Lending Language

Those crazy bankers and lenders. Tossing out words that you may not know what it means. Well, here is a little cheat sheet of terms and their definitions.

If you’re thinking of obtaining a mortgage, whether for a new purchase or a refinance, it’s a great idea to do some exploration beforehand to familiarize yourself with the process and what you can expect during your loan application, approval and closing. To help you better understand your options and make an informed decision when it comes to selecting your new home financing, we’ve gathered some of the most frequently used mortgage industry terms together for you to keep as a handy reference guide. If you have further questions about any of these terms or any other parts of the home loan process, please feel free to give me a call!

Annual percentage rate (APR): this is the actual interest rate you pay to borrow money. The APR includes the base interest rate, points, and any other add-on loan fees and costs. All lenders must follow the same rules to ensure the accuracy of the APR, so it provides consumers with a good basis for comparing the cost of loans from different lenders.

Automated Underwriting: we run your loan application through a computer system that evaluates certain numbers and information to determine if the loan appears to meet program guidelines.

Cash-out Refinance: a refinance where you borrow more than you need to pay off the original loan to get cash in hand. It’s an alternative to a home equity loan.

Closing costs: these fees are typically not part of the actual mortgage, and include such costs as title search, origination fees, discount points, prepayment of taxes and insurance, and real estate transfer taxes.

Disclosures: within three days of my receiving your fully completed loan application, you will receive these legal documents that explain your rights as a borrower on a mortgage loan. Disclosures will also show you the details of your loan amount, costs, monthly payments and payback terms.

Discount points: you can pay points at closing as a type of buydown in order to lower your overall interest rate and mortgage payment. One point equals 1% of the home loan value.

Good Faith Estimate: this is a federally regulated estimate of all the fees associated with your closing coats, including pre-paids, escrow items and lender charges.

Home price index: this is an industry tool that provides historical data on residential home prices in various regions.

HUD-1 statement: this document itemizes all of your closing costs and shows the fees you paid, such as real estate commissions, loan fees, points and escrow amounts. Also known as the settlement sheet or closing statement.

Loan modification: your lender may be able to modify the terms of your loan to make it easier for you to continue making payments and avoid foreclosure, without refinancing the loan. Generally it involves reducing the interest rate and thus the amount of your monthly payment for a fixed period of time.

Loan origination fee: the fee you pay for the lender’s services in administering your loan. A loan origination fee of 1 to 2 percent of the mortgage amount is common.

Loan-to-value (LTV) ratio: your lender will divide the amount of the loan by the asking price of the home and come up with a percentage. A high LTV, such as 90%, means you only have to come up with 10% cash as a down payment, while a lower LTV, such as 70%, means you need to come up with more cash to put down, but you may avoid the need for private mortgage insurance.

Mortgage insurance: when buyers take out a mortgage with less than 20% in cash to put down, lenders require them to pay mortgage insurance, a monthly premium that is added to the mortgage. This protects the lender should a buyer default on the home loan.

Mortgage Qualifying Ratios: these are the front-end and back-end ratios, which we use to calculate how much of your income is spent on your bills and how much will go toward your mortgage.

PITI: principal, interest, taxes and insurance: the four elements of a monthly mortgage payment. Payments of principal and interest go toward repaying the loan, while the payment for taxes and insurance goes into an escrow account to cover those fees when they are due.

Processing fees: lender fees associated with creating the loan or mortgage, usually part of closing costs.

Rate lock: this guarantees your interest rate for a set period of time while you complete the purchase of your home. Rates locks do expire but they can be extended, generally for an additional fee.

Secondary mortgage market: when we originate loans, we often sell them on the secondary market in order to raise more capital for more loans. Investors purchase our residential mortgages as a financial tool.

Truth-in-lending disclosure (TIL): this document discloses your interest rate, loan amount, the amount you will have paid upon the loan’s maturity and other relative financial information.

Underwriting: this is where your loan application is analyzed to ensure you will be able to repay the loan.

Walmart sells everything…including houses

Good ol’ “wallyworld” is taking a new spin. Walmart is now dipping its toe into the Real Estate world. For those who did not already know this. It’s true. Walmart now has in store real estate teams to help you shop for a home while shopping for your groceries.

