There is no doubt that houses are moving fast in the Denver metro area. In our last blog post 'Congratulations Denver, Colorado!', we shared that Denver's homes lasted an average of 8 days on the market; 8 days is not much time to really think about what that means nor how buying a home will affect you, the home buyer. For this reason, it is CRUCIAL to prepare for the process before you are really ready to make the jump and the good news is that we are here to help!
Lets take a look at what you can do to prepare to buy a home in this fast moving market.
Image Source: Original image Larry Johnson via Flickr, creative commons 2.0.
Know what you want and make a wish list
Take a moment to think about what you would want in a home as well as the length of time you will reside in that home. Be as detailed as possible when creating your home list because that will help you determine what you can and can't live without. Once you have thought about everything that you would want in your home, divide that list into “absolutely must have”, “must have but not a deal breaker if property doesn't have this” and “would be nice”. If you are unsure what you would want in a home, here are some ways to help you get inspired:
Think about all the homes you've ever visited and then think about what you loved and didn't love about those homes.
Attend open houses and get a feel for what is out there.
Look at design magazines or shows on HGTV.
In addition to thinking about what you would want in a home, take a moment to think about what neighborhood (s) you would like to live in – of course this will also be impacted by how much you are able to spend on a home (we discuss finances further down in this blog post). Another consideration for selecting a neighborhood (s) are schools. Good school districts are not only a great thing to want if you have kids or are planning to have children but if you do not plan to have children, homes located in good school districts tend to be more desirable when it comes time to sell.
Think about the road ahead. How long do you think you will live in the property? This is very important because it can determine how large of a home you should purchase. Future changes to consider are: marriage, children, roommates, pets, etc. What type of space would they require?
As cities change and grow, you should keep that in mind too. What we mean by this is think about how long you want to stay in your property and then think about what traffic might be like going to and from work every day from that property. Cities usually grow and with growth comes more traffic, construction and expansion. If your commute currently takes about 20 minutes on a major highway, will it still take 20 minutes in a few years (assuming you are at the same job of course)? If you live on somewhat of a main road now, how would you feel with more traffic using that road a few years down the line? There is no way to exactly forecast what the growth in your city and neighborhood would be like further down the road but we can help you think about how you would feel about those changes prior to purchasing a property.
Prepare your finances
Whether you are buying a house now or a few months down the road, having your finances in order can help you buy your home as well as determine what interest you receive on a loan.
One of the first things you should do is check your credit. Your bank should be able to give you one free report annually. If you want your credit score, you will most likely have to pay a fee for that. Checking your credit report is something you should do in order to make sure that there are no discrepancies with your accounts or unwanted accounts opened under your name. Having the highest credit score possible will help improve the interest rate you receive according to Suze Orman. Some things that you can do to help improve your score according to her article “Repair Kit for Damaged Credit” are: Pay your bills on time, keep your credit card and loan balances low, build a strong credit history, don't go on a credit opening frenzy, and keep an eye on your credit mix.
In addition to checking your credit and working on improving your score, make sure that you are not moving your money out of your account at least 90 days before you buy a home (in certain cases it could be longer than 90 days but that is situation and individual specific). Mortgage companies like to see that any money you use to buy your home has been in your account for some time.
As you dive into the finances portion of home buying, it is very important to figure out a how much you are comfortable spending. Mortgage calculators like the one on Zillow.com are useful to give you a very general idea for what you can spend (while it does have some detailed options, please keep in mind that its not going to be 100% accurate. The accurate numbers will come when you talk to a lender). This calculator breaks it down by monthly mortgage payment.
Shop for loans. It is recommended that you shop around for the best interest rate possible. If you are unsure where to go, talk to your real estate agent or visit the “Mortgages” section of our website. Once you have decided what company to use get pre-approved instead of pre-qualified. A pre-approval is when a lender runs your credit and verifies your income and assets (source: Realtor.com) In such a fast moving market, a pre-approval letter is key because its more definitive as to what you can actually afford to buy. For example, you don't want to find the house that is PERFECT for you only to have it fall through because you couldn't actually afford it.
Keep in mind when shopping for loans, certain types of loans require a certain down payment percentage (ranging from 0% for VA loans to 5% for certain conventional loans). You could possibly buy a house without a down payment with assistance from programs such as CHFA's down payment assistance grant or through a VA loan. Of course, assistance programs all have different requirements so make sure you find out first if you would qualify for that program or loan. Another thing to keep in mind is that conventional loans require private mortgage insurance (PMI) when your downpayment is less than 20% of the loan.
In this fast moving market, you need to be prepared to move FAST so that is why we want to help educate you on this big decision. When you look for a real estate team, interview them and find out how they can help YOU. As an example, ask that real estate agent how they will get your offer seen first - if they give you a strategy that involves you waiting days to hear back on your offer, then you must find someone who won't make you wait.
Finally, your effort and energy matter in this process because the more effort you put into it will have a direct effect on the result you get. When you find the house that fits you perfectly, don't wait – put in an offer FAST because in Denver houses sell in a matter of days.