THE RULES HAVE CHANGED FOR BUYING REAL ESTATE IN DURANGO COLORADO AND ELSEWHERE!

Today's news, September 15, 2008: Lehman Brothers files bankruptcy notice and Merrill Lynch agrees to a forced sale to Bank of America for $50 billion, resulting in further turmoil in the financial markets. What does this mean to you if you are buying or selling real estate in Durango Colorado?

First, the financial markets are global, and these developments are evidence that the sub-prime mortgage fiasco has not run its full course. Even before the recent change with Freddie Mac, and Fannie Mae to government oversight, lenders have changed the rules for qualifying for mortgages. Today, your credit worthiness is more important than it has been in the last decade or longer. The qualifying requirements have also tightened in the last 12 months. For sellers, this means fewer qualified buyers, and for buyers, it means much tougher standards, a more difficult loan process, and potentially more expensive credit. For borrowers with excellent credit, and a low debt-to-income ratio, they will see very little difference.

If you learn nothing else from this article, KNOW THIS: your credit score will determine the cost, and even the potential for borrowing money. If you have a credit score of 740 or higher, you will get the best rates. If your credit score is 695, you may have to pay a 1/4% higher interest rate, and a borrower with a score of 655 will pay 1/2% or more. This impacts the amount of money a lender may loan to a borrower, and the the difference in cost of that money. For example, on a $400,000 loan with the rate at 6.5% the borrower with a credit score of 655 will pay $166.60 more per month than the same amount of loan, but with a credit score of 740. If we use the same $400,000 loan, and we use equivalent payments, the borrower with the 655 credit score will be able to borrow $25,000 less money.
The loan to value ratios have also tightened. It was not uncommon in the recent past to get a 100% loan, but today, the minimum down payment is 5%, and that is on a primary residence. Other important changes include the the cost of jumbo financing, which is required on loan amounts above $443,750 in La Plata County. Jumbo rates are 1.5% to 2.0% higher interest rates than conforming loan amounts. Some of the manufactured homes and condominiums are harder to finance today, as compared to the last few years, and underwriters have less discretion on loan requirements, and procedures than in the past.

The Good News: The federal government has taken huge steps to stabilize the financial markets, and the economy. They have reduced the impact of the sub-prime mortgage crisis, and they have even added incentives for purchase. Tip: Be sure to ask your lender about the $7,500 first time home buyer tax credit, if you think you may qualify.

The above quotes are used for example only, interest rates and costs change daily, and may be different by lender. It has never been more important to use a high quality, knowledgeable lender. Please do not make the mistake of many borrowers, and assume that all lenders are alike, and that they offer the same loan products, with the same level of advise and experience. In fact, I highly recommend high quality local lenders to assist you, and to advise you. We have seen situations with some "internet" companies that make promises, and then don't deliver, and for most borrowers, this is one of the biggest financial decisions of their life, and the quality of lender reprentation is key. For this article, I received help from David Fountain of Wells Fargo Mortgage, and I would highly recommend his service. You may reach him in his Durango Colorado office at 970-385-9360.

Real estate market good new! The sale of existing homes in July in the western states surpassed July 2007. The numbers were 106,000 units versus 102,000, and there are some individual markets seeing a rebound in real estate. These include Colombus, Oklahoma City, Charleston West Virginia, and in our state, Colorado Springs. Many real estate brokers and some national media believe that we are seeing the bottom of the market. If you are a buyer, getting your "ducks in a row" with your credit score and credit report may make a big difference as you find a home to purchase. For those of you that have not taken the first step, contact a good lender, and have them provide you with a pre-qualification letter. This will help you with your real estate broker, and in your negotiation on a property. If you have already contacted your lender, then call your Realtor to find your perfect property.

If I can be of any service, please contact me: Don Ricedorff at don@frontier.net, at my website at durangorealproperty.com, or by phone at 970-259-5007.

Don Ricedorff is a licensed real estate broker in the State of Colorado, and he resides in Durango Colorado. He has numerous real estate designations including, CRS, CRB, CCIM, ABR, GRI, RSPS, and CIPS, and he is active in his church, and in the community.