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Exploring mortgage options

STEAMBOAT PILOT & TODAY

If there is one certainty in picking out a home mortgage it is that the possibilities go far beyond the traditional 30-year fixed rate loan.

With historically low interest rates, lenders still say the 30-year or 15-year fixed rate loan is a smart choice for some homebuyers, including those planning to stay in their homes for a long time, use the properties as long-term rentals or who want to lock into low interest rates.

But if someone is looking to own the home for only three to five years, has an income that is sporadic or has trouble making a down payment, other options are out there including adjustable rate mortgages and no-down payment loans.

"The most important thing is there are a million different ways to process the loan and a million different programs. You shouldn't just think about 30-year fixed and 15-year fixed loans," said David High, a loan officer for First Western Mortgage Services Inc.

Before deciding on a mortgage, Josh Kagan, owner of Yampa Valley Mortgage, said homebuyers need to ask how long they are going to be on the property and how much they want to put down.

An adjustable rate mortgage is a good idea for those who buy a home they expect to sell in three, five or seven years. Under an adjustable rate mortgage, the homebuyer pays a fixed interest rate for a period of time - three, five or seven years - and agrees to incur the market rate at the end of that time.

"Those are great tools for people who get into their first home or condo and don't see themselves living there for more than three to five years," Kagan said.

Another mortgage program allows homebuyers to pay off just the monthly interest of the loan. Kagan said this is a good program for those people who have sporadic incomes or work seasonally.

It allows them to make minimum monthly payments on the interest and then pay off the principal when they get the bigger chunks of money. Kagan said this mortgage option can work well in Steamboat's real estate market where housing values appreciate significantly.

Loans are available with 100 percent financing fees, which means homebuyers will not need a down payment.

"Typically, you end up paying a little bit of a higher interest rate," Kagan said. "But it makes sense just to be able to get into a place. And, all rates are relatively low now."

Jeff Chapman of Homebuyers Mortgage said programs offering little or no down payment are not as expensive as they use to be.

He also said Routt County received a grant where first time homebuyers can get a dollar for dollar tax credit on 20 percent of what they pay on their mortgage.

Chapman said the county has a year and half to go through the money and will have to use $1.5 million by December 2002.

Chapman said homebuyers told previously that they did not qualify for a home might find the situation is different now.

"There are so many programs out there worth investigating for those who didn't qualify," Chapman said. "They have come up with so many ways for people to get into ownership."

Another piece of advice Kagan gives to potential homebuyers is to avoid buying a new car before purchasing that first house. He said it is better to buy the house first than wait for the car, because the house is a better investment and car payments effect the debt rating for first time homebuyers.

Chapman is working with the Regional Affordable Living Foundation to hold a four-hour class for first time homebuyers. The classes should be offered every five to six weeks.

"Begin the process through getting educated," Chapman said.

- To reach Christine Metz call 871-4229 or email at cmetz@steamboatpilot.com