You earned new credentials recently. What are they for?
My new credentials are CRMP, which stands for certified reverse mortgage professional. I’m the third person in the state of Colorado to receive this designation. I was very proud. It’s not a designation that’s easy to come by. People can think of it as passing the CPA exam or certified financial planner exam. It means that I’ve met a certain level of criteria in order to qualify for this designation. I’ve done a certain amount of studies and I passed an exam. It was one of the hardest exams I’ve ever taken. This designation ensures that I am of a higher credential to help people make a financing decisions on their home — specifically a reverse mortgage, which is for seniors and homeowners that are 62 years or older. It’s one of the most misunderstood products, but it’s a valuable financial planning tool.
Can you explain a reverse mortgage?
Think of taking a traditional mortgage and turning it in reverse. With a traditional mortgage someone borrows a lot of money, uses it to purchase their home, then they write checks every month to pay down the balance. With a reverse mortgage, we turn that concept upside down. We start them with a low balance and we don’t require that they send in payments every month. They are allowed to let the interest accumulate. With that, the balance of the mortgage is growing a little, but at a pace that is usually less than the value of their house is growing.
For some of our seniors, the requirement that they no longer make a mortgage payment just makes all the difference in their monthly cash flow.
What about first time homebuyers? Do you have advice for them?
I’ve been teaching the home buyer education classes in Arvada for several years. It all begins with a budget. When you think of your monthly income, you have a finite about of money to work with. People who don’t start with a budget over commit themselves and end up short at the end of the month. That’s what we do in the home buyer education classes — we start by talking about putting together a responsible budget first and planning for all the expenses. The other thing is preparing for all those things you need to do as a homeowner that you didn’t have to do as a renter. Right now, if someone is a renter if the pipes burst they call the landlord. But if you are a homeowner, you call the plumber.
Can you talk about the down payment assistance program in Arvada?
I was really proud of a down payment assistance program that we brought to Arvada. I worked on that thing for eight years and we finally got it passed in 2015. One thing that keep folks from being able to purchase a home is not having enough money available to do the down payment. When you buy a home it’s very rare that a lender will finance 100 percent of the purchase price. Typically they want to see that the home buyer has a little bit of their own money into the project. But coming up with enough money for a down payment is really hard, especially in today’s economy. Where are you going to find an additional 15 or 20 or 25 thousand dollars? The clients that I work with can usually come up with some of that money on their own, but if they could find some additional money, then they’d have the entire package they need to finally become a home owner. So, this program specific to the city has higher income limits than almost every other regional program that is available. Many of the other programs have such low income thresholds that by the time you make enough money to qualify for the loan, you are over the income limit for down payment assistance. You’re caught between a rock and a hard place. With this program, the Arvada City Council was bold enough to raise the income requirements to say we will serve this segment of the population. Those are the people that have a high enough income that they can qualify to buy some of the lower priced homes in Arvada — which are still very expensive. They just need a little boost pulling their down payment money together. But it’s not a gift. It’s not a grant. It’s borrowed money. But it comes with such easy to use terms — very low payments, very low interest rates that it makes it very affordable to people.
What trends do you see in housing and financing right now?
When you buy a home I like to describe it as two rails of the train track. The real estate side and the financing side. You need both rails with equal attention. On the financing side we found that the mortgage market did indeed tighten up after the Dodd Frank Act in 2010. The number of products available went from a massive amount to a small amount. What’s happening now is that grip is starting to loosen a little bit, so responsible adults can once again have more options available to them. We’re also seeing interest rates in an increasing trend. Interest rates hit their low point right around 2012 to 2015. Since then, they have started to creep back up again. I think we’re likely to see more and more increases in the coming years. So, the cost of financing will continue to increase — not at an alarming rate, but it’s something to pay attention to. In housing, we’re seeing all over the Denver metro area where the cost of housing is increasing. That’s for a really simple reason: supply and demand. The problem is everybody wants to live here and there just aren’t enough houses for everybody. We have a lot of buyers chasing very few listings. Until that dynamic is corrected, we’re going to continue to see that trend prices up. What we really need is more homes being built in the Denver metro area. But it is just so cost prohibitive for them to build right now. The cost of labor, materials and regulatory requirements makes it so expensive that the homebuyer just can’t afford it anymore. So until that gets corrected, I think we will see a lot of pressure.