Now, the next question to consider after you decide that it makes sense for you and you are going to refinance your Denver mortgage, is what to do with the savings you’ll be getting. That may sound like a silly question, but trust me, if you’re not careful it is very easy for that extra money to just ‘evaporate’ at the end of each month and not really have much impact on your situation.

A couple of different suggestions as to how you might apply that money to your ‘big picture’ were made in previous articles. In each example we used the hypothetical number of $175 in monthly savings from your new, lower rate Denver home loan. While that amount of savings is pretty good, it’s probably not enough to make many people overly excited. On the other hand, we showed that with a bit of disciplined effort, it could become something quite substantial that you could legitimately get excited about.

In our first example applied the money to pay off existing credit card debts. For our example we used two cards with interest rates of 12% and 16% carrying balances of $4000 and $8000 respectively. In that example we applied the $175 per month to the minimum payments and reduced the pay back period from 23 years to just over 4 years.

The second example showed how you could apply that savings toward the principle balance on your Denver mortgage to pay it off sooner. Our example was of a loan amount of $225,000 at 5% fixed. When we applied the $175 per month savings to the principle, we shaved over seven years off the mortgage and paid it off in just under 23 years rather than 30. Those 7 years of not paying on the mortgage equates to a savings of over $58,000.

The last option we will talk about is putting that money to work by investing it. You could be investing with any number of goals ranging from a college fund for a child to your retirement. Your investment motivations are completely your own; we simply want to show you what could be accomplished with this money.

In this example, we have to guess at what your overall return might be, but we’ll use some conservative numbers.

Let’s say that for the next 18 years you’re going to add $175 to an account that already has $2000 in it (working on a college fund for a new baby). For our conservative average annual return we’re going to use a rate of 7%.

So what does baby have waiting when they turn 18? A bit over $83,000! That’s a pretty good start for college, I would say.

Now let’s look at a 30 year old who is looking to retire at age 65. We’re also going to say that this account is starting off with a balance of ZERO, but it gets the $175 savings added to it each and every month. Doing nothing else for this account or your retirement, by the time you were 65 this account would be worth more than $300,000. Again, not too bad.

You need to remember that the numbers above are just for illustrative purposes; your results may vary. However, they are very attainable. If they have whet your appetite at all for what you might be able to accomplish, you really should sit down with a Denver mortgage planner as well as an accountant or financial planner.

The main point that we hope you get here is that while some savings may appear to be rather insignificant at first, if you apply yourself properly, you can have a dramatic positive effect on your long term financial well being. Your Denver home mortgage is more than a bill; it should be part of your overall financial plan.

Let’s run some numbers based on an assumption that your new Denver mortgage will be a fixed rate mortgage on a 30 year term. Also for the sake of argument, we’ll say the new mortgage is saving you a total of $175 each month. A good amount of extra money to have every month, but what are you going to do with it?

One option that we discussed in a previous example was paying off other debts, such as those on existing credit cards. As a reminder, in that example we said there were two cards, one with an $8,000 balance at 12% and the other at $4,000 balance at 16%. Making the assumption that you were just making the minimum necessary monthly payments (plus a little towards principle), that it would take you about 23 years to pay them both off. However, if you were to use a disciplined approach and used your new found savings to systematically pay them down, you could reduce those 23 years to just over 4 years, saving a TON of interest on them.

Another smart application of that money would be to apply it towards your existing Denver mortgage to help pay down the principle faster. By doing this each month you could reduce 30 years it is scheduled to take to pay off your mortgage and again, save you a lot of money. Are you wondering how much you might save? Let’s take a look.

We need some specific numbers to work with, so let’s go with the following scenario. We’re going to say that your new mortgage is for $225,000 on a 30 year program at a fixed rate of 5%. If you could get yourself to apply that extra $175 you now have each month towards the principle on your new loan, you would be able to pay off the loan in about 23 years rather than 30 which would translate into you saving over $58,000 on the total cost of the loan! That’s not chump change…

It’s obvious that the concept of refinancing to a lower rate is very appealing to a lot of people. What sometimes gets overlooked is the true power of what a little financial discipline can do for your long-term financial picture when applied to your Denver mortgage rates. As we’ve all seen in the current economic situation we find ourselves in, a bit of us.

So whether you’re considering a Denver refinance or if you’re considering getting a purchase money loan, it’s worthwhile to take a moment to realize what small but regular efforts can make on the big picture of your financial situation.

The biggest thing to realize is that it doesn’t take a lot of money every month to have a significant impact on your long term situation. There are three primary considerations for how to apply your new found savings to best impact your long term financial goals.

