Consumer Education

Denver appreciated 19.1% over the last year alone. 60% of all homes are selling over asking prices. The Denver Real Estate Market came in strong and fast in 2022. That fact, coupled with Russia's global actions is going to have an impact on our housing market more than just the liquidity we see circulating. It will continue to put upward pressure on a rising inflationary market, increasing the cost of everything. 2022 housing buzz words will include terms like global impact, market velocity, inventory shortage, shifting interest rates, insatiable buyer demand, rising inflation, and affordability. So, what are mortgage rates doing and where do we go from here?

We are blessed to have the problems that we have and the problems that I'm dealing with the last couple weeks and the debilitating back pain. It just makes me start thinking about how minor that is compared to everything else that's happening. I'm gonna think about this in terms of housing because that's the world I live in and what impact this has on our interest rates.
Right now, we're watching the 10 year bond, which was up over two. Remember in our 30 year fixed rate, went over four. Now it's starting to come back down. It had come down to just below two. It was at 1.97. Uh, Russia started to invade Ukraine, uh, and there was this fear of higher inflation. So it was this tug of war of whether or not the 10 year was gonna benefit from that of this flight to a safety as people move their money away from stocks and into bonds, or if we were going to continue to go up with this risk, uh, and threat of inflation, which was pushing rates up to who's gonna win well today, today risk wins today. There continues to be a flight to safety.As we see in Russia, there's a run on the banks right now, as Russia just increased their Central Bank Rate. What we call fed rate. They increased theirs from nine to 20% overnight because of this run on the banks. People don't wanna keep their money in the savings account. So what they're trying to do is raise that interest rate on the savings account and say, "Please keep your money here". They wanna pull it out and they wanna put it somewhere. The Ukrainians are turning to Bitcoin and they're putting their money in Bitcoin today to get it out of its government currency to yield it somehow. And somehow that's the easiest access is to buy Bitcoin. Bitcoin is the beneficiary of that. It's going up, but I can't quite figure out if that's really a safety net. I mean, gold used to be, which is kind of dismissed today. And, asI look at this and try to think of Bitcoin as the answer. I can't wrap my head around that.  I feel like the Ukrainians are pushing the value up and they're buying it at an increasing cost. And as they buy it at an increasing cost and they push a price up, will that price drop back down again and lose a lot of their value? 
So as inflation continues to go up, this fixed cost of a mortgage payment is gonna help you offset rising rates. If, as a hedge of inflation, real estate continues to be rockstar it's at the top of the investment pile in my book and with interest rates as low as they are now, seemingly going lower this morning, we're at 1.77 on the 10 year treasury. So the today risk is that inflation could come back. The fed has said that the 50 B increase in March is probably off the table as Powell has to figure it out. Did he wait too long?
The answer is yes, but you couldn't have known that. Hindsight's 20/20, right?
Did he say that inflation was temporary for too long?
Did he dismiss it as just this passing of this coronavirus and, and say that the economy was gonna come back, and everything was gonna be fine?
And then of course the timing of Russia invading Ukraine. Who could could have known the timing of that. And the impression on that on trying to curb inflation when oil prices are going up and the cost in Russia. Russia is the number one supplier of fertilizer. So the cost of our vegetables and our produce in the spring is gonna go up. The cost of microchips, if China decides to back Russia and take Taiwan, Taiwan is the number one supplier of microchips, that's gonna increase the cost of everything.
The world's events and tragedies affect us all beyond finances and interest rates. The emotional effect also plays into our economy, even though it's "not happening here" it's still happening and affecting millions of people. Please listen to this episode as we talk about how this affects what we personally can control, our financial empire through real estate. Please tell me the thoughts you have on this current situation in Ukraine. 

Run through this list of five things you can do to avoid delaying closing, or botching up the entire deal.
 
1. Changing jobs.
Sometimes you don't think about it. You're like, but I took a job that has better pay or better opportunity. Well changing jobs and pay, changing your pay structure could disqualify you for that loan. So if you go going to do it, which you can, but if you're going to do it, make sure that you talk to your lender, give them all the specifics for your new job and have them run the scenarios to make sure that that job still qualifies you for this purchase.
2. Paying your bills on time.
Nobody wants to or sets out to paying bills late, but this time is critical. So a lender will have pulled your credit prior to you going under contract. We're gonna have to pull your credit again, three to eight days before closing, if you have a jumbo or conventional loan, we don't have to do that for FHA a and VA. But if I have to pull your credit again, and now I see a judgment or a collection, or I see higher balances or a new credit card, well, I have to stop and assess the damage that might have done to your credit score and your ability to afford this home. So lay low on the credit use during the period of time, make sure that you're staying in communication.
3. Communicate! You have a full time job, and I get that.
But as your lender, it's my job to get you to the closing table on time with the least amount of stress. Well, if you can't get back to me except for on weekends, or maybe only at night, it might delay the process. If I'm waiting for a documentation. So stay in communication with your lender, try to respond as quickly as possible and let them know how you like to communicate. 
4. Going on vacation.
I don't know how this works, but it always seems to be that you find the perfect home right before your trip to Mexico. How does that happen? But it does.
5. Spending your cash to close.
We wanna let you know what money you need up front for the down payment for the closing costs. If you have other opportunities that present during that period of time, you're under contract, maybe now is not the time to take on the at new investment. Make sure you're speaking with your lender. How much money specifically do I need? And in what accounts are gonna paper trail your bank accounts. We don't want you spending, maybe there's another account that we can't use for some reason, and we need the money in that account
 

