Buying a Home Archives - Fort Collins Homes

First-Time Buyer Challenges in Colorado’s Housing Market

Tips for first time home buyers in 2021 - Town Square Real Estate - Town Square Real Estate

Everybody is asking, “When’s a good time to buy?”

According to the National Association of REALTORS®, first-time buyers median age hit 36 last year, the oldest on NAR’s record. In 1981, it was 29.

First-time buyers are receiving fewer financial gifts or personal loans from their family, roughly 22% in 2022, compared with 28% in 2021. This may explain why the share of first-time buyers compared with all buyers has shrunk slightly.

Some first-time homebuyers get indirect financial support when they move directly from the family home into their own home. Without a rent payment obligation, they have the opportunity to save for a down payment when living at home.

Even as home prices and interest rates in Colorado remain high, many first-time buyers are ready to buy for this simple reason: rents rarely decrease

Clearing The Hurdles To Homeownership
Federal loans like FHA and Veterans Affairs (VA) home loans require little to no down payment. The Colorado Housing and Finance Authority offers grants for down payments, if buyers take a homebuyers class and meet certain income limits.

In 2019, Bank of America committed $5 billion to help its low- to moderate-income clients make their first purchase. Two years ago, the bank increased its Community Homeownership Commitment program to $15 billion. Eligible applicants can receive a $7,500 grant for closing costs, plus up to 3% or $10,000 for a down payment.

As interest rates have risen, the popular “2-1 buydown” loan offers a lower interest rate in the first two years of the loan before adjusting to a higher rate in year three. Buyers qualify at the higher third year rate. If interest rates fall in the next few years, buyers can refinance at a lower rate.

More First-Time Buyer Challenges
Buyers may feel they’ll never get to home ownership because of debt, lower incomes or low credit scores.

For credit scores below 580, a knowledgeable lender can put together a plan to help a potential buyer raise their scores above 620.

CHFA, the Colorado Housing and Finance Authority, saw an increase in first-time buyers starting in 2015, as Colorado’s population increased, but incomes in recent years did not keep up with home prices. CHFA’s first-time buyer numbers have since declined due to the drop in affordable homes for sale plus rising interest rates.

Low- and moderate-income buyers find it difficult to compete with cash offers and non-first-time buyers with cash from equity in their homes.

An FHA loan also means higher monthly payments because of mortgage insurance (that protects the bank in case the borrower defaults). Some sellers also believe the FHA loan can involve strict conditions, such as being required to repair peeling exterior paint, and therefore bypass offers made with FHA financing.

Trying to time the housing market is like trying to time the stock market. You’re going to have hits and misses. Look at your budget and do what is right for you.

Working with a knowledgeable lender is critical to preparing and planning the financing for a first-time buyers. Contact me for more information about programs for first-time buyers.

Source: coloradosun.com

Is It Time To Downsize?

Downsizing Your Home To Reduce Debt - Requirements & Challenges

At some point, most older adults will consider moving to a smaller space. Roughly fifty-one percent of retirees ages 50 and over move into smaller homes after retirement, while sixty-four percent of seniors say they plan to stay in their current homes.

How do you decide to stay in your home or move?

Downsizing and decluttering can make life easier and safer. It can also be stressful and emotional, especially if you’ve lived in one place for a while.

When you downsize your house, you not only cut down on spending for frequent purchases like groceries, you often end up downsizing household bills like your mortgage payment, energy costs, and maintenance requirements.

The potential windfall in the form of home equity from the sale of your present home can help you buy a home that better suits your needs today.

Questions To Ask
If you’re thinking about downsizing, consider these questions:

• Do the original reasons I bought my current house still stand, or have my needs changed since then?
• Do I really need and want the space I have right now, or could somewhere smaller be a better fit?
• What are my housing expenses right now, and how much could I save by downsizing?
• Can I afford to stay in my current home for five, ten, or twenty more years?
• Is my yard easy to maintain?
• Do I feel isolated?
• Do I have too much stuff to manage?
• Do I have a lot of equity in my home?

Why Downsize?
Knowing the benefits of downsizing may help you decide whether to move forward or not.

