Category: Finance & Taxes

What Do Federal Rate Increases Mean For You | Paffrath & Thomas Real Estate

Presented by: Ryan Liebelt of Fairway Independent Mortgage

A group of Federal Reserve officials, commonly referred to as The Fed’s, are a group of Federal Reserve officials who generally meet 8 times a year and as part of their agenda determine whether the short term interest rates should remain unchanged, or warrant either an increase or decrease in rate.  The short term interest rate is set for monies borrowed for less than a year (typically back and forth between banks). Short term rates don’t directly affect mortgage rates but because they can influence the Bond prices, which DO affect mortgage rates, there is a very good correlation between the rise and fall of short term and mortgage rate changes.

Before the .25% rate hike in December, short term rates had been near zero for the past seven years. They were kept low intentionally to allow for growth in the market through, by providing cheaper costs to borrowers and the employment that this tends to create.  As the overall national economy continued to show relative signs of improvement, the Federal Reserve turned their focus towards raising the rates, to keep inflationary pressure in check. That time came about after their December meeting. The increase was expected from almost everyone within the financial markets and was already somewhat buffered in.  It is aslo expected that there will be further increases this year.

Let us put this into perspective; on a $300,000 loan, the difference in monthly Principal and Interest payments between rates of 4.0% vs 4.25% is only $43.37 per month.  Now, while no one prefers to spend more money each month, it’s not likely to change the average home buyers decision to buy a home when the difference is less than a dinner out for two in most cases.

So, when is a good time to buy? Should I wait? Will prices come down? The answers to these questions will vary, but generally speaking, the recent appreciation in the Colorado market is a sign of simple supply and demand economics. Due to the economic circumstances between 2008 and 2014 there was almost no new construction that took place (supply), compound that by a swelling state population of new home buyers (demand), and the stage was set for impressive Real Estate appreciation.

Between 2014 and 2015 the IRS reported just over 101,000 more NEW tax returns that listed Colorado as their home state! In 2015 that number dropped, but still represented an increase in population of roughly 76,000. As a result, there are many that are convinced that further appreciation and price increases will continue. The result of postponing ones purchase of a home could likely be a higher rate AND overall cost. Finally, rent prices statewide are rising to record levels. So, in most cases, it is more affordable to OWN a home than it is to RENT one. For these reasons, I feel that the time to buy a home is now.

All in all, buying real estate is an investment in yourself, your future, and your financial wealth management. Through all of the ups and downs in the market, homes are worth substantially more now than they were 30 years ago. The American population will continue to grow and raise new families, which will increase the need for more housing.  If you own a home you will build equity because of that simple fact. You also can’t forget the greatest part of home ownership, being able to customize your environment and call it YOUR OWN!


Ryan Liebelt
Mortgage Consultant
Fairway Independent Mortgage

Fairway Independent Mortgage




By state statute 2017 is a reassessment year for real property taxes. New values will be assigned based upon sales comparables during the period from June 30, 2014 –Jul 1, 2016. Your new Notice of Valuation (NOV) will be sent out by May 1, 2017. You will have until June 1, (postmarked) to protest the value the assessor has assigned. Don’t waste your time saying you just think it is too high. You must include supporting comparables and examples demonstrating it is higher than the market comps indicate. You will need to follow the instructions on the NOV form.

According to early conversations with Summit Assessor, Beverly Breakstone, the average increase from the last period is looking like a 15% to 20% increase in residential values and a 10% to 15% increase in commercial values. Before you panic and think your taxes are going up 20% consider the following factors:

1. The reason for revaluations is to keep equality of tax burden, between tax payers, based on property values. The budgets approved in December by each taxing entity (towns etc.) is what drives the amount of money to be collected.