Don't get outbid or underfunded due to appraisals. You might bid $20,000, $30,000, $50,000 or even $100,000 over the asking price, and it may seem obscene to you. But, if I pay $100,000 over asking, and overvalue, how long will it take to make that value back? You'll still make it back and quickly. Denver Metro appreciate lately at double digits during the past couple of years. Will you purchase this and is this the height or is this a bubble? 
We have a strong economy underneath to help ensure you will make back that additional money you spent to secure the home of your dreams. Prices of homes will not come down. Builders can't build their way out of this because of supply chain issues.
The largest group of home buyers is 30. We have the next 2 to 3 years of supply issues to contend with. So you may be asking, "How do I get in? What are some of the hacks I can use?"
Let's talk about appraisals.
Desktop Appraisals:
It had been that you could request a desktop appraisal if you know that a seller had COVID, or requests to have a desktop appraisal to avoid having people over. This means the information is gathered from comps, historical data, past photos of condition inside and out.
This has stopped, but a variation is restarting. The pandemic is no longer a valid reason. Sandra Thompson said she'd bring it back in January. That didn't happen until now. It's very small. You can request a desktop appraisal, AUS for conventional only, Fannie, Freddie, not FHA, purchased as a primary residence with a minimum of 10% down. If you do a desktop appraisal and it comes in low if it goes higher than 90%. Let's do the math. $600,000 home. You put $60m000 down. If the value comes in at $560,000, now the loan is no longer at 90% because of that. If that happens, Fannie and Freddie will keep using a desktop appraisal, it won't go away.
When do you want o use a desktop appraisal?
Absolutely you want one if the listing agent has pictures of the home that are better than the current conditions.
You've done the walk-through, you'll do the inspection. But from a value perspective if I know the house has gone through some wear and tear, if it's currently being rented, or there are extenuating circumstances that would detract from the overall experience of the appraiser when they walked through it. What if the home backs up to a grocery store? Is that a distractor? No. But if there's nothing hiding that. That may affect the experience of the appraiser again. They are supposed to be completely unaffected by these factors, but they are human.
When you do not want to use a desktop appraisal?
When you are on point, remodels done, etc. when you want measurements to be done, you want a full report.
The benefit of a desktop appraisal is that anyone involved can give it to the appraisal company - photos, comps, etc. to the appraiser to evaluate. The agents can meet the appraiser at the home with a comparables package. 
Speed and price are factors too. It may be faster if there are not many appraisers in the area. Denver - appraisers are bored. Not enough for them to do.
This is coming back as an option March  6.
Appraisal Waiver
An appraisal waiver can get when you run through the AUS and it tells you that data from Fannie and Freddie, had a loan, and it was insured by Fannie or Freddy. That database can determine the appropriate value of that home based on the appreciation numbers that exist and past history. The value that is put in the file was within the bracket too.
Example: listed $739k, $851k offer, and got appraisal waiver?
This means you do not need to order an appraisal as long as the parameters of that loan don't change.
What if you put 20% down, and then changed it to 15%,? You could lose the appraisal waiver because you changed the parameters of the loan.
They can be run before you go under contract. If you don't get it, the loan will be terminated based on the non-fulfillment of that contract.
 
Appraisal Gap Insurance.
If you go in with an asking price of$739,000 and offered $851,000, what if you don't get the waiver? "I'll cover the gap". 20% down, shift the loan to value and absorb the difference and not have that buyer bring extra to the closing table. This is also known as mortgage insurance.
Feels like cash is king. It's extremely competitive.
What are the disadvantages if I don't have cash?
In the last 30 days in the Denver market, 18.7% of the closings were done with cash. The remainder had a loan. You have only a slight disadvantage, but you are not in an end-all situation.
Know your appraisal options. The Rueth Team Fairway Mortgage can do a TBD underwrite before you find the property so you can close it in 8-10 days. Learn more about this option by calling our office.

