After a half-decade of tightening mortgage guidelines, banks are starting to “loosen up”.

The Federal Reserve conducts a quarterly survey of its member banks and, last quarter, not a single responding bank reported having tightened its mortgage guidelines for prime borrowers.  A “prime borrower” is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.  53 banks responded to the Fed’s survey and none said that mortgage guidelines “tightened considerably” or “tightened somewhat” between September and December 2011; 50 said that guidelines remained “basicaly unchanged”; 3 said that guidelines “eased somewhat”.

Mortgage applicants sometimes remark that the mortgage approval process can be challenging.  Last quarter’s Fed survey hints that looser standards are coming.   Not since before the recession have banks lowered mortgage approval standards like this and it bodes well for this year’s Golden  housing market. Real estate agents report that 1 in 3 home sale contracts fail with “declined mortgage applications” as a leading cause.  Looser mortgage lending standards should mean more home loan approvals for buyers, and fewer contract cancellations.  This can spur the housing market forward.

Make note, though. “Looser standards” should not be confused with ”irresponsible standards”.  It remains more difficult to meet bank standards as compared to 5 years.  Today’s underwriters are more conservative with respect to household income, overall assets and credit scores.

Even as compared to one year ago:

• Minimum credit score requirements are higher
• Downpayment/equity requirements are larger
• Maximum allowable debt-to-income ratios are lower

For buyers and refinancing households gaining approval, though, the reward is the lowest mortgage rates in a lifetime.  Mortgage rates in Colorado continue to fall, helping home affordability reach new highs.

If you’re in the market to buy a new home or refinance one, your timing is excellent.

This week, once more, we find mortgage rates are on a downward trajectory.  Conforming mortgage rates have returned to near all-time lows.  After this morning’s Non-Farm Payrolls report, however, those low rates may come to an end.

It’s a risky time for Colorado home buyers and would-be refinancers to be without a locked rate.  Each month, on the first Friday, the Bureau of Labor Statistics releases its Non-Farm Payrolls report for the month prior.  More commonly called the “jobs report”, Non-Farm Payrolls provides a sector-by-sector employment breakdown and the nation’s Unemployment Rate.  In December 2011, the government reported 200,000 net new jobs created, and an Unemployment Rate of 8.5%.

For January 2012, economists project 135,000 net new jobs with no change in the Unemployment Rate and, depending on how accurate those predictions are proved, FHA and conforming mortgage rates for homes in the Denver area are subject to change.  The monthly jobs reports tends to have an out-sized influence on the direction of daily mortgage rates.  The connection between jobs and mortgage rates is fairly direct.

Job growth is a key cog in the economic growth engine and mortgage rates change daily based on short and long-term economic expectation.  As more people join the workforce, economic expectations change; the economy tends to expand, breeding optimism among investment.  When this occurs, it often spurs investment in the stock market, which tends to leads mortgage rates up.  In short, in a recovering economy, when job growth is strong, all things equal, mortgage rates rise and home affordability suffers.

So, for today’s rate shoppers this job report represents a risk.  The economy has added jobs over 15 straight months, a streak that’s added 2.1 million people to the workforce.  Although the jobs market remains weak and well off its peaks from last decade, a 15-month streak is worth watching.  More jobs means more more income earned nationwide, more money spent by households, and more taxes collected by governments.  These items build a foundation for economic growth and Wall Street is watching.

If today’s Non-Farm Payrolls shows more jobs created than the estimated 135,000, mortgage rates are expected to rise.  If the jobs figures falls short, mortgage rates should fall.

The Non-Farm Payrolls report was released at 8:30 AM ET.

One of the best ways to get more of what you want in life is to help others get more of what they want. This is “upside down marketing” in a nutshell. The normal business practice is to have a product or service, start looking for prospects, and make the sale. The normal way of doing business does not work as effectively as in the past. Let’s turn business upside down! You will not want to miss being inspired by Vickie Thomas, our keynote speaker, who will tell you about marketing in a new business climate.

Marketing ideas that will work today require you to create some new practices for the current business paradigm. In this workshop, you will learn about some marketing strategies that will separate you from the competition and give you the results you desire.