1. Paying down other high-cost debt, such as credit cards and possibly auto loans

2. Put it towards paying down the principle faster on your remaining mortgage

3. Using the money to invest in future goals such as retirement or a college savings

If you do carry other debt like car loans or multiple credit cards, it is important for you to compare the costs (i.e. interest rates), balances and mandatory minimum payments to one another. Making the assumption that you can currently make the minimum payment, you should organize and prioritize these debts by the most expensive first (highest interest rate, not highest balance), and then start applying the extra money towards that to pay it off as soon as possible.

For demonstration purposes, let’s use the following scenario of your debts: Credit Card 1 with a $4,000 balance at 16%, Second Credit Card totals $8,000 and a 12%, and the third is an auto loan of $21,000 at 4%. Let’s also say that through your mortgage refinance you’ve been able to gain a savings of $175 per month.

Assuming you were making just over the required minimum monthly payment on your two credit cards, the time it would take you to pay them off completely would be twenty-three years (assuming you didn’t add anything to the balance over that time). On the other hand, if you wanted to put that $175 per month towards paying these cards off in a systematic manner, this is what we would suggest:

First, pay off the highest interest card while maintaining your regular minimum payments on the lower card. When you’ve paid off the first card, start applying the $175 to the second, plus the minimum payment you had been making on the first. By sticking to this plan you would be able to pay off BOTH credit cards in only a little more than four years. That’s a whole lot less than twenty-three! Consider how much money you’ll be saving in interest payments over those 19 years…

It’s pretty obvious that a Denver mortgage refinance can help your situation in the short term, but now you can see how much it can have an impact on your long-term financial health as well.

1. Know what you can afford as far as a Denver mortgage. The general rule of thumb is that you can afford between 2 and 3 times your gross income.

2. Create your home wish list. After you have created your list, prioritize it.

3. Know where you want to live. put together a list of 3 or 4 neighborhoods you would be happy living in, and remember to take into account things like schools, parks, growth plans and general safety.

4. It’s never too early to start saving. Do you have enough money to both qualify for your Denver home loan and put money down for a down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. And do not forget to factor closing costs into the expenses. Closing costs – including taxes, attorney’s fee, and transfer fees ? typically cost between 2% and 7% of the home price.

5. Get your credit in order. Get a copy of your credit report to make sure there aren’t any errors on it, and if there are, get them fixed right away. Your credit report is your history of all your credit, bad debts, late payments and delinquencies.

6. Figure out how much of a mortgage you qualify for. How large of mortgage do you qualify for? Also, explore different loan options ? such as 30-year or 15-year fixed or ARMs ? and make a decision as to which is best for you.

7. Get pre-approved for your mortgage. Get all the documents a Denver mortgage lender will need to give you a pre-approval on your loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.

8. Weigh other sources of help with a down payment. For example, you might qualify for certain special mortgage programs or down-payment assistance programs. Ask your lender about state and/or local government resources that might have more information about programs like these. If you have money saved in an IRA account, you wouldn’t have to pay an early withdrawal penalty if you’re using the money to buy your first home.

9. Figure out the total cost of Denver homeownership. Take everything into consideration including property taxes and insurance, home association fees, utilities and maintenance.

10. Find a good Denver Realtor. Some first time buyers opt to try to do the deal alone rather than getting an agent. Why even bother? An agent is there to represent you and make sure you get a fair deal. And don’t forget, as a buyer you’re not going to have to pay to have that agent work with you.

So what exactly is Mark to Market and why does it matter? Is this going to have an affect on the housing market in general, and more importantly, how might it directly affect your Denver home mortgage?

We’re going to do our best to give a summary of it below so you can hopefully better undertand it, and more significantly, see how it has played such a important role in our current economic crisis, including the Denver mortgage market. It may come as a surprise to you to see that this accounting rule (i.e. law) has much more to do with the current economic crisis than quite probably anything else.

Before we even look at how Denver mortgage rates get affected, let us first discuss why Mark to Market exists at all

To fully understand Congress’ drive behind the creation of this accounting regulation, we need to look back at the stock market crash of 2000 – 2002.

At that time, before this rule was devised, companies like Arthur Anderson and Enron figured out ways of ‘cooking their books’ to make their balance sheets seem significantly healthier than they truly were. This, in turn, helped their stock valuations to be incorrectly inflated, contributing to the ‘bubble’ that, as we all know, eventually popped. When that occurred,many, many people lost tons of money. To suggest they were unhappy is an understatement. Something had to be done.

