Colorado Springs Real Estate Blog

Colorado Springs real estate and homes for sale. Tips for buyers and sellers, statistics and analysis, great homes for sale and more!

Recent blog posts
How to Improve Your Credit Score and Get the Best Mortgage Rates

As part of your Colorado Springs home buying process, you will mostly likely be applying for a mortgage. And one of the most important components lenders will consider is your FICO credit score. There are many factors that contribute to that score—some of them seemingly counterintuitive. For example, when you open a new account, your score is negatively affected—the same thing also happens when you close an existing, but non-used account. Also, when you apply for credit and the company searches your report, you are negatively affected as well.

So, if you’re thinking of buying a home in the Colorado Springs area, do you need to worry that your credit score will suffer when a mortgage lender pulls up your credit report? The answer, fortunately, is no.

When the mortgage lender pulls your first credit report, there is a 45-day window in which other people can search your report without hurting your score. This is called a “soft pull.” If, however, you apply for 3 credit cards in one month, you will experience 3 “hard pulls” which will cause major “dings” in your report.

However, you can take steps to improve your score. Here are some tips to help you make sure that your credit report is in the best possible condition before you start your home search:

  • Don’t co-sign loans. If your co-signer defaults, you will be responsible for the payments. If you can’t pay, your credit report will show you to be in default.
  • Keep old revolving accounts open, even if you have paid them off or no longer use them.
  • Avoid “same as cash” credit offers (often available at appliance and big box stores). These offers usually give you a credit limit for the amount of purchase, so you will immediately max it out. You will be “dinged” when the store does the credit search and then again when you close the account after payoff.
  • Keep your credit card balances at a maximum of 30% of the total allotted credit.
  • Don’t open new accounts or make large purchases in the six months before you plan to apply for a mortgage, unless absolutely necessary.
  • Monitor your credit report frequently at www.annualcreditreport.com to check for errors.
  • Pay your bills on time. Even one late charge or missed payment can negatively affect your score.
  • If you have not previously established any credit, sign up for a secured credit card. You will prepay a set amount and then receive a card with a spending limit of that same amount—you can then use the card as you would a regular credit card.

Coming Soon: How to deal with credit disputes, bankruptcy, short sale vs. foreclosure and loan modification.

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What is my FICO Score and Why Does it Matter When I’m Buying A House?

If you’re thinking of buying a home in the Colorado Springs area, and you’re not paying cash (and how many of us are doing that?), you will need to know your FICO score.

The FICO score is the most widely used measure of credit worthiness in the U.S. and it is the primary factor lenders consider when you apply for a mortgage. FICO was first introduced in 1989 by the Fair Isaac Corporation—hence the acronym.

FICO scores range from 300 to 850—the higher your score, the more credit worthy you are. Your score is calculated by a mathematical equation that takes into account the weight of many different factors on your credit report. There are actually 27 different scoring models with three main ones used for mortgages, auto loans and credit cards. A median score for a mortgage is 679. The general breakdown is as follows:

  • 50% of your score is based on payment history and length of payment history. This includes loans for cars, homes, tuition and other long-term loans.
  • 30% on the amounts you currently owe
  • 10% on the types of credit you have been extended in the past
  • 10% on new credit.

However, the weight of these factors may vary depending on the length of your credit history.

A sample profile of a high credit score would include at least 2 installment loans with balances (auto, student loans, mortgage); 3 revolving credit cards with balances of less than 30% of the card’s maximum, and no record of collections or late payments. Although it may seem counterintuitive, it is a good idea to keep accounts open, even when you have paid off the balances. Closing accounts tends to negatively affect your score.

The mortgage interest rate for which you qualify is based on your FICO score. Generally, the higher your score, the lower the interest rate and vice versa. Whether or not you are required to have mortgage insurance, the rate may also be based on this score, as well as the amount of your down payment.

If you are applying for a conventional mortgage, the lender will determine what minimum score will make you eligible for the loan, in addition to the price of the home and other financial obligations. Fannie Mae, Freddie Mac, FHA and other government loans have established minimum FICO score requirements.

If you are interested in learning more about FICO scores, visit www.myfico.com.

