

Eligibility for Appraisal Waivers

Fannie Mae has created rules and guidelines that state who is and is not eligible for an appraisal waiver or other forms of no-appraisal loan. Here are their regulations:

  • You must be a strong borrower with an excellent credit score
  • You must be able to prove your available assets
  • The dwelling must meet certain qualifications
  • You must meet certain LTV ratios based on the type of property
  • There may be disqualifications for certain property types, including multi-family units or those in disaster-impacted areas
  • Appraisal waiver can be denied anytime the lender has a reasonable belief an appraisal is necessary

Prior Considerations

Before going down this path, it’s vital you understand exactly what the ramifications might be. It’s possible your home’s actual value will be significantly lower than the purchase price you’re paying – this is a risk you take, and you cannot hold the lender or the seller liable for an incorrect valuation later on. Ensure you know your rights and have discussed this with your lender and realtor before proceeding.

For more on no-appraisal loans, or to learn about any of our mortgage rates or other mortgage services, speak to the staff at Altius Mortgage today.

No-Appraisal Mortgage Loans: Basics and Alternatives

no-appraisal mortgage loans

For the vast majority of mortgage and homebuying situations, a home appraisal is an important part of the process. This involves a third party appraiser examining the property inside and out to provide a professional estimate of its market value, helping confirm to both buyers and sellers (and even lenders) that the price being agreed upon is realistic plus multiple other areas.

At Altius Mortgage, we’re happy to assist all our clients with the appraisal process if needed, including first-time homebuyers, for whom we offer great mortgage rates and programs while also providing expertise and guidance through this process. We’re also available to work with borrowers for a more unique pursuit: A no-appraisal loan, which is much rarer than the normal appraisal process but will still be used in some cases. This two-part blog will go over the details of this program and why it’s sometimes used, plus the kinds of borrowers who might be good candidates for it.

No-Appraisal Loan Basics

As the title suggests, a no-appraisal loan is a home loan that requires no professional appraisal. There are a few methods by which this type of loan might be attained, the most common of which is known as an appraisal waiver – this gives the homebuyer the right to decline having a traditional appraisal done on their property.

As we’ll dig into a bit further later on, no-appraisal loans are not common at all for private residential properties, largely because they present a great risk to both the parties involved and the lender. If there is no objective evaluation of the property, it could come in far more or less valuable than the mortgage amount – leaving borrowers at risk of default on one side of the coin, or sellers stuck with far less than their asking price on the other. However, as of 2017, both Fannie Mae and Freddie Mac have begun offering some select appraisal waivers.

Appraisal Alternatives

The most common alternative used during a no-appraisal loan is a computer calculation program that plays something of a similar role, though with less specific involvement. This program will utilize information like previous home value and other properties in the area to place a value on the home – but as you may have guessed, this alternative is less precise than an actual in-person appraisal.

In other cases, no appraisal will be required at all.

Refinances

A no-appraisal refinance loan is also possible using this same method, and this is an area that isn’t quite so restrictive. Especially in cases where you’re using the same lender for both your original loan and your refinanced loan, there are often relaxed standards allowing no-appraisal refinances – programs like the VA loan, the FHA loan and the USDA loan all have systems in place to make refinancing easier from an appraisal standpoint.

For more on no-appraisal home loans, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

Recent VA Loan Changes: Eligibility and Fee Alterations

VA loan changes eligibility

In part one of this two-part blog, we went over some of the basics on recent changes to the VA loan program that makes it both more accessible and more beneficial for those who qualify. Backed by the US Department of Veteran’s Affairs and bringing benefits like no down payments and fantastic mortgage rates, VA loans are meant for military service members, veterans and their families to repay them for their service to our country.

At Altius Mortgage and our partners at Mortgage Ogden, our wide range of loan programs includes robust VA loans and mortgage rates for any of our clients who qualify here. Based on the 2019 Blue Water Navy Vietnam Veteran’s Act, which went into effect in 2020, many of our military veterans and spouses have seen significant positive changes to their ability to borrow and the amounts they can obtain. Here are some further details on how this has happened.

