Buyers with Student Debt

Denver First Time Buyers and Sellers need to be positioned to take advantage of these programs. Read on…

59% of non-owners are not comfortable taking on a mortgage with their student debt according to the Aspiring Home Buyers 2017 survey. It is estimated that buyers with student debt (aka college graduates) have an average of $37,172 in student debt.first time buyers

Fannie Mae, who has loan programs with as little as three to five percent down payments, has announced changes to how student loan debt is treated that could make the difference in qualifying for a mortgage.

For the 5 million borrowers who participate in the reduced payment plans, actual payments are considered for calculating debt-to-income ratio rather than maximum payment amount.

Non-mortgage debts paid by another party for at least 12 months won’t be included in calculating debt-to-income ratio. For example, payments being made on a student loan by the parents would not be counted against the DTI ratio for the student.

These changes can make it possible for would-be buyers with student debt to get a home now instead of waiting for years. Being pre-approved by a trusted mortgage professional is the best way to confirm that these changes apply to your situation. Call today for a recommendation of a trusted mortgage professional.

For a list of good mortgage lenders in go to my Denver lenders web page.

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Good Info – Good Decisions

While homes available to buy are pretty scarce, some folks are not willing to make the move in Denver, yet prices will make it prohibitive with 10% annual increases. Hiding one’s head in the sand will keep you in that neighborhood you do not want to be in. So we should talk after you read this…

While low inventory is certainly challenging buyers, not having a clear understanding of mortgage financing is also causing issues. By having good information, they are able to make better decisions as well as compete favorably.Mortgage Rate History in Denver

Most buyers don’t realize how the mortgage rate is determined for a borrower. While annual income is important, a good credit score, low debt-to-income ratio, loan-to-value ratio and ability to repay the loan are vital concerns.

A variety of myths seem to permeate the market such as rates are set and released once a day; FHA loans are for first-time buyers only; pre-qualification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.

Misunderstanding of actual mortgage practices may be a contributing factor to why more buyers are not taking advantage of what are still historically low mortgage rates.

While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. Success in buying a home in today’s market should begin with a real estate professional who will coordinate all the different parts of the transaction including mortgage, title, insurance, inspections.

For good lenders here in Denver, go to www.DenverRelocation.com/lenders.shtml

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Reasons to Refinance

The current conversation in Denver real estate circles is all around whether we are in a bubble. Even if we were (we are not) with rates this low, it is time to refinance that loan. Maybe even investigate a reverse mortgage? read on…

Regardless of the reason to refinance a home, the basic question to ask is: “Do you plan to live in the home long enough to recapture the cost of refinancing?” There are always expenses involved in refinancing which can be paid in cash or rolled into the new mortgage.

From a strictly financial standpoint, the break-even point is achieved when the cost of refinancing has been recaptured by the monthly savings. It would take approximately 23 months to recapture $4,000 of refinance costs with a lower payment of $175 a month.Deciding to refinance in Denver

  1. Lower the rate
  2. Shorten the term so that the loan will build equity faster and be paid off sooner.
  3. Lower your payment to reduce your monthly cost of housing.
  4. Convert an ARM to a FRM to stabilize your payment due to concern of rising interest rates.
  5. Cash out equity to be able to use the money for another purpose.
  6. Combine a first and second mortgage.
  7. Consolidate personal debt so the interest is tax deductible.
  8. Payoff higher cost debt such as credit cards, student debt, etc.
  9. Remove a person from a loan as in the case of a divorce.

Points paid to purchase a principal residence are tax deductible completely in the year paid. However, the points must be spread over the life of the mortgage on a refinance. For that reason, consider getting a “par” value loan with no points. It may have a slightly higher rate but the interest will be fully deductible and it will lower the cost of refinancing.

Determine the break-even point on your situation by using the Refinance Analysis . Call Pete 303-880-5585 ext 3 for a recommendation of a trusted mortgage professional.

Or go to www.DenverRelocation.com/lenders.shtml

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Indecision May Cost More

In an appreciating market, like Denver, I often find folks who are just afraid to make a move, even though they can financially. Indecision is created by their fears, which are real and I do not want to take that away, yet some rationalizing might help see through that fog. See if some of these fears resonate with your thinking today:”We won’t find a place we like” (hasn’t happened in 31 years), “we cannot afford to make the move”, “the replacement home will just cost too much”, “what if the market goes down?”, “we do not have enough furniture to fill a house”.

