Category Archives: Mortgages

Economy, Mortgages

Why does it matter if the Fed raises rates?

Good question.

When you take out a mortgage to buy a house, you are essentially borrowing a large sum of money from a bank or other financial institution, which you agree to pay back over a long period of time with interest. The interest rate on your mortgage is the cost of borrowing that money, and it determines how much you will ultimately pay for your home.

Photo by Precondo CA on Unsplash

The Federal Reserve is the central bank of the United States, and one of its main responsibilities is to set monetary policy in order to keep the economy stable and healthy. One way that the Fed does this is by setting the federal funds rate, which is the interest rate that banks charge each other for overnight loans.

When the Fed raises the federal funds rate, it makes it more expensive for banks to borrow money, which in turn makes it more expensive for you to borrow money to buy a house. This is because banks pass on the higher costs to their customers in the form of higher interest rates on loans, including mortgages. As a result, when the Fed raises interest rates, it can make it more difficult and expensive for people to buy homes, which can slow down the housing market and the overall economy.

On the other hand, when the Fed lowers the federal funds rate, it makes it cheaper for banks to borrow money, which can lead to lower interest rates on loans, including mortgages. This can make it easier and more affordable for people to buy homes, which can stimulate the housing market and the overall economy.

In summary, the Fed’s decisions about interest rates can have a big impact on the housing market and the overall economy, as they affect the cost of borrowing money to buy a home.

If you are looking to buy or sale a home in the Colorado Springs area, please give me a call at 7194406626.

Colorado Springs, Mortgages, State of The Market

CoS: State of the Market / Terms of Sale

Conventional is dominating the market in volume of sales month to date, accounting for 46% of sales. Here is the distribution of those sales (and cash, VA and FHA) across the market for the month in $50K incremements.

Colorado, Colorado Springs, Economy, Mortgages, State of The Market

CoS: Top 10 Subareas July 2021

Here are the top 10 subareas month to date. Meridian Ranch continues its reign at the top!

Here’s how to read this chart:

Meridian Ranch has 29 sales month to date at an average closed price of $515K, a median of $512K, an average closed to list price of 103.72% (selling for 3.72% above list price), an average of 6.17 days on the market, a median of 4 days on the market, an average seller’s concessions of $244 and a median seller’s concessions of $0.

Seller’s concessions are often referred to as closing costs. I dislike this reference because it lends itself to confusion; I like the more accurate description of “seller’s contribution (concession) to the buyer’s closing costs

Colorado Springs, Economy, From the inbox, Mortgages, Real Estate Investing, State of The Market

Is Cash King?

Cash has the (significant) advantage of no appraisal but does it command the discount many feel it does? Let’s look at the data.

Below is a breakout of the purchase types of the sales YTD in the PPAR region. You can see there have been app 9,856 sales, 1646 of which have been cash. These on the average are paying 3.66% above list price. Contrast that with the 3.87% for conventional, 3.84% for FHA and 3.42% for VA and it’s immediately apparent that cash isn’t currently commanding the discount it has a reputation for.

From the inbox, MIlitary, Mortgages

From the inbox: I see lenders advertising lower than 620 VA loans. Is this for real?

Short answer: yesno. Read the fine print.

Longer answer: the VA actually has no minimum credit score for insuring the loans of qualifying servicemembers. However, most lenders will require a minimum credit score.

There are lenders that offer loans to qualifying servicemembers with lower credit scores. There is always a cost, though. It’s usually in the form of a higher interest rate and higher loan costs.

That said, this can still be a good decision. There is something to be said about locking in housing costs vs renting, for example. But you have to run the numbers and do a cost benefit analysis.

From the inbox, Interest rates, Mortgages

From the inbox: Should I roll debt into my mortgage?

I’m in a coding bootcamp but wanted to take a moment over lunch here to answer this question that I’m seeing pop up via email, PM and I’m also hearing more ads on the radio offering this.

