Assumptions are an Alternative

OH do I have a story about a non-qualifying assumption from the mid 1980’s that was done out in Parker Colorado, a suburb now of Denver! Then it was horse property haven and country living! And it was one of the reasons that…

In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. The main reason there haven’t

Denver FHA VA Assumption.png

been many assumptions in the past 25 years is that interest rates have been steadily going down and if a person has to qualify, they might as well do it on a new loan and get a lower interest rate.

Based on projections by Fannie Mae, Freddie Mac, the MBA and NAR, rates for the second half of 2017 and 2018 are expected to be higher. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages in the recent past, it becomes more advantageous to assume the existing mortgages.

FHA and VA loans originated with lower than current interest rates have great advantages for buyers and sellers.

  1. Interest rate won’t change for the qualified buyer
  2. Lower interest rate means lower payments
  3. Lower closing costs than originating a new mortgage
  4. Easier to qualify for an assumption than a new loan
  5. Lower interest rate loans amortize faster than higher ones
  6. Equity grows faster because loan is further along the amortization schedule
  7. Assumable mortgage could make the home more marketable

An Assumption Comparison can help determine the savings and financial benefits of an assumable mortgage with a lower rate.

The process of assuming a loan is similar to getting a mortgage. One has to substitute your credit and liability to the lender for the original borrower and they are released from future liability on the loan. Given the rapid appreciation we have had here in Denver, often a 2nd mortgage or a HELOC might be needed to fill the equity difference. As a buyer you still need to qualify for both loans, yet if you have a large down payment and a home with a 2013-2016 era FHA loan fits the bill, it may be a possibility. And a great question to ask. It would be my pleasure to help you find a good loan officer to assist you. Just reach out to me at here.

 

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Family & Friends Mortgage in Denver

Somehow it just seems right to give your kids a mortgage when they buy a house in Denver, if you can afford it. Wouldn’t it be great for someone to pay you 4-5% interest on a secured loan? Yes it is until the IRS sticks their nose into it. THE IRS??? Yep. Read on…

Anytime a lender and borrower can agree on rates and terms, it can be a good match but IRS has specific rules that govern the transaction especially when the parties are family or friends.Denver Parent Mortgage

The loan must be done in a business-like manner with a written note specifying the loan amount, interest rate, term and collateral. IRS requires that the mortgage be a recorded lien to allow the interest deduction.

Sometimes, a friends and family situation might have a less than normal interest rate on the mortgage. However, the rate charged in the note is regulated by the minimum applicable federal rate which is published monthly by IRS based on current Treasury securities. For July 2017, the rate is 2.57% for terms over nine years.

The seller must report the interest paid to them along with the name, address and Social Security number on schedule B when the buyer uses the property as their principal residence. A mortgage between family and friends can be good for both parties. It may allow the borrower a slightly lower rate without the expenses of a traditional lender while giving the note holder a higher rate than they can earn in available investments.

Your tax professional can guide the transaction whether you’re a buyer or a seller and your real estate professional can help arrange to have the documents drawn and filed.

When you are faced with the idea of “helping your child” or a friend buy a home in Denver, or just a loan, make sure you have the right advice. At my website DenverRelocation.com under the drop down “Resources” you will find a plethora of folks who can help you. You can go there by clicking here. Feel free to share these fine folks with your friends too.

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Down Payment Problem – Are You Sure?

Denver has quite a few lenders who are willing to help first time buyers with minimum down payment loans. Some do not charge a mortgage insurance premiums but have other methods of helping. As long as there is work history, good credit and some “skin in the game” (money of some kind) most will help you figure out a way to buy that first home. This article covers other avenues of getting a down payment so read on…

There is increasing difficulty for first-time home buyers to save for their down payment as indicated in the graph. Several factors that contribute to this trend include rising rents, rising home prices, student loan debt and flat wages.Denver down payment graph.png

Some would-be buyers feel they cannot buy a home today but a large part of those decisions may be based on inaccurate assumptions.

Nine out of ten non-owners believe they need ten percent or more for a down payment. The typical down payment for first-time buyers is six percent. VA has 100% loan programs as well as USDA for certain qualifying areas and buyers. FHA is known for 3.5% down payments. And FNMA and Freddie Mac have down payments as low as 3% and 5%.