“More has been lost due to indecision than was ever lost to making the wrong decision.” Interest rates have as much effect on housing costs as price and when they are both trending upward, it can be very expensive to wait. Indecision in Denver

There can be some legitimate reasons for postponing a purchase such as needing to save the down payment, improve your credit or waiting to find out about a possible transfer. The problem is that prices and interest rates could, and very likely will, go up in the future.

If the price of $250,000 home went up 5% and the interest rate went from 4.5% to 5.25%, the payments would increase by $176.42. The additional cost over a seven-year period would be close to $15,000.

The questions that indecisive buyers need to ask themselves is “how am I going to feel knowing that if I had not waited, I could have been living in the home for less money?” and “What would I have spent the money on if I didn’t have to make the larger payment?”

Use the Cost of Waiting to Buy calculator to find out how much indecision may be costing you.

If you want to know the selling process go to http://www.denverrelocation.com/selling.shtml. Then call me to schedule a time to talk. 303-880-5585 ext 3.

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Would-be to Should-be in Denver

When I counsel a new or first time buyer here in Denver, or even a seasoned seller buying their next home I often hear “we just don’t know” where, what kind of loan, how quickly, etc. There aren’t answers for some questions until you get your feet wet and start looking but the financing is often the easiest. Here are some thoughts about turning your “we shoulda” into your “we did”!

Some would-be buyers have emotional reasons to own a home like having a place of their own where they can raise a family, feel safe and secure and enjoy their friends’ company. Other buyers’ dominant reasons might be financial in nature such as building equity or lowering their cost of housing.Denver

Regardless of what might be motivating people to want their own home, it is easy to justify that now is a good time to purchase. Let’s look at a $250,000 example using a FHA loan.

The total payment will be about $1,835 dollars a month. If the payment is lower than the rent a person is paying, that should encourage a person to continue investigating.

In this example, when you consider the monthly principal reduction, the monthly appreciation and the tax savings, even with money added for monthly maintenance, the net cost of housing is less than half the total house payment.

Considering all those advantages, the would-be buyer is spending over $1,100 per month more to rent than it would be to own. In a year’s time, they would lose close to $14,000 which is more than the down payment of $8,750 required on this price home.

Most would-be buyers understand that a home is a big investment but they may not understand the advantage of the leverage caused by the low down payment mortgage. The benefits extend beyond a return on the down payment but to the value of the home.

In this example, the $8,750 down payment grows to an equity of $73,546 in seven years based on 2% annual appreciation and normal amortization on a 30-year loan. If you calculated that as a rate of return, you’d be challenged to find anything that could compare with it.

Denver rent vs own 2017.png

To see what your numbers might look like, check out this Rent vs. Own. If you need any help or have any questions, contact us. Part of our greatest satisfaction is helping would-be buyers understand why they should-be.

Most new home builders honor the Realtor Client relationship in Denver however, I would need to be with you on your first or second visit to the builder’s site. Best advice I can give you is carry my card with you and present it to the builder representative and say “this is my Buyer’s Agent”. Do not sign or fill out any forms. If you find you want to buy something right now! call me and I will do my best to get there to make sure you are well covered. Those of you out of Denver it is a bit harder, but I might find a good Realtor to help you too. Best practice is to call me with your questions.

There are pages of resources at DenverRelocation.com for all buyers

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An Alternative to Paying Tax Today

There can be a substantial amount of capital gains tax due upon the sale of an investment property in Denver, both the IRS and the State of Colorado. Often an investor will use a 1031 exchange as a tool to defer those taxes. Read on…

The cartoon character Wimpy would say that he’d gladly repay you Tuesday for a hamburger today. Some real estate investors say a similar thing to Uncle Sam to be able to hold on to their proceeds from the sale of an investment and agree to pay the tax later. Denver

The benefit of a 1031 exchange is that it allows the investor to defer the tax due from the sale into the replacement property. This allows more money to be reinvested. In the example shown, the investor has 27% more to invest now by deferring the tax into the future.

The property to be exchanged must be like-kind which means real estate for real estate. Rental property can be exchanged for other rental or investment property. Personal-use properties like a first or second home are not eligible for exchanges.

