So you have decided to buy a property in Vail, Colorado. Unless you are incredibly wealthy, you are going to need a mortgage. However, the old days of a either a fixed rate 15 year mortgage or a 30 year fixed rate mortgage with 20% down are behind us. You will find that you have so many options that it can make your head spin. Much of it will depend on your situation or what it is you are buying the Vail property for, but there a few types of loans and mortgages with which you should be familiar.
First is the Adjustable Rate Mortgage (ARM). An ARM has a rate that will change and adjust over time in a manner that will be outlined in the mortgage agreement you sign. Usually the ARM is lower than a fixed rate mortgage at the time you sign on. You should be aware, however; the rate can change with the market. These are actually the best loans if you plan to own the Vail property for only a short time.
You may also hear about a convertible mortgage. This is actually a type of ARM. With a convertible, though, you will be able to change your loan over to a fixed rate loan after a certain amount of time has passed. There is generally a conversion fee, but it is usually less than a refinance cost.
Two step mortgages start you off with a lower rate fixed rate for a few years. After the time has passed, the rate goes up to a fixed rate for the duration of the loan. The problem with a two step mortgage is that the up swing can be substantial. However, in the case of a rental vacation property it may make the payments easier until you establish some reliable and regular renters to cover it for you and hopefully make a profit.
Another option if you don’t have a lot of liquid capitol is a zero down loan. Not all lenders offer it and you will absolutely have to have a solid credit history to invoke the kind of trust that the investors need to give you a 0 down loan. If your credit score is below 600 you will likely need some sort of proof of a large reserve of cash somewhere.
Another way to avoid a down payment is through the use of an 80/20 finance plan. This plan uses two loans to finance the entire price. You would need to talk to the seller before trying an 80/20 loan, though as some do not want to work through them. In many cases the buyer carries the second mortgage. You will also likely need a score of 560 on your credit report.
There are dozens of types of loans that mortgage companies can work out for you. These, however, are some of the more popular for those seeking a vacation property or real estate in Vail, Colorado at all. Talk to your lender and talk with the seller to work out what will be the best mortgage for you. Before you know it, you will be a real estate owner in the ski resort town of Vail, Colorado.