Changing Eligibility

In addition to eliminating the conforming loan limit in many areas for veterans, as we went over in part one, the act above also increases access to VA loans for two groups of veterans: Those who have been awarded a Purple Heart and any Native American service member. For the former group, funding fees will be waived entirely for those who close on their home while on active duty; for the latter group, the $30,000 cap on loans for building or purchasing a home on federal trust land has been lifted.

This simply makes it easier for those in this position to obtain loan funds easily, which was the primary goal of this section of the act.

Fees for Funding

Speaking of funding fees, there have been some small changes made here as well. Specifically, veterans and active service members will pay a slightly increased funding fee of 0.30 percent, up from 0.15 percent. However, National Guard and Guard Reserve members will now see their fees decreased to match this same 0.30 percent figure that active service members pay. This change is meant to be temporary.

Now, several groups of veterans were already exempt from funding fees, including those with service-related disabilities and surviving spouses. In these cases, this exemption remains.

Application Process Stays Unchanged

One area that saw very little change due to the act we discussed above is the application process for VA loans, which remains identical. Veterans who wish to use their VA benefits to purchase a home must still obtain a Certificate of Eligibility, plus potentially additional documents that your loan officer will be happy to detail for you.

For more on recent changes to the VA loan program and how they might impact you, or to learn about any of our mortgage rates or home loan services, speak to the staff at Altius Mortgage today.

Recent VA Loan Changes: Basics and Loan Limits

VA loan changes limits

While we’re proud of all of our mortgage loan programs offered at Altius Mortgage and our partners at Mortgage Ogden, perhaps the area that gives us the most pride is our VA loan services for military veterans, service members and select spouses. Backed by the US Department of Veteran’s Affairs, VA loan programs contain several benefits for those who qualify, from no down payment requirements to great mortgage rates.

One of the most common questions we’re asked about this program by those who are looking to apply: If I qualify, what are the limits to what I can borrow under a VA loan? And as it turns out, some major developments here within the last two years have actually made this area less restrictive for those who qualify, allowing them a wider range of loans covered by the VA than previously. This two-part blog will go into all the recent changes you should be aware of, plus the basics to understand on loan limits if you’re a veteran or military member applying for a VA loan.

2019 Blue Water Navy Vietnam Veteran’s Act

A very important event to be aware of down these lines was the passage of what’s known as the Blue Water Navy Vietnam Veteran’s Act in June of 2019. While the primary purposes of this act were to change certain benefits for Vietnam veterans who were exposed to certain herbicides or chemicals, the act also contained vital language covering anyone eligible for the VA loan program.

The changes, which we’ll go over further in our upcoming sections, were in several areas. They touched on everything from loan limits to eligibility changes for veterans, generally expanding the range of individuals who qualify while also expanding the maximum borrowing amounts for many. Let’s dig into how they did this.

Loan Limits Vs. Cost Limits

It’s important as we move forward here to understand that loan limits and cost limits are not the same thing in a mortgage situation. Loan limits only apply to the amount the VA will actually approve for a loan; cost limits do not apply to any loan, including VA loans.

One more important piece here: Any person who is eligible for a VA loan but also has other VA guaranteed loans already active may fall under different restrictions. Our subsequent sections will go into the specific changes the 2019 Blue Water Act helped usher in for VA loans.

Conforming Vs. Jumbo Loans

In previous situations, veterans or military members who lived in higher-value areas faced some challenges due to county-specific conforming loan limits. However, the 2019 act we discussed above – which went into effect in 2020 – provides relief for this restriction. Now, veterans can obtain no-down payment VA-backed loans no matter where the home is and no matter whether the home exceeds conforming loan limits in the area.

For more on the recent changes that improved borrowing power for veterans and military members under the VA loan program, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

Mortgages and Retirement: Reasons to Maintain

mortgages retirement reasons maintain

In part one of this two-part blog series, we went over some of the reasons why some of those who are approaching retirement age often try to increase their mortgage repayment schedule to pay the entire home loan off before retiring. When this is financially possible, it’s a move that can not only reduce stress and make retirement budgeting easier, but also one that can reduce the total amount of interest you pay through the life of the mortgage.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to provide a number of mortgage resources for those in this age range, including reverse mortgages for those over age 62. While some who are able will try to pay down their existing mortgage before retiring, this isn’t always possible – and even if it is, it might not always be the most practical move given your situation. Here are some basic circumstances where you might not choose to prioritize this effort, plus how our loan officers will help.