• A more intimate home environment. While larger homes are great when you have a family, many smaller homes offer open floor plans that also make socializing easy.
• Safety. Stairs, multiple levels, outdated bathrooms, or long driveways and walkways become more dangerous as we age. Moving to a one-floor space that’s easy to access and navigate can help you age in place longer.
• Medical needs. Seniors with chronic conditions or needing more frequent medical care may need to relocate to be near their doctor or adult day care, or move into a space that can accommodate specific medical equipment.
• Better weather. One study shows that 25 percent of older adults plan to move to a warmer climate.
• More freedom. With less financial stress and maintenance responsibilities comes more freedom to live your life outside of your home.
• Simplify your lifestyle. The less you have, the less you have to maintain. A larger home also requires a larger amount of maintenance. If you are older or living alone, that upkeep can end up taking up a large amount of your time.

Bottom Line
If you’re looking to save money, downsizing your home could help you accomplish your goal. Give me a call to discuss your housing goals for the coming year.

Sources: www.keepingcurrentmatters.com, raleighrealtyhomes.com, www.seniorliving.org

FHA Borrowers Will Pay Reduced Mortgage Insurance Premiums

300+ Free Dollar Sign & Money Images - Pixabay

On February 22, 2023, the Department of Housing and Urban Development released details of a long-anticipated plan to reduce the annual MIP (mortgage insurance premiums) that are currently charged to FHA borrowers by 30 Basis Points (0.3% of the loan balance).

The FHA mortgage insurance premium is the monthly fee homeowners pay to insure their mortgages. The fee is calculated as a percentage of the loan amount and paid in addition to the monthly principal and interest payments.

The annual FHA mortgage insurance premium will reduce from 0.85% to 0.55% for most new borrowers.

The National Association of REALTORS® applauded HUDs move to reduce the MIP for Federal Housing Administration loans, saying the financial relief will help more homeowners and buyers weather affordability challenges, and potentially save borrowers with FHA-backed mortgages hundreds of dollars a year.

FHA loans offer down payment options as low as 3.5% to first-time and low- to moderate-income home buyers. Eighty percent of FHA borrowers are first-timers, and more than 25% are minorities.

Homeownership is currently the principal source of wealth creation for most American households, but due to a nationwide shortfall in the supply of affordable homes, first-time homebuyers have struggled in recent years to achieve homeownership.

FHA loans offer a small down payment and more flexible underwriting, enabling credit worthy borrowers to begin building wealth through homeownership earlier than they might otherwise.

National Association of REALTORS President Kenny Parcell said in a statement: “Mortgage rates have doubled over the past year, and home prices have increased more than 30% in some counties. In this competitive market, new and low- to moderate-income buyers are often left behind.”

With a $400,000 FHA-insured mortgage, the MIP reduction could save a borrower approximately $1200 in the first year of homeownership.

The MIP reduction is the result of several factors: an improvement in the credit quality of borrowers in the FHA mortgage portfolio, home price appreciation, and significant refinance volume. As a result, the FHA’s mortgage insurance fund has seen gains in its capital reserves.

The FHA mortgage insurance premium reduction became effective in March, 2023.

Find more details about the FHA MIP reduction and savings on page 2 this month’s newsletter!

Contact me about specific loan programs for first time homebuyers available to you or someone you know!

Source: nar.realtor/magazine, nationalmortgageprofessional.com, https://www.mortgagenewsdaily.com/news/02222023-fha-mortgage-insurance

Delivering Water To Northeastern Colorado

Delivering Water To Northeastern Colorado.

During the 1930s, Colorado suffered through the Great Depression and a devastating drought. Entire fields of topsoil were blowing away and one-third of the farms in Larimer County were put up for sale.

In the summer of 1933, the Greeley Chamber of Commerce organized the Grand Lake Committee to pursue a water diversion project. The committee preceded a group
formed in 1935 to propose the Colorado-Big Thompson Project as a supplemental water source to Northeastern Colorado farmers.

In May 1937, the Colorado Legislature passed the Water Conservancy Act, laying the groundwork to create the Northern Colorado Water Conservancy District the same year.

The Northern Colorado Water Conservancy District, or Northern Water, was created to jointly operate and maintain the federally-owned Colorado-Big Thompson Project. In
1937, the main purpose of the C-BT Project was to provide supplemental irrigation water to farmers in Northeastern Colorado.

Today, the C-BT Project collects supplemental water west of the Continental Divide for delivery to approximately 1 million people and 615,000 irrigated acres in Northeastern
Colorado for agricultural, municipal, domestic and industrial purposes.