Coming soon:

  • How to Improve your Credit Score
  • How to Deal With Delinquent Fees
  • How to Resolve Credit Disputes
  • Loan Modification Alternatives
  • Short Sale and Foreclosure and their Effect on Credit Scores
  • Bankruptcy and Your Credit Score
Tagged in: home buying advice
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Watching for Wildlife

In the past week I have almost hit two of these beautiful creatures with my car... mule deer. One rainy evening it was a very adorable, but confused fawn; once I slowed to a stop it just stood in my headlights... true "deer in the headlights" look. 

Living in this area, and much of Colorado (well, and other areas) we run the risk of wildlife in our communities. Because we are so close to the mountains and have treed communities like Black Forest, Erindale, Broadmoor and others, we are at risk for much of the year... or the wildlife is at risk if we're not aware / catious! 

In Black Forest we have mule deer, coyote, fox, squirrels (at least two different breeds, including black "Abert" squirrels), rabbits, a couple bears... last year there was even a moose. It is VERY unusual for moose to live at this altitude, so it was strange to have one here and in the Douglas County area just north of here. 

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The west side of Colorado Springs sees even more wildlife. I'm not sure I've ever shown houses in Peregrine, Broadmoor Bluffs or Skyway without seeing deer. There are most of the animals listed above on the west side, plus more bears, and add mountain lions and big horn sheep to the mix. For the mountain lions especially, pet owners are cautioned to keep pets, like small dogs and cats inside at night! Broadmoor Bluffs, Mountain Shadows and other west side neighborhoods post caution signs when widelife has been spotted in the area. The bears are especially dangerous just before and after hybernation when they are particularly hungry. They even make their way into dumpsters and even stores (as we've seen on rare occassion on the news). The bears and mountain lions will climb trees. The only black bear I've seen in town was off W. Woodmen Rd, pretty high in a tree on a 3 acre property. He didn't want to deal with us, but if there were baby cubs invloved it might have been a different story! 

In all areas, keep watch for deer crossing the road, particularly at this time of year when they have fawns and in the fall at dusk when they are very active. A friend once told us, when the Air Force relocted him here they told him during a local orientation, if you see a deer dart across the road don't watch him trail off... watch for his buddy and his buddy's buddy behind him. They normally travel together. In our neighborhood they travel in small groups of 6-10, however right now they seem to be just a doe and her baby(ies) or a bunch of individuals. If I can figure out how to imbed video in my blog, we had the awesome experience of 7 mule deer bucks "rutting" last fall as they establish the hierarchy of the herd. DO NOT approach these animals!! While they can seem harmless and will most frequently run from you, our neighbor's dog was gored by a large buck's antler, when he obviosuly felt threatened.... they will challenge each other. 

Living in the heart of town, don't think your immune to this wildlife. In 1999 my mom's car got hit by a deer near Circle and Fountain / MLK bypass... he jumped the car next to her and hit the front left side panel of her car. There are creeks and natural habitats that course through our city, creating avenues for deer and other critters to come into the city. 

Now, out east, you have to be aware of the coyote and fox, especially if you want to protect your cats and chickens at night. Let the rabbits and ground rodents be their prey! There are also large herds of antelope that roam the prairie in eastern Colorado Springs and from here to Texas and Montana. These are general much more slow moving creatures, and since they are out in the open they are easier to spot as opposed to the deer that often dart from trees and bushes into roadways. Watch for antelope especially in the areas along Black Forest Rd, Woodmen Rd, Marksheffel... and any home shopping out east to Falcon, Calhan, Ellicott, Ramah, even south of Fountain. 

As a friend used to tell us... Stay Alert, Stay Alive... important advice for you and the wildlife at risk (however I don't think they're reading this blog). 

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2014 Home Sale Forecast

In the first half of this year, home prices rose. From January to June, the average sales price of a single family home went up by 1.8%. The average sales price of a condo or townhome went up by 2.8%.   First quarter (Jan-Mar) single family home sales started out slow, but they made a nice recovery in the second quarter with better results (Apr-Jun).   And while sales are not quite at last year’s pace yet, I believe they will be by end of the third quarter. There are still plenty of buyers buying, interest rates are still low, and summer is only half over.   Historically we slowdown in late fall, so we still have much buying time left to bring those numbers up.

Interestingly, there is a lot more inventory meaning homes for sale, this year. We ended June with 4,233 single family homes for sale, a dramatic increase over last June when we saw only 3,868 single family homes for sale. I think the increase is the result of two things: (1) many sellers were waiting until the market improved to put their home up for sale, and when it finally did they all did. AND (2) new construction is booming again, causing many to move up into a newer home.

