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Month: October 2015

New Federal Laws Impact Buying a Home (TRID)

As of October 3rd, there are new regulations in place that impact new loans and the process involved in buying a home.  Prior to this, buyers received  a Good Faith Estimate (GFE) when applying for a loan and a Settlement Statement (HUD-1) prior to closing to show what the final costs  in the transaction would be.  These are replaced with the Loan Estimate (LE) and the Closing Disclosure (CD), respectively.

So what has changed?  The LE must be delivered to the buyer 3 days after applying for a mortgage.  Also, the figures provided by the lender are more precise than they were with the GFE.  You’ll see what your monthly mortgage payment will be and how much money you need to bring to closing.   This will help you know what you will owe and whether or not you can afford a home.

With the CD, you will receive this 3 days prior to closing (not 15 minutes prior as has happened in the past).  The LE and CD are in the same format so it is easy for you to compare them and identify any changes.  If the lender gets a figure wrong or an amount owed on the CD is higher than the LE, the buyer may be due a refund.   Be mindful, if any changes occur that impact the loan (job changes), a new CD has to be drawn up and an additional 3 days added before you can close.

To help the process go smoothly, you’ll want to work closely with your REALTOR and with your lender to make sure that there are no issues that could prolong the process or end the deal altogether.


 

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Benefits of Home Ownership vs. Renting

The local economy is such that owning a home has benefits that outweigh those of renting.  The economy is more healthy and housing prices are at least stable and may continue to appreciate.   If you’re a first time home buyer or have been sitting on the fence waiting for things to improve after the housing crisis, now is a good time to buy a home.  Here’s why:

Low interest rates.  We are still benefiting from low interest rates for mortgage loans.  In fact, rates are still averaging below 4%.  So if you buy a home for $200,000 with 3% down at a 3.9% interest rate, your monthly payment is estimated to be $1296 per month.  With the demand for rental units and the resultant increase in rent, it is much better to own.  For example, the average rental price for a 2 bedroom apartment in Denver was over $1700 per month, according to Rent Jungle.

Build equity in your home.  Equity, the difference between what you owe on your home versus what you could sell it for, will continue to increase with every payment you make on your mortgage.  Compare this to paying rent, you will never see the money you pay each month ever again.  In addition, your equity could also increase due to price appreciation on your home.  That is, as the overall market improves, the value of your home could improve as well.  This means you can sell your house for more than you originally paid for it, thus increasing your equity and ultimately your net profit when you do sell.

Tax benefits.  With home ownership comes the benefit of tax deductions:

  1. Mortgage Interest: You can deduct the interest you pay with your monthly mortgage payment.  Over the course of a year that can add up to be quite a deduction.
  2. Property Taxes: The property taxes you pay yearly are deductible.
  3. Private Mortgage Insurance: If you’re loan requires you to pay mortgage insurance, you can deduct this amount from your taxable income.
  4. Interest on Home Equity Loan: You can deduct the interest you pay on a Home Equity Loan.

Fixed monthly payment.  When you have a fixed rate mortgage, your monthly payment is static as compared to rent.  With rental rates rising, you can expect your monthly rental payment to go up at some point, sometimes up to several hundred dollars.  This can break someone’s budget.  With a mortgage, your payments are the same throughout the life of the loan.  There may be some fluctuation if your property taxes go up or if your homeowners insurance premium goes up but not to the degree that rent rates may go up on you.

Pride of ownership.  When you own your own home, it’s just that, YOURS!  You can decorate the interior to your liking, improve the landscaping and basically give the house your personal touch.   Then, down the road when you decide to move to a bigger house or to another location, you can sell your home and keep the profits or keep it as an investment property, renting it to others.

So look at it this way, paying a monthly mortgage payment is likely cheaper than rent, will build equity and thus potential for a return on your investment and give you tax benefits.  The only person financially benefiting from your rent check is your landlord.  These are some of the great benefits of owning your own home.  Now that the market is stable and growing here in Northern Colorado, owning can only benefit you financially as a long term investment.

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Balloon Fiesta!

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Every October, the first two full weekends celebrate the Balloon Fiesta in Albuquerque, New Mexico.  People from all over the world come to fly their hot air balloons!  Observers can enjoy the excitement of the mass ascension when all the balloons take off or watch the America’s Challenge Gas Balloon Race get underway and many other activities.  It’s fun for the whole family!

P.S. Bring your camera

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