There was a pole recently done to which consumers say the would consider getting a mortgage from Walmart. Folks even said they would consider even something like PayPal!

It will be interesting to see where the finance world will head and what the future for big banks hold.


If you want to read the article check it out HERE!

Metro Denver home prices up for 9th month from previous year

Denver-Aurora-Broomfield metro area increased 9.2%

Woo Hoo!

If you want to read the full article check it out HERE!

What is FHA?


In 1934, the federal government established the Federal Housing Authority (FHA). The FHA was not created to actually lend money; rather, it was created to insure the loans made by approved lenders, such as W.J. Bradley, and to protect the lenders against defaults on the loans.

If a borrower obtains an FHA loan and then defaults on it, the lender is compensated by FHA, and thus the lender will not lose as much money and is therefore more willing to lend according to FHA guidelines.

Inviting Terms
Originally considered a program mainly for first-time buyers, FHA loans are now one of the most popular types of loans for all types of borrowers due to a variety of attractive features:

  • Low down payment. FHA loans let new buyers put down as little as 3.5 percent of the home’s purchase price. Gift funds may be used for the down payment, which means you may not need to come up with any cash at all.
  • Market-appropriate loan limits. For many years, FHA loans had very low maximum loan limits. But in 2007 the FHA raised its loan limits to equal the median home price in your market.
  • Lower credit requirements. While there are no set credit requirements, it’s best to contact me to determine if your credit history along with other factors will qualify you for an FHA loan.
  • Low up-front mortgage insurance rate. The FHA requires mortgage insurance to protect itself from loan defaults, but premiums are only 1 percent of the loan amount. The premium can be paid directly by the borrower or rolled into the loan amount.

In the past FHA loans were considered “risky” or too much trouble for lenders, with strict regulations and requirements that had to be met before an FHA loan would be approved. Borrowers who applied for an FHA loan were also sometimes considered high-risk, because usually they would not qualify for conventional funding. Relaxed guidelines combined with the state of the market have taken the stigma off of these loans and made them a great choice for nearly any borrower.

Other Considerations
While FHA loans offer less stringent terms than you would find with conventional loan requirements, they are also designed to ensure responsible homeownership. FHA loans impose ratios on borrowers’ debts in relation to their income. The FHA also requires you to pay 1% of the loan amount as an upfront mortgage insurance premium. In addition, annual mortgage insurance payments are also required, divided into monthly payments of 1.10% to 1.15% for 30-year loans, according to the loan-to-value ratio.

If you’re looking to purchase a new home or refinance a current mortgage, but are worried you don’t have enough for a down payment or that your credit is too low, remember that FHA loans may present a perfect option.

FHFA: Conforming Loan Limits

FHA loans are limited to $417,000 for a home purchase. In some areas however that limit is higher due to high-cost areas (New York).  There is now talk about raising that limit country wide. Due to inflation, home prices and other factors. If you want to read a brief article on this just click HERE.

Top Ten Things to Do in Colorado in Your Lifetime

  1. Climb a Fourteener
  2. Attend a concert at Red Rocks
  3. Explore Mesa Verde
  4. Sink into Strawberry Park Hot Springs
  5. Visit the Great Sand Dunes
  6. Touch Dinosaur Tracks
  7. Hear Elk Bugle
  8. navigate a Mountain Road
  9. Board a Train
  10. Raft the Arkansas

Do think these are the top 10? Do you have any other TODO’s in Colorado?

To read the full article click HERE

Colorado and some of its Changes

I can proudly say that I have been alive for the old Stapleton Airport. I have flown out of and into this smaller Denver Airport. Now it is a thriving little city. Even now it is finding new growing pains. With this new change, the city is deciding on what they are going to do with the Stapleton control tower land mark.

What do you think should be done with the tower?

To read more about this. Check out the Denver Post Article.