The idea of “Mark to Market” accounting was created in an attempt to make things more transparent and to ensure fair valuation of companies and all their assets. In a nutshell, what it means is that all assets have to be valued as if they were to be sold on a daily basis. For those who opted not to do this conservatively, they put themselves at risk for potential jail time.

Let’s now take a look at how this rule can cause a problem affecting the whole economy, including Denver mortgages.

Between the enormous amounts of money handled by banks – not to mention the wide (and strange) variety of financial instruments they use, – it can be hard to try to get one’s mind around exactly what it is they do. It will be easier to illustrate how this accounting concept works using an analogy more approachable to the rest of us.

Let’s say you live in a neighborhood and all the houses are worth about $200,000. Let’s also imagine your neighbor owns his house outright.

Suddenly, you neighbor has some major medical expenses and needs to sell his house to pay for them. He is in need of his money right away and does not have the time for a Denver refinance, and he isn’t in any position to wait for the best price he can get. Instead of waiting, he sells his home for $150,000 to get rid of it fast, even though it’s obvious that the house is worth considerably more than that.

If you happened to live across the street in an identical house, does the fact that your neighbor’s house sold for $150,000 indicate your house just lost 25% of its value? No, of course not. If you decided you were going to sell your house, you would take the time needed and get a fair market price for it; you wouldn’t be forced into a “fire sale” situation like your neighbor.

However, if you were a public company and were required by law to go by the Mark to Market accounting rules, you, and all your neighbors too, would now be forced to claim that the house you live in was only worth $150,000 and not the $200,000 you know to be the real value.

Now we’re going to look at how this applies to a bank.

Let’s do some more hypotheticals.

We’re going to pretend you have decided to begin a brand new bank, let’s call it YOUR BANK. You get started with a $2 million initial investment to get Your Bank going. Your plan to make money as a bank is to bring in other people’s money as deposits, you will pay them a safe but low return on that money, and then use the money to create other loans, for example Denver home loans, that pay you a higher rate of return. The difference between the two rates is the profit you keep.

Let’s say that out of that initial $2,000,000 in deposits, we created $30 million of loans. Our Capital Ratio (the ratio of loans to capital on hand) is at a respectable 15:1 ($15 million in loans for every $1 million in deposits). This kind of ratio is no problem at all and is totally acceptable by banking standards.

We’re going to imagine that you run your bank by extremely conservative standards, and the Denver loans Your Bank agrees to make are only those of the utmost quality. You require a 30% down-payment (normal is 20%, or sometimes even less), you require a credit score of 800 (this would be a VERY high credit score), you require full documentation on all income and assets and only allow a DTI(debt-to-income) ratio of 10 percent (40% is the industry standard).

It is clear, Your Bank will only make the highest quality Denver loan. And it’s evident. All of your borrowers pay as promised, no one is unhappy and Your Bank is making money. This drives Your Bank stock price higher.

All of a sudden, the Denver real estate market starts to slow down a lot and go soft, and Denver home values start dropping (however, your borrowers still make all their payments on time, with no problem).

However, with the industry wide reduction in home values, you are forced to re-assess the valuation of your total loan portfolio. Now, instead of the loans being 70% of the value of the home, they are at 90% (your equity position in the home just went down considerably). This means these loans are now a lot riskier than back when you had a lot more equity, and because they’re more risky investments, investors are less interested in buying them from you than they were before and therefore they now have less value.

Your accounting team now tells you that, according to law, you must “Mark to Market” if you don’t want to risk a serious penalty (such as jail time!) In their Mark to Market analysis, the estimated value is now at $1 million; it has been cut in in half!

Don’t forget, not one thing has changed regarding your borrowers or your loans (everyone is paying on time so the cash flow is still coming in just as it always has). However you now have to reflect the fact that Your Bank’s ‘value’ has been cut by 50% to only $1 million.

The problem is, you still have $30 million of loans out there, and with a valuation of only $1 million, the capital ratio is now at at 30:1 and that is a LOT different than 15:1.

Alarm sirens begin to go off everywhere because it’s a concern that with just a handful of loans that go bad that you would be forced to cover, you might quickly run out of cash. This could put depositors at risk of losing their savings.

Now you have a situation where the FDIC begins looking into Your Bank and the SEC (Securities and Exchange Commission) is asking questions. Your Bank stock commences to fall quickly. Every one of the financial news networks catch wind of the situation and just add fuel to the fire.

Your Bank is in deep trouble.

The thing is, Your Bank is ‘over leveraged’, and to make up for that you are forced to begin selling off some assets. (Another option could be to try to raise some capital, but when you think about the way the situation appears and your capital ratios completely out of balance, no one is going to be willing to extend you the million dollars you need).