I think the biggest factor to consider here is inventory has gone way up, but sales have only gone up slightly.   With more supply and less demand, prices will probably stabilize.

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Keep Your Eyes Open During the Final Walk-Through

You’ve found your dream home…the offer was accepted…the loan is secured…your inspector has given the thumbs up…and you’re about to sign the closing papers. There’s one more important step I urge you not to overlook before you receive the keys: the final walk-through. This should be done the day before, or even the day of, your closing.

The final walk-through is a critical part of the home buying process. You and your agent will visit the property to make sure that the home is in good condition and that you are getting everything that was written into the sales agreement. This generally includes all window coverings, attached light fixtures (e.g. chandeliers, track lighting), appliances, area rugs/carpets and spas/pools, unless otherwise indicated in the agreement. You’ll also want to ensure that any previously agreed-upon repairs have been completed.

Make sure that the home is clean, the cabinets and garage have been emptied, the toilets, sinks, dishwashers and laundry machines are functional, the heat and air conditioning work and that all trash has been removed. Turn on all the light switches and test the outlets. Other potential surprises include large carpet stains that were hidden by furniture, large wall cracks that were camouflaged under paintings or mirrors, or water stains from leaks that have developed since you last saw the property. If you discover any of these conditions, you have the option of asking the owner to repair them before closing or to provide financial concessions on the selling price. Once you have closed, the sellers are no longer obligated to make any repairs.

If I still haven’t convinced you of the importance of the walk-through, here’s a cautionary tale that we personally experienced. The buyer and agent did a walk-through on a home that was built in 2005. They thought they had done a completely thorough inspection and everything appeared to be in working order, so they proceeded to closing.

A few weeks later, the buyer called our company and said that the furnace did not look like it belonged in the house. Sure enough, upon inspection, the furnace was a beat up, rusty model from the 1970s—the owners had swapped out the new furnace after the inspection and replaced it with an old one! You can be sure that from that point on, we included the furnace in our walk-throughs and advise you to do the same.

Tagged in: home buying advice
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22045 Osteen Ct - Landings at Denmark | Calhan

Oh give me a home... where the buffalo roam... where the deer and the antelope play...

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Well, maybe not buffalo, but the antelope, chickens, kittens and horses love it here!! This ranch-style modular home is almost 2200 sq ft, taped / textured, and so well decorated you can move right in. Vaulted ceilings in nearly every room, Pikes Peak views from all rooms facing west and a nice little patio. Open great room includes a huge living room area, dining space, plus tremendous kitchen with pantry, island, desk space, eating nook and walk-out. Master includes 3 huge windwos, ceiling fan on remote, 5-piece bath, walk-in closet, plus storage closet.

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The kids and pets will enjoy plenty of space to roam, plus cross-fenced property for the horses.

Check out more details and the video tour here - http://www.osteencourt.com/  -  and contact me for a personal showing! 

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Posted by on in General News
Remember to Vote!

Tuesday, June 24th, is Primary Election Day in Colorado.  This is the day when U.S. Citizens have the opportunity to voice their opinion and vote for local and regional government.  I am grateful to live in a country where my vote does count, where I have a say in how government is run.

 

I wouldn't want to live in Great Britain.   There they have a monarchy, where government consists of royalty such as a Queen and/or King and a parliament.  The royals are not voted in by the people, and government is not as easily changeable.  And citizens pay higher taxes than we do.

 

America was founded on democracy, a political system in which the supreme power lies in a body of citizens. In the ever-famous Gettysburg address, delivered by President Abraham Lincoln in 1863, we heard the words..."a government of the people, by the people and for the people."   It's OUR government.  It's our freedom.  It's our privilege to vote!

 

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12710 Rockbridge CR
Colorado Springs, CO 80921

Located in the Popular Middle Creek Manor Subdivision

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The main level has both formals and a great room as well as an office and 2 staircases. The kitchen features granite counter tops and backsplash, upgraded appliances, double ovens and a kitchen island. The kitchen opens up to the family room with 17’ ceilings, a gas log fireplace and a wall of windows allowing plenty of light.

The master suite is located on the back side of the home which has great views of the mountains. The master bath has double vanities, a large soaking tub, a tiled shower and a walk in closet. There is a fireplace located between the bath and the bedroom.The basement is great for entertaining with a large wet bar that has upgraded cabinets, granite countertops and a refrigerator.