There are gift provisions available for buyers who have an “angel” who would like to help them with their down payment.

There are ways to borrow against a person’s qualified retirement program for a down payment. It isn’t necessarily limited to the buyer but could include a relative. Interestingly, a son or daughter can borrow against their retirement to benefit their parents.

In some respects, having good credit and sufficient income is more important than the down payment. Don’t rely on “common knowledge.” Get expert advice and counsel to see if there is a way to advance your dream of owning a home.

When you want to talk to a competent lender in Denver contact me and we can discuss who might be best for you. There are a lot of really good lenders to choose from!

PS: A SAFE & HAPPY 4th of July to you!

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Don’t Have a CLUE?

Denver & CLUE reports?

An insurance policy is required by most lenders when you buy a home in Denver or other places. The premium for that first year needs to be paid and an escrow is set up to pay next years policy. If that policy premium is too high you may not qualify for the mortgage on that home. And it is all related to the previous owner’s claim history. Read on…

If you haven’t heard of a CLUE report, it has nothing to do with the table game searching for a murderer. It is a report showing the insurance claims on your home and car for the past five to seven years.Denver CLUE report

This database is used by insurance companies to evaluate risks and determine rates. C.L.U.E. stands for Comprehensive Loss Underwriting Exchange. Rates can be increased not only due to legitimate claims but data entry errors also. Sometimes, simply asking a question without filing a claim can be logged as a claim.

For that reason, similar to verifying the accuracy of your credit report, it is important to check out the CLUE report on your home and car. The reports are free and there is a process for correcting mistakes.

An interesting and sometimes costly surprise occurs during the home buying process. The claim experience of the prior seller could impact the price of the premium of the new buyer. For that reason, you can ask for a copy of the CLUE report on the home you’re interested in buying prior to writing a contract.

Here is an interesting example: My neighborhood has been hammered by hails storms twice in the last 3 years hence 2 claims. A neighbor had the water line between the house and the street start leaking and raised the ground water in his and another neighbors crawl spaces. Well the neighbor filed an insurance claim, that makes 3, and now his insurance company has cancelled his policy due to the number of claims, and his clue report means he will pay excessive premiums for a few years until the claims fade away. And none of this has to do with any culpability on his part, only acts of God and a contractor who “kinked” a copper pipe 28 years ago. So when getting ready to sell your Denver home, it might be good to check that CLUE report if you have had multiple claims on your insurance.

If you need help getting a CLUE drop me a note here.

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Hidden Costs of Home Buying in Denver

One of the greatest joys of working in this business of real estate in Denver is helping someone buy that first house. The excitement is palpable and it is especially gratifying when everything goes according to plan: the lender gets the money there; the inspection works out; there are no title glitches; and everyone gets the times and locations correct. No drama just weeping for joy! When you hear someone asking real estate related questions please introduce us, but make sure to read on…

Owning a home is the great American dream! When it comes to buying a home, most of your clients naturally begin by combing through thousands of online listings, oohing and aahing as they find homes they ♥. While the process varies from client to client, that first-time home buying feeling only happens once. And when it comes to that group, here are the facts:

  • First-time buyers account for 52% of the future buying potential
  • Despite being plagued by student loan debt and in a different headspace than previous generations, Millennials are ready to buy with the majority of current first-time home buyers being in this generation
  • Older Millennials (25-34) dominate current home shoppers, making up 33% of the market

As with all buyers, first-time home buyers are aware of the long-term financial commitment that comes with homeownership. However, while they know what features and amenities they want in a home and are expecting a mortgage payment, they may not know about the additional “hidden” costs associated with buying a home. Remember, these buyers are completely new to the process and are looking for an agent who knows their stuff! In fact, according to the National Association of REALTORS®, 74% of Millennials said that help understanding the purchase process is the most beneficial part of having a real estate agent. This is your chance to demonstrate your value! We’ve made that easy for you by creating the infographic below for you to share directly with your first-time home buyer clients.

Denver Millennial Home Buyers

For more about the Home Buying Process in Denver CLICK HERE

Source: ListHub

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Emergency Kit for the Car in Highlands Ranch

Last week I traveled from Highlands Ranch to the Mescalero Apache Indian Nation near Alamogordo and found myself in the middle of an emergency. They needed blankets and ropes which I had in my trunk. My lightweight jacket went too! I was glad I had them to give to those in need as I know there was real comfort given. My real estate emergency supplies are in my experience but read on…

Mickey Mantle said “If I knew I was going to live this long, I’d have taken better care of myself.”