2. There is another factor at play and that is known as the Gallagher Amendment. It says that 45% of all the property taxes in the state must come from residential improved property which leaves 55% from all other property including vacant land. As vacant land has been built upon in the state there is less of the commercial category to cover the 55%. This is adjusted by the assessment rate which has been 29% of real value for the commercial sector and 7.97% for residential sector. This year commercial will stay the same at 29% and it appears that the residential rate (multiplier) will drop to 6.96% offsetting much of the increase in valuations.

*More on the Gallagher and Tabor amendments here: Preliminary Residential Rate Study for 2017-2018

Real Estate can sometimes feel like a world of its own with its very own language. Maybe you’re new to buying and selling or maybe it’s been a while since you’ve visited the “Real Estate World” Either way here is a run down of commonly used words.



Abstract of Title: Summary listing of documents registered in the local land registry office that affect ownership.

Acquisition: The process of taking title to or ownership of something.

Adjustable Rate Mortgage (ARM): Also known as Variable Rate Mortgage, a loan secured against land which has an interest rate that changes according to some outside index such as Federal Prime Rate. The change in interest will result in a change in the payments due.

Amortization: The killing off of an existing debt by regular partial payments i.e. a payment plan.

Appraisal: An estimate of the value of property from an analysis of facts about the property; an opinion of value.


Balloon Mortgage: A loan which is repaid by a series of small, periodic payments until a given date at which point the balance is due in a single large payment or the periodic payment amount rises significantly.

Breach of Contract: A failure to meet one’s obligations, whether under a contract or otherwise. A breach of contract allows the innocent party to enforce the contract, rescind the contract or sue for damages.

Bridge Financing: Also known as a “swing loan”, a loan used to fill a gap in financing, often between the purchase of a new home and the sale of the old one. If the purchase closes before the sale, the homeowner needs to borrow enough money to pay for the new house for the period of time before the equity in his old house comes available as a result of the completion of the sale.


CC&R’S: Short form for “covenants, conditions, and restrictions”, which are the rules of general application governing the relations between landowners in a specific subdivision, development, condominium development or cooperative housing facility. May be registered on title.

Certificate of Occupancy (C.O.): Document issued by the local municipality indicating that a new dwelling is suitable for occupation. Generally confirms that the dwelling complies with local building, safety, and health by-laws.

Certificate of Title: A written opinion of the quality of a person’s ownership of property, issued by a lawyer or a title insurance company after a search of the title records has been conducted. May contain qualifications to the certification regarding defects found or potential defects not investigated.

Closing: The process of completing a real estate transaction. Deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as register the transfer of title.

Closing Costs: Moneys expended by a party in completing a transaction, over and above the purchase price, including legal fees, taxes, mortgage application charges, interest adjustments, registration fees, appraisal fees, etc.

Closing Statement: Also known as HUD-1 statement. A document which sets out the financial agreement between the parties, the costs each must pay, and all other similar information regarding a transaction (may be joint or separate for each party).

Commission: Payment to a salesperson (a listing real estate agent or broker) for her efforts in marketing and selling a property, usually expressed as a percentage of the purchase price.

Concessions: Sacrifices made by a party to convince another party to enter a contract.

Conditional Offer: An offer to purchase a property which is contingent on the fulfillment of certain conditions before it becomes firm and binding. Also known as “Conditional Sales Contract”.

Conventional Loan: A loan or mortgage to which the normal rules of such transactions apply without the inclusion of a government program (i.e. VA or FHA insurance). Also, a loan or mortgage with a fixed interest rate, fixed payments, and a fixed term.

Convey: To transfer title to (or any other interest in) a property to someone else.


Deed: A written document by which title to real estate is conveyed from one party to another.

Deed Restriction: A clause in a deed which limits the use of the property in certain respects.

Default: Failure to perform a promised task or to pay an obligation when due.

Depreciation: The lessening of the value of a property over time. Or a tax adjustment accounting for the reduction in value of an asset (a building or a piece of machinery) over time.

Down Payment: The amount of money provided by the Purchaser toward the total price of the property (not including legal fees or other acquisition costs). In general, down payment plus mortgage equals purchase price.