Simple Affordability

In some cases, those who are not flush with extra income simply won’t be able to afford accelerating their mortgage repayment schedule ahead of retirement. There are several other major areas that must be budgeted for during this same period, and you might not have room in yours for making these extra payments.

And if this is the case, that’s totally okay! You are not necessarily putting yourself in any kind of bad position by continuing to pay your mortgage during retirement, so long as you’ve included this area in your future budgeting. It’s much better to be realistic about this than to strain your finances in a misplaced attempt to pay the mortgage down earlier than you realistically can.

Saving for Future

Down related lines, putting all your current funds into paying down the mortgage may significantly hamstring your ability to contribute to long-term savings. Locking all your money into home equity leaves very little left over, and is only good for taking out a home equity loan or selling your home – neither of which are common events during retirement.

Loan Officer Assistance

Are you on the fence here, unsure whether to divert more funds toward your mortgage payoff or simply continue making the same payments ahead of retirement? You’re not alone – this is a conversation many in this age range tend to have, both with their spouses and/or their loan officers. Our loan officers are happy to assist you with all the basic variables involved here, helping you evaluate your finances and remaining loan balance to determine the best course of action.

For more on how to handle your mortgage as you approach retirement, or to learn about any of our mortgage rates or home loan solutions, speak to the staff at Altius Mortgage today.

Mortgages and Retirement: Reasons to Pay it Down

mortgages retirement pay down

For those who are approaching retirement age and considering ideal timing and budgeting themes here, an active mortgage is one of the key areas that will be considered. As one of your largest individual expenses, remaining years and amounts on a mortgage may play a major role in determining when you can retire – and some in this position will make extra efforts to pay off their mortgage before retirement.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to provide not only a wide variety of mortgage options, including reverse mortgages for those over age 62, but also tips and expertise for those who have an existing mortgage and are looking for advice on how to proceed with it leading up to retirement. While some make it a major priority to pay the mortgage off ahead of retirement, others don’t feel quite the same rush – and both groups are often justified here. This two-part blog will go over some reasons why many make this effort, but then also why others don’t and why it’s okay to be on either side of this coin depending on your specific situation.

The Stress of Debt

Owing money can be a stressful thing, especially for larger sums like an outstanding mortgage. Those who are constantly worried about their debts may see these struggles transfer over to other areas of their life, such as their sleep quality or general anxiety levels.

For those who are able from a reasonable financial standpoint, paying down the mortgage at a slightly accelerated rate before retirement is a great way to limit this stress entering what’s supposed to be a rewarding period of life. Be sure not to go too crazy here and risk your retirement funds or other parts of your budget; that said, there are many simple ways to increase your payments and move a bit quicker through the final few months or years of your mortgage so you own the home outright by the time you retire.

Budgeting Themes

In addition, retirement comes with some significant budgeting needs. You won’t be working or receiving the same kind of steady income, meaning you must budget well. Without an expensive mortgage taking up a significant portion of your funds each month, it will be much easier to budget other retirement areas.

Interest Savings

Maybe the biggest reason some homeowners look to fully pay down the mortgage before retirement: Paying less overall interest. You might be able to save thousands or even tens of thousands of dollars in future interest payments by accelerating your mortgage payments. Be sure to check about early payment fees, which are present for some lenders in certain cases.

For more on how to consider your mortgage when approaching retirement, or to learn about any of our mortgage rates or other home loan services, speak to the staff at Altius Mortgage today.

Making the Transition From Renting to Homeownership, Part 2

making transition renting homeownership

In part one of this two-part blog series, we went over some of the basics on making the all-important transition from renting into homeownership. Owning a home holds several major benefits over renting, both financial and otherwise, but many potential buyers struggle with understanding when they’re in the right financial shape to consider this leap.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a variety of mortgage loans for first-time homebuyers, from FHA and VA mortgage programs to certain low-down payment conventional loans available to those who qualify. While much of part one went over the benefits of homeownership and finding the ideal time to make the transition from renting, today’s part two will dig into some of the specific steps we recommend following once you’ve decided to go down this road.