There are 2 bedrooms that share an updated bath as well.The exterior is stucco and the roof was replaced in 2013. Located on a third of an acre, the property has Northwest views to include, Pikes Peak and the Front Range and the Air Force Academy. There is a stamped concrete patio, a pergola complete with outdoor grill, a hot tub and is fully landscaped.Updates include air conditioning, interior paint,, plantation shutters, rod iron spindles, granite in the kitchen and bathrooms, upgraded kitchen appliances.

For More Information, please visit: http://www.rockbridgecr.com/

 

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Posted by on in Personal
I Have Commitment Issues...

... okay, well, not maybe in some areas. I am happy to say I'm coming up on my 15th wedding anniverary in August.

However, when it comes to commitments outside of work, I struggle to commit. This crazy business keeps us on our toes. It's kind of a running joke in the industry-- if you want to get busy with your sales, just plan a vacation. Because it is somewhat of a flexible, work-all-the-time kind of business, there are times when we do personal stuff during the week. I have a group of friends that tries to gather with kids almsot every Thursday to socialize the kids while they're out of school and give us times to chat with other moms. Well, as they plan their summer and invite me and my boys along, I hem & haw over whether we can make it or not. My responses are something like... "ummm, yea, well, we'd like to..".. "well right now I don't have an appointment"... "uh, sure, yes, I think we can be there". Part of the problem is I really feel like an unreliable friend. I want to say yes with finality and mean it, but the truth is stuff comes up, inevitably when I've made plans. So I almost never tell the boys we have plans until we are on the way there!! I hate to disappoint my boys too!!  A friend text me Monday night and asked if we could meet at McDonald's Tuesday to celebrate her son's birthday... perfect, yes, short notice and I know we can make it!! 

My procrasitnation to commit to things, however, has made us miss out on a couple things this summer, namely the boys' favorite day camp - Eagle Lake Day Camp at Glen Eyrie... EVERY week ALL summer completely sold out. I literally cried because I knew they'd be disappointed. So I broke the news to them, and began planning the rest of our summer. I went to our regular YMCA and low-and-behold... their day camp also COMPLETEY sold out, all summer... AHHHHH #momfail. So I am scrounging to get friends to help out when I have appointments, hope for a week or two open at another Y... and we'll probably get them another trip to grandpa and grandma's in July! 

My husband's gotten used to my nutty Realtor schedule, I think it took about 10 years. But when I say I'll be home at a certain time he normally adds 15-30 minutes to my estimate. And my kids understand my work is a little unusual. Sometimes they ride along while I stop by and check on a listing, or even if they need to tag along for a home inspection. They used to love joining me for the Parade of Homes every August, but I think they're getting a little burnt out. 

This weekend our boys go on their 3rd annual visit to grandpa and grandma's... where they usually stay for 10-14 days. (I love to refer to it as date week for Jason & I!) So I have a billion thoughts going through my head... "Are those clients coming back down to meet with the builder on Saturday?... "were we planning to help our friends move?... oh and isn't there a farewell dinner before she leaves town?"... I'm expecting an offer on my listing... I'm waiting to hear from an appraiser.... if that buyer's contract gets accepted, when will we do the inspection? All the while I really don't like being away from my boys, so I want to go to TX... I LOVE them like no other and we've had a great 2 weeks out of school thus far. But they love being at their grandparents, they have so much fun!! So my husband is planning to take them in about 26 hours and I still have no idea if I'm going with them. 

Because my business is important to me, and the clients I serve tend to be my top priority, I often cancel on friends last minute... or pawn my kids off on them. Thanksfully we have some seeriously awesome friends, and my kids are pretty super! 

I guess this blog is mostly for my friends... or anyone who can stand to be friends with a Realtor... I apologize for being a non-commital, unreliable friend. I hope you'll forgive me! Let's get together soon... well maybe... if I don't have something I need to do.... 

 

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Posted by on in Buying a Home
Home Warranties Are Just a Good Idea

We have all heard the stories, someone we know buys a house and has problems right after they move in. Big problems like the water heater bursts, the furnace stops working, etc... Although these problems are a normal part of home ownership, it always comes as an unwelcome surprise. Additionally, the financial stress can be an even bigger problem. The best way to ease some of the financial strain is to have a Home Warranty in place before the problems happen.

