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The dream of homeownership has long been an essential part of American culture. We are fascinated with the idea of owning our own homes and creating a place that is uniquely ours. The prospect of painting walls, hanging pictures, and decorating a home to suit our tastes is alluring.
Owning a home is also a big step towards financial security and a key to unlocking a solid financial future. It gives you a sense of pride and control over your living situation while also serving as an asset that can appreciate over time. As you pay your mortgage, you will also build your own equity, not your landlord’s.
Some less obvious benefits to owning your home include tax deductions for mortgage interest and property taxes. Additionally, you can improve your home’s aesthetics, energy efficiency, and functionality to increase its resale value.
If you’re buying your first home in Colorado Springs, you’ve made an excellent choice. The area offers beautiful scenery, four seasons, sunshine, excellent schools, and plenty of outdoor activities. Colorado Springs and the entire Pikes Peak Region offer an outstanding quality of life.
A growing number of people have discovered Colorado Springs, so real estate prices have risen. It has become increasingly difficult to find an affordable home.
The Cost of Living and median home price in Colorado Springs are slightly higher than the national median price, but the area is still one of the most affordable places to live in Colorado. Housing prices in areas like Aspen, Vail, and Boulder are REALLY high.
Median home prices in these areas can range from 75% to 150% higher than in Colorado Springs. Colorado Springs makes a lot of sense if you are looking for the quality of life that only Colorado offers at an affordable price.
Colorado Springs is like any thriving real estate market; the trick is getting into the game and buying your first home in Colorado Springs. Once you own a home moving up to that next home is easier than buying that first one.
The key to successfully getting into that first house is to get some help from an expert, and by an expert, we mean a great realtor. A great realtor will guide you through the process and help you find the perfect home.
Most first-time home buyers comment at closing that they can’t believe they could buy a house. They don’t say that the process was easy because it’s not, but: it’s certainly worth the effort.
Working with a skilled Realtor who can assemble and manage a strong team of specialists is crucial for a successful real estate transaction. A knowledgeable realtor coordinates the various aspects of the transaction by collaborating with professionals such as lenders, inspectors, agents, title experts, attorneys, and contractors.
Their ability to effectively navigate these relationships and manage the team provides a seamless transaction, allowing homebuyers to focus on their dream home without burdening the home-buying process’s complexities.
The lender and realtor are the two most important players on your team. Collaborative efforts from both parties are required to guarantee a successful outcome for the buyer. However, when the lender and the realtor aren’t aligned, it can lead to big problems, resulting in real estate horror stories where the buyer ends up with a house they neither love nor can afford.
To avoid such circumstances, finding a lender and realtor with a track record of success who can work together to help you navigate the process smoothly is imperative.
No matter how many homes you have purchased, the first step in home-buying is to get your finances in order. We only want to consider houses that you can afford. The smartest move for a home buyer is to talk to a mortgage lender before looking at any houses.
One of the most common mistakes we see is when buyers miscalculate their buying power and start looking at homes online they don’t realize they can’t afford. They get excited about the house, start planning, and dream of their new life there, only to discover it’s not within their budget.
If you are already working with a Realtor, they can recommend a few of their trusted lenders, or you can talk to friends and family that have had positive experiences with a particular lender.
Though meeting with a lender to get prequalified may not be the most exciting part of the homebuying journey, it is an essential first step. Prequalification provides a clear understanding of your borrowing capacity, which is crucial in determining your budget. This important initial step will give you insight into your financial capabilities.
This process also helps narrow your home search based on what you can afford, making the entire process more efficient and focused.
This is a simple process where the lender collects some basic information to determine whether you will qualify for a mortgage.
The lender is going to look at the following information:
For a complete description of the mortgage pre-qualification process, look at our Mortgage Per-Qualification Guide.
Preapproval is an important step in the home mortgage process, taking you beyond the initial prequalification stage. During preapproval, the lender will take your application, request supporting documentation, and begin verifying all the information you’ve provided.