There are some critical dates that restrict the validity of the exchange. The investor must identify the replacement property within 45 days of the sale of the relinquished property. The replacement property must be closed within 180 days of the sale of the relinquished property.

  • The replacement property must be equal to or greater in value, equity and debt than the one being relinquished.
  • All net proceeds must be used in acquiring the replacement property.

There are specific rules involved in constructing a valid tax-deferred exchange. There are three professionals that should be involved: a tax advisor, a real estate professional and a qualified intermediary who will assist in the acquisition and transfer of both the relinquished property and the replacement property. Additional information can be found in IRS Publication 544.

If you would like to talk about moving your Denver real estate holdings into something closer to home, or closer to where you intend to retire, lets talk about using the 1031 exchange as a legal, and very cost effective way of doing it. There are some tricks and having a good Realtor lined up in the destination city is critical to the smooth running of the exchange. And it does not cost a buyer anything to participate in the exchange. We can get the first leg started here in Denver for you. Give me a call…or visit www.DenverRelocation.com.

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Lower the Rate – Deduct the Interest

WOW, this is so true…I know I have had issues with managing debt and found the use of a line of credit could help immensely! So make sure to read through and at the bottom, I will have a resource for you here in Denver to use to get a home equity line. You can use the same line of credit to get your Denver home ready to sell! What a great tool for a home owner who still has the laminate counter tops and wants to up-grade them.

Credit card debt in America is back to levels prior to the recession. The average credit card APR is just under 16% according to CreditCards.com Weekly Credit Card Report. Denver RatesHomeowners have an advantage over renters when it comes to getting their arms around debt issues.

Basic money management suggests that higher rate debt be replaced with lower rate debt. Credit cards, personal cars, boats, motor vehicles and other personal property, typically have interest rates higher than that of real estate loans.

Borrowing against a person’s home usually provides the lowest rate of financing. Refinancing a home mortgage to take cash out to retire personal debt is one option. Another would be to secure a home equity or HELOC, home equity line of credit.

An alternative advantage of borrowing against one’s home is that the interest may be tax deductible unlike the interest on most personal debt. Qualified mortgage interest includes acquisition debt which can only be used to buy, build or improve a principal residence and up to $100,000 of home equity debt which can be used for any purpose.

Managing money is a critical life skill that people need to master. While the goal may be to become debt-free, paying the least amount of interest possible can be a good first step. Owning a home provides an asset that allows for options not available to tenants. Seek professional advice to determine your best course of action.

Denver has some great sources for lower interest rate home equity loans or even a re-finance for your mortgage. I do have some experience and would be happy to share my knowledge and experience, so drop me a note at pete@DenverRelocation.com. Or if you want to re-finance that home in Denver go to https://www.DenverRelocation.com/lenders.shtml.

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Denver Rentals are IDEAL

Think about it…until the very recent past the best return you have seen on most any investment has been about 3-4% while real estate in Denver has appreciated at about 10% per year for the last 6 years. On top of that your investment at the most for rental properties has been between 20 & 35% of the value when you bought them. That means you would have been leveraging others money to increase your own. In short, your 30% investment has earned 100% of the appreciation. That is a great return!.

Rental homes are the IDEAL investment because they offer a higher rate of return than other investments without the volatility

Denver real estateof the stock market. With certificatesof deposit and bonds at less than 2%, people need an alternative investment that they understand and with a reasonable amount of control.

In this case, IDEAL is an acronym identifying the advantages of rental properties.

  • Income from the monthly rent contributes to paying the expenses and a return on the investment.
  • Depreciation is a non-cash deduction that shelters income for some investors.
  • Equity buildup occurs with amortized mortgages because each payment is composed of interest owed and principal reduction to retire the loan by the end of the term.
  • Appreciation is achieved as the value of the property goes up.
  • Leverage can increase the return on investment by using borrowed funds to control a larger asset.

These individual benefits working together make rental real estate a good investment for today’s economy. Increased rents, high rental demand, good values and low, non-owner occupied mortgage rates contribute to positive cash flows and very favorable rates of return.

To find out more about how rentals might complement your current investment plans,contact me.