In this episode, we talk about how volatile interest rates are and what you can do to avoid the heartbreak of not qualifying for the home of your dreams. 80% of Americans 75% of their net wealth is in their singular home. What about the number of people in the 80% that don't have a home? They just lost 75% of their opportunity to build their net wealth. They are relying on their 401K, basic savings. 
What if the jump in interest rates put you at the 50% balance to debt ratio. Your options thinned out quickly. You are now high risk, with less available for a percentage down, so the interest rates are higher. You need to be strategic and bring all the options out to explore them so you can get the house of your dreams.
The situation with Russia and Ukraine is affecting the markets and the interest rates. You need to have current information and not rely on an older lender letter. You will be heartbroken when you no longer qualify for the home you are searching for. Make sure your interest rate is secure. 
Interest rates are going up with the Fed too. Rates jumped up last week to over 7%. 
It's a fair question... why are interest rates rising? A combination of international politics putting a strain on inflation and large flights of safety to sell stocks, it's causing turbulence on our market. When rates jump and move around so quickly, it affects affordability. Knowing the affects on conforming, high balance and jumbo loans is important so you can advise your clients on their next move! Listen to this episode for helpful tactics and information from Nicole Rueth.

Sure you can buy your rate down, but does that actually benefit you the most? What about eliminating some debt on something with a high rate of interest or a high balance? What about mortgage insurance? Do you need it or can you buy your way out of that with the money you would have used to buy your points down? There are so many factors to consider and no one right answer. PLEASE listen to this episode to have a better list of options before you make that decision.

Creating or finding a home to age in place can be difficult. You may feel you don't have options to move.You could pull equity out of your home, but you still need that age-appropriate home. Enter the Home Equity Conversion Mortgage for Purchase (HECM).
Let's say you are living in a home with a $750,000 value.Your mortgage balance is around $150,000.That leaves you with $600,000 of equity, minus closing fees and costs nets you around $550,000 profit upon sale.It can be tough to find an age-appropriate home for $550,000 today.
Nicole's guest, Gabe Bodner, Reverse Mortgage Specialist at The Rueth Team Fairway Mortgage, gives an example of how this works.
BUT, if you take the $550K, find a home for $650K to buy.You are able to put 50% as a down payment - that's $325,000.If you walked away from your previous home with $550,000, that's a boatload of cash AND a new age-appropriate homeAnd, there is no required mortgage payment with the HECM. When the loan comes due, the home is sold to pay off the loan. Since your home will continue to build equity, you or your heirs will still end up ahead and you will have made no mortgage payments.

Back out now? Or stay in the game? Well, the politician's answer is, "It depends." Every home and buyer situation is different, so this question should be assessed as such. If you or your buyer are unsure about anything in the inspection report, are unsure of any conditions, or feel it's just not the right move, have an "A-Team" on standby to answer questions and assess situations on a case by case basis. Get some quick tips to determine the best course of action in this episode of the Double Comma Club, "When should you back out of a deal?"
In this episode you'll also get a taste of Nicole's dream in an unlimited future ala Kenny Rogers.

This episode is for agents AND sellers.  With inventory so tight, we have to be on point with our lending solutions because BUYERS NEED AN EDGE.  Here's what that looks like appraisal gap insurance, appraisal waivers, earnest money guarantees, and loan objection waivers. PLUS all the creative loans to match the opportunity.
What is a TBD underwrite? This is where you disclose the loan, gather all income and asset documentation, we completely underwrite that file for a particular TBD purchase price, with estimated insurance, taxes and amount down, qualify to verify income and assets, then all you need is the property. That can give you the ability to waive the loan objection. Would this help you the buyer gain an edge? You bet it will!
Nicole and her team are specialists in this to help your buyers, agents. Buyers, ask your agent to get help with this. There are more tips in this episode that will help you purchase the property you have found. This will tell people you are good as cash when it comes to the loan.
We still need to go through the inspection and appraisal process, but as a verified cash buyer you have a huge advantage. She also covers appraisal gap insurance and the logic behind it.
There are bonus tips for credit repair.

Some people are better off renting. You'll have to decide where you are today. You can go back and forth from owner to renter and back again. Please consider these big points.
Homeownership advantages:
Building equity/wealth
Adding to your credit profile
Stability - especially with children in school districts
Possible tax advantages
Ability to upgrade to add-on, remodel - make it your own.
Disadvantages to buying:
Costs more upfront
You have to pay for the maintenance
Apply and get approved for a loan
You can lose money
Renting Advantages
The epitome of flexibility and freedom
Less up front costs, other than security and first and last.
No responsibility for maintenance even thou
No ancillary fees such as higher insurance and taxes.
Negatives to renting:
Not building equity
You'll possibly have to move several times that are not in your control
No long-term tax advantages