Since you need to get that money as soon as possible, you find yourself in a similar situation to that of your neighbor who was forced to ‘dump’ his house very quickly at a below-market price. As you sell your assets to raise capital fast, at the same time you are minimizing the value (i.e. quantity) of your remaining assets, further skewing your capital ratios even further.

This is the sort of death spiral that is almost impossible to stop once it begins. The thing is, the problem does not end with Your Bank.

Let’s say that my Denver mortgage company (we will call it “My Bank”) bought those assets from you. You were unloading them at such a great price that My Bank felt like we were receiving such a excellent deal that we could not resist, so we bought a whole lot of them.

The issue is, with the Mark to Market rules, the loans My Bank just bought from Your Bank at such a reduced price need to be used as comparables that all the other financial institutions also use to value their assets. So now each $200,000 Denver mortgage loan that My Bank held (not only the ones I bought from Your Bank) are now only worth $150,000 each despite the fact that they were loans that were performing perfectly.

Now the value of My Bank also goes down. This, in turn, negatively affects My Bank’s capital ratios and makes me to have to sell assets fast in order to generate funds… and so the cycle continues.

It’s not difficult to see how quickly and wide spread the problem becomes, despite the fact that there were not necessarily any ‘bad business decisions’ made. It is all caused by good intentioned, but over-reaching, accounting law.

When you think about the scenario above, you might ask yourself, “Why don’t they have everyone just stop buying all the discounted assets from the other guys and just stop the cycle?” This is a fair question.

If the cycle is stopped, not only will some financial institutions fold, but the whole flow of money just stops in general. This is what’s referred to as the ‘credit freeze’. When there is no credit available, mortgage loan originations come to a crawl, car and truck sales basically stop, people are laid off their jobs and the whole economy goes into a recession.

We’ve been in, and gotten out of a recession before. Why can’t we do the same thing we did the last time?

The minor recession of 2001 recovered pretty quickly in large part because the Fed lowered interest rates and mortgage lending standards were more relaxed, which ultimately led to nearly $3 trillion worth of cash being extracted in the form of home equity and put right back into the economy.

In today’s world, mortgage guidelines everywhere (not just the ones Denver mortgage brokers are dealing with) are much more restrictive, house values are significantly lower (and have been heading in the wrong direction for quite some time). And as was mentioned earlier, the truth of the matter is that there is just not a lot of money flowing out there for Denver mortgage companies to access for either home purchase loans or for a Denver mortgage refinance.

However…

How about some good news for a change!

4/2/2009 – Today the Financial Accounting Standards Board (FASB) voted favorably regarding relaxing the Mark to Market standard. They will let financial companies to use alternatives such as cash-flow analysis to value assets. This change is going to significantly reduce the write downs banks have had to take on assets and investments like mortgages. This could mean more funds will soon be available to your local Denver mortgage companies. We certainly hope so.

In the past 30 years, Denver mortgage rates have ebbed and flowed massively in a financial tide of home loan offerings. Near the beginning of the 1980s, for example, interest rates for regular 30 year, fixed rate mortgages were right around 18 percent. Today, though, we see interest rates for exactly the same type of loan in the neighborhood of 5% – and even as low as, in the 4 percent range.

Many Denver home owners who bought their homes when interest rates were sky high are now seriously thinking about a Denver refinance so as to reap the benefit of today’s lower rates. If you’re among these people, know that there are some expenses that will be involved in refinancing your home mortgage, such as a home appraisal, getting title insurance, and a loan origination fee, just to name some. To calculate if these expenses will off set with the potential money you may be able to save by refinancing, you can use the general rule of thumb referred to as the 2 percent rule.

In plain English, this rule recommends that the percentage difference between the current rate you have on your loan and the new rate being offered should be at least 2 points. If you were one of those those who borrowed in the 80s who bought a rate in the double digits (and today you can get a rate around 5%), it would make pretty good sense to refinance.

What you’ll find below are three advantages why people are refinancing in Denver with a lower rate:

1) Lowering monthly payments – By lowering the rate of your loan, you will see a major difference in what you pay for your mortgage each month. And, every little piece adds up. Some people who refinance have saved thousands and thousands of dollars over the lifeof their loan period. How much you save, though, completely depends on your specific numbers. So, make sure to speak to a mortgage advisor who is capable to do the number crunching for you to determine how much you will be able to save by refinancing.

2) Changing the kind of loan you hold – Some people make the decision to refinance in Denver even if they won’t save any money by doing so. Consider of the large number of people who got an ARM (Adjustable Rate Mortgage). We’re a lot of these people refinancing just to change to the fixed rate mortgage. At the same time, some people who have a balloon included in their mortgage choose to refinance when it gets nearer to the time to make that bulk payment.

