Bad economic news in Europe is good news for American homeowners and homebuyers. Europeans, and other investors, are flocking to the safety of US securities causing the rates on mortgages to fall. Freddie Mac announced that mortgage rates have fallen to the lowest level of the year.

If you intend to stay in your home for less than a year it probably does not make sense to refinance. The old rule of thumb, that it does not pay to refinance unless you drop two percentage points, is worthless.

The correct way to analyze your mortgage is to compare the costs of refinancing against the pure interest rate savings. Eliminating mortgage insurance is an added bonus that should be included, if applicable. For example, if your pure interest rate savings and dropping the mortgage insurance saves $200 a month, and your total closing costs are $1,400, you would break even in seven months. Hard to find an investment in this day and age that will beat that!

Do not look solely at the change in the payment as that is deceptive. The reason is that you may be adding on to the life of loan. I have seen my clients refinance and the take the savings and apply that directly to principal. They have the flexibility of a lower payment, if needed, and the option of paying the mortgage off sooner and saving tens of thousands of dollars.

Remember that interest rates float down and spring up. You need to check sooner, rather than later, if you want to take advantage of this.

Next time: What is a zero cost loan?

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

Your Lender for Life!

Ok, so you only have so much money to spend on a new home. You are realistic about what you can buy with that money and after looking at quite a few places, you know that you are not going to be able to get everything you want. The question now becomes: ‘What things do you sacrifice and what characteristics are critical for a good investment?’

Here’s a quick checklist of how you should evaluate buying a home on a limited budget. I have broken it up into two categories, “Must have’s” and “Not Necessary.”

First, if you stick with these “Must Have’s,” you’ll never go wrong and your house will not only be an enjoyable place to live, but a good investment should you decide to sell it.

1)    Location, Location, Location: The critical things to look for are: Is it in a desirable neighborhood where people want to live? Are homes always in demand in this neighborhood? Is it in a good school district? Is it at the end of the cul-de-sac or a non busy street? Does it have a view: back to the mountains or a greenbelt? And how are the other homes in the neighborhood?
2)    Size: You should always be looking to buy the biggest home for your money. There is no such thing as too many bathrooms and bedrooms, but it is a problem when there are not enough.
3)    Land: Yard size is still a big deal. At least it is in Denver, Colorado. Everyone wants more yards and it’s hard to come by so get the biggest lot you can. If you bought a home that sits on a 3200 sq ft lot, you may have a tough time reselling that home.

There are a variety of things that you can live without and shouldn’t be a top priority if you are buying a home on budget. Next week, we’ll take a look at the checklist of items that you might consider sacrificing before buying a new home.

Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost