Last week I got several calls for construction loans. The potential clients were looking to buy lots or older homes with the sole purpose of building a new home. FYI: there’s no such thing as “No Ratio Construction Loan” or “No Doc Construction Loan”.  Some may have been looking to scrape, a trend that has consumed several areas of Denver.

Sunday’s Denver Post delivered this gem on scraping: Scraping down, building up

The move to replace smaller, older homes with larger, costlier ones took hold in Denver in the late 1990s. A Community Planning and Development Office map of residential demolition permits issued from January 2006 through May 2007 suggests the most activity now is in east-central Denver, specifically the Cherry Creek and Hilltop neighborhoods, and in two corners of the city.

In the southeast, the most affected areas are Observatory Park and Eisenhower Park. Northwest, the hot neighborhoods are Sloan’s Lake, Berkeley and West Highlands.

Yet the teardown trend raises a raft of social issues. Critics say it disrupts neighborhoods and thwarts residential affordability. A 2002 study by the Washington- based National Trust for Historic Preservation was co-written by Jim Lindberg of the organization’s Denver office.

Older neighborhoods are often the target of scrape-and-rebuild developers with good reason, said Lindberg. Many were designed for pedestrian traffic, not cars. Washington Park, for example, grew up in the era of streetcar commuting.

Most of the smaller homes deserve to be scraped. They’re usually energy inefficient, small, and not up to code. Did I mention that they were small.

Mortgage article from the Rocky Mountain News:

A German bank has pulled the plug on its deal to lend $160 million for a 41-story condominium project under construction downtown – the largest example in Denver so far of how the turmoil in international lending markets affects a local market.

Read the full story: Downtown highrise project loses lender

Frying a turkey has always intrigued me. The people who fry their turkey every year for Thanksgiving swear by them. They say the turkey is juicier and it takes less time to cook. There is the down side that turkey fryers can cause a fire.

This Thanksgiving I got a wild hair and decided to give turkey frying a go. I did some research and found a relatively inexpensive ($60) fryer at Sears. The fryer is made of three components, a base, a connection to propane, and a 30 quart aluminum pot. Moreover, the fryer is made by a company, Masterbuilt, that’s fairly reputable and the construction was welded together so it seemed fairly stable. I picked up the requisite peanut oil and marinades at the grocery store.

I got off to a late start (3 PM) putting the turkey fryer together. After putting the fryer together, I realized that the propane tank was empty. Off to the gas station I went to get propane. When I returned I realized that there was still a lot to do. It was now 4 PM and the sun was going down fast. I put the oil in the 30 quart pot and started lit the fire. I thought the fire was full bore but halfway through I realized it was only at 50% fire power. It took almost an hour for the oil to hit 350 degrees.

Once the oil was hot enough I finally put the 13 pound turkey into the container and lowered the container into the pot very slowly. The last thing I wanted was a massive fire. The instruction manual says that you should cook the turkey 3 minutes for every pound. I followed the directions and 39 minutes later I pulled out the turkey. One problem. The internal temperature of the turkey measured a paltry 150 degrees. It needs to be 180 degrees for it to be considered cooked. Other than sushi I hate undercooked meat and I’m not a huge fan of beef so I don’t dig rare steaks. I threw the turkey back in the fryer for 10 minutes. When I removed the turkey the second time, it was 168 degrees internally. After 15 minutes of standing time and the internal temperature of the turkey was 177 degrees.

After carving up the turkey, I now know why people fry their turkeys. It’s definitely juicy. It’s definitely flavorful. It’s definitely something I’d do again and I definitely recommend that everyone give it a go.

Last year, I met a real estate agent by the name of Ron Buss with Coldwell Bankers. He was referred to me by a friend. I rarely go out of my way to meet with real estate agents mainly because my time is limited and I just don’t want the brain damage. Ron was different. He was a nice guy who seemed to actually care about his clients and the community. It was a good meeting but we went our separate ways.