A home warranty is an insurance policy that typically covers the repairs and or replacement of your home's major systems during the term of the policy.

There are a myriad of options for home warranty plans but here is a list of the a basic plan should cover:

  • Heating System
  • Ductwork
  • Plumbing System
  • Water Heater
  • Built-in-Whirlpool Tub
  • Sump Pump
  • Electrical System
  • Garage Door Opener
  • Central Vacuum
  • Doorbell
  • Kitchen & Bathroom Exhaust Fans
  • Refrigerator
  • Oven/Range
  • Dishwasher
  • Built-In Microwave
  • Garbage Disposal
  • Trash Compactor

More extensive plans will cover items like:

  • Washer
  • Dryer
  • Roof Leaks
  • Well
  • Septic

It is important to read about the extent of a warranties coverage before purchasing. There are often unexpected costs associated with claims, especially for major systems. Warranty companies won't cover the cost to bring a system up to current building codes. For example: On an older home requiring a furnace replacement. The warranty will cover the cost of the furnace but not the cost of bringing the supporting ductwork up to current building code. This can cost hundreds of additional dollars, the home owner still ends up with a new furnace but might be surprised when the contractor asks for a check to cover the work not covered by the warranty.

Most home warranties have a deductible. This is usually paid to the repair person at the time of their first visit. These deductibles are generally in the $50.00 to $75.00 range.

Home Warranties are negotiable between Buyer and Seller. Buyers will often ask for a home warranty in their initial offer. Additionally, sellers will often offer them as a buyer incentive.

As a home buyer, it's a good idea to ask the seller in your initial offer to include a home warranty. If they are not willing to do this, it's still a good idea to buy one prior to closing.

Sellers, should really consider offering a warranty when it's time to sell. This acts as tail coverage in the event of a problem and the warranty could keep the buyer from pursuing the seller should there be a problem with any of the major systems.

These policies are affordable ranging from $300 to $800 depending on the level of coverage and the premium is usually recouped in the first claim.

Although problems with a home are inevitable, a home warranty can really take the sting out of paying for those surprises.

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Posted by on in Finance
Allocation of Closing Costs

Allocation Of Closing Costs

Closing costs and pre-paids are additional fees associated with your mortgage loan and the closing of your property. Your Realtor and Lender should explain and review these fees as you start the home buying process and then clarify actual amounts as you get closer to the closing table.

Below is a brief description of the various costs that are commonly paid by the purchaser. It should be noted that the seller or lender can participate in paying some or all of these costs.

Loan Origination Fee-This fee covers the administration costs of processing the loan. It may be expressed as a percentage of the loan (i.e. 1% of the loan amount).

Loan Discount Points-These are the “points” charged by the lender to adjust the yield on the loan to market conditions. Each point equals 1% of the mortgage amount. Additional points can be paid to lower your interest rate.

Appraisal Fee-The lender orders the appraisal to determine whether the value of the property is sufficient to secure the loan should you default on the loan. The appraisal fee will be collected up front.

Credit Report Fee-The lender orders the credit report, which is used to determine your credit worthiness. Like the appraisal fee, this fee will sometimes be collected up front, other times it will be collected at closing.

Interest-You will probably have to pay the interest on the mortgage from the date of settlement to the beginning of the following month. For example, suppose you settle on February 10th. Your first monthly payment begins to accrue on March 1st and will be payable at the beginning of April. At closing, you will be required to prepay the interest for the period from February 10th through the end of February. This means that if you settle later in the month, your closing costs will be less than if you close earlier in the month.

Mortgage Insurance Premium-There are a variety of ways to pay mortgage insurance. It can be paid up front or monthly, or as in the case of FHA can be added to your loan. Your Loan Officer can explain your options in detail.

Hazard Insurance Premium-(Homeowner’s Insurance Policy) - You may be required to pay the first year’s premium at settlement. Or, you may be expected to bring proof that you already have paid for such a policy.

Escrow Accounts or Reserves-Reserves are required if the lender will be paying your property taxes, mortgage insurance, and hazard insurance.

Title Charges-Primarily these charges are payable to companies or persons other than the lender. This includes the settlement (or closing) fee, title search/title insurance premium (lender’s and owner’s coverage), and attorney fees (for legal services provided to the lender). Note that the fees you pay for your own attorney are not part of the settlement procedures.