They’ll ensure the loan file complies with guidelines set by entities in the secondary mortgage market like Fannie Mae, Freddie Mac, or Ginnie Mae, which purchase loans from lenders allowing them to recoup funds and continue lending. If a loan doesn’t follow the guidelines, the auditor will return it, reducing the lender’s available capital for future lending.
For a complete description of the difference between pre-qualification and pre-approval, take a look at this article, What is the Difference Between Prequalification and Preapproval?
To better understand how the mortgage process works and the secondary mortgage market, we have put together a guide explaining everything you need to know about mortgages.
You will want to find a lender to discuss the various loan types and programs that might best fit your situation and long-term goals. Because there isn’t a one-size-fits-all loan that works for everyone, it’s essential to know your options to choose the best loan for your situation.
If you have issues that might keep you from qualifying for a loan, like credit problems, qualifying ratios, or a down payment, the lender can help provide solutions to these problems.
When looking for a lender, it’s crucial to find one approved for the type of loan you might use. For instance, military members with VA eligibility should ensure the lender is VA-approved and can do VA loans.
Alternatively, if your FICO score is below 620 and you have limited funds to put down, you would likely want to speak with a lender who can do FHA loans. FHA loans are insured by the Federal Housing Administration, accept lower credit scores, and require less money down than some conventional loans. For more information on FHA Loans, read our guide to FHA loans.
Selecting the right lender is critical to making sure you get the best home loan options and terms available based on your financial situation and needs. Your realtor should be your trusted consultant regarding finding this type of lender.
According to the National Association of Realtors, 2022 Profile of Home Buyers and Sellers, 26% of first-time home buyers reported that saving for the down payment was their biggest challenge in the home buying process.
Accumulating enough funds for a down payment can be challenging, especially for those with limited income, high living expenses, or student loan debt. While programs are set up to help first-time home buyers cover down payment costs, the best practice is to save up for the down payment on your own.
Often, first-time homebuyers will save for several years to amass the necessary funds for a substantial down payment, which can be anywhere from 3.5% to 20% or more of the home’s purchase price, depending on the loan type and lender requirements.
Another aspect of this process a Realtor or lender can help with is finding housing assistance programs you might qualify for. Homebuyer assistance programs are available to support individuals and families looking to purchase their first home.
These programs provide various helpful services, such as financial support, home-buying classes, and counseling.
They can also provide down payment assistance, help with closing costs, and sometimes offer low-interest loans to eligible applicants. State and local government agencies, as well as non-profit organizations, typically offer these programs. They exist to make homeownership more accessible and affordable for those with limited income or credit.
Housing assistance programs can be beneficial, but they often have specific requirements, limitations, and guidelines that vary depending on the program and location. Therefore, it is crucial to research the available options in your area and speak with an approved lender to determine if you meet the income limits and other eligibility criteria for any of these programs.
This is one of the most popular first-time home buyer programs for people with lower credit scores and one of the easiest mortgages to qualify for. If you have a credit score of 580 or higher, the FHA will allow down payments as low as 3.5%. If your credit score falls between 500 and 580, you will need to make a 10% down payment. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.
If you are looking for an FHA loan, Luke Skar at the Mortgage Real Estate Blog has a list of important FHA Underwriting Guidelines That Every Home Buyer Should Know. Eric Janette from Dream Home Financing has a great article entitled How Much Are FHA Closing Costs?
Mortgages are available to military members, veterans and surviving spouses which are guaranteed by the U.S. Department of Veterans Affairs (VA). Benefits include no down payment or private mortgage insurance required and the closing costs are quite low when compared to conventional mortgages. A VA funding fee is required, and the application process is slightly more complicated, but this option is great for veterans without a lot of money for a down payment.
If you are shopping for a home in a rural or semi-rural community, you might consider a loan from the United States Department of Agriculture (USDA). Like the VA loans, there is no down payment required and approval can be made for those with lower credit scores. You will not be eligible for a USDA loan if your income level is higher than 115% of the current U.S. median income or if you qualify for a conventional loan. Here is a detailed look at USDA loans and How They Work.
