What to Avoid Before Closing Your New Denver Home

It’s understandable; you’re excited; you’ve found the right home, negotiated a contract, made a loan application and inspections. Closing is not that far away, and you are making plans to move and put personal touches on your new Denver home.

Even if you have an initial approval on your mortgage, little things can derail the process which isn’t over until the papers are signed at settlement and funds distributed to the seller. The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower’s credit or income that might disqualify them.

Most lending and real estate professionals recommend NOT to:

  • Make any new major purchases that could affect your debt-to-income ratio
  • Buy things for your new home until after you close
  • Apply, co-sign or add any new credit
  • Close or consolidate credit card accounts without advice from your lender
  • Quit your job or change jobs
  • Change banks
  • Talk to the seller without your agent

The lender and I are working together to get you into your new home. It’s understandable to be excited and feel you need to be getting ready for the move.

Planning is fine but don’t do anything that would affect your credit or income while you’re waiting to sign the final papers at settlement.

For more great tips and information, please visit our website at www.denverrelocation.com. Thanks and make it a great day!

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Rising Rates in Denver Affect the Cost Too

Without a doubt, when rates rise you can buy less home in Denver…especially with our continually expanding price point. Can I ever afford a new home? Read on…

Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also.

When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand?

As the rates gradually go up, the affect may not be noticeable at all except for the fact that the payments for the buyer have increased.

A ½% change in interest is approximately equal to a 5% change in price. A $300,000 mortgage at 4.5% for a 30-year term will have a $1,520.06 principal and interest payment. If the mortgage rate goes up 0.5%, it would affect the payment the same as if the price had gone up 5%. The difference in payments for the full term of the loan would be $32,547.

There are some things beyond buyers’ control, but indecision isn’t one of them. If they haven’t found the “right” home yet, it is understandable. However, when that home does present itself, the buyer needs to be ready to make a decision. If they are pre-approved and have done their due diligence in the market, they should be able to contract before significant changes occur in the mortgage rates.

Contact me for some good Denver mortgage professionals.

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Replace It Anyway

If it’s not broken, why would a homeowner consider replacing something as expensive as a toilet when there may be other things in the home to replace that provide more aesthetic appeal. Don’t be too quick to ignore the functionality and the reliability of this basic convenience.homeowner

The first rationalization might take place at the economic level. A water-saving model could easily pay for itself in a few years and then, there is the good feeling of participating in the conservation of our natural resources.

Having to plunge a toilet more than once a week could motivate a homeowner to spend money on a replacement especially, if having made repairs to the flapper and fill valve didn’t solve the issue.

Maybe your existing toilet has ugly scratches that make it difficult to clean. Maybe there are cracks in the tank or bowl that you’re concerned will develop into a leak at the worst possible time.

The average cost to replace a toilet is around $400 with models ranging more and less based on the features and brands. Round toilet bowls tend to take up less room, are less expensive and better suited for children. Elongated bowls generally take more room, have more powerful flushing action, more comfortable, more stylish and cost more.

Replacing the shut-off valve for the toilet could be a good thing to do while you’re replacing the toilet. Generally, it is as old as the toilet and having a reliable valve that works could be very convenient in a future repair or emergency.

There are a variety of videos on YouTube that could give you the confidence to do it yourself or simply, to have a better understanding of the scope of the project

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Highlands Ranch…Please, Before You Leave Town…

You probably do not know this about me but for close to 10 years I was the area coordinator for the Neighborhood Watch Program in all of Highlands Ranch. As a matter of fact we actually assisted in solving a break in or two and prevented an abduction in the neighborhoods! All because the neighbors looked out for each other. I had to give it up as we approached 5000 names in the database and the Douglas County Sheriff got the community relations department a computer. But I learned a lot about safety and signals to the bad guys. The newspaper from Thursday in the drive on Saturday was always the best. But read on…

Along with all the planning of what you’re going to do and where you’re going to stay, consider this checklist to make you feel more comfortable while you’re away from home.

  • Ask a trusted friend to pick up your mail, newspaper and keep yard picked up to avoid an appearance of not being at home.
  • Stop your mail (USPS Hold Mail Service) and your newspaper.Highlands Ranch
  • Don’t post about your trip on Facebook and other social media until you return; some burglars look for this type of announcement to schedule their activities.
  • Do notify police or neighborhood watch – especially if you’re going to be gone for more than just a few days. Let your monitoring service know when you’ll be gone and if someone will be checking on your home for you.
  • Light timers make it look like someone is home. Set multiple timers for various times to better simulate someone at home. There are plug-in modules for lights and appliances that would allow you to control them from your phone while your out of town.
  • Do unplug certain appliances – TV, computers, toaster ovens that use electricity even when they’re off and to protect them from power surges.
  • Don’t hide a key; burglars know exactly where to look for your key and it only takes them a moment to check under the mat, above the door, in the flower pot or in a fake rock.