Do Your Research

The first major area to lean into is research, both on your own financial situation and the broader market out there. This is a field that can be complex to those who have not dealt with it before, and given the amounts of money that are at play and the long-term impact of the decisions you’ll be making, it pays to know what you’re getting into.

For some, various homebuyer education courses – offered both online and in other settings – might be ideal, helping them grasp basic terms and pieces of the mortgage application and home search process. For others, leaning on trustworthy sources like friends or family who work in real estate or the mortgage industry may be beneficial, though you should be quite sure this is someone you trust – and not someone who is going to try and lock you into working with them, which shouldn’t be decided until later in the process.

Credit, Debt and Income

Another major area to focus on for the homebuying transition is your overall finances, which can generally be split into credit history, current debts and your income. Ensure your credit score is at a high enough figure and is also accurate, plus that you are not paying exorbitant amounts of debt that will raise your debt-to-income (DTI) ratio above where many lenders will feel comfortable lending money to you. In addition, look at your savings and expected future income to determine your capacity to make a robust down payment, plus to understand the general range of home prices you’ll be looking for.

Specific Budgeting Themes

Some of the specific areas you’ll need to be budgeting for as part of a homebuying process:

  • Down payment
  • Closing costs, earnest money or mortgage “points”
  • Moving and relocation costs
  • Utility deposits
  • Insurance and property taxes
  • Emergency expense savings

For more on making the transition from renting to owning a home, or to learn about any of our mortgage rates or other mortgage solutions, speak to the staff at Altius Mortgage today.

Making the Transition From Renting to Homeownership, Part 1

making transition renting homeownership

Are you tired of renting continuously for your living situation? Whether in an apartment, condo or even a rented home property, those in this position are often looking for the ideal opportunity to make the leap to eventual homeownership, which comes with several major financial and other benefits.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a wide range of ideal first-time homebuyer mortgage options, from conventional loans to FHA loans, VA loans and several other specialty programs meant to assist those making the jump from renting to owning. Not only this, but we’ll also assist clients with the transition from renting to homeownership, one that can be a struggle for some if they don’t have the right guidance. This two-part blog series will go over all the major touch points you need to know here, from why it’s beneficial to make this move to the practical steps you should be following while doing so.

Why Some Remain Renters

Firstly, it’s important to understand the reasons why many people remain in the renting cycle instead of purchasing a home. Two general situations to consider here include:

  • Simple finances: For many, there’s a desire to own a home – but not the means, namely the required funds to do so. Important financial areas here include credit score and history, down payment savings and enough income to be able to make monthly mortgage payments consistently. This is one area where working with our loan officers may improve your prospects significantly.
  • Flex: For others, it’s more of a choice to remain in a rental situation, one that’s based on their day-to-day needs. Some people travel around a ton and relocate every few years or even more often, whether for work or personal desires. In these cases, remaining in a more flexible rental situation is often the way to go.

Benefits of Owning a Home

Now, the above stated, there are a few specific benefits to transitioning into homeownership:

  • Financial stability: While it takes crossing some financial benchmarks to enter homeownership, the resulting benefits are vast once you do. You don’t worry about rising rent or finding a home, plus can capitalize on the equity you build up in your home – which is really an investment in your future as much as a living space.
  • Community: Owning a home allows you to set down your roots in a home you can stay in for many years, learning about the community and building relationships with neighbors.
  • Family themes: There are also several ways homeownership benefits growing families, from additional space to consistency in school district, familiarity with the local surroundings and more.

Ideal Timing for Homeownership Transition

A common question we get from potential first-time buyers: When is the right time to make the move to owning a home? Here are a few benchmarks to consider:

  • Your credit score should be at least 580, the minimum threshold for qualifying for an FHA loan.
  • You should have steady income and be prepared to settle down in a single location for multiple years.
  • Your debts and expenses do not take up too high a portion of your income, allowing you to manage mortgage payments as part of your future finances.

For more on the transition from renting to homeownership, or to learn about any of our mortgage rates or services, speak to the staff at Altius Mortgage today.