If you're a buyer in the Denver area home market, not financing through FHA, but don't have enough cash for a 20% down payment, you may have a challenge ahead of you to find a lender.  Lately banks have tightened their lending practices for home mortgages, but there are still some who will offer a loan to buyers with less than the traditional 20% down.  The problem is, once the buyer is able to find a lender, they still have to obtain private mortgage insurance (PMI), which protects lenders by paying off your loan if you default.  And that is proving harder than most expect.

Over the past several years, when lenders were willing to take more risks and offered loans much more liberally, it was common for mortgage insurers to approve someone for PMI simply because the bank was willing to finance them.  Today, however, a record number of those low down payment mortgages are now in default and the insurance companies are losing billions of dollars.  They've decided it's time to make some changes. 

Now, insurers have enacted tighter standards than most banks, which has resulted in them insuring fewer loans.  Once very uncommon, borrowers are now being turned down for PMI even though they have been approved for a mortgage because of a low credit score or high debt-to-income ratios.  There are also some other restrictions insurers apply that are related to the property as well as the loan type.

If you are looking for a Denver area home and will require PMI, avoid these disqualifying factors:

• low credit score - insurers are typically requiring a score over 720

• a down payment less than 10% of the loan amount for a single family home/15% for a condo

• a debt-to-income ratio above 45%

Even if you cannot qualify for PMI because you don’t have enough of a down payment, you might still be able to qualify for a mortgage through the federal government.  FHA loans are offered to borrowers with a higher debt-to-income ratio and credit scores as low as 620, and VA loans are available to veterans.

Are you ready to start looking for a Denver house? Whether or not you've been pre-approved for your mortgage, give the Bandy Team a call!  If you're hoping to buy a home in the Denver metro area, or in some of the other beautiful towns along the Colorado front range, like Parker, Franktown, or Castle Rock, we are your local real estate experts.  We can help you navigate the Denver real estate market to find your perfect home!

Marianne Bandy
Tips for Denver Area Home Buyers

Right now is typically a slower season in the Denver real estate market, and nationwide.  Most people are consumed with the holidays and are not motivated to move during the colder months for a variety of reasons.  But, this year, it might just be the best time in a generation to buy a home in the Denver Metro area.

According to Freddie Mac, interest rates have dropped to an historic low, with the average rate on a 30 year fixed mortgage at 4.78 percent nationwide - Denver area lenders are also offering mortgages at rates under 5 percent. 

Bankrate.com is also reporting a record low in 24 years, with an average rate of 5 percent offered by large lenders for conventional mortgages.

While it may not seem like an ideal time of year to be buying or selling real estate, often just the opposite is true.  Sellers and buyers, alike, are serious about negotiating and closing a deal, otherwise they wouldn’t be in the market during the holidays.  Combining motivated sellers with low interest rates is a recipe for success right now!

And, as an added bonus, the federal government has extended the tax credit for home buyers ($8,000 for first time buyers and $6,500 for repeat home buyers) until April 30, 2010.  Right now is looking like an ideal time to be in the market!

Whether you’re thinking of buying or selling a home in the Denver metro area, or in areas like Parker, Elizabeth, or Highlands Ranch, contact the Bandy Team for all of your real estate needs.  We will guide you every step of the way to achieving your dreams!

Marianne Bandy
Denver Relocation Information

With word just out that FHA is about ready to tighten the rules for borrowers, the lending scene is about to change for Denver home  buyers.  Since the Great Depression, FHA has helped those with less than perfect credit buy homes by guaranteeing the loans.  Over the years, it has provided an alternative financing process that some sellers looked down on because it took longer. In recent boom times, FHA was only called on to guarantee about 3% of all mortgages. Buyers not only got their loans, they got them with as little as 3% down, and with credit scores in the 500’s, though most participating lenders required a score of 620 or more.  Sellers could contribute up to 6% of the closing costs.

Over the last few years, FHA suddenly has been called upon to back 30% of mortgages and 20% of refinancing deals on homes up to $729,750.  In an era when many homeowners have defaulted on loans, FHA cash reserves are at the lowest since 1994 and serious losses are projected for the next five years with over 71% of the losses coming from loans already on the books.

To prevent further losses, HUD Secretary Shaun Donovan recently outlined a new plan to force potential buyers “to put more skin in the game” and stabilize the system.  The proposed new rules would require buyers to put up a 5% down payment, raise required credit scores to a yet undetermined level, and decrease the amount of contribution the seller can make to the closing costs.  The agency is also considering whether to increase the monthly insurance fee borrowers pay. FHA is soliciting comment for 30 days on its proposals and the comments received will be considered in the development of a final rule.