The federal government created Freddie Mac and Fannie Mae in order to maintain liquidity in the mortgage markets. Like FHA these entities guarantee loans made by mortgage lenders. This means they buy back those loans so that the lenders have more money to loan to Future home buyers. Both companies have a number of first-time homebuyer options for individuals with low down payment cash or low credit scores. Both companies offer options with adjustable-rate terms and cancelable private mortgage insurance (PMI).
In addition to these programs, Bill Gassett over at Maximum Real Estate Exposure has a list of additional Mortgage Programs For First Time Home Buyers.
The Colorado Housing and Finance Authority (CHFA) offers purchase and refinance loans, as well as down payment and closing cost assistance for first-time home buyers.
CHFA defines a first-time home buyer as anyone who hasn’t owned or co-owned a home in the past three years. Veterans or repeat home buyers in Colorado can get CHFA loans and assistance if they meet certain requirements.
In addition to meeting CHFA program requirements, borrowers must qualify according to the underwriting guidelines as determined by one of CHFA’s Participating Lenders.
The CHFA FirstStep program CHFA provides access to 30-year, fixed-rate mortgages. Homebuyers don’t need to have a credit score to qualify, but if you do have a credit score, it must be at least 620. As with other CHFA programs, your income can’t be higher than the local median if you want to take advantage of this program.
Designed for borrowers with a credit score of 620 or higher, the SmartStep mortgage program offers CHFA’s lowest mortgage interest rates. You can combine SmartStep with a Mortgage Credit Certificate and down payment assistance for added savings. The CHFA SmartStep program provides down payment assistance for FHA, FHA 203(k), VA and USDA Rural Development loans.
If you can make a 3% down payment and have a 620 credit score, the CHFA Preferred program provides lower mortgage insurance prices. There’s also an option to pay your entire mortgage insurance bill at closing for lower monthly payments. If you don’t have 3%, but have at least $1,000, you can use a CHFA down payment assistance program to make up the difference.
CHFA Advantage Loan is one of the most straightforward loan types. If you have at least a 680 credit score, this loan offers you fixed-rate mortgages without a private mortgage insurance requirement. A low 3% down payment makes this an attractive option.
The Home Opener Loan has the same eligibility requirements as the other CHFA loans, but there are no purchase price limits. Higher incomes may qualify for this loan. As little as $1,000 is required for a down payment.
The HomeAccess Loan is designed to assist lower the cost of homeownership for those buyers living with disabilities or a parent of a child with disabilities. As little as $500-$750 is required for the down payment and up to $25,000 is available in down payment assistance.
If you have been using Section 8 rental vouchers for at least 1 year and meet the standard CHFA requirements, the CHFA SectionEight Homeownership loan might be for you. You must also meet the HUD income requirements to qualify for this loan type.
The Down Payment Assistance (DPA) Grant is a grant that can be used to provide further assistance to first-time home buyers. These grants offer up to 4% of the mortgage loan amount to apply toward the down payment and closing costs. For example, if you have a $300,000 mortgage, that means $12,000 toward initial homeownership costs.
DPA grants can help home buyers not only save money upfront but also have leftover funds to improve their new homes and start saving for the future. Best of all, you never have to pay the money back.
If you are in the market for a Second Mortgage, CHFA offers first-time home buyers a second mortgage of up to 5% of their primary loan amount. For example, it means you’d get a $15,000 loan if you have a $300,000 mortgage. The main benefit is that the second loan doesn’t carry any interest, but it does require repayment.
A Mortgage Credit Certificate (MCC) is for first-time home buyers and allows them to claim 20% of their annual mortgage interest as a tax credit on their federal return. To qualify, you’ll need to meet CHFA and HUD income requirements, credit score, and profile requirements. Your remaining interest can be claimed as a home mortgage interest deduction which when coupled with a CHFA loan can be a big cost savings.
FHA, VA, and other national mortgage loan programs are so popular because of their low down payment options and low credit score requirements. These programs make homeownership possible for people with less-than-perfect credit and limited savings for a down payment.
To apply for one of these programs, you can get started with the following tasks.
