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The Rueth Team - Denver's Top Mortgage Company

Is the Benefit of Low Interest Rates Sliding?


By Nicole Rueth - September 12, 2020

We talk about affordability and how this year's low interest rates have given buyers the ability to afford more home.. even more home than they could have a year ago. The Denver Post came out with an article this week stating Denver was unaffordable citing the statistics of a median home in the DMAR 11 county area today vs 1 year ago.  I pulled up the September 2020 report (highlighting August data) and the September 2019 report as well as the Freddie Mac rates for the last week in August. 

​Detached

  • 2019 $459,000 median home, 10% down, 3.58% rate, P&I = $1873
  • 2020 $510,000 median home, 10% down, 2.91% rate, P&I = $1913 ($40 more).  
Attached
  • 2019 $310,000 median home, 10% down, 3.58% rate, P&I = $1265
  • 2020 $325,000 median home, 10% down, 2.91% rate, P&I = $1219 ($46 less).  

A few of things they left out that that needs to be highlighted.  
  • Attached is where the opportunities are for today's first time home buyers.  The close to list was 99.61 for attached verses 100.26 for detached. Fewer multiple offers, discounts off list, and these low interest rates are giving those buyers who are willing to look long term, beyond the current COVID environment the opportunity to get in and still build equity.  Attached saw a 5.86% gain in year to date median price growth.
  • Small shifts in interest rates still make a difference.  This past week rates dropped again to 2.86% dropping today's median priced home to a P&I of $1900.  And only 1 week later in 2019 we saw rates go up to 3.78% where they stayed thru the end of the year.. making the 2019 median price home P&I go up to $1920.  Making 2020 $20 LESS expensive on a monthly basis.
  • Income is a part of affordability that everyone (including DP) seems to ignore.  We are in the middle of a pandemic with an unemployment rate of 8.4%; meaning 91.6% are employed. Denverites who are employed experienced an average increase of 2.90% increase in Hourly Wages over last year and a 3.48% increase in Weekly Earnings.  The difference in hourly and weekly?   Weekly accounts for more hours worked in a week..which means people today are making more per hour and working more hours per week.
  • Taking income into account, in 2019 a buyer needed a monthly income of $4355 a month to afford a P&I payment of $1873 at a 43% debt to income ratio.  With a 2.90% year over year hourly increase, their income today is $4481/mo.  At the same 43% DTI, that affords a P&I of $1926... MORE than the $1913 needed in the above example for today's median home with 10% down.  IF you lock in today at 2.86%, that purchase price just went up to $517,000.. how about offering an appraisal gap? 

Bottom Line: Affordability is getting strained by the lack of supply, increased demand, multiple bids, and ultimately rising home prices.. but we aren't there yet ... NOW is the time to buy! ... BEFORE home prices continue to increase and interest rates go up (Real Estate Agents... if you missed Friday's market trends, hop over to our agent ignite FB Group.. I'll tell you exactly WHY rates are going to go up next year).

Want to know how much you can afford today?  Give me a call.  We would be honored to support your leap into homeownership and building wealth through Real Estate!

Nicole Rueth
303-214-6393

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Loans: Knowing Your Loan Options


By Nicole Rueth - September 9, 2020

In today’s financial market, there are dozens of real estate finance options to choose from, and those options typically vary depending on the type of property you’re buying, the amount you need to borrow, your credit profile, and the condition of the property. When evaluating your financing options, it is important to work with a lender who has experience in the various loan types guiding you on how to best leverage your personal equity while maximizing your unique goals and circumstances.

It always pays to know your loan options. At the Rueth Team, we are committed to finding the best possible solution for each of our clients’ unique needs. Read on to learn more about the loan options that the Rueth Team can provide for you:

Conventional Loan – Less Restriction, Same Results
Conventional loans provide a variety of options for individuals in the real estate market, with as little as 3% down and a 620 credit score.  A conventional loan is defined by a county’s loan limit and provides its borrowers options for no mortgage insurance, flexibility for time on the job or use of future income, and the combination of loans to avoid mortgage insurance. For clients with strong credit profiles, conventional loans often provide the most cost-effective solution.