Earnest Monies: A sum of money paid by a potential purchaser as proof of her intention to complete the purchase transaction. Held in trust, usually by the Listing Agent, and credited to Purchaser off the purchase price. May be forfeited if Purchaser fails to complete the transaction.

Easement: The right of the owner of one parcel of land to use all or part of the land of another for a specific purpose. Runs with the land. Requires one property to be in the dominant position (enjoys the benefit of the easement) and one property to be in a servient position (is subject to the right).

Eminent Domain: The right of a body of government (often a state) to expropriate private property, while paying appropriate compensation to the owner.

Encroachment: The intrusion across the property line and into one property of an improvement to a neighboring property. May result in a claim for adverse possession if the encroachment is unchallenged for a long period of time.

Equity: The difference, in dollars, between the market value of a property and the principal owing on debts secured against the property. The amount of money the owner will be able to keep from a sale transaction once the mortgages are paid out. Also known as “owner’s interest”.

Escrow: Technically, this term strictly refers to a deed delivered to a third person to be held by him until the fulfillment or performance of some act or condition by the grantee. In the title industry, it means the depositing with an impartial third party (typically an escrow agent or title company) of anything pertaining to a real estate transaction including money and documents of all kinds. The money and documents are to be disbursed and delivered to the rightful parties by the escrow agent or title company when all conditions of the transaction have been met.


Fannie Mae: The U.S.’s largest supplier of mortgages to home buyers and owners, a corporation established by Congress. The Federal National Mortgage Association (FNMA).

Federal Housing Administration (FHA): Division of the Department of Housing and Urban Development, sets standards for the underwriting of private mortgages. Also insures residential mortgages made by private lenders.

Fee Simple: The highest degree of ownership that a person can have in real estate. An interest in real estate that gives the owner unqualified ownership and full power of disposition.


General Warranty: A warranty provision in a deed or mortgage or other real estate instrument containing all of the common law items of warranty. Also known as a full warranty.

Gross Income: A person’s earnings from all sources in a given period before expenses are deducted.


Historic District: A classification (whether under zoning, heritage or other authority) of a specific area of a community in which the buildings and improvements have a historical value or significance which may not be reflected in their market value. Designation as such a district may also involve strict rules regarding the way the buildings and properties are dealt with.

Home Equity Line of Credit: A special kind of loan (also known as a “revolving loan”) which is secured against a property and allows the owner to borrow and repay money at her leisure. Periodic payments of at least accumulated interest are required but the loan is fully open: may be paid out in whole or in part at any time and, if there is still money available under the loan ceiling, the borrower may take more money for his/her use.

Home Inspection: The written statement of the results of the inspection of a given property by a professional home inspector. Will show problems and potential problems with the property not always visible to an average purchaser (i.e. a deteriorating roof, an ancient furnace, termites, wood rot, basement seepage). Many purchasers make their offer to purchase conditional upon obtaining a satisfactory Home Inspection report.

Home Owner Association (HOA): A cooperative effort by property owners in a given neighborhood aimed at improving quality of life, providing a unified political voice or combatting identified ills.

Housing and Urban Development (HUD): Federal Agency charged with the duty of overseeing a number of enactments relating to housing in America.


Improved Land: Also known as “developed land”. Opposite of “raw or vacant land”.

Improvements: Things added to vacant land with the view to increasing its usefulness and value, such as buildings, parking areas, drainage works, etc.

Indemnify: To take responsibility for the losses and damages suffered by another person.


Joint Tenants: Two or more persons who hold title to real estate jointly, with equal rights to share in its enjoyment during their respective lives with the provision that upon the death of a joint tenant, his share in the property passes to the surviving tenants, and so on, until the full title is vested in the last survivor. A joint tenant cannot legally sell or encumber his interest without the consent of all of the other joint tenants.

Jumbo Loan: A loan for more money than the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation will fund under its mandate.

Junk Fees: Slang term for extra fees charged by a lender on a mortgage loan.