And lets add a bit to the equation….some of you may be thinking this has been a nice long run and it is time to sell those rentals. I just had a customer buy a rental from a client with no pressure and a fair price. Let’s talk about selling those assets and how we could use a 1031 exchange to help you. To see a timeline for the process go to www.DenverRelocation.com/selling.shtml

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Save the Cost of Mortgage Insurance

This 80-10-10 loan has long been a favorite of mine in Denver, as is the adjustable rate loan that is fixed for the first 7 years. Most of the time folks can either payoff the 10% second mortgage with an equity r-finance because the Denver Real Estate market has had values increase, or they will need to move before the first rate adjustment. Good Counsel is important. See the bottom of this post for good Denver Lenders.

During the banking crisis in the Great Recession, certain types of mortgages were unavailable that are once again being offered. Fortunately, the 80-10-10 mortgage is one of those making a reappearance and it can save borrowers a considerable amount of money. 80-10-10.png

The objective of an 80-10-10 mortgage is to avoid the expense of mortgage insurance for buyers wanting a 90% loan. A buyer can obtain an 80% first mortgage and a 10% second mortgage with a 10% down payment and not be required to have private mortgage insurance.

For example, a buyer could put $30,000 down on a home priced at $300,000 and get an 80% first mortgage without mortgage insurance. The borrower could get a second mortgage, either through the same lender or a third party.

In the example, the 80-10-10 would save a buyer $193.71 per month which can be a considerable amount of money over a ten-year period. The interest rate on the second loan will be higher than the first because there is more risk.

Helping buyers make better choices is a valuable service real estate professionals can provide. Having the right tools and information can make the decisions easier to understand. Using an 80-10-10 calculator, you can see what the savings might be for your situation.

To find good advice from a local Denver lender, as well as resources for buying a home in Denver, go to www.denverrelocation.com/buying.shtml

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Important Estate Documents

While I am not an attorney, quite a bit of my recent Denver work has been helping folks get interests in the right place for the right time. As an example a gentleman owned a piece of land and wanted to sever the minerals. As a landman working in Denver knowing “how” was only part of the issue. The “when” became more important over time. And working with attorneys and the personal representatives of the estates is also critical. Sometimes it is right down to who can spend the money for the estate to get the carpet cleaned. One thing I have noticed is that having CO-PERSONAL REPRESENTATIVES can create huge timing issues for the estate if they do not have their tasks identified. So part of the letter of instruction below might include “Harry does the real estate, Melody does the personal property and Freddy handles the tax returns”. Check with your estate attorney on how this can be done and READ MORE BELOW:

An estate plan is a collection of documents to ensure that your wishes are carried out because of death or incapacity to make decisions for yourself. Spouses, minor children, adult children, property and investments can all be factors that should motivate a person to undergo the process.Denver

Will – this document specifies the way a person wants to manage and distribute his/her assets after their death. When a person dies without a will, the laws of the state where the person resided will determine the distribution of the property.

Durable Power of Attorney – this document grants to a designated person the authority to act on behalf of the principal in in legal affairs should the principal become incapacitated. Among other things, this would allow the attorney-in-fact to buy and sell property on the behalf of the principal.

Healthcare Proxy – this document grants that a designated person can legally make healthcare decisions on behalf of the principal when they are incapable of making and executing specific decisions stated in the proxy.

Living Will – this document directs physicians with respect to life-prolonging medical treatments in case they become unable to communicate their decisions.

Hippa Release – this document allows heath care providers to release your health care information to a designated person. Otherwise, they are required by federal law to protect the privacy of your health information.

Letter of Instruction – This document contains information and instructions about a person’s wishes upon death. It is intended to offer details on whom to contact and where to find important documents about personal and financial matters.

Requirements of these documents can vary from state to state and legal advice should be obtained. If you need a current estimate of value on real estate that may be involved, usually a price opinion from a licensed real estate professional will suffice. It would be my privilege to assist you with this at no cost or obligation.

Want to compare homes on-line, just to see?

Go to: http://denverhomes.denverrelocation.com/i/compare-homes

Depending on the county, a person who dies without a will needs to file a probate action in each county where he owns real property. So if you own land in Garfield County, Denver, and oil and gas right in Natrona County, Wyoming, you may need to probate them all so your heirs can receive their inheritance. Again, talk to your Denver area attorney for specifics. But know that a will is very helpful and probably the most valuable instrument listed above. Even with a will some actions will be required.

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