The C-BT Project began its first year of water deliveries to the full district in 1957 and since then has collected and delivered more than 200,000 acre-feet of supplemental water each year on average. The project is designed to collect and store water from the melting snowpack near the headwaters of the Colorado River and bring it underneath
the Continental Divide to Northeastern Colorado.

In addition to the original C-BT infrastructure, Northern Water has worked cooperatively to create enterprises to finance and build additional water infrastructure,
including the Northern Integrated Supply Project.

In 1970, Northern Water’s Municipal Subdistrict, a separate and independent conservancy district, was created by six Front Range municipalities: Boulder, Estes Park,
Fort Collins, Greeley, Longmont and Loveland.

The Municipal Subdistrict began formal efforts to develop and construct the Windy Gap Project in the summer of 1967. Currently the Subdistrict is constructing Chimney Hollow Reservoir near Loveland, the main component of the Windy Gap Firming Project.

The Windy Gap Project consists of a diversion dam on the Colorado River that creates a 445-acre-foot Windy Gap Reservoir, a pump plant and a six-mile pipeline to Lake Granby. Currently, Windy Gap water is pumped and stored in Lake Granby for delivery to water users via the C-BT Project. Windy Gap Project water utilizes both West Slope
Collection and East Slope Distribution infrastructure to reach Windy Gap participants.

Northern Water provides cities, towns, rural-domestic water districts and industries with year-round water deliveries. During the primary growing season between April
and October, water is also delivered to more than 120 ditch, reservoir and irrigation companies serving thousands of farms and more than 500,000 acres.

With growth continuing in Northeastern Colorado, more than 1 million residents are now served by Northern Water. This area encompasses portions of eight counties:
Boulder, Broomfield, Larimer, Logan, Morgan, Sedgwick, Washington and Weld.

Source:www.northernwater.org

Leverage Investment Property With A 1031 Exchange

When you sell an existing investment property, you’ll pay capital gains on any appreciation, as well as the depreciation recapture.

In 1031 exchanges, one income property is swapped for another and the gain transfers from the former property to the newer property, allowing your investment to grow tax
deferred.

As an investment property owner, you can exchange for a vacation or future retirement home.

Requirements of a 1031 exchange
Here are seven primary 1031 exchange rules to keep in mind:

1. The investment property being sold and the property being acquired must be similar, or like-kind.
2. 1031 exchanges only apply to business or investment properties, not personal property.
3. The replacement property must be of equal or greater value.
4. For a tax-free exchange, you can’t receive “boot” which is cash or other property added to an exchange to make the value of traded goods equal. While partial exchanges of a newer, but lesser value property, are allowed, you will pay capital gains tax on the difference or “boot”.
5. The titleholders of both properties in the exchange must be identical.
6. After selling the property currently owned, you have 45 days to identify up to three potential like-kind replacement properties.
7. The replacement property must be received and exchanged within 180 days after your original property is sold.

There are currently no limits to how many times you can conduct a 1031 exchange. Even if subsequent swaps produce a profit, you can defer paying taxes until you sell for cash.

Only business or investment properties are eligible for a 1031 exchange, including vacant lots, apartment buildings, commercial properties, and even single-family residences you rent out to tenants.

A property you use solely for personal use, such as your primary residence, does not qualify.

Buying a vacation home with a 1031 exchange
You can invest the proceeds of a likekind exchange into a vacation rental home by meeting these requirements:

During the first two 12-month periods after the exchange:
• You must rent the property for 14 days or more per year.
• You must limit personal use to not more than 14 days per year and no more than 10% of the days rented.

Rental rates must be at fair market value. Renting it to a family member for $1 per night would count as personal use.

You can also sell your current vacation home through a 1031 exchange as long as the rent and occupancy requirements for the two years preceding the sale are
met.

After meeting the requirements of the first two years of ownership, then you are free to stay as often as you’d like without further requirements.

Buying a retirement home with a 1031 exchange
The rules during the first two years of acquiring your future retirement home require that your personal usage not exceed 14 days, and the property is rented
for 10 times the number of personal use nights: at least 14 days per year.

Additional rules apply to converting a rental property acquired in a 1031 exchange to a primary residence.

Be sure to consult your attorney and tax advisor to determine if a 1031 is right for you.

Contact me to discuss a vacation or future retirement home investment with or without a 1031 exchange!

I’ll help you find an out of area REALTOR® as well!

Source: https://www.vacasa.com/buy-vacationhome/1031-exchange