10 Ways to Build Equity in Your Home

Home finances and residential equity symbol as a bird nest shaped as a family house with a gold egg inside as a metaphor for financial security planning and investing in real estate for retirement freedom.

1. Rising home prices – when home prices rise, you will gain equity simply because your home will be worth more. For example, if your home is currently worth $250,000, if it rises to $300,000 in five years, you’ll have $50,000 more equity. Unfortunately, the opposite can also occur.

2. Falling mortgage balance – as you pay off your mortgage each month, you pay a portion of interest and a portion of principal (assuming it’s not an interest-only home loan). Every time you make your mortgage payment you’ll gain some home equity.

3. Larger mortgage payments – if you make larger payments each month, with the extra portion going toward principal, you will pay off your mortgage faster and gain home equity a lot quicker.  (Stop to consider your long-term investment goals before doing this.  Oftentimes, if you put your money into a different investment vehicle like a mutual fund, you would receive larger returns from the mutual fund than you would from putting more money toward your mortgage.)

4. Biweekly mortgage payments – you can go with a biweekly mortgage payment, where you make 26 payments throughout the year. This will shave down your mortgage term, save you a ton in interest, and help you build home equity a lot faster.

5. Shorten your mortgage term – you can refinance into a shorter-term mortgage with a lower mortgage rate, such as a 15-year fixed, which will increase the size of your payments, but build equity much faster than a traditional 30-year mortgage.

6. Avoid refinancing – conversely, if you don’t refinance and pull cash out, you’ll retain all the equity in your home. During home value growth periods, many homeowners refinanced over and over until they sucked their equity dry – then when prices drop, as they tend to with any market, these homeowners found themselves upside down on their mortgages.

7. Home improvements – if you make smart home improvements, where the expected value exceeds the cost, you’ll increase your home equity by having a home that’s worth more. While it’s seemingly completely played out, granite countertops and stainless steel appliances still draw buyers in, and you can sell for more.  Or if you like to go the Conscious Group route – eco-friendly home upgrades can build equity, save you money on your energy bills, and make your home more attractive to future buyers.

8. Maintenance – keep your home in tip-top shape and you will be rewarded when it comes time to sell. If you can unload it for more as a result, you’ve essentially created more equity in your home.

9. Curb appeal – same goes for staging. Make your home look good when you list it and there’s a better chance it’ll sell, and sell for more. Simple things can make a big difference, such as new paint, carpet, bright lighting, cleanliness, plants, flowers, etc.

10. Bigger down payment – you can make a larger down payment when you purchase your home to automatically acquire home equity. While this may seem like you’re putting money in an illiquid investment, more equity means a lower loan-to-value ratio, which equates to a lower interest rate and easier-to-obtain financing. Over time, that lower rate will mean less interest paid and more equity accrued.

If you’re ready to refinance, Conscious Real Estate works with a great lender we can recommend, so give us a call!

How To Improve Your Credit Score in 7 Steps

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Thinking about buying a home, but are worried that your credit score will hold you back?  Here are 7 tips to improve your credit score.

1. Know your credit score

Credit scores range from 300 to 850.  Higher = Better.  Your credit score is based on whether you’ve paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You’ll need a score of at least 620 to qualify for a home loan, most loans will require a score of 640, and a score of 740 to get the best interest rates and terms.

You’re entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Access all three versions of your credit report at www.annualcreditreport.com. Review them to ensure the information is accurate.

2. Correct errors on your credit report

If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there’s an error.  Send documents that support your case, and ask that the error be corrected or removed.  Also write the company or debt collector who reported the incorrect information to dispute the information – ask to be copied on any materials sent to credit-reporting agencies.

3. Pay every bill on time

You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You’ll also save money because you’ll keep the money you’ve been spending on late fees. Credit card or mortgage companies probably won’t report minor late payments, (less than 30 days overdue,) but you’ll still have to pay late fees.

4. Use credit carefully

Another good way to boost your credit score is to pay your credit card bills in full every month. If you can’t do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.