Recording and Transfer Fees-Most states impose a tax on the transfer of property and require a payment of a fee for recording the purchase documents.

Additional Charges-These charges can include but are not limited to: ILC (Improvement Location Certificate), which may be required for any purchaser obtaining a new loan, and any other inspections or requirements from the lender.

Adjustments-Another part of the settlement statement involves looking at items paid by the seller in advance and items yet to be paid for which the seller is responsible. The most common expense to be pro-rated between the Buyer and Seller is property taxes.

Final Figures-In calculating the total amount that the borrower must pay, the Settlement Statement begins with the sales price and adds in the total closing costs for which you are responsible. Any pro-rated adjustments payable by you (as discussed above) are then calculated in. From this total, your deposit is deducted (which has been held in escrow since the seller signed your purchase offer) as well as the principal amount of your mortgage. Then, any adjustments payable by the seller are deducted. The resulting figure is the amount you must pay at settlement.

Summary-The complexity of the mortgage world has increased dramatically over the last few years. The pricing differences are dramatic based on not only credit but down payment and the property itself. It is advisable that you consult with an experienced, professional mortgage banker. When it comes to choosing a lender, ask for referrals, especially from your Realtor.

Tagged in: closing
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Colorado Springs home prices rose in May 2014 with a month to month increase of .92%, and a year to year decrease of 2.59%, making the average sale price $243,231 and the median price $216,000. The number of Colorado Springs homes sold compared to May 2013 has increased .90%, with 4,046 units sold year to date. The number of homes for sale here compared to May 2013 has increased 10.07% with 4,012 currently on the market.


Single Family/Patio

YTD 2013

YTD 2014

+ / -

 Closed Sales

4,233

4,046

-0.90%

 Median Sales Price

$215,250

$216,000

+0.35%

 Months Supply of Inventory

3.27

3.57

+9.09%

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Posted by on in Central Neighborhood
1480 Iver St.

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Want mountain views?  Look no further!  Enjoy unobstructed views of the front range in this terrific, new rancher.  Built in 2008, this home features 4 bedrooms, 3 baths and over 2,200 finished square feet!  Interior has 10 ft. ceilings on the main level, gas fireplace, air conditioning, wood floors in kitchen, cherry stained cabinetry with 42” uppers, counter bar, pantry, black appliances, upgraded tile in bathrooms, upgraded carpet and pad, spacious master bedroom with attached 5-piece bath, good size secondary bedrooms, large finished basement and there’s even a security system.  Great location...walk to nearby school and park.

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Posted by on in Marksheffel Neighborhood
8870 Christy Court

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Check out my new listing!  Built in 2003, this terrific 2-story home is located on one of the largest lots in the neighborhood, and features two-tone stucco exterior, wood floors throughout the main level, updated kitchen with slab granite counters, stainless steel appliances, pantry, arched doorways, gas fireplace, huge master bedroom with his/hers closets, 5-piece master bath, finished basement, good sized secondary bedrooms, air conditioning, composite deck, basketball court, storage shed, trampoline, finished garage and views of Pikes Peak!  Popular Claremont Ranch neighborhood provides easy access to shopping and military bases!

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Posted by on in Military
Happy Memorial Day

At Springs Homes, we know that freedom isn’t free. This Memorial Day, we honor all those who have made the ultimate sacrifice for the freedoms we enjoy. As Realtors who work frequently with the military, every day it is our honor to serve all those who have served.

Thank you for your service!

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Posted by on in Personal
Running for Charity

This week I am especially enthused about running.  Each time I run I am donating money to a non-profit charitable organization called Back On My Feet.  Mizuno is proud to partner with this national nonprofit organization that uses running to help those experiencing homelessness gain the confidence to turn their lives around.

For each mile I log, Mizuno will donate $1.00 to this charity.   It's really simple.  You dowload the Mizuno Baton app. (which is free) to your cell phone, and each time you run, your mileage is tracked by GPS.   You have one week to accumulate as many miles as possible.  Your week begins at your very first run.  This program goes through August.

I've been a runner for 20 years now,  and while I don't need anyone to motivate me to do this sport, I sure have appreciated this opportunity to donate my miles to a worthy cause.  I am having so much fun!

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Posted by on in Finance

203 k FHA LoanIf you have ever decided to buy a house and fix it up, you probably ran into a wall when it came to financing your dream. This is because lenders see rehab properties as risky investments, so financing is difficult to find and expensive.