FHA Loan – Minimize Up-Front Expenses
Federal Housing Administration (FHA) Loans can help reduce the amount of money needed for closing, a down payment, or if a buyer lacks the necessary credit to qualify for other loans. These variations can make securing the funding for a home purchase easier for those who qualify. FHA loans are so flexible that you can have a credit score as low as 600, a recent bankruptcy, foreclosure or short-sale, and a less favorable debt-to-income ratio than is required for a conventional loan. The cost of securing an FHA loan is the upfront mortgage insurance in addition to the monthly mortgage insurance. Unlike conventional loans, FHA MI does not fall off once the loan drops below 80% loan to value.

VA Loan – Active Military and Veterans
The VA Loan is specific to those who have or are actively serving in the armed forces. Only the individual themselves, or a qualifying family member, are eligible to receive this type of loan with 100-percent financing available and no monthly mortgage insurance. VA Loans are an incredible option for those who have served our country, as they allow for the lowest credit score, the highest debt-to-income ratio, and the shortest time since any personal credit issues. They typically also have the lowest interest rates, affording our Veterans the lowest possible monthly payment.

Jumbo Loan – Purchasing in a High-Priced Neighborhood
Jumbo loans allow buyers to purchase a high-priced residence. Jumbo loans typically start $1 above the area conforming loan limit. For example, in the Denver market, the 2020 conventional loan limit is $510,400. The “High Balance” conventional loan limit is $575,000 (based on higher median income by county). This means Jumbo loans can start at $510,401 or $575,001, depending on the cost-benefit to the buyer. Often, Jumbo loans require more documentation and stronger credit profile borrowers since they are larger loan amounts.

USDA Loan – For Living Outside the City
If purchasing in a designated rural area, USDA loans offer buyers the ability to purchase with no down-payment. You will want to check the USDA map or talk to your loan officer as USDA defined areas are typically outside of major populated areas. USDA Loans require less down payment, lower interest rates, and smaller mortgage insurance fees than FHA, giving buyers a low monthly mortgage payment.

HECM Reverse Mortgage – Reap the Reward of a Long-Term Investment
Home Equity Conversion Mortgages are specifically designed for individuals ages 62-years or older who have established equity in their home. By optimizing this equity and working in partnership with your Financial Advisor and family, an individual can purchase a home and never have a mortgage payment again, or take advantage of building wealth via alternate opportunities.

Physician and Dentist Loan – For Medical Professionals
A loan type specific to those in the medical, dental, or chiropractic fields can receive special funding targeting their specific needs. Recognizing a professional’s path from Medical Student to Resident to Practice, this loan program offers solutions at every stage. Benefits include 3-to-5 percent down, no mortgage insurance, no prepayment penalty, the use of future income and forgiveness of student loan debt.

Renovation Loan – Buy a Fixer-Upper
If you’ve found a home that needs a lot of TLC, a renovation loan might be the perfect option. A renovation loan is similar to a construction loan and a purchase rolled into one. These loans give the buyer the option of rolling in renovation costs based on a “to be” value. Renovation loans are available for primary loans, second homes, and investment properties, so you can buy a property at a lower price point, knowing improvements will be made through the money borrowed.

If you’re ready to purchase your first or next home, the Rueth Team is here for you! Contact us today for all of your mortgage and real estate financing needs.
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Opportunities in the Attached

DMAR Market Trends Report - September 2020

By Nicole Rueth - September 4, 2020

The September Market Trends report is out. Amid COVID-19, social justice rallies, a crippled economy, millions out of work, and a contentious election, the real estate continues to hold the American economy up.

Lawrence Yun, Chief Economist at the National Association of Realtors, says if not for the crippled economy we’d see 20% more sales. That’s HUGE and signifies how big market demand is for homes. Mortgage applications, another indicator of how strong the market is, are up 28% compared to last year - and it’s all thanks for millennial first-home buyers.

And record-low interest rates are fueling demand even more.

Now is the time for Realtors and brokers to be leaders and educate clients about what’s happening in the market, even if the news isn’t great for keeping buyers happy. The news of the day: lack of inventory, multiple offers, yet a lack of expected home value sold increases. Average and median closing prices both landed under a 1% increase. The year-over-year average has been about 11.7% while the median closing has gone up 9.18% from last year.

Attached and detached homes both saw a year-over-year increase, but detached is experiencing a much higher increase now. Many buyers want to move out of dense attached neighborhoods in cities due to COVID. However, as older generations look outside of cities, first-time buyers are scooping up the available attached homes.

Is moving out to bigger homes with more land the right move for your clients? As leaders and educators, you need to pose that question to buyers who are thinking about TODAY as opposed to TOMORROW. Whenever the world returns to normal post-COVID, demand will return to the urban areas - and they should be thinking about their future.

