So what does all of this mean?

Contributed by Scott Friedman, Realtor®

We have all heard the media reports about how the sky is falling. Every other house is foreclosing and values are a mere fraction of what they were just a few years ago. And if that is not enough, your home will be covered by water within 10 years due to global warming. So the question is, why would anyone want to buy property in Denver, Colorado at a time like this?

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Denver Realtor - Scott Friedman

Scott Friedman

Broker Associate Herman Group
Colorado Real Estate
360 S. Monroe Street Suite 501
Denver, CO 80246

303-908-9974
email: scott@lighthouseteam.com

My Personal Mission As your professional real estate advisor, I focus on client satisfaction. My business is about service and I am not happy until you are happy. My time in the business has provided me the experience to assist you with nearly every real estate need. Whether it's finding you a home, finding the best loan, or helping you getting the most out of selling your home I am here to guide you. If there is anything you need, please let me know. About My Services I will listen to your needs and want to establish our goals and objectives. We work as a team to meet the goals and you will continually be in the loop during the entire process. In this fast paced market, I believe communication is key in meeting our goals and building our relationship. Knowing that you are reading this right now, tells me that you are comfortable with the Internet and email and that means you will be able to take advantage of my 24 hour electronic assistant right here on my Website. Please use my Website to provide you powerful features such as the access to the MLS through my MLS Wizard to help you narrow down the ideal home. Selling your home takes special care and attention in order to get the highest possible price and you can feel free to use my Value Wizard to get an instant comparable sales report. My links section is designed to point you important information on home shopping, owning and selling. And if you find what you are looking for, then contact me and I will do my best to get you an answer or point you to a resource. Satisfied clients are the key to my success My satisfied clients are my best resource for new business. In this very competitive business of real estate, service makes the difference. My service is second to none and has earned me a valuable source of referrals. If you are considering a real estate professional, please give me an opportunity to earn your business too. I am confident you will be very happy! Scott Fredman

The cost of procrastination

I spoke with a new client yesterday (I'll call him Jason) about the house he's buying in Silverthorne (in Summit County, Colorado -- home to Copper Mountain, Keystone and Breckenridge ski resorts.) Jason had gotten back at 1:00 am from a meeting with the sellers, and was a little dazed by how quickly he had gone under contract, putting a $10,000 deposit down on the house. In just over 36 hours, he had gone from seeing the house for the first time to being under contract to buy it, already approved for his mortgage.

Bear in mind that Jason loves this house. He's seen many in recent weeks, none of which excited him very much. "As soon as I stepped inside," he said, "I knew that I could keep this house for a long time."

A few minutes later I was on the phone with the seller, who told me that just a few hours after Jason got home from signing the contract, the seller received another offer at full price to buy the house.

That's how it is to buy property in Summit County -- when you see a place that will work for you, you have to act.

In today's paper there's a report on a study by a Canadian researcher on the scope and cost of procrastination (the study took 10 years but was only supposed to take five -- click here for the full article.) In short, the study found that with all of the technology around us (TV, online video, cellphones, video games, blackberries and iPods) the number of people who say they have serious procrastination problems has gone up by more than 500% since 1978.

The researcher, University of Calgary professor Piers Steel, says that the U.S. gross national product would probably rise by $50 billion if the icon and sound that notifies people of new e-mail were to disappear.

In the field of personal finance, right now there are millions of Americans with adjustable rate mortgages from the past few years which had their interest rates increase (or will shortly.) Every month that goes by without acting -- like refinancing into a fixed-rate mortgage -- costs them more money.

Professor Steel says that one key cause of procrastination is "whether you believe you can get the work done." Mortgages can be complicated, with different programs and payment options to consider; properly done, a refinance takes you whole financial picture into consideration.

To be proactive, follow these steps:

1. find a mortgage broker whom you can trust
2. be open about your finances with him, and
3. let him guide you to the closing table

Don't let another day go by without acting in your financial best interest!

By Jordan Graham

Permission to republished by Jordon Graham Copyright 2007

Our nation's debt to income ratio

Featured Article by Jordan Graham

What ever happened to the stigma associated with paying interest?

There are still some people -- usually older than 50 -- who recoil at the thought of paying interest for something like a couch or a car. By contrast, Americans today are so culturally addicted to overspending that we think nothing of buying things for which we cannot afford to pay cash. And the more we borrow, the more expensive it becomes to borrow.

One of the key benchmarks that lenders use to evaluate a new mortgage application is the Debt to Income Ratio ("DTI".) It's calculated by adding up the monthly minimum payments required to sustain a borrower's current credit accounts plus the new loan in question and dividing by the borrower's gross monthly income. Here's an example for a hypothetical (but typical) American borrower who is seeking to take some equity out of his home with a Home Equity Line of Credit ("HELOC"):

• First Mortgage: $1,780
• Car payment: $ 425
• VISA cards: $ 300
• Student loans: $ 325
• Furniture payments: $ 185
• subtotal: $3,015
• New HELOC: $ 395
• Total: $3,410

Monthly Income: $7,000 (gross; that's $84,000 a year)

DTI: (3,410 / 7,000) = 48.71%

This borrower would probably be approved for the new HELOC; many lenders will let you commit to a DTI of up to 50%. Bear in mind that after taxes, his monthly take-home income is $5,040 -- so after making the minimum payments on his debt obligations, he has $1,630 left.

Sounds like a lot of money, right?

But remember -- he's only making minimum payments, which means he's effectively getting nowhere on paying down his debts. Quite likely, he has an adjustable mortgage ("ARM") -- his new HELOC is certainly adjustable -- which means that his interest payments can increase over time, further chipping away at his $1,630 per month.

Never mind saving for retirement, or college fund planning.

Sound familiar? Far too many Americans push their fears about their own debt load to the backs of their minds every night so they can get to sleep.

Let's look at another borrower whose finances are structured a little differently, split between "Mandatory Spending" (think of that as being installment loans, like car loans or financed furniture) and "Interest." How easily would sleep come to you in this scenario?

	Mandatory spending	Interest	Total (% of income)
2005	63%	10%	73%
2010	67%	11%	78%
2015	73%	13%	86%
2020	81%	19%	100%
2025	94%	24%	118%

I'll identify the borrower in this case -- it's the US Federal Government (data from the Congressional Budget Office, December 2005, "The Long Term Budget Outlook, Scenario One".) I'll start by saying that under no circumstances would a lender lend anything to a person with this kind of cockamamie financial plan.

It's not sustainable. The tough part is that "Mandatory Spending" includes Social Security and Medicare, which sooner or later will have to be cut -- we simply cannot spend more money than we take in. Borrowing to pay our Mandatory Spending bills gets more and more expensive, too, so that's not a viable option.

I read an article in this morning's New York Times about Chile, which “spends practically nothing on interest payments, because we have been able to reduce public debt” and instead use the savings for social programs, according to Chile's Finance Minister, Andres Velasco.

I know that there is a vast difference between the global priorities of the US and Chile, but I long for a culture of sustainability -- in which we act today in such a manner that we will be able to afford sustaining our lifestyles in the years to come.

By Jordan Graham

Permission to republished by Jordon Graham Copyright 2007