If you are a resident of Colorado and believe that you are eligible for a CHFA loan, the best place to start is with a reputable lender. If you do not have a lender that you are working with, talk to your Realtor, or give us a call and we can give you some lenders that specialize in CHFA loans. Here are some steps to get you started.
According to the National Association of Realtors® 2022 Profile of Home Buyers and Sellers, 47% of home buyers searched online for properties for sale as their first step in the home buying process.
This is a good way to get a feel for what things cost and where you might want to live, but when you decide to get serious, the primary step should be meeting with a Realtor. A good real estate agent should evaluate the buyer’s basic wants and needs. This includes considering everything from simple things like the number of bedrooms, and bathrooms, to the number of garage spaces, total square footage, location, and any special needs the buyer might have.
Location is another important factor for a home purchase. Home buyers, job requirements, or a preferred school district usually drive where the buyer will focus their search.
When we consider location, list price becomes a major consideration. The most desirable neighborhoods usually come at a premium. This means that depending on your budget and requirements, you may need to look in emerging or alternative neighborhoods to find what you’re looking for. Once again, a Realtor can help with this, good Realtors are aware of Niche neighborhoods in and around hot neighborhoods.
It’s important to be open and flexible regarding location, but at the same time, be aware of your priorities. For many home buyers, being in a particular neighborhood is more important. The old real estate Axiom goes like this: it’s better to be the cheapest house in the most expensive neighborhood than the most expensive house and a cheap neighborhood.
Once we have a clear picture of your ideal home and location and a budget, we can start looking at homes that may be the perfect fit for you.
This is where a Realtor should shine. If you’ve done a thorough job of explaining what you’re looking for, and if your Realtor has done a good job listening, they should have some creative and interesting ideas about what types of homes and neighborhoods you will look at.
This is a very exciting part of the process, as the buyer starts to get an idea of the type of house you will ultimately end up with. They also have an opportunity to learn about new neighborhoods and areas and imagine themselves living there. This is the phase where you start weighing your options against your priorities.
A dedicated realtor employs a comprehensive approach to identify prospective properties that cater to a buyer’s unique needs and preferences. The home search process should employ a combination of tools to provide a thorough understanding of the available options.
The Multiple Listing Service (MLS) is a valuable resource, granting access to a vast database of properties listed for sale. Builder Inventory lists offer insight into new construction homes, providing opportunities to explore residences with the latest features and finishes.
Additionally, leveraging their extensive network, realtors rely on word of mouth to uncover off-market listings and exclusive opportunities. By combining these resources, your realtor seeks to present you with a tailored selection of homes, providing a seamless and efficient home-buying journey.
As we mentioned earlier, 96% of home buyers in 2022 used the Internet as their primary home search tool. This makes it very easy for home buyers and Realtors to collaborate on homes that might merit an in-person tour. Properties can be saved and sent to your Realtor, who in turn can set up in-person showings for you to see the homes firsthand.
The first time out viewing homes isn’t likely to produce the home of your dreams, but it will help educate you about the market. Most home buyers take between 8 and 10 weeks to find the home they ultimately buy. Patience and persistence go a long way in this stage of the process.
It’s been our experience that home buyers need to see a certain number of houses to know a good deal when they see it. In other words, you have to look at a lot of houses before you can walk into the one you end up buying and say, “This is it!”
For first-time home buyers, staying within your budget and choosing a property in good condition is important. We look for homes that won’t require additional expenses for repairs. First-time buyers often use their financial resources to purchase a home, so choosing a property in good shape is crucial without additional expenses.
As a first-time home buyer, it’s important to be mindful of potential and costly issues when buying a new home. Here are some things you should try to avoid:
By being mindful of these potential issues, you can help make sure you make a smart investment in your first home.
Once you’ve found the house you want to buy, you’ll need to prepare an offer. This is a big step and there are several things to be aware of as you prepare to make an offer on a property.
When it comes to pricing, an old real estate saying goes, “You make your money when you buy a house; you just pull it out when you sell.”
This is why evaluating the home’s value is important to ensure it’s priced correctly. Overpaying for a home at this early financial life stage can be devastating. This is why it’s important to do your homework before making any offers to the seller.