HUD is also going after lenders who repeatedly make questionable loans.  All lenders will be held accountable for losses, and will be ranked on a “lender’s scorecard” of banks who make FHA loans. Lenders will have to submit annual financial reports and maintain higher net worth. Weak lenders will lose their ability to process FHA loans.  The agency does not want to be the source of the next “subprime crisis” in lending.

While getting the agency on a firmer financial footing may improve its long-term health, some marginal buyers may be pushed out of the housing market. This may appear to be a good idea, but many critics question whether the amount of the down payment is really what puts these loans at risk.

These proposed changes will have a negative impact on the current housing recovery and will delay the lowering of the unemployment rate. Now that prices and interest rates are low enough to qualify for an FHA home loan home buyers may no longer qualify. It’s ironic that just when they announced the extension of the $8,000.00 tax credit, these FHA changes were announced.  Who will need the tax credit if they can not get a loan? Please contact your congress representatives and FHA to voice your concerns.

In any case, some type of changes are likely to come soon.  If you are looking for a home and planning on financing through FHA, talk to The Bandy Team at RE/MAX Professionals today to discuss your options before you proceed with your home search in the Denver metro area. We can show you beautiful homes in Stapleton, Larkspur, Parker, and other communities, as well as familiarize you with the fine points of the tax credit for first time homebuyers and repeat homebuyers.

Marianne Bandy
Local Denver Resources

This time last year, the Denver housing market was just beginning to show the impact of the nation’s recession.  Now, one year later, our market is showing strong signs of recovery with a rising rate of resales (existing single-family homes, condos, or townhomes that have sold at least once before).  According to data recently released by Metrolist, Inc. (metro Denver’s MLS), the local housing market is “normalizing.”

Below are a few quick highlights of November’s home-sale data:

• Average selling prices in the Denver Real Estate Market increased by 5.3 percent when compared to 2008 numbers - from $226,895 in November 2008 to $238,852 a year later.
• Home resales rose 23.3 percent last month, from 2,920 in November 2008 to 3,599 in November 2009.
• Single-family home sales were up 16.8 percent from November 2008.
• Condos and townhome sales were up 50.09 percent from a year ago.
• The average selling price for single-family homes was up 9.5 percent (at $265,498) from November 2008.
• Average days on the market for resales dropped almost 14 percent to 81 days in November from the same month a year ago.

While some of the numbers have dropped from October of this year, including total sales (down 9 percent), this is to be expected in a normal market, where we see drops in sales during the holiday season.  Another sign that the Denver housing market is returning to normal is the amount of move-up buyers is increasing.  During the first part of this year, virtually all homes purchased were by first-time home buyers and investors, with few current homeowners looking to move into higher priced homes.  A normal Denver metro market reflects roughly 25 percent first-time buyers, 60 percent move-up buyers, and the remainder are people who are in the high end market, or relocating from other markets.

While the tax credit for first-time buyers (that originally was set to expire on November 30) could be responsible for the uptick in sales activities, it has now been extended to April 30 of next year, and expanded to include current homeowners.  That could be a further boost to bring the housing market back to normal levels into the future.  Right now, inventory is shrinking, but is expected to increase after the new year - which is right on track.

Whether you’re sitting on the sidelines waiting to see what the Denver area housing market does, or you’re ready to find the perfect home for you, contact Bandy Homes today.  The Bandy Team can help answer your questions about our local market and show you some beautiful homes in the Denver metro area, including Aurora, Parker, and Castle Rock.

Marianne Bandy
Compare Local Denver Communities

Up till now, “short sales” have been the real estate agent’s definition of an oxymoron; they have not been short, and, in fact, many have not resulted in sales. The banks have not been crazy about doing them, claiming they are understaffed or overwhelmed. Yes, consumer groups, HUD counselors, and Certified Distressed Property Experts (CDPE) like Marianne Bandy of The Bandy Team at RE/MAX Professionals have continued to promote short sales in Denver as excellent alternatives to foreclosures. Since the early days of the Making Home Affordable program, the Obama Administration has been promising some new rules to make short sales easier to complete. 

All parties except the lenders agree that short sales help preserve neighborhood housing prices and keep homes occupied longer, which, in turn, further stabilizes prices. The process is less costly for lenders than foreclosure, though it may not satisfy the investors behind any financing deal.  Finally, on December 2, the Administration released the long-awaited rules which attempts to touch all bases and actually get short sales moving.

The new guidelines offer financial incentives for borrowers, mortgage companies, and investors to participate in the program.