5. Take care with the length of your credit

Credit rating agencies also consider the length of your credit history. If you’ve had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you’re not using them.

6. Don’t use all the credit you’re offered

Credit scores are also based on how much credit you use compared with how much you’re offered. Using all $10,000 of available credit will give you a lower score than having $10,000 of available credit and using $1000 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.

7. Be patient

It can take time for your credit score to climb once you’ve begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you’ll do to your credit score.

Mortgage Credit Certificate Program of Denver

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Getting ready to buy a home and want to get 30% of your interest payments back?  Keep reading.

The City and County of Denver 2012 Mortgage Credit Certificate (MCC) program allows qualifying borrowers to receive an annual federal income tax credit equal to 30% of the annual interest they pay on their mortgage loan. The tax credit enables a taxpayer to subtract the amount of credit from his or her annual total federal income taxes. Borrowers may choose to adjust their W-4 withholding to account for the tax-credit benefit and receive a higher net monthly income. Any excess credit from the MCC may be carried forward for up to three subsequent tax years.

This program will run from April 2012 to December 31, 2014.  Homeowners must keep their first mortgage and occupy the home as their primary residence.  The homeowner must not have owned another home in the past three years (unless they have purchased their home in a “targeted area.”)  Furthermore, the allowable maximum family income for families of 2 or fewer is $79,300 in a non-targeted area and $91,195 for a family of 3 or more, while the maximum family income is $95,160 for a family of 2 or less in a targeted area and  $111,020 for a family of 3 or more in a targeted area.  Click here for a list of targeted areas.

Note:  You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home.

For a list of lenders who participate in the MCC program of Denver, please call us to get started at 303-908-9873.

Different Types of Mortgages – Which One is Right For You?

New house buyers concept for mortgage, home loan

FHA Loan – This is a great program for first-time home-buyers, though you do not need to be a first-time buyer to qualify for this loan.  FHA loans usually require a middle credit score of 640 and tends to have more lenient guidelines than most other mortgages.

The Guidelines:

-Bankruptcies must be discharged at least two years ago

-Foreclosures and Short Sales must be at least three years ago

-Debt to income ratios are allowed up to 55%

-3.5% is required for a down payment

-Co-signers are allowed, as well as gift funds for a down-payment

CHFA Loan – This is another great program for first-time home-buyers offered by the Colorado Housing and Finance Authority.  CHFA is a organization that provides down payment assistance for FHA loans.

The Guidelines are the same as FHA Loan Guidelines except:

-Only a .5% down payment is required or a minimum of $1,000 down, whichever is more

-Buyers must complete a Homebuyer Education class that can be done in person or online

VA Loan – This is a great loan program for any veteran with VA loan eligibility.  Similar to FHA loans, this loan has very lenient underwriting guidelines.

The Guidelines are the same as FHA Loan Guidelines except:

-No down payment is required

-No mortgage insurance is required

Conventional Loan – This is the preferred program for any buyer with a higher credit score (at least 650) and can afford at least a 5% down payment.  Ideally, a buyer would need to put 20% down for a conventional loan.  However, buyers can now put as little a 5% down with various options for mortgage insurance.  (Generally, a higher credit score will gain the buyer a lower price on mortgage insurance.)

The Facts:

-Bankruptcies must be discharged at least 4 years ago

-Foreclosures and short sales must be at least 7 years ago

-Debt to income ratios allowed up to 45%

-At least 5% is required for a down payment

-Co-signers are allowed in most cases, as are gift funds

-With a slightly higher credit score and a slightly larger down payment than an FHA loan, a conventional loan ends up being a much cheaper option than an FHA loan

On a final note, buyers be aware that a conventional loan is often required when purchasing a condo.  If you have more in depth questions about which loan is right for you, give us a call or email and we will point you in the direction of a great loan officer!  Also, if funds for your down payment are a problem, look into the Denver Mortgage Assistance Program to see if grant money is still available for home-buyers who qualify for a home, but need assistance with a down payment.