Similarly, if people planning their summer travel knew they were going to have an emergency, they would have the right things available. Only 5% of drivers carry all recommended emergency supplies in their cars.Highlands Ranch emergency supplies

The Federal Emergency Management Agency (FEMA) recommends that all Americans have some basic supplies on hand in order to survive for at least three days if an emergency occurs. Some of these things would be more important if you lived or traveled in remote areas.

  • Reflective hazard triangle or road flares
  • Spare tire
  • Jumper cables
  • First-aid kit
  • Flashlight and extra batteries
  • Cell phone and charger
  • Crucial medications
  • Emergency radio with batteries
  • Bottled water for each person and pet in your car
  • Non-perishable, high-calorie food
  • Distress signal flag
  • Matches or lighter

During cold weather, additional items are recommended:

  • Windshield scraper and brush
  • Blankets and extra warm clothing
  • Road salt or cat litter to help with tire traction
  • Tarp for working outside in weather

It is recommended that emergency supplies should be checked at least twice a year to see that all of the items are in working order and in good condition. It is important that items are replaced if any of them are used during the year.

The American Red Cross is among many sources where emergency preparedness kits and supplies can be purchased.

You never know when you need these things for someone else and I never know when a client will need some special help. You might drive down the road and into a flash flood or find yourself on the edge of a wildfire like we had in Highlands Ranch last year. Something in your car could save a life or just provide warmth and comfort. Get to know more about this Highlands Ranch resident and Realtor here.

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DENVER-What Can You Expect?

One of the basic tenants I have always subscribed to is “FAIR and HONEST Business dealings” with all my Denver, and elsewhere, clients. I was thrilled to see that proclamation in the real estate commissions guidelines and definitions of real estate brokers. I take it even further with my standards which you can see by clicking here. But read on…

Businesses must treat customers fairly if they expect to do business with them again or get recommendations to their friends. Customers of stores like Nordstrom’s understand that a salesperson is an employee and represents the company.denver home buyers

The line becomes less clear in some industries, especially ones that involve real estate. Agency is a legal relationship authorizing a person to act for or in the place of another. It involves responsibilities that exceed treating a person fairly.

The duties a buyer or seller can expect to receive from a real estate salesperson or broker include but are not limited to honesty, accountability, full disclosure, representation and reasonable skill and care. Buyers and sellers might additionally expect representation, obedience, loyalty and confidentiality. State laws can differ on specific duties.

Mortgage and title officers are limited in their duties to the buyer to honesty and accountability and specific requirements under the federal Real Estate Settlement and Procedures Act.

A special relationship with a real estate agent makes it advantageous to have them coordinate efforts with the other professionals in the home buying process. Since most buyers’ and sellers’ transactions are infrequent, the agent can bring valuable experience to the transaction.

Every buyer and seller should discuss the level of service they expect from the real estate professional they work with. Another good question is what happens if the purchase and sale are within the same company.

Regarding agency, I have always chosen the direct route…that is to disclose the relationships early. And hopefully, when we talk about your real estate needs here in Denver, you will find that I always want to take the position of being on your side of the fence, not being on the fence as so many do today. My goal is to represent you, and your interests first. How can I do that? Well as an dear friend, attorney and instructor who is now gone on to greater things once said to me “Pete, you know what you are doing”.

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Hands-Only CPR

Last time I was certified for CPR was in 1975. I am sure glad it has evolved into hands only instead of the additional breathing. Some times a Denver Realtor has to perform CPR on a real estate transaction. I had one that took 6 attempts to get it closed! But this is far more important…

Hands-only CPR can save lives. The American Heart Association states that “Almost 90% of people who suffer out-of-hospital cardiac arrests die. CPR, especially if performed in the first few minutes of cardiac arrest, can double or triple a person’s chance of survival.” Most people who survive a cardiac emergency are helped by a bystander.

  1. Check for responsiveness – shake the person and shout “Are you OK?”11700251-250.jpg
  2. Call 9-1-1 – either tell someone to call or make the call yourself
  3. Compress – Push hard and fast in the center of the chest at a rate of 100 per minute.