From time to time, I’ll pick up the Washington Park Profile a local publication when I’m at coffee shops in the Wash Park area. Much to my surprise Ron Buss was featured in an article entitled You Can’t Stop Ugly, But Can You Slow Density? by Paul Kashmann. According to the article, Ron is taking a stand against re-zoning of properties to combat scrapes in the Wash Park area.

Many people have voiced concern in recent years that the accelerated real estate values in South Denver are changing the very nature of the communities in which we live.

Once coveted bungalows are being pop-topped, scraped and replaced by homes that are not only much larger than their predecessors, but also built in a different style, using materials foreign to our early 20th century streetscape.

For well over a decade, community meetings have been called to consider first a plague of haphazardly-designed second and third story expansions (pop-tops) offensive to the eye and disrespectful of neighbors’ sunlight; and more recently, scrape-offs of (frequently) viable homes to allow for construction of much larger residences that often contain multiple units where a single family home once stood.

Rather than continue bemoaning such changes without acting, Ron Buss – a realtor and West Washington Park resident – has decided to take matters into his own hands. Buss is spearheading a movement that could lead to the downzoning of a large portion of 18 blocks of his neighborhood from R-2 to R-1, to prevent construction of multiple-family units: the duplexes, tri-plexes and even four-flexes that have become commonplace in the area.

“The problem is the rate at which change is occurring – and the accompanying change in character and increase in density,” said Buss, noting that, “from December of 2005 to now, duplexes under construction and permitted are equal to the number from the past three years.”

Keep up the good work Ron!

Here are the real estate and mortgage highlights over the weekend:

• With rates on the rise and a cooling housing housing market, this article discusses how builders are switching their focus from Single Family Residences to Townhomes and Condominiums.
  

  The cooling housing market has homebuilders throughout the nation girding for fewer sales, larger inventories and stiffer competition for people in the market for new homes.

  Rising mortgage rates and overbuilding are largely to blame, yet the pace of construction continues as builders rebalance their holdings, move from single-family to attached-home projects, and search for lucrative niches to fill.

• The cooling housing market is also a reason for apartments increasing their rent and their occupancy rate.
  

  The Denver area’s vacancy rate was 7.4 percent for the first quarter, compared with 7.9 percent for the fourth quarter last year, according to the Apartment Association of Metro Denver. The rate has been steadily dipping since the end of 2004, when it hit 10 percent.
  …
  The surge in apartment rents and occupancies in the West is the result of rising mortgage rates and home prices, which have pushed potential buyers to rent instead, said Caroline Latham, owner of Novato, Calif.-based RealFacts. Read more

• Al Lewis’ column discusses short selling your home when foreclosure is around the corner.

When I read the Denver Post this morning, I needed to do a double take.

One of Denver’s oldest neighborhoods on downtown’s northern edge is experiencing a renaissance as new housing lures young professionals.

Hundreds of housing units are planned or are under construction in Curtis Park, a historic urban neighborhood that, until recently, was known more for its notorious public housing project than for its upscale urban pioneers.

Apparently Curtis Park aka Crack Park is a hotbed for development. I recall fondly the days when vagrants, bodegas and the buses headed for Mexico, were the main attraction to Curtis Park.

Read More

The Uniform Residential Loan Application is commonly referred to as the 1003 (ten-oh-three) throughout the mortgage industry. When the loan application is completed accurately, the data obtained provides sufficient information for the underwriter to make an informed decision about the borrower(s).

The application is divided into sections to make it easier to complete and understand. They are as follows:

• Type of Mortgage and Terms of Loans
• Property Information ampersand Purpose of Loan
• Borrower Information
• Employment Information
• Monthly Income ampersand Combined Housing Expense Information
• Assets ampersand Liabilities
• Details of the Transaction
• Declarations
• Acknowledgement ampersand Agreement
• Information for Government Monitoring Purposes

Type of Mortgage ampersand Terms of LoanThis section identifies the loan program requested and the term of the loan in months.

