Being a first-time homebuyer can be equal parts exciting and terrifying. There are so many ins and outs of the home buying process that it’s easy to get overwhelmed by the thought of it.
Having an experienced and involved realtor or real estate agent is crucial to making your first home process an exciting and seamless experience. As much as we hate to say it, a lot can go wrong from start to finish, so it’s imperative to have a trusted expert on your side.
We have worked in Denver and Aurora for over 20 years and offer an involved experience to all of our clients. We know that buying a home is often one of the most significant transactions you’ll make in your life, and we want you to feel confident throughout the process.
We thought it’d be helpful to put together a guide for first-time buyers that will help you understand the basics of first-time home buying and everything you’ll need to be prepared for the process.
Set a Budget, Find a Lender, and Get Pre-Approved
One of the first and most essential steps in the home buying process is setting your budget and finding a lender who will approve you for that loan amount. An excellent way to set this budget is by using a mortgage calculator to understand what your monthly payments would look like.
Another critical thing to consider is your current spending power – do you have enough saved to put down 5% or 20%? Will you have a backup “emergency fund”?
It’s best not to stretch yourself too thin, as lenders prefer a healthy debt-income ratio, meaning a third of your monthly income is generally the amount they’re willing to lend. You should also remember that just because you can get pre-approved for a certain amount doesn’t mean you should.
Make sure that you take the time to find the right lender who will help explain the financing behind the transaction and make it clear what your payments and payment schedule will be.
Find a Realtor You Can Trust
Your realtor will be your trusted resource and companion throughout the entire process, so you want to make sure that you are working with someone you can trust. That doesn’t always mean your family friend who sells homes; sometimes, that can mean the person who will put in the work and effort for you – especially in this market.
Your network is a great place to start when looking for a realtor. If you have a family member, friend, or co-worker that has recently purchased a home, ask them about their experience and realtor. Did their realtor make the process easy? If so, ask to be put in touch.
Your realtor will act as your representative, which means they are responsible for facilitating showings, constructing offers, arranging appraisals and inspections, etc. Given that there is so much responsibility on your realtor, you must be completely comfortable with them, so some people choose to interview multiple realtors before moving forward with one.
Establish Your Wants and Needs
When shopping for a new home, it’s easy to get caught up in all of the possibilities. Bathtubs, garages, kitchen islands, walk-in closets, finished basements…you name it. Yes, all of these things are exciting and desirable, but it’s essential to take a step back and establish a wants and needs list.
Make a list of home features that you’d like. Then, go through and determine if they are necessary – give yourself some tough love here. You will most likely have to compromise unless you’re doing a new build. If you’re buying a home with a partner, it’s a good idea to make your list and then blend them for your home search.
Sometimes miracles happen, and buyers get everything they want, but more often than not, there’s at least one item on their list that they have to compromise on.
Explore Different Areas and Neighborhoods
Whether you’re moving to a new state or moving within the same one, it’s important to explore different areas and neighborhoods while starting your search. There are tons of areas around Denver that are great for first-time buyers, like Lakewood, Aurora, Edgewater, Highlands, and Parker. Each of these areas offers a distinct experience that ranges from peace and quiet to the heart of the action.
Sometimes things like “walkability” will make your priority list, which automatically excludes some neighborhoods, so just make sure you’re doing research and keeping your priorities straight.
First-Time Home Buyer Program
There are federal and state-based first-time homebuyer programs designed to help get buyers who might not have the down payment they need to get into their first home. For example, the Federal Housing Administration (FHA) has loan structures geared toward helping first-time homebuyers who might not have the down payment but have the credit score to back them as a viable loan candidate. As a result, buyers can get loans for as little as 3.5% down as long as they have mortgage insurance for the entirety of the loan.
The Colorado Housing and Finance Agency (CHFA) offers down payment and closing cost assistance and a variety of loans, which differs from the federal program. If you have a decent credit score and are looking at purchasing your first home, we highly recommend looking into these programs further!
Attend as many Showings and Open Houses as You Want
There is no set number of houses you should see before putting in your first offer. On some rare occasions, we even have buyers fall in love with their first home. Generally speaking, though, we encourage first-time buyers to see a multitude of homes to get a better understanding of what they might be looking for.
Open houses are a great way to get some showings under your belt without taking up an extensive amount of time. Drive around the neighborhoods you are interested in or look online, and dedicate a Saturday or a Sunday to go to a few of them.
It’s important to remember that if you are looking at homes with HOA fees, those would not be factored into your expected monthly payment. HOA fees can fluctuate from $2 to $500 per month so make sure your realtor gets all relevant listing details.
Chances are your realtor will set you up with house search software but don’t be afraid to look at other listings. Zillow and Realtor.com are great resources for listings in your desired area, so keep your eyes on different sites.
We will be adding to this guide over the next few months so that we will soon have a comprehensive guide on how to buy your first home. If you have any information that you’d like us to cover in the next update, send us an email or DM us on social media!