December Monthly Newsletter

REAL news from your trusted Realtor!
CO 5th Strongest Housing Market in U.S.
How Can I Improve My Credit?
4 Reasons to Sell Now (and Buy)
8 Mistakes to Avoid as an Investor
Colorado in the News…Again



It’s true: Colorado is ONCE AGAIN in the news for being one of the strongest real estate markets in the entire country. It’s not surprising, as we have both affordability AND desirability, an extremely rare combination for any city.

This month’s newsletter is packed with some excellent articles below, including how to repair your credit, why now is a perfect time to sell, 8 awful mistakes to avoid as an investor, and why there are so many buyers right now!

Let me know if you have any questions!

Sarah Bowles
    720-83-SARAH (72724)

Colorado 5th Strongest Housing Market in U.S.!
According to NBC News, Colorado was 5th on the list of stateswith the strongest housing markets. With a 1 year home-price change of +7.3% and a median home price of $240,000, it’s hard to debate both the desirability and affordability of Colorado – a very rare combination!  The Colorado housing market was not badly damaged when the housing bubble broke.  Home prices dropped 9.5% from the first quarter of 2007 to the first quarter of 2012. Colorado home prices are forecast to recover at 3.7% between the first quarter of this year and the first quarter of next year. Over the longer period from the first quarter of this year until the first quarter of 2017, prices are expected to improve 2.4% per annum.

How can I improve my credit score right now?
As you know, your credit score is that 3 digit number that determines a lot in your financial life, including whether you can buy that beautiful house you’re drooling over. So how can you improve or keep your credit score high?
There are several factors that contribute to one’s score. Here are 5 ways to improve your credit score now:
  1) Have multiple types of Credit: Lenders want to see that you have a history of multiple types of credit. If you only have one credit card, open up another. If you’re going to buy a car, don’t pay cash but pay a good downpayment instead and get a loan. Your credit score will go up as you pay.
2) Pay down your debt: The more debt you have the riskier you appear to a lender. Paying down or paying off debt is a great way to make yourself more desirable for a home loan.
3) Be on time with every bill. Don’t be late! You can set up automatic payments from your checking account to pay off your credit card each month, and get those miles you need for a trip to Italy!
4) Do NOT under any circumstances open new lines of credit, no matter how small, before you start looking for a home.
5) Build your credit history: Younger borrowers are always at a slight disadvantage because they have a shorter credit history. But the longer you have lines of credit open (never close a line of credit! Even if you don’t use a card, just keep it open), the higher your score will be!

4 Great Reasons to SELL right now (and Buy)
If you are thinking about selling your home but still a bit unsure, here are 4 reasons that are knocking on your door:
1) Mortgage rates are laughably low right now for buyers. They are less than 3.5% right now for 30 years! 3% for 15 years. You better believe buyers are rushing to get loans right now, especially with how high rents are: it is actually much cheaper to buy than rent.
2) Inventory is down, which means you have less competition. 4 years ago the Front Range had about 27,000 houses for sale. Today there are 10,299 (and 5,870 others under contract!). There are alsodefinitely more buyers today than in 2008. Less supply and more demand mean 1 thing for you: more buyers looking at your house, and less competition of other sellers.
3) You could buy a bigger & more expensive house for the SAME MORTGAGE PAYMENT as you have now because of the lower interest rates – meaning your monthly payment would be just about unchanged.
4) Home prices have gone up in 7 consecutive months compared with last year, according to the S&P/Case-Shiller Home Prices Index released recently. Denver-area prices were up 5.4%!

Email or call me if you want some more information on selling your home.


8 Mistakes to Avoid as an Investor

Being a real estate investor is perhaps one of the most wealth-creating opportunities out there. There are also lots of pitfalls along the way. Check out these 8 for you to avoid!

1) Buying In Spite of Horrible Neighbors
2) Hiring Your Friends for Remodeling
3) Buying Houses With Title Issues
4) Hiring Contractors Based on “Trust Me”
5) Not Sticking to Your Numbers
6) Buying on Emotion
7) “Faking It”
8) Breaking Promises…and Breaking Trust

Email me if you want this whole article which breaks down every point!

Madison & Company Properties, LTD | 5600 S. Quebec St. Ste A-113 | Greenwood Village | CO | 80111