The stock market gains and transfer of wealth to millennials will tempt buyers to spend more on a home outside the cities. Detached homes valued over $500,000 have seen the largest increases this month. However, thanks to millennials staying in cities on tighter budgets, attached homes valued between $300,000 and $750,000 experienced the highest increase in attached homes sold. While the overall economy struggles, the Federal Reserve has said they’d like to see inflation - the arch-enemy of bonds - go past 2%. While Fed actions don’t directly affect interest rates, we can expect 30-year mortgage rates to go up as well. The last time the Fed slowed down on mortgage-back securities purchases in October 2018, rates consequently went up.

If your clients need a mortgage lender who knows how to strategically act on locking in a mortgage rate to gain the best advantage possible while ensuring they’re best prepared to act quickly on a home, you know who to call.

Nicole Rueth The Rueth Team of Fairway Independent Mortgage Corporation 750 W Hampden Avenue, Suite 500 Englewood, CO 80110
303-214-6393
www.TheRuethTeam.com

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Denver's Real Estate Did Not Surprise - It Delivered

Market Trends Report - August 2020

By Nicole Rueth - August 4, 2020

Denver's Real Estate Did Not Surprise - It Delivered

Homes are safe places providing joy, safety, and stability. As the world spirals, real estate remains a rare silver lining. Demographics and record-low interest rates drive demand while the uncertainty of jobs and schools weigh heavy on sellers. Even as builders rush to fill the market gap between buyers and sellers, their efforts will be determined by the stock market’s resilience.

Last week’s devastating U.S. Bureau of Economic Analysis report documented of the worst U.S. economic contraction of 32.9% from April to June, wiping out five years of positive growth. Negative economic indicators like high jobless claims and closing businesses are driven by the never-ending spread of COVID-19 cases.
Here’s what I see going on in the market.

Let’s start with the sellers. They’re not budging. Inventory continues to strain the market with 6,449 active listings at the end of July 2020, 31.1% less than July 2019. The uncertainty of the job market, the inability to find a replacement home, and the now the stress of homeschooling have sellers thinking twice about listing. Meanwhile, Denver saw New Home Pending Sales up 17.9% in June 2020 - 22.9% more than June 2019 – and builder confidence rallied in July to meet the suburban demand trend with smaller homes void of shared spaces.

Alternatively, buyers clamored for homes that are priced right and staged well, with 31% of detached homes selling for over asking and average days on market dropping 7.7% year over year and median dropping 36.4%. First-time homebuyers, downsizers, and investors drove the demand for $300,000 and $500,000 valued homes to close at 100.6% of the list price. Buyer demand increased for mansions as homes valued $1M+ experienced 55% more homes sold in July 2020 than July 2019, pushing the average single family detached average above $601,863 – a 10% increase over last year.

Speaking of McMansions, the two highest priced home sales in July were a $7-million-dollar home in Boulder and a $5.985-million-dollar home in Cherry Hills Village.

For each week in July, Denver ranked in the top six housing markets in the nation by Realtor.com’s weekly measure of market recovery - and we felt it! 6,664 homes closed in July which came from June’s record number of pending home sales, breaking the previous record of 6,230 homes closed in June 2017. Low-interest rates and pent-up COVID-19 demand pushed record-breaking, short-term stats. Demographic changes will benefit the long-term outlook by further increasing housing market demand.

Low-interest rates not only fueled demand, but gave buyers a Christmas present in July! As I noted, the average closed price for a single family detached rose to $601,863, up from $547,537 in July 2019. If I calculate a payment at today’s 2.99% interest rate with 20% down for the median home price compared to a year ago, home buyers are now saving $43/mo.

Now is the time to stop paying your landlord’s mortgage and move into a position of wealth and stability.

What keeps me up at night? The stock market. As CNN’s Fear & Greed Index moves further into Greed and Citigroup’s Panic/Euphoria Index points towards extreme Euphoria, both point to lower stock prices within a year.

All signs point to an excruciatingly long economic recovery as COVID-19’s death toll increased to 155,000, positive cases doubled with no hint of slowing down, high jobless numbers and unemployment claims, and Yelp’s business tracker shows another 15,742 businesses closed permanently in July.

Real estate, however, continues to show strength. Looking to September’s market trends report covering August’s data, July has a potential record-breaking 7,122 pending home sales - 27.47% higher than September 2019. Dream on.