These easy-to-handle suggestions may protect your belongings while you’re gone while adding a level of serenity to your trip.

One other item for those of you from the more humid areas of the country now living in the semi arid climate of Highlands Ranch…DO NOT TURN OFF THE SPRINKLERS! The lawn will die in a week without water. Seen it. Been there. If you are worried about it, ask the neighbor to go inside and check it. But it is up to you. Of course please contact me with any other questions, or the Douglas County Sheriff at www.dcsheriff.net for their vacation house check program.

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Denver…Owning Makes More Sense

Denver has experienced yet another 12 month cycle where median prices have increased between 7 & 9% over the previous year. Some folks in Denver will tout their analysis yet most others could be missing as much as 17% of the actual closed data when they report. And it really does not matter as it is only an indication of the market, not what it is like in your neighborhood. That can only be determined with a deep dive into your local statistics including sales and under contracts. But think about this as you contemplate the value of your home…

When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting.denver

Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity.

There are additional expenses for owning a home that renters don’t have like repairs and possibly, a homeowner’s association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage.

net cost of housing.jpg

The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282 more to rent at $2,500 a month than to own. In a year’s time, it would cost $15,000 more to rent than to own which is more than the down payment and closing costs to buy the home.

With normal amortization and 3% annual appreciation, the $10,500 down payment in this example turns into $112,00 in equity in seven years. Check out your own numbers using the Rent vs. Own or call me at (303) 880-5585. Owning a home makes sense and can be one of the best investments a person will ever make.

Again, as you consider the chart above 7.6% appreciation would be more appropriate for last year in Denver. WOW! Contact me for more info.

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A Word Denver Homeowners Need to Understand

What is your mortgage balance? Well, that is one answer, but the new tax law has a very specific reference for the term Acquisition Debt as it relates to Denver home owners, and others around the country. So read on to learn more, then talk to you tax adviser as to the effects this will have on re-financing your current Denver mortgage, or buying a new home here, in Littleton or in another part of the country.

Acquisition Debt is the amount of money borrowed used to buy, build or improve a principal residence or second home. Under the new tax law, mortgages taken after 12/14/17 are limited to a combination of $750,000 on the first and second homes. The mortgage interest on this debt is tax deductible when itemizing deductions.denver

It is a dynamic number that is reduced with each payment as the unpaid balance goes down. The only way to increase acquisition debt is to borrow money to make capital improvements.

Prior to the new law, homeowners could additionally borrow up to $100,000 of home equity debt for any purpose and deduct the interest when itemizing deductions. Mortgage interest on home equity debt is no longer deductible unless it is for capital improvements.

Acquisition debt cannot be increased by refinancing. Some confusion occurs because mortgage lenders are concerned in making home loans that will be repaid according to the terms of the note and using the home as collateral. That does not include making a tax-deductible mortgage.

Another thing that adds confusion to the issue is that the lenders will annually report how much interest was paid in a year but only the amount that is attributable to acquisition debt is deductible.

Even if the interest on the cash-out refinance is not deductible, it may be advantageous to pay off higher interest debt such as credit card debt and replacing it with lower mortgage debt.

It is the responsibility of the taxpayer to know what part of their mortgage debt is deductible. The challenge becomes more difficult after a cash-out refinance. Homeowners should keep records of all financing and capital improvements and consult with their tax professional.

The key here is to consult with your Denver tax adviser BEFORE a re-finance to find out the effects on your tax return. Most good loan officers will be able to answer the question, but a tax adviser is best. To find either a tax adviser or a loan officer go to https://www.denverrelocation.com/vendors.shtml.

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Denver and Unexpected Expenses

Yesterday I had one of those…our AC went out over the weekend. Saturday was not bad. Sunday was a tad warm. Yesterday in Denver, it was nearly miserable, with what we consider HIGH HUMIDITY too. So wishing I had something like a plan they are speaking about could only be wishing. What happened I learned about AC units though. I heard it trying to start and it normally would on the 3rd or 4th try. But the tech tells me it is the capacitor and I was lucky it kept starting. Also wash out the “compressor aka condenser” so there is no cotton/dirt plugging it. Clean/vacuum the blower housing and CHANGE THE FILTER so you do not kill the unit. But read on to find out this good incentive…

It’s common for Sellers to consider offering a home warranty or protection plan to make their home more marketable. A growing number of homeowners are now purchasing this type of protection for themselves to limit the unexpected expenses of repairs and replacements.denver

A home protection plan is a renewable service contract that covers the repair or replacement of many of the components in a home. Some homeowners especially like the convenience that it organizes a qualified service provider as well as the cost of the repairs or replacements.

There are a variety of companies that offer home warranties and the coverage may differ but the majority of things will include heating, air conditioning, most built-in and some free-standing appliances, as well as other specific items. Additional specific coverage may be available for other items like pool and spa equipment.

Some investors are even placing this coverage on their rental properties to limit the amount of repairs during the year. It is a viable way to manage the financial risk and the stress dealing with unexpected expenses.

