Purchasing your very first home can be an exciting and rewarding experience. Whether you’re a fervent outdoorsman, desire to live closer to family, or are simply looking to leverage current market trends, now has never been a better time to buy that new Colorado dream home! Here are some expert tips for first-time home buyers.
In fact, first-time homebuyers made up 31% of all homebuyers in 2020 according to the National Association of Realtors1.It’s important for many first-time homebuyers to capitalize on the low mortgage rate environment while they can.
Mortgage rates are near all-time record lows with the average U.S. 30-year fixed mortgage rate recently hitting 2.72%, the lowest rate in almost 50 years according to aggregator Freddie Mac2.
But interest rates aren’t the only reason new buyers are entering the market. It’s becoming more and more expensive to rent in Colorado. In fact, the National Rent Report of 2020 indicates that Colorado residents experienced a 1.6% increase in rent prices for 20193.
Making the jump from renting to owning is certainly a change. For many first-time home buyers, figuring out where to start the purchase process can be a little overwhelming. But it doesn’t have to be.
There are things that you can do to set yourself up for a successful and hassle-free buying experience.If you are a first-time homebuyer, here are the top three tips you need to know if you are looking to make Colorado the place you call home.
Request and Review Your Credit Report
It’s always a good idea to know where your credit stands before you start the buying process. Like most homebuyers, you will probably need a new home mortgage loan to help finance your purchase and you don’t want anything impeding your ability to obtain new credit.
The first step into reviewing your credit is to get free copies of your credit reports from all three credit bureaus (Experian, Equifax, and TransUnion). Make sure to review your report for any erroneous errors or derogatory issues that may be negatively impacting your credit score.
Furthermore, make sure you are paying all your credit accounts on time (that includes small retail cards and flexible spending accounts). Try not to close any revolving debt or open any new debt just before applying or while your new mortgage application is in process.
Decide How Much Home You Can Afford
Figuring out how much home you can get for your budget is one of the best first steps you can take as a first-time homebuyer.
Not only does it set realistic boundaries and expectations when you start the search for that dream home, but it also opens up other great learning and networking opportunities.
The easiest way to figure out how much you can afford is by using a free affordability calculator. A good calculator will give you a comfort level on how stressed your monthly finances can handle a corresponding loan payment and what that would measure to in terms of a max purchase price.
It should also break out all the anticipated monthly expenses associated with your proposed
- Housing Payment
- Including Taxes
- Mortgage Insurance Premiums
Feeling proactive? Consider meeting with a reputable mortgage broker. A preferred lender can help you create a plan for how much home you can afford while simultaneously addressing any questions you might have about the purchase process.
You can also kill two birds with one stone by also getting a prequalification letter right out of the gate so you don’t have to spend more time shopping around for financing. Markets can move fast and you don’t lose out on an opportunity to buy your forever home.
Make Sure to Research All Your Mortgage Options
Before you meet with a lender it’s always important to do your own research as to what mortgage solution may be best suited for your needs. There are several mortgage programs available to first-time homebuyers that can offer lower down payments and flexible credit eligibility criteria.
Both aggregators Fannie Mae and Freddie Mac have affordable mortgage solutions available for qualified borrowers. Furthermore, the Colorado Housing and Finance Authority, Inc. (CHFA) also offers purchase loan programs to first-time homebuyers who meet certain eligibility criteria.
Consider grants and other community assistance programs when making your decision. The CHFA also has a down payment assistance program available that may help you with your down payment and/or closing costs4.
- NAR. (2020, November 11). Quick Real Estate Statistics. Retrieved November 23, 2020.
- Roha, A. (2020, November 19). Mortgage rates break the record again, down to 2.72%. Retrieved November 23, 2020.
- Fisher, A. (2020, January 10). Rent in Colorado: Prices Climbed In 2019. Retrieved November 23, 2020.
- CHFA. (2020). Down Payment Assistance. Retrieved November 23, 2020.