If you want to have “exceptional” results in your business, you will need to put “exceptional” methods to work for you. This workshop is designed to help Entrepreneurs and Small Business Owners market their products and services differently in 2012 and beyond.

Join us to learn how you can get more of what you want in 2012 by helping others get more of what they want. Also, you will learn from Andy Cleary how to create “buzz” around what you are doing. You will learn from Dave Block how to use his “Upside Networking” to be more effective in creating power partners. You will learn from Sherry Armstrong, Dale Davis, Ken Nierman and Jon Terry how they have implemented Upside Down Marketing to create business for themselves. They will share with you what they are doing, how they are doing it, and how it’s working.

If you are an entrepreneur or small business owner who wants to achieve extraordinary results in 2012, then take the first step by signing up for this workshop today. All profits from this workshop will benefit Kudo Communities. To learn more about Kudo go to www.facebook.com/kudohonorsyou.

• January 26, 2012 from 8:00 a.m. to 12:00 p.m.
• Jefferson County Association of Realtors, 950 Wadsworth Blvd # 101 | Lakewood, CO 80214
• $29.95 limited to the first 100 registrants

• Register & pay at www.kudostore.com/events.htm or send your check made payable to Kudo Community to 6801 S Dayton St, Greenwood Village, CO 80112

Here is a flyer with more information about the event:

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.  Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).  This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, homeowners who itemize their tax returns can apply their January mortgage payment’s interest portion to their 2011′s tax returns.  The alternative is to pay the mortgage on schedule and wait for April 15, 2013 to claim the credit.

If you choose to pre-pay your mortgage and typically send your payment via USPS, give your check ample time to be delivered to your lender, and processed. Mail your check no later than Saturday, December 24.  For homeowners that pay electronically, the process is simpler.  Edit your online bill pay program to have your mortgage payment post no later than Thursday, December 29.

Make note, however.  Not all mortgage interest is eligible for tax-deductibility and not all homeowners throughout the state of Colorado who pay mortgage interest should itemize said interest on their tax returns.

Before prepaying on your mortgage, ask your tax professional for advice.

Alaris Properties 2012 Vision Board

Recently, the team at Alaris Properties created a new vision board. We would like to share with you some of the things we have on the vision board so you can get to know us better and understand what we are creating. However, before I tell you about any item on the vision board, I would like to share our “Passion Statement.” It seems everyone has a vision statement and a mission statement. We do, and we love to communicate those. However, our Passion Statement helps us to stay focused on what is most important to us, as a company, as a team, and as individuals. Our Passion Statement is: “Fueled by Gratitude.” What that means for us is that we receive our motivation and have the most impact when we are in a place of gratitude: grateful for the incredible individuals we are privileged to assist, grateful for one another, even grateful for all the wonderful lesson we learn. We each believe that nothing occurs by accident. I have personally learned that focusing on gratitude helps me to stay positive in the face of great challenges. In fact, being in a place of gratitude helps me find solutions to the biggest challenges.

Now … on to our vision board. Here’s a photo of it: http://alarisproperties.com/wp-content/uploads/2011/12/photo-2.jpg

Notice that the word “gratitude” is at the center. There is so much that I love about this vision board. First, it gives us a visual image for what we are. Second, it provides a road map for where we are taking our company. Further, it gives me personal motivation for working hard to make a difference in the world. My favorite piece on the vision board is this (it’s in the bottom left corner): “I have never met this morning. We’ve never shaken hands or hugged awkwardly, or looked into each other’s eyes. I’ve never experienced this very hour, or felt this very sunshine touch my skin. Golden, healing, warm. The birds, the breeze, my breath. All are new. Each ushers in never imagined intentions and never dreamed of possibilities. So … I choose this Day, while also honoring tomorrow. I will live, laugh, love and practice without leaving a trace. I will ground my feet. I will stretch my palms to the sky and I will say: “Hello Day! I like you. I’m so happy that we’ve met.” The reason I love this so much is that it is a reminder for all of us to embrace each moment of everyday and to be grateful to be alive. I see and hear from many how anxiety about tomorrow prevents them from enjoying today. I am a firm believer that we can enjoy today and honor tomorrow without losing our integrity.