Call me at (303) 880-5585 if you’d like a recommendation of available programs. Or CONTACT ME

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Don’t Let a Killer In – Colorado

Colorado enacted a law many years ago that requires a carbon monoxide detector within 15 feet of every “sleeping area” before the home is sold. Denver is pretty good about this as they only cost $40-50 and are easy to install. Here is part of why the state legislature enacted this law…

Carbon monoxide is a silent killer you don’t want in your home but because it is colorless and odorless; you may not even be aware the deadly condition exists. The Center for Disease Control says more than 400 people in the U.S. die annually from carbon monoxide poisoning and over 10,000 require medical treatment each year.Denver, colorado

Unmaintained furnaces, water heaters and appliances can produce the deadly gas. In addition, other sources could be leaking chimneys, unvented kerosene or gas space heaters or exhaust from cars or trucks operating in an attached garage.

The Environmental Protection Agency suggests the following to reduce exposure in the home:

  • Keep gas appliances properly adjusted
  • Install and use an exhaust fan vented to the outdoors over gas stoves
  • Open flues when fireplaces are in use
  • Do not idle car inside garage
  • Have a trained professional inspect, clean and tune-up central heating systems annually

Headaches, nausea, vomiting, dizziness and feelings of weakness or fatigue are a few of the most common symptoms. Lower levels of exposure to carbon monoxide may be mistaken for the flu.

Carbon monoxide alarms should be on every level of a home and especially, in sleeping areas. The alarms can be purchased for as little as $25 and plugged into the wall like a night light.

Regardless of the government requirements, no one would want to put their family, guests or themselves at risk for something so deadly.

Contact me if you want more information on this state law and the requirements affecting Colorado & Denver.

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Denver…Waiting Will Cost More

As I sit here and edit the little addendum I can hardly believe how our prices in Denver have increased and interest rates have too! And then there is a couple I am working with to try and find a home who have been here for 6 months “waiting” and they have found that very thing…prices in the 300 to 400k range have increased by about 7% and interest rates have gone up too, making it harder to afford a home they “could learn to love”. It is a hard lesson when the right house disappears from under you because someone acted faster than you and that is a regular part of the orientation into the Denver market I do for buyers. And sellers start to wonder when their home is not sold in 5 days! What a crazy market here in Denver!

An economist responded when asked how interest rates would change: “They may fall some and then, rise and after that, they’ll fluctuate.”Denver

Just because interest rates have been low for ten years doesn’t mean they are supposed to be low. The Federal Reserve has raised interest rates twice this year and are expected to go up twice more plus three times next year. Mortgage rates have risen from 3.95% to 4.62% since the first of January.

Increased rates directly affect the payments on homes but so does the price. With inventory levels remaining low, the prices will continue to go up. When interest rates and prices rise at the same time, it costs buyers a lot more.

If the mortgage rates go up by one percent and prices increase by five percent in the next year, the payment on a $250,000 home could go up by $200 a month. In a seven-year period, the buyer would pay $18,000 more for the home.

People planning to buy a home, need to investigate the possibilities of accelerating their timetable to take advantage of lower rates and prices. Use the Cost of Waiting to Buy calculator to see how much more it could cost you to wait. Call (303) 880-5585 if you have questions about what can be done now. Or contact me.

Cost of Waiting in Denver

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The Tax Difference in Second Homes

Many folks who live in Highlands Ranch have 2nd homes in the mountains. Some are fishing cabins while others are condos for ski weekends, or you might find a true replacement residence. The truth is that some of the tax law changes form last year might affect those home owners in Highlands Ranch. So read on…

A principal residence and a second home have some similar benefits, but they have some key tax differences. A principal residence is the primary home where you live and a second home is used mainly for personal enjoyment while limiting possible rental activity to a maximum of 14 days per year.Highlands Ranch

Under the 2017 Tax Cuts and Jobs Act, the Mortgage Interest Deduction allows a taxpayer to deduct the qualified interest on a principal residence and a second home. The interest is reduced from a maximum of $1,000,000 combined acquisition debt to a maximum of $750,000 combined acquisition debt for both the first and second homes.

Property taxes on first and second homes are deductible but limited to a combined maximum of $10,000 together with other state and local taxes paid.

The gain on a principal residence retained the exclusion of $250,000/$500,000 for single/married taxpayers meeting the requirements. Unchanged by the new tax law, the gains on second homes must be recognized when sold or disposed.

Tax-deferred exchanges are not allowed for property used for personal purposes such as second homes. Gain on second homes owned for more than 12 months is taxed at the lower long-term capital gains rate.

This article is intended for informational purposes. Advice from a tax professional for your specific situation should be obtained prior to making a decision that can have tax implications.

Should you need a good Highlands Ranch CPA or tax adviser, contact me. I can put you in touch. OR, if you want to buy that mountain getaway, let me know that too, as I know quite a few good mountain Realtors.

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