Your Partner in Building Wealth through Real Estate,

Nicole Rueth
The Rueth Team of Fairway Independent Mortgage Corporation
 
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Loans: from calling to closing


By Nicole Rueth - August 4, 2020

Buying a home can be extremely exciting, but for many buyers, it can be confusing and even overwhelming. The process can also be lengthy, but it does not have to be as daunting or stressful as you might think. Arming yourself with information and the right mortgage team ahead of time can go a long way toward making the process much easier and more enjoyable. 

If buying a home is one of your goals in the near future, here are six steps to help you navigate the process of securing your dream home sooner than later:


1. Complete a loan application
This is where you will sit down with your mortgage team, discuss your situation as well as your goals for the home you’re looking for, and start to make them a reality through a pre-qualification letter. A mortgage pre-qualification is a high-level overview of your credit and capacity to repay a home loan, and will allow your mortgage team to pinpoint exactly what your price range should be. The meeting is typically brief and is where a loan officer will ask you questions to get an overall assessment of your credit and financial situation as well as the long term goals for the home. Once you know how much you are pre-qualified for, you’ll be able to confidently look at homes that fall within your budget. 

2. Get organized for pre-approval
Before you begin the mortgage pre-approval phase, it’s important to get organized with all of the documents a lender will need to underwrite your loan. Anything you can do to prepare in advance will reduce the turnaround time for your approval once you find the right home and are ready to make an offer. When you’re ready, you’ll want to be able to hand over all your paperwork at once so you can make an offer quickly. Your mortgage team should provide you with a list of all the documents required ahead of time in order to make the process as smooth as possible and eliminate any potential surprises. After reviewing the loan documents, your pre-qualification letter will be upgraded to a pre-approval letter, which lets sellers know you are a serious buyer. In a hot market like Denver, it’s common for sellers to entertain multiple, competitive offers, so the winning bid often goes to the buyer who is already pre-approved because it lets the seller know you are serious and ready to buy.  

3. Find your dream home and make an offer
Whether it’s your first home or you’re a seasoned homeowner, you’ll know when you’ve found the right home, and you’ll want to act on it quickly. This is where many lenders can drop the ball by taking too long to get everything approved, which can cause you to lose out in a competitive market. Your mortgage team should set you up for success with a solid pre-approval, so you and the seller already know you are ready to go and set up for a quick closing. As far as the offer itself goes, your real estate agent will know the ins and outs of how to structure it, which will include any potential contingencies that must be satisfied before the deal is complete, such as appraisals, inspections and final loan approval. 

4. Underwriting, disclosures and appraisal
Once the home is under contract, your mortgage team will disclose your loan, lock in your interest rate and order the appraisal. This is a busy time, so this is where being as prepared as possible will help things go smoothly and ensure a successful launch of the loan process. Working with a reputable mortgage lender goes a long way to ensure speed and accuracy in the underwriting process. The underwriter is the key decision-maker, and they will closely evaluate all the documentation prepared by the loan processor in your loan package, and cross-check to see if the borrower and property match the eligibility requirements of the loan. 

5. Loan approval and closing disclosure
As underwriters review your documents, it’s common they may ask for additional items to clarify the facts and ensure standards are met as defined by industry guidelines. Don’t panic - your mortgage team will ensure you know exactly what they need to get the celebrated ‘Clear to Close’ as quickly as possible. You will receive your “Initial Closing Disclosure” three days prior to closing, then once received, the title company and your mortgage team’s closing department will work together with a host of third parties to provide the “Final Closing Disclosure” 24 to 48 hours before the closing date. 

6. Cash to close
The final closing disclosure reflects your required cash to close. The cash to close will need to be in “good funds” which is either a cashier’s check or a wire transfer from your bank. Once that is complete, it’s closing day! The closing meeting will take a couple of hours, and your mortgage team will work with you, your real estate agent and the title company to ensure your loan documents and loan funds are waiting for you in advance. Once everything is signed, your participation in the closing is done, and it’s time to celebrate! The very last closing items happen in the background, and the title company will complete the recording and funding. 

There you have it! The mortgage process doesn’t have to be intimidating or overwhelming, and now that you have these key tips, you’ll be well prepared to feel more comfortable about what to expect along the way. Your home is likely the most expensive asset you will purchase in your lifetime, but having a trusted team by your side each step of the way will make the process more exciting and less stressful. Contact The Rueth Team today for more information on how you can leave the stress behind with Fairway Mortgage. 
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