I think this is a marketing tactic related to the rising interest rates and home prices (as companies try to generate additional revenue).

This is not legal or financial advice but I believe the short answer is: it depends.

The longer answer is it depends on your circumstances. While rolling high interest debt into your lower rate mortgage may sound good , there are a number of variables to consider, two of which are:

  1. If you take the surplus of income and turn it around into paying down your home mortgage, that could be a good thing.
  2. Doing so raises the value at which you have to sell your home (in a peaking market, this may cause trouble for you, if you have to sell).

What do I mean by the first option?  If one has credit card debt of $25K that’s costing $450 in interest monthly, you may be able to roll that into a mortgage refi. But consider that may raise your mortgage payment. If it does so by $125, that leaves you $325. If you are disciplined and build an emergency fund with that or invest it or turn it back around into paying down the principal of the home, I could see this being a good option.

However!!! (emphasis intentional), know that it raises the amount you need to sell your home at by that corresponding value plus some (if you use a percentage based commission agent to sell, for example). If you are looking to stay in your home long term, that may still be a good option. But – and here’s the bottom line of this post – please understand it’s putting you in a position where you must have continued market appreciation to sell (unless you have a lot of equity). 

And if you have a short horizon on home ownership, or are looking to sell soon, this could put you in a bad spot.

Colorado Springs, Home Improvement, Mortgages

From the inbox: how much should I budget for home maintenance?

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photo from OpenClipArt.org

Ooh. This is a good one. The general rule of thumb is one percent of the purchase price of your home, annually. Jeff Brown, from Main St, has quite a good breakdown on what this means for you as a homeowner.

For a home price of $200,000, that’s $2,000 annually it’s recommended you plan for. You may not always spend that much but I do recommend you save it…because there will be times you do.

Last year, I had to replace my roof ($1K deductible) and repair some damage from a washer that failed ($15 part, $1K deductible).

Knock on wood and I really shouldn’t say this but this year we have been fortunate (so far) and not had any major home maintenance issues.

 

Mortgages, Short Sales

Mortgage Debt Forgiveness Act extended for 2015

If you owe more than your home is worth, there may be more options than you know.  One such option is a short sale, in which the bank agrees to allow you to sell the home for less than the mortgage balance owed.

If the home is your primary residence, you may also be exempt from paying taxes on the forgiven debt.

What does this mean?  If the lender forgives $10K in debt, the IRS may treat this as income, meaning you could owe taxes.  This Act – the Mortgage Debt Forgiveness Act – is meant to exempt you from those taxes (provided you meet the conditions, etc.).

Questions?  If you’re in Colorado, I’d love to help.  If you’re in one of our sister states, let me know and I will connect you with the local agent!

This is not legal advice.  Always consult a CPA, Attorney and local Realtor as needed!

Colorado Springs, From the inbox, Mortgages, VA loans

From the inbox: Can I really buy a home for $780 up front on a VA loan?

I get variations of this question a lot! The short answer is, “Yes, in Colorado Springs and with a VA loan, it is possible (other areas, please consult your local Realtors!).”

Longer answer: there are three costs to a home buyer generally in the purchase process.

1. Earnest money: this is “good faith” money a buyer puts up to compensate the seller if they (the buyer) breaches contract for a non-protected reason.  I’ve had a lot of success w/$500 earnest money in town.  When that hasn’t worked, we try $750 or $1,000. Note: coordinate with your lender but you can often get this money back at closing.

2. Inspection costs: a home inspection costs about $280 in Colorado Springs. This is a sunk cost; even if you choose not to continue with the purchase, this isn’t reimbursable in the normal course of a purchase.

3. Appraisal: there is an appraisal cost that some lenders will charge upfront, others charge as part of the loan costs.

In sum, it is entirely possible to buy a home for an upfront cost of $780-$1280, depending on the lender and the earnest money required…and that earnest money can often come back to you.

Questions, please give me a call! If you’re looking to buy or sell in Colorado Springs or Denver, I’d be honored to earn your business.

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