Property Information ampersand Purpose of LoanThis section identifies the subject property’s common address and legal description including the year the property was built and the number of units within the property. The purpose of the loan and the occupancy status are included in this section. The section also addresses other informational items such as whether the loan is a construction loan, construction permanent loan, or a refinance loan. Finally, this section includes the name and manner in which the title is held, the source of the down payment and the settlement charges.

The Borrower Information contains all of the personal information of the primary borrower and co-borrower. The information needed to complete this section includes the following: Name Social Security Number Home Phone Birth date Years of Schooling Marital Status Number of Dependents and Ages Current Address Former Address if residing at Current Address less than 2 years If there is a co-borrower this information will need to be supplied as well.

• D. Year Built — The year the subject property was built
• E. Purpose of the Loan — The reason you are applying for the mortgage –(1)Purchase or (2)Refinance
• F. Property Will Be — (1)Primary Residence — Borrower will live in the property. (2)Secondary Residence — Borrower will use the property as a vacation home and it will NOT produce income.

(3)Investment — The borrower will NOT occupy the subject property; it will be used as an income producing property.

G. Complete this Line if Construction or Construction-Permanent Loan

• Year Lot Acquired — The year the lot was purchased
• Original Cost — The purchase price of the lot
• Amount Existing Liens — Total balance of ALL mortgage liens on the subject property
• Present Value of Lot — Present market value of the lot
• Cost of the Improvements — The dollar amount of the construction costs for the proposed new home
• Total (a+b) — (a)Present Value of Lot + (b)All the Cost of Improvements

L. Estate Will Be Held In — Indicates how estate will be held.

• Fee Simple — Indicates an estate under which the owner(s) is entitled to unrestricted use of the property.
• Leasehold — Indicates an estate in real property wherein the mortgagor does not actually own the property, but rather has recorded a long-term lease; the expiration date of the lease should also be included in this section

IV. Employment HistoryThis section is designed to identify at least a two-year employment history for the borrower(s). It identifies potential factors like stability, tenure, and the line of work of the borrower(s).

If you would like us to assist you in completing the 1003 application over the phone, give us a call at the number listed at the top of the page.

The 1003 is the starting point for the entire loan process. Wherever you go to apply for a loan, be it at your local bank, or with a mortgage broker, or even on the Internet, all lenders insist on a completed 1003 application. It is the standardized form designated by Fannie Mae and is a pre-requisite for a real estate loan.

K. Source of Down Payment — The source of the funds the borrower(s) is using for the down payment and/or closing costs on the subject property loan. These funds can be personal funds, gifted funds, etc.

Information needed in this section is as follows:

• Borrower’s Name — Full name with middle initial including Jr. or Sr. if applicable
• Social Security Number — Borrower’s Social Security Number
• Home Phone Number — Borrower’s phone number at their present address
• DOB — Date of birth in MM/DD/YYYY form
• Yrs. of School — The number of years of education the borrower has completed in whole numbers
• Married, Unmarried, or Separated
• Dependents — The number of dependants and their ages
• Present Address — The complete property address where the borrower currently resides. A full two-year residence history is needed
• Own or Rent — Does the borrower own or rent at the present address or any other addresses in the 2-yr residence history
• The borrower’s complete mailing address if different from the present address

• Mortgage Applied For — Type of Mortgage Requested
• Agency Case Number — FHA, VA or USDA/RHS Case Number
• Lender Case Number — Lender’s Internal Case Number
• Amount — Dollar Amount Wanted
• Interest Rate — Rate the Borrower Expects to Receive
• No. of Months — Term of the Loan in Months
• Amortization Type — Either Fixed Rated, Graduated Payment Mortgage(GPM), Adjustable Rate Mortgage(ARM), or Other

• A. Subject Property Address

— The property address that will be secured by the mortgage loan. If the property address is not known, put TBD (To-Be-Determined)

• B. No. of Units — The number of units contained within the subject property
• C. Legal Description of Subject Property — The method of geographically identifying the subject property; see preliminary title commitment or purchase contract for legal description

J. Manner in which title will be held — The type of tenancy.

• Joint Tenants — An ownership of a property by 2 or more individuals who have equal, undivided interest in the subject property
• Tenants in Common — An ownership of a property by 2 or more individuals, each of them having an undivided, but not necessarily equal, interest in the subject property
• Single Tenant — The ownership of a property by one individual.