Is a 203(k) Loan Right for You?

green paint and paint supplies ready to do home improvement

FHA’s Streamlined 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser. Homeowners can make property repairs, improvements, or prepare their home for sale.  Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior or purchasing new carpet.

This could be very useful for you if you don’t mind buying a home that may not be move-in ready or would like to have the home customized to your taste… that’s right, the kitchen and bathroom would be designed by you.  For those of you who are passionate about sustainable living, the 203(k) loan could utilized to do green upgrades, such as energy-efficient windows, ENERGY STAR appliances, high-efficiency furnace with sealed ductwork, and solar panels.

The Section 203(k) program is FHA’s primary program for the rehabilitation and repair of single family properties. As such, it is an important tool for community and neighborhood revitalization, as well as to expand homeownership opportunities.

Note:  It is recommended to use a 203(k)-approved contractor for improvements.

Colorado Energy Saving Mortgage Program – 2013


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On May 28, Governor Hickenlooper signed into law the Colorado Energy Saving Mortgage Program.  Under this program, a homebuyer purchasing a new or renovated Zero Net Energy (ZNE) home is eligible for an $8,000 reduction on financing the total cost of their home mortgage.  A ZNE home produces as much energy as it consumes.  A new or renovated home that has a HERS rating greater than HERS* 0, but less than HERS* 50 will also receive a mortgage reduction incentive.

In addition to the mortgage incentive, homebuyers will benefit from lower energy bills, which can be used to offset the cost increase of a ZNE home.  For example, $30,000 in improvements on a 2,200-square-foot home after the $8,000 incentive would require an additional $94.53 in mortgage payments each month.  However, the monthly energy savings would be $154.00.  That’s a net savings of $59.47 a month.

Under this new program, a homebuyer can receive an $8,000 incentive and purchase a zero net energy home that is worth substantially more at a lower annual cost than an equivalent non-ZNE home.

With this attempt to move our Colorado housing market to ZNE homes, this movement should create more construction jobs, as well as increase state and local government tax revenue.  According to the analysis conducted by Architecture 2030, each $1 million in incentives will generate:  $16.22 million in direct spending, $16.49 million in indirect and induced spending, and $1.92 million in state and local government tax revenue.

*The HERS Index is the nationally recognized scoring system for measuring a home’s energy performance.  The HERS Index Score can be described as a sort of miles-per-gallon (MPG) sticker for houses, giving prospective buyers and homeowners an insight as to how the home ranks in terms of energy efficiency.  A HERS Index of 100 represents the energy use of the “American Standard Building” and an Index of 0 (zero) indicates that the building uses no net purchased energy.  The lower the value, the better.

Denver’s Mortgage Assistance Program – 2013


      I love to be the bearer of good news!  Denver currently has a grant program to assist home-buyers with their down payments.  Lacking the funds for a down payment prevents many people from purchasing a home, so this program seeks to alleviate that problem for individuals and families with lower to moderate incomes.  This program provides up to 4% of the down payment and closing costs of the home for people applying for 30-year fixed rate mortgages.  This is not a loan; it is grant money.  It does not need to be paid back.

To find out whether you qualify, you may speak with a lender.  The guidelines are the following:  your income must be lower than $91,100 for households with two or fewer people, or less than $103,000 for a household with three or more people.  Your minimum credit score must be 640, (660 for manufactured homes.)  You must attend homebuyer counseling, which is free.  You must occupy the home as your primary residence. At this time, only homes in Denver, Arvada, Dacono, Edgewater, Littleton or Sheridan can be purchased through this program.

This program currently is funded at 15 million dollars, and is operating on a first-come, first-serve basis.  The funding is expected to last until approximately December 2014.

If you are interested in being connected with a lender to see if you qualify for this program, please contact me and I will provide you with a list of lenders.  In fact, my favorite lender is on that short list.  If you are accepted, I would love to help you find your new home!