Ask the Colorado Dream House Team – Increased Debt to Income Ratios

Ask the Colorado Dream House Team – Increased Debt to Income Ratios

Another episode of Ask the Colorado Dream House Team with broker/owner Dan Polimino. The debt to income ratios have increased and Dan covers these ratios and some changes that may increase your credit score. 

  • Increased debt to income ratios to 50%
  • Mortgage lenders will no longer count judgments or collections against you
  • Will mortgage insurance go up?
  • A first right of refusal and what it means
  • What’s the $250.00 guarantee?

Full Transcript

Hi there, welcome to today’s live edition of Ask The Colorado Dream House Team. I’m your host, Dan Polimino. Coming to you live from sunny Denver, Colorado, where it’s supposed to hit 100 today. I know lots of parts of the country are experiencing some of the same heatwaves, and I hope you had a tremendous 4th of July holiday. Well, lots to talk about today, if you’re new to the program, we talk about real estate here; buying, investing, and selling real estate. What works in Denver works in a lot of parts of the country. So a lot of the information I’m giving you today, whether you’re in Denver or not, will help you navigate the real estate industry.

Two things we like to accomplish each week, we want to give you some market news, and we want to answer your questions. Remember, you can leave us a comment at any time right here on Facebook, or you can email us at the email address behind me, or give us a call at 720-446-6325. We are happy to answer your questions. All right, what is the market this week? Well, it’s good news if you’re trying to get a home loan. They are going to increase the debt to income ratio. In the past, the debt to income ratio was sitting at around 42%, okay? So that means your debt could not be more than 42% of your total income. Well, they’re going to raise that to 50%, that means your debt can now be up to 50% of your total income. When I say your debt, that means your future house payment, your car payment, your credit cards, any bill that you’re paying on a monthly or yearly basis, that’s your total debt, can now be 50% of your total income.

The other thing that they’re doing is everybody is going to get a credit score boost. Yay! How are they going to give everyone a credit score boost? Well, mortgage lenders are no longer going to count judgments and collections as a negative on your credit report. So if you’ve got a judgment or a collection it will not be held against you, and therefore, your credit score will go up, all right? So for any of those people that have had some of those problems, expect an increase in your credit score.

Now, many of you may be saying, “Well, Dan, with all of this, certainly, mortgage insurance is going to go up, because this sounds like the riskier loans.” They are not going to raise mortgage insurance. Mortgage insurance is going to say the same, even though they’re going to go up to a 50% debt to income ratio. Still, some of you say, “Geez, Dan, this feels an awful like 2005 and 2006 when lending got kind of loose and fast and we got into that trouble.” That point I will agree with. It does seem a lot like 2005 and 2006. We may not have learned our lesson and we may be headed down that same path. I don’t know, we’ll have to see how this all turns out, all right? That’s today’s market update.

Now to the questions. “Dear Colorado Dream House Team, what does the first right of refusal mean in a contract to buy and sell real estate?” Well, first, the right of refusal says, we’ve got a buyer, we’ve got a seller. The buyer gives the seller an offer and in that offer is a first right of refusal. Let’s say the buyer’s not ready to close yet like they’ve got a house to sell. The seller would like to take the offer, they don’t want to take their house off the market while this person tries to sell their house.

What they might do is they might agree on a contract in terms of the contract and price and the buyer may give the seller a first right of refusal, which means the seller can accept other offers while they’re trying to sell their home, and in the event that the seller gets a better offer, they go back to buyer number one and say, “I’ve got a better acceptable offer. Will you meet it or beat it?” If the buyer does meet it or beat it, they need to remove their contingency to sell their home and move forward with the contract. If they don’t want to meet or beat it, that contract is terminated and the seller is able to take the new contract. I hope I explained that well, it’s a little complicated. I’m happy to talk with you and tell you how it potentially can work for you.

“Dear Colorado Dream House Team, why would a lender want two appraisals?” Well, generally we see two appraisals ordered in a jumbo loan, so when we’re talking about properties in excess of, I would say 2 million. Occasionally we’ll see two appraisals on a $1.5 million house. But usually in excess of 2 million. The lender is very skittish about the luxury market and what’s happening in the luxury market. They may not take the word of one appraiser. So one appraiser brings the house in at the purchase price. The lender might say, “You know, I want a second appraisal just to reconfirm that something fishy isn’t going on in the luxury market.” All right? That’s why they would order two.

“Dear Colorado Dream House Team, what is your 250 marketing guarantee?” Well, it works just like this, we believe that our marketing to sell your home is better than everybody else’s, that we’re willing to put our money where our mouth is. So here’s what we’re going to do. We think our marketing is so good, we want you to interview us and let us present that plan to you, all right? Then you can go interview our competition. If our competition’s marketing plan is better than ours, you can hire them to sell your home and we’ll give you $250 bucks. But we’re so sure that their marketing plan is not better than ours that we don’t think we’re going to end up paying that $250. We think you’re going to hire us to sell your home. That’s what the marketing guarantee is all about.

If you want to know more information about that, you can call us at 720-446-6325, [team@coloradodreamhouse.com 00:06:00], or leave a comment here on Facebook. We would love to talk with you more about what our marketing plan can do for you because right now our statistics show that we are getting a 4 to 6% higher purchase price than our competition with our marketing plan. All right, that’s it for this week. We are back next Tuesday with more information for you on the real estate market wherever you live. Look forward to talking with you then. Have a great weekend everybody.

Leave a Comment

Your email address will not be published.

Featured Listings