The victim should be flat on their back preferably on the floor. Place the heel of one hand on the center of the victim’s chest and place the heel on top of the other hand lacing your fingers together. Lock your elbows and compress the chest forcefully; make sure you lift enough to let the chest recoil.

Chest compressions should be continued until the person shows obvious life-like breathing, the scene becomes unsafe, an AED (automatic external defibrillator) becomes available, or a trained responder takes over the emergency treatment.

Alternating mouth-to-mouth breaths is not necessary using this method. Compressions are adequate except in drowning or drug overdose situations where 30 chest compressions are followed by two mouth-to-mouth breaths.

Watch this two-minute video and consider taking instructions from the Red Cross or other qualified provider. Every household should have at least one person trained in life-saving skills.

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Denver Realtor “Not Just Denver”

Denver Realtor shares From the National Association of Realtors

Pending Home Sales Sluggish as Low Supply Rears Its Head

Pending home sales were sluggish in April as low supply reared its head, down 1.3 percent in the National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI). The PHSI posted 109.8 in April, down from 111.3 in March. The Index is based on contract signings.

“Much of the country for the second straight month saw a pullback in pending sales as the rate of new listings continues to lag the quicker pace of homes coming off the market,” says Lawrence Yun, chief economist at NAR. “REALTORS® are indicating that foot traffic is higher than a year ago, but it’s obviously not translating to more sales.

Denver Realtor

National Assn Realtor

“Prospective buyers are feeling the double whammy this spring of inventory that’s down 9.0 percent from a year ago and price appreciation that’s much faster than any rise they’ve likely seen in their income.”

The West fared best in April, with pending home sales up 5.8 percent to an Index reading of 100.0, though still down 4.2 percent from one year ago. The Midwest saw a 4.7 percent decrease in the Index to 104.4, while the South saw a 2.7 percent decrease to 125.9, and the Northeast, a 1.7 percent decrease to 97.2.

Scarce supply will remain the status quo, according to Yun, unless more homes are made available, especially from the investor side.

“The unloading of single-family homes purchased by real estate investors during the downturn for rental purposes would also go a long way in helping relieve these inventory shortages,” Yun says. “To date, there are no indications investors are ready to sell; however, they should be mindful of the fact that rental demand will soften as the overall population of young adults starts to shrink in roughly five years.”

If you want to visit (no obligation) about the Denver real estate market and where we see it going, drop me a note or contact me. It would be my pleasure!

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Denver – Must Be This Tall to Ride?

Oh yeah…it happened to me near White Plains New York. But it also happened when I was looking for a house here in Denver. And it just happened to a couple who wanted to pay all cash. They did not have proof of funds that a seller could see. “I have never had to do that before!” But today is a lot different than it was 25 years ago. So enjoy the read and then come back…

Surely, you remember being a child at an amusement park when after having stood in line with your friends and family, waiting to get on a terrific ride, you discovered the sign that read, “you must be this tall to ride.”This Tall in Denver

Not only was it disappointing, it was slightly embarrassing. You never want to go through that again.

A remarkably similar situation occurs when people are buying a home. After finding the right home and negotiating the contract, they find out that they don’t measure up financially. It’s not something that anyone wants to go through if they have a choice.

Regardless of what you think you know, if you’re buying a home with a loan, you need to physically visit with a trusted mortgage professional before you get serious.

  • You’ll find out your credit score which will directly affect the mortgage rate you’ll pay.
  • You might discover blemishes on your credit that possibly can be corrected.
  • You’ll even get a pre-approval letter that you can submit with an offer which could dramatically affect your negotiations in the current competitive market.

Some rides don’t turn out to be as good as you thought they were going to be. A person certainly doesn’t want that disappointment with a lender. Contact me for a recommendation of trusted mortgage professional.

It would be my pleasure to introduce you to a professional loan officer. Contact me… When I bought my first home in 1972, people took your word you could afford it. It doesn’t seem that way anymore. If you are getting a loan they want a loan officer to say that you can. If you are paying cash they want to see proof you have it. 

And if you are an all cash buyer here in Denver, lets talk about how you need to be ready, and what documents the seller will need to see.

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