3) Extracting money from your equity – If you have been in your house for ten years or more, you probably have a significant bit of equity because of the overall Denver home appreciation (even with the current reduction in house values) and to the fact that you have made those payments every month for quite a while now. This is why some folks choose to withdraw money out when they refinance their loan so as to help with retirement or with their children’s college expenses.

If you’re considering refinancing your Denver home mortgage, be sure to talk to a seasoned loan officer – someone with a lot of experience specifically in refinancing who can sit with you and review your situation and your numbers and the the various options you have. And know, that each situation is different. Your lender should inquire about short-term and long term benefits (or consequences) that are specific to you and targeted towards your financial future.

So again, I remind you; If you’re waiting on the sidelines waiting for the Denver refinance market to get better… it’s time to jump in now!  Denver mortgage rate are nearing historic lows.  There’s never been a better time than right now to get your Denver home loan.

No matter whether you are purchasing your first Denver home or are an experienced homeowner, you may likely need a mortgage to make such a huge purchase. Irrespective of where you live in the area, there will be multiple Denver mortgage brokers who you could use to make buying your home probable. How are you able to select the best Denver mortgage lender for your budget? These are some tips for doing precisely that:

Shop for the best Denver mortgage rate.

When it comes to Denver home loans, finding the lowest Denver mortgage rates is critical. Some may say that it is actually the most significant part of selecting a loan officer. Don’t stop looking after only 2 or 3 firms; get as many rates as you can. Don’t forget, your complete cost doesn’t just mean the interest you will pay. When you talk to a lender for the 1st time, they will give you a GFE (Good Faith Estimate) which includes information a bout your rate as well as closing costs. You should be prepared for to spend at least $2000 to $5000 in closing costs and more if you are purchasing a million-dollar (or greater) house.

With some Denver mortgage bankers, closing costs could be relatively low, while with other mortgage banks, you could be paying quite a bit more. These are out of pocket fees, so you have to pay for them them upfront, just like you do with your down-payment.

Be ready with your credit report that loan officers can review.  Don’t be afraid that you won’t be able to get a Denver loan with bad credit.  You have to ask to find out.

When selecting a mortgage bank, a really good tip to make sure that you find the most qualified one is to be prepared with your credit history and FICO . Most mortgage firms will have a look at this information if you get to the point at which you would like pre-approval, but you’ll probably have to pay a fee to get your credit report through them, and too many checks can essentially lower your score if they are spread out over several months. You can take a look at your own credit history free once a year, so before you start looking for a bank, print your credit report and discuss with them based on that info.

Now, after you have basically selected a bank, you’re going to need to pay for the official credit check, (but there’s really no need to pay for that until you have selected a final lender.) In the meanwhile, get ideas about what the costs could doubtless be using the unofficial (but accurate) credit history you have.

Avoid any pre-approval that has a very high interest rate. Some banks will try to encourage people to pick them by pre-qualifying you at high rates. Don’t forget, you know how much you can really afford every month. When you only have enough income for a once per month payment of $1000, getting pre-qualified for a multi-million dollar home is just looking for trouble.

The best mortgage banks in Denver will always keep your own interests in the back of their minds. Pre approving you for more house that you can afford is a danger sign this company does not truly care about your and your fiscal situation.

Ask questions about your potential Denver mortgage loan.

Finding the right Denver mortgage bank is all about asking good questions, and the more you ask the better off you are. Don’t be nervouse about the answers, because it is much better to know now rather than in a number of months when you wish to buy the perfect home you found and only then realize that there are issues. Ask your questions not only about cost, but also about what to expect as far as turn times, trends, and reliability. of your lender.

If possible, talk one-on-one with the person who is going to work with you on the deal, rather than just speaking to a processor or receptionist. One of the best methods to make sure that you are getting the answers you want is to literally write down your all your questions beforehand. That way, before you hang up the telephone or head out of the office, you can look over your all your questions and ensure that all of your questions have been answered.

Finally, when you’re looking for a Denver mortgage bank, remember that there are 2 different places you can look.

Internet banks can often be a great resource. At several internet sites for example, you can see their rates and the mortgage ratesof other firms. However, other folks find that the best option is to use a bank in their own neighborhood. When you first start your research, do not restrict yourself to only search for online firms or only offline firms; consider all the companies you can. Even if you are not happy with working with a company based on-line, you can still use info from these sites for comparison purposes. The thing not to forget is to simply keep comparing as much as possible until you find a Denver mortgage lender that seems to be a perfect fit for what you need.