Debt Relief May Trigger Tax

The Mortgage Debt Forgiveness Act, originally passed in 2007, was extended three times to protect homeowners from paying income tax on debt that was relieved due to foreclosure, short sales or deed in lieu of foreclosure. Mortgage Debt Relief example 2017.png

The law expired on December 31, 2016 and unless it is extended again, homeowners with debt relief in 2017 may be subject to tax.

A homeowner might feel a sense of relief without the obligation of a delinquent mortgage but just because the payments are no longer due doesn’t mean that there isn’t another obligation that replaces it. If a lender cancels or forgives debt, a taxpayer must include the cancelled amount in their income for tax purposes depending on the circumstances. The tax significance could be serious.

This previously allowed relief only applied to a taxpayers’ acquisition indebtedness of their principal residence which did not include second homes and investment property. The maximum amount was limited to $2 million of mortgage debt forgiveness or $1 million if filing separately.

Due to the serious consequences involved in short sales and foreclosures, it is advised that homeowners faced with this possibility should seek expert advice from their legal and tax professionals.

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Indecision is Not a Decision

Wanting to buy a house in Denver takes some definite and strategic planning. First, make sure that you can get a loan. What do I need to get a loan? Typically, it takes about $60,000 gross income per year to qualify for a $300,000 home loan. And a good credit score. You need to ask “How can I improve my credit score?” Sadly, some lenders have gotten into the mode of “producing” and have forgotten the joy of helping those who need it.

There could be some legitimate reasons for not buying a home but indecision is not one of them. Indecision is rooted in not having enough information to move forward to own a home or continue renting.denver

If you keep renting, at the end of the year, you have had a place to live and a pile of receipts that helped the landlord pay for his house. Deciding to buy a home will give you a place to live that is yours and all the things that come with that.

When you consider principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you’re paying. The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation as the home goes up in value. The equity is part of your net worth and an investment in your family’s future.

The income tax savings can be an additional financial consideration if the combined interest and property taxes are greater than the allowable standard deduction.

Trends are showing that both tenants and homeowners are staying in their homes longer. It’s been said that whether you rent or own, you’re paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own and then, call us to help make it happen.

As you consider the possibilities of home ownership In Denver there are a lot of questions…some I can answer and others a loan officer is needed. However, home ownership is still the best investment for long term growth. And even though you own a home, you still need to keep your credit sparkling clean for the next opportunity that will show itself. Do not let those credit cards get behind, and make those minimum payments. Therefor when those questions arise make sure to reach out and call or contact me.

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Denver: Risk Rate Relationship?

Many years ago when I was just starting in real estate in Denver, I had clients who would shop interest rates and pick a lender based upon the rate quoted. More often than not, and in spite of my coaching, those rates would be for a 10 day close. That meant the loan had to close in 10 days or less to get the rate quoted. Normally, that did not work out, but after all the trials and tribulations of getting that initial approval, the borrower would stay with that lender. not always a pretty result.

Regardless of what a lender quotes on mortgage rates, the actual rate a borrower pays is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.Denver lenders

Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved.

  • Loan amounts – conventional mortgages above conforming limits as set by Fannie Mae and Freddie Mac are considered jumbo loans and generally have a higher interest rate.
  • FICO score – the lowest interest rate is reserved for the highest score; the lower the score, the higher the rate the borrower will pay.
  • Occupancy – borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.
  • Loan purpose – purchase transactions generally have the lowest interest rate with refinancing for better rates and terms being priced slightly higher. An even higher rate might be charged for refinancing and taking cash out of the property.
  • Debt-to-Income Ratio – a borrower’s monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower’s ability to repay the mortgage.
  • Property Type – some types of property are considered higher risk than others which could adversely affect the rate.
  • Loan-to-value – the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

Any combination of these factors could limit a borrower’s ability to secure a mortgage at the rate initially quoted. Pre-approval by a trusted mortgage professional can be the best way to know what rate you can expect to pay. Please call for a recommendation of a trusted mortgage professional.

Currently I have 5 or 6 clients, who will be home buyers in Denver that are in credit repair, services that good mortgage companies offer to their clients in need of increasing their credit scores. Often procedures include new credit cards that are pre-paid, paying off small debts and closing some accounts. But honestly, just by following what I just said, you might not get the right accounts. So, to get the best rate, today or a year from now, do not go it alone. CONTACT me and I will direct you to a good lender that can help get you ready.

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Denver: Pre-approval is Good for Everyone

“CASH IS KING” in Denver’s real estate market these days and our “word” that we can afford to buy the house just does not work anymore. The Seller wants to see that someone else, who has the ability to provide the funds has looked at your credit, job history and funds to make sure you can get the loan. That gets you as close as you can to having “CASH”. In Denver’s red hot real estate market Cash is still king yet your…

Buyer’s mortgage pre-approval is good for you and everyone in the transaction. It saves time, money and removes the uncertainty of knowing whether the buyer will be qualified after negotiating a contract. The direct benefits include:

  • Looking at “Right” homes – price, size, amenities, locationPre-approval is good for everyone.png
  • Find the best loan – rate, term, type
  • Uncover credit issues early – time to cure possible problems
  • Negotiating power – price, terms, & timing
  • Close quicker – verifications have been made

There is a significant difference in having a trusted mortgage professional take a loan application and run all the necessary verifications compared to going through calculators on a lender’s website. Beside the peace of mind, the cost of being pre-approved is a bargain and generally, limited to the cost of the credit report.