Land Lease: A rental agreement for the use of land but not the improvements thereon.

Lease: An agreement granting the use or occupancy of land or building during a specified period in exchange for rent.

Lease with Option to Purchase: A rental contract which allows the tenant to purchase the property during the period of the lease. Payments under the lease may be credited (in whole or in part) against the purchase price.

Lender’s Title Insurance: A policy of Title Insurance which covers the interest of a lender on a mortgage registered on title to a property.

Lien: A legal claim against property for moneys owed.

Loan Estimate: A three-page Loan Estimate must be provided to the consumers no later than three business days after they submit a loan application for most mortgages. The Loan Estimate provides information about key features, costs, and risks of the mortgage loan for which the consumer is applying.


Market Value: An average between the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing, but not compelled to sell, would accept.

Metes and Bounds: An older way of describing land in registered instruments. Starting at a recognizable point (the meeting of two roads, the corner of a lot), the description then describes the boundaries of the land by indicating distances and directions for each boundary (i.e. “South 100 feet” or “South 73 degrees, five minutes west for a distance of 100 feet”), returning at the end of the description to the beginning point.

Mill: 10 percent of a penny. In many jurisdictions, property tax assessments are based on a mill rate.

Monthly Total Expenses: The total when monthly housing expense is added to monthly debt service.


Owner’s Title Insurance: A title insurance policy which covers the owner of the property from title defects and other flaws which were not apparent at the time of the purchase.


Parcel: Another word for a piece of land.

Perc Test (Percolation): A method of determining the ability of the soil of a property to absorb liquids, used in construction projects and for septic systems.

Power of Attorney: A legal instrument authorizing one to act as another’s agent or attorney.

Prime Rate: The best rate charged on loans, usually saved for the best clients of the lenders. May also be set by a national institution as a benchmark or index for other lenders.

Principal Balance: The amount of money borrowed or still owed on a loan, without including interest.


Qualified Buyer: A purchaser who has been pre-approved for financing.

Quite Claim Deed: A conveyance which releases any interest the conveying party may have in a property without any warranty as to that party’s claim.


Radon: A radioactive gas which may cause health problems for occupants of some buildings.

Rate Cap: A limit of how much an interest rate can change in a variable of adjustable rate mortgage either in a given period or over the life of the loan.

Re-Issue Rate: A reduction in the fee for title insurance on a property which was previously title insured.

Restriction: Any limit or control on the owner’s ability to use the property. May be contained in a deed and be binding on the land and future owners of it.

Right of First Refusal: The ability to make an offer for a property before the owner puts it up for sale on the open market.


Scarcity: The idea that price is driven by the availability of the product. If there is not enough product to meet demand (the product is scarce), the price of the product will rise.

Settlement Sheet: The information sheet which sets out the allocation of funds on closing.

Severalty: Ownership of land by an individual.

Special Assessment: The levying of an additional tax on a property for a specific purpose (i.e. to apportion the cost of infrastructure upgrades among area landowners).

Survey: A pictorial depiction of land and the improvements on it. Shows boundary lines (with measurements and bearings), buildings, sheds, easements, etc.


Tenant in Common: A person who owns property with one or more others, where each owns a stated portion of the property and is free to deal with his portion as he wishes.

Title: The legal term for one’s ownership interest in land.

Triple-Net Lease (NNN): A rental agreement which requires the tenant to pay all operating costs of the building.


Underwriter: A person who reviews and evaluates an application for a loan or insurance policy.


VA Loan: A loan on below-market terms guaranteed by the Department of Veterans Affairs, given to former members of the armed forces.

Variance: An indulgence granted by a local zoning commission or authority to allow a non-conforming use of a property to continue. The zoning bylaw or ordinance is actually amended as it pertains to the particular property.

Vesting: To become the property of someone through action of law. How ownership of title is taken.


Water Table: The natural accumulation of water either above or below ground, often used for well purposes. May also refer to the distance from the surface of the land to the location of the water.