The way rehab and renovation project financing generally works is that the buyer needs to first secure financing to purchase the property. Buyers then procure financing for the repair work with the high probability of high interest rate(s) loans and with shorter amortization periods. When the work is completed, the buyer will then seek permanant financing to pay off the existing interim loans. This is a big hassle as anyone who has gone that route will tell you.

HUD and the FHA saw this as a problem, especially for areas that were in bad shape due to the economy. These neighborhoods were in a Catch 22 situation. Investors didn't want to put cash into these areas because they weren't desirable but owner occupants couldn't move in and start the re gentrification process because financing was too difficult to obtain. This is where the 203K loan becomes a viable option.

The purpose of the 203(k) loan is to eliminate the financing hassles associated with trying to fix up a house. In the 203(k) program the borrower gets one mortgage loan for both the acquisition and repairs of the home. Additionally, this loan is at a long-term fixed (or adjustable) rate. It's important to note that these loans are for owner occupied properties.. sorry investors.

FHA 203K loans are designed to take away some of the lender risk associated with making loans for home purchases that involve rehabilitations or renovations. Mortgage lenders generally provide what is known as permanent financing. This means, they will lend money to purchase a property in good, habitable condition. Lenders consider these less risky because they are easier to sell in the event the borrower doesn't make their payments.

The good news for the lender is that the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully insured mortgage loan.

The mortgage amount is based on the future or projected value of the post renovation property in addition to the cost of labor, even if the borrower is doing the work themselves. This figure must be less than the FHA loan limit, which at the time of this writing is $271,050 in El Paso County, Colorado for a single family home.

The mortgage proceeds must be used in part for rehabilitation and/or improvements to a property. There is a minimum $5000.00 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are impracticable and unacceptable; however, they may be added to the minimum requirement (in addition to $5,000). The mortgage must include one or more of the items listed below, with a cumulative minimum of $5,000.

Here is a list of the type of repairs this loan will pay for:

  1. Structural alterations and reconstruction (e.g., additions to the structure, finished attics, repair of termite damage and the treatment against termite infestation, etc.)
  2. Changes for improved functions and modernization (e.g., remodeled kitchens and bathrooms).
  3. Elimination of health and safety hazards (including the resolution of defective paint surfaces and/or lead-based paint problems on homes built prior to 1978).
  4. Changes for aesthetic appeal and elimination of obsolescence (e.g., new exterior siding).
  5. Reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air conditioning and electrical systems.
  6. Roofing, gutters and downspouts.
  7. Flooring, tiling and carpeting. H. Energy conservation improvements (e.g., new double pane windows, insulation, solar domestic hot water systems, etc.).
  8. Major landscape work and site improvement, patios and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion.
  9. Improvements for accessibility to the Handicapped.

When basic improvements are involved, the following costs can be included in addition to the minimum $5,000 requirement for the existing structure:

  • Construction or rehabilitation of a detached garage or an attached unit(s) to the existing dwelling (if allowed by the local zoning ordinances).
  • New cooking ranges, refrigerators and other appurtenances (Used appliances are not eligible).
  • Interior or exterior painting.

That's a pretty wide range of improvements and repair types. We think this is a great loan program for the right type of buyer. If you would like to learn more, please feel free to give us a call 719-388-4000, we would love to discuss your options.

Tagged in: 203K FHA
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Home Prices Are Up But Sales Have Slipped

Colorado Springs home prices rose in April 2014 with a month to month increase of 1.55%, and a year to year increase of 2.48%, making the average sale price $241,004 and the median price $213,500. The number of Colorado Springs homes sold compared to April 2013 has decreased 1.07%, with 2,923 units sold year to date. The number of Colorado Springs homes for sale compared to April 2013 has increased 8.71% with 3,671 units active.


Single Family/Patio

YTD 2013

YTD 2014

+ / -

Closed Sales

3,121

2,923

-1.07%

Median Sales Price

$214,925

$213,500

-0.66%

 Months Supply of Inventory

3.62

3.98

+9.88%

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VA Funding Fee

All mortgage loans carry some level of risk for the mortgage lender. Depending on the kind of loan (FHA,CONV or VA), lenders can use different types of insurance and fees to protect or minimize those risks. In a previous article we looked at Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP), these are insurance types for conventional and FHA loans.