Over the next several weeks, each of our team members will be posting what they love about the vision board. Once again, our intention is that you can get to know us better by understanding who we are and where we are going. I could go on for pages about the vision board and, at the same time, I want you to get to know all of us from the “inside out”. Enjoy and thanks for being part of our journey.

The move creates additional mortgage financing possibilities in more than 650 U.S. counties, and promises to increase the FHA’s mortgage market share, which has grown from 6% in 2007 to roughly 30% today. The change in FHA loan limits also marks the first time that FHA loan limits exceed those of conventional mortgage-backers Fannie Mae and Freddie Mac. Conventional loans remain capped at a maximum of $625,500.

For home buyers in the Denver area and nationwide, FHA-insured mortgage offers several advantages over comparable conventional loans, the most commonly cited of which is that FHA-insured loans require a down payment of just 3.5 percent.  FHA-insured mortgages carry other advantages as well.

First, FHA home loans are not subject to loan-level pricing adjustments (LLPA).  This means that, all things equal, buyers and would-be refinancers with credit scores below 740; or, who live in multi-unit homes; or, who have high loan-to-values are not subject to additional loan fees as a conventional mortgage applicant might.

Second, after 6 months of on-time payments, FHA-backed homeowners are eligible for the FHA Streamline Refinance.  The FHA Streamline Refinance is among the simplest loan products for which to qualify with no appraisal required.  Even if you’re “underwater” on your mortgage, you can still be streamline-eligible.

And, lastly, at least in today’s market, FHA mortgage rates are below those of the conventional market.

The downside of FHA financing, however, is that all FHA mortgages require mortgage insurance and FHA mortgage rates are often higher versus a comparable conventional loan.  This means that, although its mortgage rate may be lower, the payment for an FHA home loan may be higher as compared to a Fannie Mae mortgage with similar credit traits. FHA loans aren’t always optimal, but with higher FHA loan limits, expect the FHA’s market share to increase.

Check your local FHA loan limit at the HUD website or call one of our preferred mortgage broker’s, Christian Durland at 720.929.5702. Or, email him at cdurland@firstcal.net.

A conforming mortgage is one that, literally, conforms to the mortgage guidelines as set forth by Fannie Mae and Freddie Mac. Conforming mortgage guidelines are Fannie’s and Freddie’s eligibility standards; an underwriter’s series of check-boxes to determine whether a given loan should be approved. Among the many traits of a conforming mortgage is “loan size”.

Each year, the government re-assesses its maximum allowable loan size based on “typical” housing costs nationwide.  Loans that fall at or below this amount meet conforming mortgage guidelines.  Loans in excess of this limit are known as “jumbo” loans.

Between 1980 and 2006, as home values increased, conforming loan limits did too, rising from $93,750 to $417,000.  Since 2006, however, despite falling home prices in many U.S. markets, the conforming loan limit has held steady.  This will remain true for 2012 as well. In 2012, for the 7th straight year, the national single-family conforming mortgage loan limit will remain at $417,000.

The complete 2012 conforming loan limit breakdown, by property type :

• 1-unit properties:  $417,000
• 2-unit properties:  $533,850
• 3-unit properties:  $645,300
• 4-unit properties:  $801,950

However, there are some areas nationally that have earned ”loan limit exceptions” based on the local median sales prices.  These areas are known as “high-cost” areas and loan limits within these regions range from $417,001 to a maximum of $625,500. Some examples of high-cost areas include San Francisco (along with a most of California), New York City, and most of Hawaii and Alaska. In fact, the majority of the high end ski towns is at $625,500.  Nationally, there are approximately 200 such “high-cost” areas.

Verify your local conforming loan limit and loan limits across Colorado via the Fannie Mae website.  A complete county-by-county list is published online.

In its press release, the Federal Reserve said that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”.  The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.  The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include:  

1. A slowdown in business investment
2. A “depressed” housing market
3. Strains in global financial markets

The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones.  It re-iterated its plan to leave the Fed Funds Rate within its current range “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.  Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates little reason to rise or fall.

Mortgage rates remain near all-time lows and, for homeowners willing to pay points + closing costs, 30-year fixed rate mortgages can be locked at less than 4 percent.  If you’re thinking of buying or refinancing a home, this may be the best time to lock a mortgage rate.