• $1000 to lenders for administrative costs
• $1500 to sellers to cover closing costs or for moving expenses
• Up to $3000 towards paying the junior lien holders to release their lien.

To qualify:

• The property must be the home owner's principal residence.
• The homeowner is delinquent on the mortgage or default looks likely.
• The loan was made before Jan. 1 2009 and is less than $729,750.
• The borrower's total monthly mortgage payment exceeds 31 percent of before-tax income.

What’s unique about the new program is that it standardizes paperwork and gives the lender 10 days to approve or turn down a request for a short sale. When it’s done, the short sale must release the borrower from the debt.  During the process, the lender cannot foreclose on the property or charge fees. The new rules come at a time when at least one major bank has adopted improved software to streamline paperwork for short sales. Click here for the full text of the new rules.

What pleases sellers (and real estate agents) is that mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt. The rules also prohibit mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.  The deadlines remove a lot of the uncertainty from short sales, a relief to buyers as well as the seller and their agents.
The new rules have the potential to help three groups of Denver area residents, and as always, The Bandy Team is ready to help,

If you are facing foreclosure in Denver, and meet the criteria above, contact Marianne Bandy today about listing your home as a short sale.

If you are a potential home buyer, a short sale home is one more choice before you as you are house shopping at a time when the market is crowded with other buyers eager to use the home buyer tax credit.

If you are an investor looking for great potential rentals in Highlands, Aurora, Centennial, or other communities in the Denver metropolitan area, you can take advantage of great prices and interest rates.

For more information, contact Marianne at The Bandy Team today.

Marianne Bandy
Denver has Great Schools

The first time home buyer’s credit in effect for much of 2009 effectively stimulated home buying in Denver and the rest of the country, even though only 6% of first time buyers said the credit was the definitive thing that encouraged them to purchase.  According to a recent National Association of Realtors (NAR) survey, housing prices and interest rates were cited as more powerful factors, but along with the credit, the combination was irresistible to many buyers.  What happened in many areas was the stimulus to housing was uneven, so lower priced homes have depleted inventories, while more costly ones sit unsold. 

This situation reflects the basic economics of first time buyers who are often just starting out in their careers: they tend to buy homes priced under $200,000.  In Denver, local housing experts agree that the credit was so successful that 40% of homes sales in 2008 were made to first time buyers.  As a result, single family homes priced under $85,000 have less than a one month inventory remaining, homes from $85,000-$135,000 have a 1.8 month supply, and homes from $135,009-$210,000 have a 2.9 month supply.  Homes over $460,000 have a 20 month inventory. 

Given those dynamics, a credit just for first timers wouldn’t have done much more to jumpstart housing had not repeat buyers been put in the equation this time around.  Eventually, people outgrow their starter homes and they want to move up.  The $6,500 incentive for repeat buyers who are likely to buy homes at higher price points is expected to create a new pool of homes priced for first time buyers.

The credit does not require repeat buyers to purchase a more expensive home, so theoretically, some repeat buyers might be in competition for some of the same houses.  A smaller home appropriate for empty nesters will not necessarily be cheaper though, so hopefully most repeat buyers will be shopping at higher price points.  The credit does not require an owner to sell his home; he could turn it into a rental and buy a new permanent residence.

Unless the stock of homes for first time Denver home buyers increases, would-be buyers will be faced with several choices:

·         Buy a more costly home.  This is not a workable option for most new buyers, as it could put their payment into the unaffordable range.  Some buyers have bought homes with friends or family members to increase their buying power, but most people prefer to house their nuclear family

·         Wait for an appropriate home to become available – and possibly become entangled in a bidding war for it.

·         Settle for a home that is not really what they want

·         Wait for the newest round of bank owned homes to hit the market.  These homes tend to be priced at market value or below, but the ones with the most attractive prices either need a lot of costly work or are snapped up by investors.

·         Put off buying and miss the credit.

The best thing a buyer can do right now is hook up with an experienced real estate agent, such as one from the Bandy Team.  The agent can’t pull the perfect house out of a hat, but a good agent who knows the market can be a useful ally in finding a workable house in an area the buyer hadn’t considered or in being on the lookout for a newly-available house the buyer would like.  The agent can also be a sounding board for a buyer considering a distressed property or one that might be a step above their normal affordability.

Whether you are a new or repeat buyer, for the best homes in the Denver metro area, call the Bandy Team today! We can show you beautiful homes in Aurora, Cherry Creek, Castle Rock, and other communities, as well as familiarize you with the fine points of the credit for first time homebuyers and repeat homebuyers.

Marianne Bandy

Relocate to Denver