In this article, we are going to take a look at the VA or Veterans Administration sponsored loans and how the lender is protected from risk of default on this type of loan.

VA Loans

VA Loans are loans that are backed or guaranteed by the Veterans Administration. These loans were established in 1944 as part of the Servicemen’s Readjustment Act. The purpose was to help returning service members purchase homes. The idea was that these people had missed out on a lot of opportunities while serving our Country and this benefit would help create or compensate for opportunities they had missed while away.

The primary benefit of a VA loan is it's no or low downpayment requirement. VA loans do have a limit and these limits occasionally fluctuate in relation to the general market conditions. The current VA loan limit in El Paso County, Colorado is $417,000. As long as the borrower stays within the local VA loan limit, there is no down payment.

Funding Fee

The VA funding fee is the VA loan's version of lender protection or insurance. The Funding Fee is a set percentage (see charts below) paid by the borrower and applied to both purchase loans and home refinances. The money from the funding fee goes directly to the VA, much like an insurance premium paid on Conventional and FHA loans. This fee is then used to help minimize losses incurred through defaults.

VA Funding Fee Table

The funding fee is paid by the borrower. This fee can either be paid up front or rolled into the loan. If the fee is rolled in, it is amortized over the life of the loan. If you choose this option, you are essentially financing the fee or adding interest payments. At the end of the day this option leaves you paying significantly more.

Exceptions

There are a few exceptions where the VA will waive the funding fee. If a veteran receives a minimum of 10% VA disability compensation, they are exempt from this fee. Additionally, in the event a veteran is awarded disability compensation after they have paid the funding fee, they can apply for a refund of this fee, as long as the beginning date of the disability is prior to the closing date of the home mortgage.

Unfortunately, there are a couple of scenarios where the funding fee is raised. Reservists and National Guard members actually pay a slightly higher funding fee then do regular military members.

Additionally, the second time you use the loan, the funding fee is higher. The thought behind a higher fee for the second use of a VA loan is that these veterans have already used the benefit and have had the time to accumulate equity or save money towards a down payment.

This makes VA a great loan, the first time the borrower uses it. We generally see borrowers move to a conventional loan the second time around.

If you have any questions about Mortgage loans, please feel free to give us a call 719-388-4000, we would be happy to help.

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What I Told Mike Today

I often run into Mike when I go running at Cottonwood Park.  He is a regular there and always braves the elements of snow, ice, wind, and rain as well as 95 degree summer days. Today, after my morning run Mike caught up with me in the parking lot.  "How's the housing market?" he asked.  Here was my answer:

We saw great improvement in 2012 and 2013.  It appeard we had made a significant recovery after the slower times.  Sales were up.  Home prices rose, and foreclosures went way down.  We climbed out of the recession.  But the first quarter of 2014 has started off a bit slow, and I didn't see much momentum until early April.  Mike said "I know what you mean.  It seems I read about the great recovery in one newspaper, and then I pick up another and read something totally different."   

I think we Realtors get a little overzealous in reporting good news.  At the first signs of recovery, we are standing tall and thumping our chests about how great the market is doing!  Yes, it has improved, especially compared to 2007 and 2008 when sales dropped dramatically and prices plummeted.  But the recent improvement is still wobbly and is easily shaken by new conditions. Example, I think consumer confidence is not as strong today as it was a year ago.  That certainly affects housing.  In Colorado, we've had some cold winter storms recently.  Even weather throws a wrench into buying activity.

Nationally, the stats say the same.  Here is what the National Association of Realtors recently reported:  "WASHINGTON (April 22, 2014) – Existing-home sales were essentially flat in March, while the growth in home prices moderated, according to the National Association of Realtors®. Sales gains in the Northeast and Midwest were offset by declines in the West and South.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, slipped 0.2 percent to a seasonally adjusted annual rate of 4.59 million in March from 4.60 million in February, and are 7.5 percent below the 4.96 million-unit pace in March 2013. Last month’s sales volume remained the slowest since July 2012, when it was 4.59 million."

I don't think this is cause for alarm.  Locally, we have already seen the pace pick up this month.  Showings on listings have increased, and there are more buyers out looking now.  The posture we need to take is CAUTIOUSLY OPTOMISTIC.  We know the market has improved over the last few years.  We see encouraging signs of busy-ness in the upcoming months.  But we understand the market is still fragile, vulnerable to change.

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