The FOMC’s next meeting will be its first scheduled meeting of the new year. The meeting is slated for January 24-25, 2012.

Home improvement projects are booming, expected to cross $110 billion in total volume this quarter.  Unlike in recent years, however, the projects aren’t helping to create much new home equity.

According to Remodeling Magazine’s Cost vs Value Report 2011-2012, for each home improvement dollar spent in 2012, homeowners can expect to recoup just 58 cents in home equity. This figure is down sharply from 2005, when the cost-to-value ratio was 87 percent. 

Today’s Colorado homeowners get a much smaller payoff on their home improvement projects.  If you’re planning to remodel/update in preparation for sale, consider the following projects, each of which carries a high cost-to-value ratio. From Remodeling Magazine’s “Mid-Range Project” list :

• Steel Entry Door Replacement:  Cost, $1,238; Recoup, 73.0%
• Attic Bedroom:  Cost, $50,184; Recoup, 72.5%
• Minor Kitchen Remodel:  Cost, $19,588; Recoup, 72.1%
• Garage Door Replacement:  Cost, $1,512; Recoup, 71.9%
• Wood Deck Addition:  Cost, $10,350; Recoup 70.1%

By contrast, other projects carry a low cost-to-value ratio, and should only be undertaken if the project’s utility exceeds its cost.  These projects don’t do much to raise a home’s resale value.

• Home Office Remodel:  Cost, $27,963; Recoup, 42.9%
• Sunroom Addition:  Cost, $34,133; Recoup, 45.9%
• Backup Power Generator:  Cost, $14,760; Recoup, 47.5%
• Bathroom Addition:  Cost, $5,125; Recoup, 51.0%
• Fiberglass Entry Door Replacement:  Cost, $3,536; Recoup 56.3%

In the “Upscale Projects” category, projects including the replacement of doors, siding and windows, occupy the list’s first 6 slots in terms of cost-to-value. If you’re planning a home improvement project over the next few months, the timing is right — both contractor costs and material costs are low nationwide, and improving a home can extend its useful life.

See the complete Cost vs Value report online.

If you plan to buy new construction in the Denver area sometime in 2012, don’t expect today’s low prices.  Like everything in housing of late, the market for newly-built homes appears to be stabilizing and, in some markets, improving.

As foreshadowed by this month’s strong Homebuilder Confidence survey, the Census Bureau reports that the number of new homes sold rose to a 6-month high in October, climbing to 307,000 units on a seasonally-adjusted, annualized basis. A “new home” is a home that is new construction in which no one has lived.  It’s the opposite of an “existing home” in which someone has lived.

Home buyers are comparing new construction to home resales and liking what they see.  At the current sales pace, the nation’s complete new home inventory would now be depleted in just 6.3 months.  This marks the lowest home supply since April 2010 — the last month of the last year’s federal homebuyer tax credit. By building only to meet new demand, builders are keeping home supplies in check, and home prices stable.  They’ve also found a niche market – 80% of homes sold last month sold for less than $300,000.

Split by region, the Census Bureau reports October’s New Home Sales as follows :

• Northeast Region : +0.0% from September 2011 
• Midwest Region : +22.2% from September 2011 
• South Region : -9.5% from September 2011 
• West Region : -14.9% from September 2011 

Unfortunately, the data may be inaccurate. Although the October New Home Sales report says that sales climbed 1.3 percent last month, the government’s data was published with a ±19.7% margin of error.  This means that the actual New Home Sales reading may have been as high as +21.0 percent, or as low as -18.4 percent.  Because the range of values include both positive and negative values, the Census Bureau assigned its October data “zero confidence”.

As home buyers, we can’t take our market cues from the published data.  Instead, we should look to other metrics including Housing Starts data and the aforementioned homebuilder confidence survey.  Each points to strength in the new home market, and foretells higher home prices in 2012. More to the point, we know that home builders have backed off in housing starts. In fact, this is an area we will be watching. Once we deplete existing home inventory a bit more, we will begin to see home prices rise. This is not going to happen overnight; however, it is an inevitable result as we move through the recession.

If you’re in the market for new construction, consider writing an offer soon.  Home prices remain low as well as mortgage rates — a combination that keeps home payments low.  We will likely see things begin to change in the coming year or two.