Warranty Deed: A deed containing one or more title covenants.




Zoning Bylaw: A rule passed by the local government which regulates the use of property according to its location within the municipality, placement of structures on the property, maximum floor area, minimum lot area, minimum floor-to-lot area ratios, etc



Real Estate Dictionary. 2016.
Real Estate Glossary.


Why is this happening?

The CFPB (Consumer Financial Protection Bureau) has mandated that buyers/borrowers must now be given at least three business days (upon their receipt of the Closing Disclosure) to review the new form before the buyer/borrower can enter contractual obligation with lender for the real estate transaction (now known as consummation). This will allow buyer/borrowers to review the terms and conditions of their loans in a non-stressful environment and ask questions if they need clarification before they get to the closing table.

Loan Estimate:

The new Loan Estimate replaces the Good Faith Estimate (GFE) and is required to be handed or mailed to a borrower within 3 days of a mortgage loan application being taken. The Loan Estimate is designed to provide disclosures that will be helpful to buyers/borrowers in understanding the key features, costs, and risks of the mortgage loan for which they are applying, including the property to be taken as collateral, length/purpose/type/loan terms, origination costs, projected payments, estimated costs & cash to close. The loan estimate could also include items not listed here.

Closing Disclosure:

The Closing Disclosure replaces the Truth-in-Lending Disclosure (TILA) and the HUD-1 Settlement Statement (HUD). In most cases the Closing Disclosure will be prepared and delivered by the lender (The HUD and TILA were historically prepared by Title Companies). Part of the regulation requires that there be proof that the borrower has received the Closing Disclosure, if that does not happen 3 days prior to the scheduled closing date then the closing will have to be rescheduled to allow for the 3 day review. The CD is a much more customer friendly document than the two it replaces. It lists all costs and fees in alphabetical order, detailed information about loan terms/interest rate/payments/penalties, necessary disclosures, and contact information for vendors that assisted with the transaction. The CD is considered to be non-public personal information related to the buyer and therefore will not be seen by the seller or seller’s agent.


As stated above, the Loan Estimate must be given or mailed to the borrower within 3 days of a mortgage loan application being taken; the Closing Disclosure must be received by the borrower at least 3 days before the loan can be closed. This may mean transactions could take longer if a loan is involved. There are also certain instances (some listed below) in which the Loan Estimate or Closing Disclosure or both will need to be redone and resent to the borrower. If this happens the closing could be pushed back 3-10 days to accommodate the required timelines. It is important to note that these timelines are required and therefore can NOT be waived.

Do over:

Below are some examples of when it will be necessary to redo one or both of the forms. This list is in no way meet to be exhaustive or final. Ultimately, because the regulation is lender focused, the lender will have the final word on when a “do over” will happen.


-If APR increases by 1/8%
-If there are changes to the type of loan (e.g. fixed to adjustable)
-If a prepayment penalty is added.


-Non-numeric mistakes
-Last minute buyer/seller negotiations
-Clerical errors
-Disclosed costs increasing by less than $100
-Governmental fee changes (recording fees, etc.)

What does this all mean for me?
This new regulation is a good thing for borrower/buyers but it is also a change from how things have been done for a long time. Communication is key for all parties involved in a real estate transaction to be on the same page. If you are a buyer you will want to get the loan process started sooner than later. That includes making sure your lender has all the necessary documents (tax returns, pay stubs, bank statements, etc.) to process your application. Ask your realtor, lender, and title company questions if you don’t understand, that’s what we are here for. If you are a seller most of this will not affect you outside of the extra time that might be required. If there is a delay please remember it doesn’t mean that your buyer has bad credit or did something wrong it just means that everyone is working inside a new system.

If you have any questions please feel free to call Title Company of the Rockies at 970-453-6120 or Paffrath and Thomas at 970-453-0466.


Website designed and developed by Slyd Studios Web Solutions