If you’re a first-time home buyer in the Denver Market you probably already know the market is red hot, on fire! You’re competing against many other first-time buyers, but along with that, you’re also competing against cash investors. So, what steps do you need to take to be successful in your home search? Follow these 5 simple steps and you’ll be well on your way to home ownership and the first stage to build your wealth.
STEP ONE – Work with a professional
Seek out a qualified Realtor®. 7 reasons to work with a Realtor You should feel very comfortable with your Realtor®; establishing trust is a key to ensuring the home buying process runs smoothly. An experienced Realtor® will begin by explaining the various types of agency to you. There are various types of agency: seller’s agency, buyer’s agency, and a transaction broker, who works with both the buyer and the seller. In a conventional home purchase, your Realtor® will be working with you as a buyer’s agent. Their sole concern is to guide you through the process and provide you with information which will assist in your decision to make an offer or continue your search. Your Realtor® should not only ask questions about the number of bedrooms and bathrooms, but also more personal questions regarding your long-term goals. These probing questions help Realtors® understand your long-term plans, and enable them to find the right home for you.
STEP TWO – Get prequalified
Find a lender and get prequalified. Typically, first-time buyers don’t have a relationship with a lender, this is where a qualified Realtor® adds value and can provide you with a few suggestions. Once you have your lender, they will review the various programs and loan types with you to determine the best financing solution for your specific situation. There are many loan solutions, and you most likely will not be required to put 20% down! Typically, it is much less, potentially as little as 1% in some cases. You will need to have bank statements, W2’s, and many other documents for your lender. Don’t worry, the lender will supply the list of needed documents. Lastly, when you do select a lender, make sure to look at the entire loan, the interest rate is important, but so are the associated fees.
STEP THREE – Find a home
Begin your home search. Your Realtor® can set you up to receive emails from the MLS (Multiple Listing Service), showing you all the homes that meet your criteria. Savvy Realtors® will help you navigate through the many available mobile apps. Your home search is going to have many emotional highs and lows, prepare yourself mentally for this challenge. Great photography can be deceiving–you’re likely to see pictures online that look amazing, but when you get to the home they may be nothing like what you saw online. You also need to set the right expectations and realize you will most likely have to make some sort of concession. Finding the absolute perfect home that checks all your boxes is like finding a unicorn: I keep hearing about them, but have yet to see one. Well, I thought I did once, but that story is for another article.
STEP FOUR – Extend an offer
Creating your offer. You’ve been searching for a week or two, or maybe even three or four, and you’ve finally found the perfect home. It checks the most important must-have boxes, you’re excited. Your Realtor® is going to review the comps (comparable homes) in the area. They will create a list of what has recently sold, what is under contract, and what is still active. From this list the Realtor® will begin comparing similar properties; square footage, number of bedrooms and bathrooms etc. Your Realtor® will review the comps with you to develop an offering price you’re comfortable with. Keep in mind, the Denver market is very hot, your offer may need to be over the asking price. A good rule of thumb to keep in mind: For every $1000 added to the price, your payment will increase approximately $5 per month. For example, if your Realtor® suggests offering $5000 over the asking price for the home, you can expect to pay approximately $25 more each month. Your Realtor® will guide you through this process, however, you should ask questions during this time to make sure you are comfortable with, and fully understand the offer you’re making. If you have questions regarding your monthly payment you should reach out to lender.
STEP FIVE – Accept, Counter or Rejection
This step can have many different results: acceptance of the offer, a counter offer, or a flat-out rejection. If the offer is accepted, you will be considered under contract. If the offer is countered, you’ll have to discuss the counter offer with your Realtor® and decide whether you want to accept the counter. If they completely reject your offer and accept another offer, you’ll obviously continue your search. It can be a daunting task, I’ve had first time buyers submit multiple offers and take months to find the right home. You must be diligent and perseverant in your search and do not get discouraged when your offers are rejected. I think back to a note one of my co-workers put on my desk the week before I was going to participate in my first Olympic Triathlon: It simply said, “you’re going to want to Quit, DON’T!” If you continue working with your Realtor® and don’t quit, at the end of the day, you will find the right home for the right price.
Your first time buying a home is an enormous task to undertake, especially in this market. The key to a successful purchasing experience is to follow the steps above, build those relationships with your Realtor® and lender, and don’t wait until the last minute to start the process. It is not out of the question to begin working with your Realtor® well before you plan to purchase, even 6 months to a year ahead of time. Having additional time allows the lender to discuss your buying power and identify areas that can improve your score, maybe credit card debt for example that will increase your buying power when you’re ready.
Unsuspected pitfalls and tough negotiations can be mitigated with the experience and knowledge of a qualified Realtor®. Choose carefully, and good luck with your first home buying experience!
Marion Shelton is a Realtor® with Century 21, SPX Realty Professionals. Contact him now for more information
5900 South University Blvd. Suite C7
Greenwood Village, CO 80121