Even if a person has been pre-approved, a second opinion from a different lender may be a good option. It can verify there is a good deal or you’ll discover that you can improve it. Either way, it works to your advantage. Contact me if you’d like a recommendation of a trusted mortgage officer.

When there is a shortage of properties on the market, like in Denver, the buyer needs as many arrows in their quiver as possible and the first one is the pre-approval (not pre-qualified) letter from a reputable, local lender. Others will include your buyer’s agent and their market knowledge, their negotiating skills and tactics, and if they create trust in you. They should ask for a buyer’s agency agreement to be signed as well (but that could just be me) so you will know whose side of the fence they are on. If you would like to talk more about where to live or who good lenders are CONTACT ME here

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Denver Real Estate Play the Game

So many times I have seen folks get that glassy eyed look over a foreclosure or other “deal” in Denver real estate. Friends are especially happy to help you leave your money with them. It would be my pleasure to help you when that time comes. So no matter where in Denver it is, lets take a look and do not forget there really are some rules…

It’s much easier to play a game when you know the rules so you can avoid mistakes that may keep you from winning. Homeownership isn’t a game but there are some rules that will protect your investment and increase your enjoyment.

Most people want a home of their own to raise their family, share with their friends and to feel safe and secure. In most cases, it is also their largest asset. These suggestions can help protect your investment and make homeownership more enjoyable.Denver real estate

  • Don’t overpay for your home
  • Maintain your home to protect its value
  • Minimize your assessed value to lower property taxes
  • Make extra contributions to save interest and build equity
  • Validate the insured value of improvements and contents
  • Be aware of current surrounding property values
  • Make mortgage interest payments deductible
  • Invest in capital improvements that increase market value
  • Don’t over-improve the neighborhood comparables
  • Keep records of capital improvement & other maintenance

I would like to be your personal source of Denver real estate information and we’re committed to helping from purchase to sale and all the years in between. If you need assistance with any of the items mentioned in this article or need a recommendation for a service provider, it would be our pleasure to help. And please remember, I can even connect you with someone I trust across the country.

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Protecting Your Credit

One of the “big” three credit bureaus recently announced that a massive hack has exposed the personal information of up to 143 million people. To add perspective to that statement, that is about two-thirds of American credit card holders or close to half the population of the United States. Part of protecting your credit is being vigilant and making it difficult for thieves to steal your identity. Denver

If you suspect you are a victim of identity theft, an initial step is to place a fraud alert on your account. Contact one credit reporting company (Equifax, Experian or TransUnion), tell them you are an identity theft victim and ask the company to put a fraud alert on your credit file. Confirm that the company will contact the other two companies.

The initial fraud alert will make it harder for an identity thief to open accounts in your name. The alert lasts for 90-days and it can be renewed.

A more severe precaution called a credit freeze restricts access to your credit report. A credit freeze makes it more difficult for thieves to use your identity to apply for loans or credit cards in your name.

By contacting each of the three credit reporting agencies separately, you can request a temporary freeze. This would prevent them from providing credit information without both your explicit permission and a PIN that temporarily lifts the freeze.

Unlike the fraud alerts, the agencies may charge you a fee for instituting the freeze in addition to another fee to lift the freeze each time.

A credit freeze will not affect your credit score. If you are in the process of buying a home, contact your loan officer and discuss the decision you are considering. If you will be making a mortgage application in the near future, you can temporarily lift the freeze for the lender you are using.

A trusted mortgage professional is a key team member in purchasing a home. Making an appointment with them is one of the first steps along with determining your real estate professional. Contact us to get a recommendation of a trusted mortgage professional.

To request a credit freeze, you can do it online or by phone:

Equifax – 800-349-9960 | Experian – 888-397-3742 | Trans Union – 888-909-8872

For more information, see Credit Freeze FAQs at the Federal Trade Commission.

It is important to personally monitor your credit reports through annual credit to discover any unusual activity.

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Denver – Downsize with Dignity

Living in Denver for the last (can it be?) 39 years, has shown me a lot about how I, and my clients & friends age.  The included chart  is a great summary of the events, health-wise, that might be indicators of our progression through life.

Knowing the physical aspects of aging can help you better understand and serve those

Denver Downsize

How we age in Denver

above 50 in your life. The good news is that, in absence of disease, normal aging can be a rather benign process. Genetic and environmental as well as lifestyle factors determine how we age. There’s good news about aging. A long life span provides the benefit of a greater perspective on life, self-knowledge, and a new depth to our gratitude. We also become less concerned with what others think about us, except for our physical appearance.

Many life decisions – marriage, child rearing, career, retirement – are settled and are no longer worries. Some might say a pleasure of “settling scores” comes from living well and “outliving those who were mean to us”. Respect for one’s own experiences, feelings, and opinions all contributes to successful aging as does respect for the body through daily exercise and a healthy diet. And we all know, Denver is one of the healthiest cities in America.