• Name and address of the employer — A full two-year employment history is needed
• Self-Employed — Mark here if the borrower is self-employed
• Yrs. on the Job — The length of time the borrower has worked in their current line of work in years and months
• Years employed in this line of work — Length of time in the current profession in years only
• Position — Current job title and position
• Business Phone — The phone number of the borrower’s employee, not a cell phone unless the borrower is self-employed
• Other Income — If the borrower has a second/part-time job and they are using the income for purposes of qualification, they must included a 12-month history and be able to demonstrate the income will continue.

H. Complete this line if this is a refinance loan

• Year Acquired — Year the subject property was purchased
• Original Cost — The purchase price of the subject property
• Amount of Existing Liens — The total balance of ALL the mortgage liens on the property
• Purpose of the Refinance — (1.) No cash-out rate/term — The borrower is refinancing the subject property to include the payoff of existing mortgage(s), the closing costs, and/or prepaid items/reserves with zero net proceeds to the borrower at closing. (2.) Limited cash-out rate/term — The borrower is refinancing the subject property to include the payoff of the existing mortgage(s), the closing costs, and/or prepaid items/reserves and receives industry acceptable cash at closing that is usually less than 2% of the loan amount. (3.) Cash-out — The borrower is refinancing the subject property to pay off the existing mortgage(s) for the subject property, to pay any closing costs associated with the loan, and/or to receive additional cash proceeds at closing for any personal or business matters.

I. Title will be held in what name(s) – The name(s) of the individual(s) who will be vested in title to the subject property

III. Borrower InformationThis section identifies information about the borrower(s) such as names, social security numbers, and at least a two-year residence history. This section falls under the regulations of the Equal Credit Opportunity Act (ECOA). When concerning martial status, the borrower may only be asked, “Are you married, unmarried, or separated?” In a community property state, the applicant may further ask, “If unmarried, are you single, divorced, or widowed?”

A bridge loan is often commonly referred to as a “swing” loan. Short-term financing which is expected to be paid back relatively quickly, such as by a subsequent longer-term loan.

Bridge loans are often utilized when a borrower is selling one home and purchasing another home or having a home built. In the new home scenario a bridge loan is used if the two settlements are not on the same day, and the borrower needs the money for a down payment on the new home before the old home settles. For new construction a larger initial deposit may be required, or larger periodic payments while the home is being built

To qualify for a bridge loan, the borrower normally must have a contract to sell the existing house.

Most borrowers can also go with a stated loan program to eliminate the bridge loan.

The bridge loan will hold the equity from your existing home until your current home sells. Bridge loans are common in construction loans ampersand when people relocate.

Rarely used as much as they used to, bridge loans are for people who haven’t sold their present property, but must close on a new property. The bridge loan becomes the source of their funds for the down payment.

Many home builders offer incentives when building a home such as adding a deck or different upgrades if you agree to use their preferred lender or title company. It is important that you do not have to and are not required to use their preferred partners. You should always shop around for the best rates. Usually, the preferred lender will bump up their rates or fees to cover the upgrades your getting making that “free” Sub-Zero fridge not so free after all.

Builder incentives can even be given towards the financing aspect of your loan and/or given towards reduced title costs. An example may be a .25% off of your interest rate if you enter into a purchase agreement during the month of May. Again, you will need to use the builder’s finance company and title company in order to receive these discounts.

