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Buying On A Dime

I recently wrote a blog featured on The Dime Colorado:

http://www.thedimecolorado.com/2015/03/09/sick-of-renting-read-this/

Rent prices are skyrocketing, especially in Denver. If that fact is getting you down, it might be time to start looking into buying a home. There is a myth, especially with the millennial generation, that they can’t afford to buy a home due to their bad credit, large student loan debt or simple lack of savings.  Although there might be some work and time that needs to be put in beforehand, most people can usually buy with the help and guidance of a good real estate agent and informed lender.

Buying a home stabilizes your rent. When you lock in on a 30-year-mortgage on a single family home the only increase over time can be in the taxes. Not only is your payment set, but in the end you actually own your investment. It is essentially like paying yourself for living there. Even though it takes a long time to pay off a house with interest, you are making progress forward with each payment. Not only that, but if home prices rise, you are making money on your investment and getting a yearly tax write off on the interest you pay.

Of course there are a lot of things to consider in the process. You want to make sure you make a smart decision that doesn’t end up being a money pit. Here are some tips to protect yourself along the way.

Choosing the right real estate agent

It is okay to interview agents. You will spend a lot of time with them and you should enjoy the time spent. You should also find them trustworthy and honest. Ask them what their success track record is or what they think gives them a competitive edge. We do this as a job and a good agent should be prepared to answer questions and guide you through the process.

Agents end up being the coaches of the home buying process. You will have a lot of other members on your team, and a good agent should be able to offer you multiple referrals in each category.  An important item to note is typically you don’t pay the buyer’s agent, the seller does.

Choosing the right lender and understanding your options

First time buyers often don’t realize all of the programs and options that are available to them. A great lender should be able to speak to you in terms you understand.

Currently buyers can purchase a home with as low as 3% down conventional using Fannie Mae if they are a first time buyer.  In this case, first time buyer is defined as someone who hasn’t owned a primary residence in the prior 3 years.  If you are part of a couple only one person has to qualify.  Freddie Mac offers a similar program called Home Possible Advantage where buyers can do 3% down even if they aren’t first time buyers.

The goal of both Freddie and Fannie is to make home ownership available to those who have strong credit and jobs, but haven’t been able to save enough money for a down payment yet.  FHA loans have lower credit limits and are still available at 3% down.  There are also loans that only require $1,000 down.

CHFA is a great down payment assistance program that effectively grants people money. You don’t have to have perfect credit or even great credit. Not all lenders are approved to offer the CHFA program so if you think that might be the program for you, ask your real estate agent if they know a CHFA approved lender. Keep in mind that you have to take a one day class to qualify for the CHFA loan. I have found this class really is helpful to understand the home buying process.

In addition if you are military, VA loans are a great benefit offering people a chance to buy homes with no money down.

Finding and securing the right home 

Once you have your financing in place, you and your Realtor can start searching for homes. Millenals are flocking to the cities urban centers in the high numbers.  According to a recent New York Times article, Denver alone is up 46% in young and educated people moving to the city center, doubling the same growth of New York City. Having a savvy agent who knows the market in the area you are looking can help you put your best foot forward. The agent will work with you and your lender to structure an offer that is favorable to all parties and get you under contract.

Once you have found a home you are interested in purchasing, be prepared to start spending money. Doing a home inspection can save you thousands of dollars in the long run. If you are buying a single family home, you might want a general inspection, sewer scope, and radon test to name the most common. These can range in total from $400-$600 dollars. Often your agent can negotiate repairs based on these inspections. Making sure you have solid systems can save you costly repairs down the road, or at least prepare you for what issues might come up in home ownership.

As you are juggling all these items, the right agent, loan, and ultimately the right house for you and your family, remember that this will be your home. A home should be a place you enjoy spending time. The quality of life it creates is always more important than the investment in the end.