Denver Home Prices Rise 4.1%

This week the S&P Case-Shiller Index was released with information from the month of August.

This report is the most widely reported real estate report in the country currently. For Denver, home prices have increased 4.1% in the last 6 months since March! This continues to be great news.

It appears that for Denver, March was the bottom of the market. Hopefully, this bottom will hold through this credit crunch the last 2 months and the slower winter months.

For the last 12 months Denver home prices are down 5% which makes us the 4th best large real estate market in the country according to Case-Shiller. Nationally, home prices in the 20 largest cities dropped 16% in the last 12 months

Details of $7,500 Tax Credit/Refund

Now of course there is some fine print with the $7,500 tax credit that you may be eligible for and here is some fine print you must be aware of—

· There are income limits for this tax credit that begin at $75,000 for individual taxpayers and $150,000 for married filing jointly taxpayers.

· You can’t buy a home from a family member.

· You can’t obtain a mortgage from CHFA, a down payment assistance loan type, and receive the tax credit.

· You must own the home at the end of that taxable year. Believe it or not this has come up with one of my clients already.

· If you are married filing jointly both spouses must not have owned a home in the last 3 years.

· If you are married filing separately, then one spouse could take a $3750 tax credit.

· It 2 or more unmarried people buy their first home together it appears and I assume that each person would get a portion of the $7,500 tax credit. For example, 3 buyers each would get a $2,500 tax credit. This is not set in stone however.

· Please consult your tax advisor for more details and realize some of these details may not be worked out yet.

One other great benefit of this bill is even if you buy a home in the first 6 months of 2009 you can receive the credit and refund on your 2008 tax return.

This bill comes at a great time in Denver for first time home buyers as it appears that our market has already hit bottom and in some parts of town home prices never did drop (Wash Park, Platte Park, Stapleton, parts of Highlands Ranch, parts of SW Jefferson County).

So take advantage of this great offer by June 30, 2009.

What Only 1 First Time Home Buyer Knew

Since July 30th when President Bush signed into law The Housing and Economic Recovery Act of 2008 I have been amazed how few first time home buyers know about a great provision in this bill that applies to them. How few? Only one first time home buyer, out of dozens that I have talked to, in the last 3 months have known about this benefit and he was a financial advisor.

One of the main provisions of this bill is a $7,500 tax CREDIT for eligible first time home buyers and a tax CREDIT is far better than a tax deduction. This credit will directly reduce your IRS tax bill by up to $7,500. In instance, if your income tax owed to the IRS this year is $9,000 and you paid to the IRS through employer withholdings $9,000, you would be eligible for a $7,500 tax refund!

If your total tax bill is only $6,000 and you paid $6,000 already to the IRS through your withholdings on your paycheck, you will receive a refund of $7,500 which is more than you paid in!

Would you like Uncle Sam to give you $7,500 next year when you file your tax returns? If so, here is what you have to do—

· First, be a first time home buyer defined as someone who has not owned a home in the last 3 years.
· Buy a home with a value of $75,000 or more. If you buy a cheaper home your credit will be a little smaller.
· Must, buy a home between April 9, 2008 and June 30, 2009.

Please realize that this is money that does have to be repaid to the IRS over 15 years beginning in tax year 2010 in increments of $502 a year. Thus, it is essentially an interest free loan, which is the best kind of loan. You get all the benefit now (Instant Gratification) that you repay over time.

Now, how can you use this money to buy your first home? Really the only way possible is to obtain a loan from a family member for the amount of your down payment, normally 3% of the sales price. Then, next year repay them when you get your tax refund. Another idea is adjust your W-4 Withholdings with your employer so that more money stays in your pocket. This would be a great idea if you intend to buy your first home in 2009.

Are Mortgages Still Available?

Ever since the Treasury Department took over Fannie Mae and Freddie Mac in early September millions of people are wondering “are mortgages still available?” The resounding answer is YES! If the following statements describe you and your situation, mortgages are still available for you—

· You have been employed for the last 6 months.
· Your earnings from work are by salary or hourly pay.

· If you receive commissions, you have received them for at least 2 years.

· If you are self-employed you have been so for at least 2 years and you can prove your net income with your tax returns.

· You can “round up” at least $1,000 (legally of course).

· Your credit score is 580 or higher (if your credit score is below 580, I can help you improve it).

So, you may be thinking that I must be describing only awful sub-prime loans are still available. Far from it! Sub-prime loans are basically non-existent anymore.

The loans I am talking about are FHA loans, which are insured by the government. FHA loans are great loans for both first time buyers and repeat home buyers. What are the benefits of a FHA loan?

· Fixed rate loan terms of 15-30 years providing you with peace of mind.

· Great interest rates—if your credit score is less than 740 almost always a FHA loan will give you a lower rate than a conventional loan from Fannie or Freddie.

· Only 3% down through end of 2008. In January this increases to 3.5%.

· Only need a 580 credit score to be approved.

· Much cheaper mortgage insurance than on a conventional loan.

· Down payment can be gifted to you or lent to you by a family member.

· A co-borrower such as a parent who will not live in the home is allowed.

· Down payment assistance loans are allowed.

· No hefty pre-payment penalties.

FHA loans have come back “en vogue” in the last 15 months with many mortgage professionals. For me they have always been “en vogue” as I HATED doing sub-prime loans for two reasons. First, they are bad loans for my clients. Second, don’t even get me started about how these sub-prime lenders treated me and my clients before closing. I would blow a gasket! Ugh!

This is why I have only closed 6 sub-prime loans in nearly 11 years and hundreds of FHA loans in that time. It’s all about doing what is best for my clients and my own sanity.

Denver's Foreclosure Rate Keeps Dropping

According to today’s Realty Trac Report on foreclosure activity around the country, Realty Trac reported that both Colorado’s and Denver’s foreclosure activity have dropped for 2 quarters in a row! This is great news!