Builder incentives can range from almost anything. A builder incentive could be a side entry garage, a brick front, a premium sized lot, upgraded appliances, a finished basement, an upgraded front, discounted closing costs, and much more. Always check to make sure that you are getting the best deal when a builder starts offering incentives. If they are offering incentives, there is usually a good reason. You all know the old saying, “you don’t get something for nothing” and this definitely applies here. Trust me 99 times out of 100 they will make that money up somewhere else.

Builders may offer you a certain dollar amount in upgrades to your home. For example, they may offer you a deck or hardwood flooring in your kitchen worth $6,000. It’s important to know that this is not the actual cost for them to give you the addition. It costs them much less. The $6,000 is what they would charge if they were making a healthy profit off of the upgrade.

Builder incentives are also offered to increase the number of pre-completion sales in an area that has seen a slow down in sales in the new construction market. A slow down does not necessarily mean that the homes will not sell but are just taking longer to sell.

Usually these incentives are paid for through your interest rate which in fact makes none of it free. When shopping for a builder it is almost best to find one that works on a cost plus ratio. This way you know exactly what your builder is making through the whole process. Usually between 10%-15%.

Other sites: Loan Officer | MIP | 1003 The Loan Application | Reduced Documentation Loans | Why should I refinance| Pay Option Arm Calculator

There are quite a few ways to build equity in your home faster than a traditional fixed rate mortgage will allow. Within the first six years of your home, for every dollar you apply towards your mortgage, approximately twenty cents will go towards reducing your principle, or the original loan amount borrowed. One way to increase the amount applied towards your principle is to increase your monthly payment to a higher amount. If this is not possible than structuring your mortgage with a bi-weekly payment plan will help to decrease your principle balance and increase the equity in your home.

Building a home also has an advantage over buying an existing home. When you build you usually end up with instant equity at the end of the construction phase. If you have good credit and want to build you should consider a construction loan or a one-time-close loan.

If you get a tax refund check every year, rather than spending it or put it in your savings account, apply it towards paying down the principal of your mortgage. Interest rates offered by most savings accounts and CD’s do not come close to the interest rate charged on your mortgage loan. Paying down the principal in the early years of your loan can significantly lower the total interest expense in your mortgage over the life of your loan.

Instead of making an extra mortgage payment, many of the savviest personal real estate investors use any additional capital to invest in additional assets, which over an equivalent time period tend to build more value than additional payments to principal. Instead of trying to pay off your house 7 years faster, in certain areas it may be more profitable to invest that money in additional property. Assuming a 30 year mortgage, ask yourself, “How much was my house worth 23 years ago?”. In most areas of the country, the answer might be 1/5th or even less of its current value. Now ask yourself how much even a relatively small additional investment would be worth in the same amount of time. In many areas you will likely find that owning more property is more lucrative than paying down principal, because they can always print more money, but they aren’t making any more land.

Not all lenders allow you to structure and pay weekly or bi-weekly directly with them. You can do this on your own if you are diligent. Take your monthly mortgage payment and divide it by 4. If you always dedicate or set aside this dollar figure every week then in the months that have 5 weeks instead of 4 you add those additional funds to your principal that month. At the end of the year you will have put an entire monthly payment directly towards reducing your principal balance.

If you can make one extra payment per year you will end up knocking 6-7 years off of your mortgage.

Although property values are not guaranteed to increase they have always risen and historically performed well. There may be times where values decrease slightly or stagnate but your investment in real estate will 99% of the time increase in value over time.

There is one very simple way to build equity without making any additional payments on your mortgage. That is simply to own property. In some areas of the country, southern California for instance, property values have risen over 20 per cent per year for the past couple of years. Although property is not guaranteed to increase in value, you can see that the more real property that you own the chances are very good that the more equity you will be building.

Building equity also comes from natural appreciation in your property. If you are in an up and coming area the value of your home, and equity will increase at a quicker pace.