This is where you will need to rely on your realtor they should be able to help you determine the home’s value by preparing a Competitive Market Analysis (CMA). This analysis uses recent sales data to compare the home you are interested in with similar homes sold in the neighborhood or nearby in the past 6 months to one year.
This is the same process an appraiser will use later when trying to establish the property value for the lender. This is an important point because if the property doesn’t ultimately appraise, the lender won’t make the loan. This creates a set of problems that can be difficult to overcome.
At this stage of the game, if it looks like the property won’t appraise for the purchase price, it’s best to walk away and move on to the next property. You’ll be wasting time and money as the appraisal isn’t cheap, and you’ll miss out on new properties while trying to resolve any appraisal issues.
Once you’ve established your offer price, you can move on to deciding other factors that could ultimately determine the success or failure of your offer.
As the market becomes more favorable for buyers, more sellers may offer to cover some of these costs.
Earnest Money: Earnest money is a deposit made by the buyer at the time the offer is accepted, and it is a sign of good faith to the seller. This money is usually 1-2% of the purchase price, so it’s important to plan for it before making an offer.
Closing Costs: Closing costs are fees associated with both the closing and the loan. You should review these costs with your realtor and have a plan in place to pay for them.
Prepaids: Taxes and insurance are examples of prepaids. You will need to carry homeowners insurance as required by your lender, and you may also need to pay for mortgage insurance. Property taxes will need to be settled at closing, and the buyer is responsible for taxes from the day of closing forward. The title company will set up an escrow account to hold these payments, so it’s important to be aware of these costs and have the funds ready.
Home Warranty: A home warranty can be a good idea for first-time home buyers as it covers your home’s major systems, such as the furnace and water heater. There are varying opinions on the usefulness of home warranties, but often, we will ask the seller to purchase one at the time of the offer.
Are you about to buy your first home? Due diligence is an important step in the process that you don’t want to skip. It’s the process of thoroughly investigating a property before making a purchase offer. The goal is to uncover any potential issues or hidden costs that may impact the property’s value or the transaction’s terms.
Here’s what you need to know about the due diligence phase:
Inspection –The home inspection is a very important step in the buying process. This is your chance to check out the property’s condition. Hire a certified professional home inspector to give you a thorough report.
Appraisal – Your lender will require an appraisal, even if you pay cash. It’s a good idea to get one anyway to make sure you’re not overpaying for the home.
Title – The seller will buy a title insurance policy, but it’s important to review the title work to see if there are any claims or abnormalities with the property, the land, or the title itself.
Covenants – Many homes belong to an HOA and have covenants, so it’s important to understand how they may impact your time in the property. Don’t ignore them until it’s too late.
Review your Loan Estimate – Within three business days of applying for a mortgage, you’ll receive a three-page form called a Loan Estimate. This document provides you with all the important details about your loan.
This is your chance to make sure everything is accurate and matches your expectations. Here’s what to look for:
By doing your due diligence, you’ll understand the property and make an informed decision about the purchase. And if anything seems off, you can make it right or walk away from the transaction, keeping your earnest money.
Before the big day arrives, you’ll receive a closing day checklist to guide you through the process. This checklist will let you know where the closing will take place and how much money, if any, you need to bring.
In Colorado, you’ll need to bring real funds in the form of a cashier’s check or money order. Wiring the money to the title company is also an option.
Don’t forget to bring a valid form of identification, as specified on your closing checklist. You will likely be able to meet the seller at the closing table and learn more about the neighborhood and property. Get ready to make your home ownership dreams a reality!
Buying your first home can be an exciting and daunting experience. However, it can also be a smooth and successful process with the right guidance and resources.
At our Springs Homes, we understand the unique challenges of being a first-time homebuyer, and our experienced realtors are dedicated to helping you navigate the complexities of the market.
Whether you have questions about financing options, home inspections, or the negotiation process, we are here to offer the support and expertise you need to make informed decisions and find the perfect home for you. So, if you’re ready to take the first step towards homeownership, don’t hesitate to reach out to us for help.
We look forward to working with you!