If you would like an invitation to our next Downsizing with Dignity presentation please contact me.

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Investing on Your Side of the Fence in Denver

Denver horse properties is not the topic here so lets not get distracted! Below is a sound investment opportunity for anyone who has owned a home and is worried about college tuitions in the future, or just wants a steady, dependable investment. And Lord knows I have been distracted into “trading schemes”, “oil & gas” investments, etc where I really had no business going. Hence our opening line today:

The grass tends to look greener on the other side of the fence. Maybe that’s why some people invest in things they don’t understand. It has been said that the grass is just as hard to mow on the other side of the fence so stay with what your most familiar.Denver

Single-family homes used for rental property give a person a chance to invest in something they understand: a home. They also have distinct advantages over other types of investments.

An investor can borrow up to 80% of the value at fixed interest rates 30 years. The financing creates leverage so that the investor can benefit from the increase in value of the home not just the down payment.

It is reasonable to expect that the home will appreciate while providing tax advantages and practical control that are not available with many other investments. Low housing inventory in many markets has caused rents to increase and low new home growth will make it difficult to keep up with demand.

Consider a $150,000 home purchased for cash that would rent for $1,500 per month. With $18,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. There would be an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 2.35% and a 10-year Treasury yield at 2.13%.

An added bonus is the amortization that occurs on the loan as the principal is reduced with each payment. It becomes a forced savings account that increases the equity and isn’t taxable until the property is sold.

The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with alternative investments. Please contact me if you’d like to know more about available opportunities.

Even though our market is drastically different than the example above, the rents make up for it. Denver’s median rent is in the $1400 per month for a 2 bedroom condo, while a 2000 square foot house might rent for over $2000 per month, depending on the neighborhood. Therefore, if you want to investigate buying a rental home as an investment property; for college tuition or other; lets have a chat. Contact me

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Denver Deductible Dilemma

Denver home owners have experienced more than our fair share of insurance claims with the hail we seem to get during the season. And making sure we have the right amount of coverage balanced with the deductible is more math than I care to do in a month. But to be well protected one needs to do that analysis. And folks across the country today are finding that their insurance simply does not cover the losses they are facing. Do the Denver Double check of your coverage with your agent, and remember…

The purpose of insurance is to shift the risk of loss to a company in exchange for a premium. Most policies have a deductible which reduces the amount of the claim that is paid by having the insured share in the first part of the loss.Denver flood insurance

In the process of managing insurance premiums, policy holders often consider higher deductibles to lower the premium. Lower deductibles mean less money out of pocket if a loss occurs but also results in higher premiums. Higher deductibles result in lower premiums but require that the insured bear a larger part of the loss.

A small fire in a $300,000 home that resulted in $2,500 of damage might not be covered if the policy holder has a 1% deductible. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible could be considered.

Homes in high-risk flood areas with mortgages from federally regulated or insured lenders require additional flood insurance. However, each homeowner needs to assess the risk of being able to financially sustain a flood loss on their home when flood insurance is not required. The recent events in south Texas and Louisiana are evidence that the unexpected can happen.

It is important to review your deductible and discuss risks with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate before a claim is made. The FEMA website has information and frequently asked questions about flood insurance.

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Denver – Downsize or Right-size?

Denver has always been a “younger” community, at least until everyone I know now has grey hair! When did that change? Anyway, in my travels around town, we still seem to have that special sway to our step, an extra energy that emanates from us as we walk and yet I run into folks who want to move Mom in with them from other parts of the country (a move from sea level for someone with COPD is not a good idea). And they prepare to do so by getting a larger home with a separate  entrance and a main floor bedroom. Before we buy that house let’s talk about the possibilities and what is best for Mom or Dad:

AGING IN PLACE: This can be done in two very different ways…

Aging in the COMMUNITY: Everytime I speak with someone who is in this process of downsizing they really do not want to be uprooted and thrown into new surroundings having to find a new dentist or grocery or shoe repair…they like their surroundings. So staying in a comfortable community close to friends, activities and support services, but in a different home, a condo, apartment or a different house, might be the ticket.

AGING IN “MY HOME”: This is the preferred approach, (just ask them) and can be done by modifying the current home to make it less hazardous? Are there services available to help remodel. Just removing throw rugs can help a lot! There is more to it than that but first…

Yet when is it time? Here is a Planning Continuum that may help you…Denver Aging in place












As you can see from this graphic things in our lives can change quickly and if you are the care giver it may be difficult for others who are involved to understand that there is more of an “emergency” than they thought. As an example a simple stumble caused by a rug in a hallway may be an indicator that mom is shuffling her feet not raising them up and stepping. This is something that we notice in our aging parents in Denver and across the country. Yet it may be time to start considering a plan and devising ways to make her current home safer. Stretching carpet, and handrails are good first steps.

Next time: A Primer on HOW WE AGE and things we can watch for in our older friends here in Denver.

And of course, if you want to have a more private evaluation of your needs, this Senior Real Estate Specialist is more than happy to help here in Denver. Just CONTACT ME.


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