In the third quarter foreclosure filings of all types dropped 11% from the 2nd quarter at the state level and in Denver foreclosure filings dropped 13% in the 3rd quarter!

As of September 30th foreclosure filings in the state are down 31% from September 2007.

In Denver the percentage of household units with a foreclosure notice dropped to .91% in the 3rd quarter. The highest in the nation was Stockton, CA at 3.69%. In March, Denver’s ratio put it at the 11th worst in the country; now Denver is only 26th worst in the country. We are moving our way down this terrible list.

As the Case-Shiller Index has shown it appears that March 2008 was the bottom of the market here in Denver and this data supports this conclusion as well.

What a great time to buy a home in Colorado! I will leave with this quote from Warren Buffett last week, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." Now's the time to buy.

No Down Payment--No Problem

Despite all the doom and gloom, government restrictions, and tight credit markets no down payment loans are still available for some people. In fact, there are still four options available.

The best option and always has been is a VA loan for qualified military veterans. VA loans are government insured loans that feature a great fixed rate and no monthly mortgage insurance.

The second option is combining a FHA loan with a down payment assistance loan from a city, county or state municipality. For example, the City of Aurora has one of the best programs called HOAP for first time home buyers. Arapahoe County has a similar program and Douglas County has their own program too. Two other programs exist for anywhere in the state and one is called CHAC and the second one is CHFA.

Each of these programs features a maximum income limit to qualify. For each program besides CHFA the income limit is $45,900 for a family of two people. Whereas, CHFA’s income limit for a family of two is $71,800.

Most of these programs have no monthly payment on the second mortgage. Next, interest rates on these loans are really low. Third, some of these loans will even help you pay your closing costs. Fourth, these programs do require a minimum investment from you, normally $1,000 or a little more.

CHFA also offers down payment assistance loans for current and previous home owners. The income limit for a family of two for these loans is over $82,000.

The third option is obtaining gift money from a family member or your employer or a qualified non-profit organization. However, seller funded down payment assistance programs, like Nehemiah, are no longer allowed.

A fourth option, which is new, is a loan from a family member. You can now borrow money from a family member and then you could repay them next year with your income tax refund of up to $7,500 if you are a qualifying first time home buyer.

To learn more please follow these links—
http://www.chfainfo.com/

http://coloradohousingassistance.org/

http://www.auroragov.org/AuroraGov/Departments/Neighborhood_Services/Community_Development/021459?ssSourceNodeId=967&ssSourceSiteId=621

http://douglascountyhousingpartnership.org/

http://www.co.arapahoe.co.us/Departments/CS/hcdsindex.asp

How Not To Become A Statistic

Do you want to become a statistic?
Do you want to lose your first home to foreclosure?

If you answered both of these questions “no”; then you should read this post.

In the last year I have discovered that the home buyers I am talking to are very concerned about becoming a statistic, a negative and sad statistic at that. The statistic is a home owner who loses their home to foreclosure or short sale in the future. No one wants this to happen to them as we have all seen and heard their stories. In fact, you may know someone who has gone through this “living hell”.

Millions of Americans have been taken advantage of by their mortgage professional who put them into a home and mortgage they really can’t afford. True?

So, how do you protect yourself? Here are two things you can do to protect yourself. First, decide on a budget for your mortgage payment. What can you realistically afford? If you currently pay $1,000 a month in rent and you can save $500 a month after paying your taxes and contributing to your retirement account, then you should be able to afford at least a $1,500 mortgage payment and maybe more because of the tax benefits. You also might have to re-prioritize your spending and your goals to be able to buy a home. So, please do your homework.

Second, only work with a mortgage professional who asks you the following question when you first talk with them—“what is your monthly budget for your house payment?” Why is this important? First, this question tells me that they have your interests in mind. Second, most mortgage professionals who don’t ask this question will tell you that you can really afford whatever payment they can get you pre-approved for. A larger commissions check for them is riding on this.

Be aware that even if with underwriting standards being more conservative we often can get you approved for more mortgage than you can really afford. For example, your budget may tell you that you can afford a mortgage payment of $1,800 a month; but I might be able to get you pre-approved for a payment of $2,600 a month. Just because I can get you approved for a payment this high, does not mean you can afford it. Remember you are the one who will be making the payment, not your mortgage professional.

This is why I ask all my clients “what is your monthly budget for your house payment?” Make sure whoever your mortgage professional is that they ask you this question too. If they don’t, run away from them and find another mortgage professional.

My Favorite Clients to Help

In my 10+ years in the mortgage business, my favorite clients to help and serve have been first time home buyers. Why? There are three reasons. First, is the excitment of helping someone or a couple fulfill the dream of owning a home. It is very rewarding! At a recent closing a young lady broke out in tears of joy when the closing was complete.

Second, I have found first time home buyers are "hungry" for information and very willing to learn. I adore this trait in first time home buyers as I love to educate and inform people. This spring I was helping a young couple less than one year out of college and their parents were concerned that they were "biting off more than they could chew" as they were buying a $230k home in south Aurora. They were both from Kansas where home prices are much cheaper. I reassured them that they were not as their total debt to income ratio was only 32% which is below the 36% standard that many financial advisors recommend.

Third, first time home buyers are very appreciative of my services. I must admit I enjoy their compliments. I use my 10+ years of experience to make the process as easy and smooth as possible. I have had many first time home buyers comment at or near closing, "this wasn't so tough" after the horror stories they have heard from friends and family. Next, I strongly encourage my clients to ask any and all questions as there is no such thing as a stupid question with me. This summer one lady finally asked me about a week from closing, "Lonnie, are you sick and tired of all my questions yet?" I told her, "No, and keep asking".