Here at American Professional Home Inspection, we’re fortunate to be a part of many home purchases working with buyers and realtors. We often hear the common questions and concerns from younger, first-time homebuyers.
As millennials continue to become the largest cohort of homebuyers, we wanted to provide a resource for Colorado Springs homebuyers so they feel comfortable throughout the often stressful process of buying a home.
Here is a list of items you’ll want to make sure you understand and have covered as you embark on the home buying journey!
1) Get Pre-Approved
The first step to buying a home is figuring out how much home you can actually afford. You’ll need to make sure your credit is in good shape, have a decent job and savings in the bank.
A mortgage lender will take this information and run it through their system to “pre-approve” you. All this means is that you meet their initial criteria so they can write what’s called a “lender letter” to show potential sellers that you’re for real.
You can do your own research for a reputable mortgage lender, or you can ask your realtor or network for recommendations. Here are some links to help with the pre-approval process.
2) Down Payment
Most first-timers aren’t sure how much they should be putting down. If you can swing 20% down, then you’re in great shape. You’ll get access to lower rates and not have to pay Private Mortgage Insurance (PMI). This can add hundreds to your monthly payment, so it definitely pays to hit that 20% mark.
If you’re like most first-time buyers, you won’t have 20% to put down. As a rule of thumb, the less money you put down on a house, the higher your costs (and risk) will be. Check with your lender for the minimum you can put down while still getting a “conventional” mortgage. In any competitive market, a conventional loan is preferred since FHA and other government-insured programs can have additional requirements that can stand in the way of a smooth closing.
Depending on your lender’s requirements, you may be able to receive a “gift” to help with your down payment. This will require a letter documenting that it is indeed a gift.
Having more to put down can be a slight advantage if you’re in a market that is competitive like Colorado Springs/Denver.
3) Find A Realtor You Can Trust
Realtors are mainly found through word-of-mouth. Ask your friends and family for recommendations and make sure it’s someone they trust, has experience and knows the area well.
4) Know Your Preferences
Many first-time buyers think they know what they (and their spouse) wants, but they find they don’t truly know when it comes time to make an offer. Some key considerations to think about when deciding what’s most important:
- Size of home
- Number of bedrooms
- Are updates needed? Do you want a home that needs DIY love?
- Schools in the area
- Type of heating/cooling
- Is there an HOA? What are taxes?
This is just a start. Your realtor should be making sure you are evaluating all aspects of the area of Colorado Springs you want to live in.
5) Know What Kind Of Market You’re In
Denver gets all the attention as one of the hottest markets in the country, but Colorado Springs has certainly caught up with a hot market of it’s own.
It is a seller’s market now in Colorado Springs. This means as a buyer you need to be fully prepared when house hunting. You should already be pre-approved, know where your down payment is coming from, and know what you’re looking for in a potential home.
Understanding the current state of the market also helps you have more realistic expectations when making offers and asking for items after the home inspection.
6) The Home Inspection
This is where you hire an objective third party like us to perform a comprehensive evaluation of your home’s health. You’ll want to get this scheduled right after you get a contract accepted, as you’ll usually have about a week to 10 days to get the home inspection completed and get the items you’re asking for to the seller.
To get the most out of your home inspection, we recommend the following:
Ask questions! You’re not just paying for a home inspection report, you’re paying to tap our knowledge of how the major systems of your home work.
Look through your report. We provide tons of images, explanations and info for you to reference as you get to know your home.
Keep us as a contact. We’re here as a resource for you, before, during and after the inspection.
After your home inspection, your realtor will walk you through what they think you can/should ask for from the seller. Often the seller will offer a credit or concession that is paid out to you at closing as part of the credits and debits.
7) The Appraisal
This part is coordinated by your lender, and paid for by you at closing with everything else. This is essentially so the lender can make sure the property is worth what you’re offering to pay.
In hot markets like this, houses can sometimes appraise for less than what you offered. When this happens, your agent will find out if the seller is willing to lower the sales price, or if you will need to come up with extra cash to cover the difference. Remember, the lender will only lend the amount that the appraiser deems it to be worth.
A Guide to Understanding Appraisals
8) Final Walk-Through
This is where you (or your inspector) gets the opportunity to make sure any fixes are done up the standards outlined in the Inspection Objection/Resolution. This is typically a couple days before closing and any issues should be raised at that time so the seller has a chance to remedy.
Congratulations! You made it to the closing table. This is where you get to sign a ton of documents and get keys to your new home!
This is also where many first-time homebuyers get overwhelmed with what they have to do. Try to take it one project at a time. Start with small projects to feel a sense of accomplishment and build momentum from there.
If you’re not already, get comfortable with researching fixes, hacks, ideas on Google, YouTube and Pinterest.
Let us know if we can help in any way throughout your home buying process!
Helpful Links And Resources: