Planning on becoming a home buyer in 2020? Perfect. Here are the 7 steps you need to take now to make an awesome purchase. Good luck!
Are you itching to start a new chapter in your life? To finally go from renter to first-time home buyer? A home is more than just a place to live. It's also an investment, an asset and something that could pay off big down the road. If you're putting off buying a home, you could be missing out a fantastic opportunity to secure your future.
Let's walk through seven actionable steps you can take right now to land your dream home!
Write Down Your Goals For Home Ownership
Buying your first home isn't something you want to do on a whim. It takes planning, saving, financing and market research. The first thing you want to do is narrow down your own goals for home ownership. This will help you land the right property for your needs. Ask yourself the following questions to hone in on what you really want as a home buyer:
- Do I want a home just for myself? Do I want roommates to help offset the mortgage?
- Am I looking for a long-term investment, a property I can sell in years to come?
- Do I want to rent out the property and act as a landlord?
- Are my partner and I planning on having children?
- Do I want a fixer-upper project? If so, did I plan for this financially?
Learn About The Home Buyer Market
Now that you know why you want to buy a home, it's time to talk about the Denver real estate market. You may have heard the terms "buyer's market" and "seller's market." Knowing when to buy can determine whether or not you land your dream home on the first try. A buyer's market means Denver home prices are reasonable, there is an ample supply of homes for sale, and fewer bumps in the road toward financing.
On the flip side, a seller's market is far more competitive, and with fewer homes on the market, buyers should expect to pay more than the listing price. If you do decide to buy in a seller's market, be patient and don't be tempted to exceed your budget. In a seller's market, it may take you several offers before you get under contract.
These market conditions don't apply to the home buyer market as a whole; they can be segmented. For example, during a seller's market, a 4-bedroom suburban home may be more competitive than a 1-bedroom loft. That's why it's important to determine your goals for home ownership at the start.
How's Your Credit?
Do you cringe when you look at your credit report? Lots of people do, but achieving good credit is crucial for all first-time home buyers. This first thing you need to check is your FICO score. Home loan and mortgage lenders look at that score to see if you're eligible for financing. Before buying a home, see if your FICO score falls within the following ranges:
- 750-799 is considered a very good. This is the cream of the crop of FICO scores.
- 700-749 is considered good and will help you get financing or a better mortgage interest rate.
- 650-699 is considered fair but you may have difficulty getting the financing you need.
- 600-649 is considered poor and you have difficulty achieving any financing for your home.
If your FICO score is not up to par, don't worry. Your score isn't some scratch on your permanent record. You can raise your score by changing your spending habits, maintaining good lines of credit and lowering your debt-to-income ratio.
Let's discuss some tips you can use right now.
Pay Off Debts and Put Away Cash
Your debt-to-income ratio (DTI) represents 30% of your FICO score. This means you want to do your best to decrease how much you currently owe. Your FICO score is also comprised of the following:
- New credit obligations - 10%
- Duration of credit history - 15%
- Payment history - 35%
- Misc credit obligations - 10%
One of the first steps you can address is your student loan and any other major outstanding loans. You also need to pay off any major credit card debt you have, outstanding medical bills, and layaway payments. To help chip away at your debt, take note of the following money-saving tips:
- Start a home buying fund or savings account.
- Talk to your banker about automatically transferring money from your paycheck to your fund every pay period.
- Cut down on frivolous expenses you don't need, such as expensive take-out, extra clothes and accessories, pricey cocktails, and unnecessary entertainment.
- Pay attention to when items you need go on sale
- If appropriate, talk to your family about cash gifts in lieu of expensive items for birthdays and holidays.
Pick Your Neighborhood
What do you want most from your future neighborhood? This is an important question because where your home is located is just as important as the property itself. Let's take a look at some important factors to consider:
- Do you currently have children or are you planning for them? If so, you will need to look at the quality of the schools in the neighborhoods you're considering, crime rates, and parks, museums, swimming pools and other kid-friendly accommodations.
- Are you single and looking for sports or arts and culture? You may want to look at more metropolitan neighborhoods that offer galleries, theater, and exciting nightlife options.
- Hate to drive? There are several neighborhoods that offer nearby public transportation and grocery stores within walking distance.
Once you've narrowed down your ideal neighborhoods, research the market to see if available properties fall within a buyers market or seller's market.
Read Next: Top 25 Neighborhoods in Denver
Create a "Mock" Household
With your debt and savings in control, now it's time for a reality check. As a prospective home buyer, you need to be a diligent planner. By creating a "mock" household, you'll get a clearer picture of your financial obligations as a homeowner. Calculate the following for your household budget:
- Mortgage rate increases (if you have an adjustable rate)
- Home loan payments
- Property taxes and homeowner's insurance (if not escrowed)
- Monthly utilities like gas, electric and water
- Monthly cable and internet charges
- Trash pickup
- HOA fees
- Average weekly groceries
- Home improvements like painting, structural reinforcement, etc.
Two more factors you need to consider are appreciation and depreciation. Remember that your home is an asset. Therefore, if the property value of your neighborhood increases, your home will increase, or appreciate, in value. Economic inflation can also cause homes to appreciate in value as well. Depreciation is the opposite. This is when your home decreases in value due to gradual wear and tear, dips in the housing market and shifts in neighborhood property values.
Talk To A Usaj Realty Broker
Once you have all your ducks in a row, talk to a Denver real estate broker to get additional insights on market conditions, when to buy, and how to get the best deal. You can also get insider information about neighborhoods with great property value projections. Brokers know the local real estate markets. This way, you waste less time looking at properties that don't meet your goals or have a greater risk of depreciation.
Buying your first home is a big deal, so you want to get it right. Don't hesitate to make an appointment with a broker at any stage of the process to get valuable advice. Your home is a sanctuary, but it's also a powerful asset for your future. Look into the advantages of home ownership now to start building that nest egg sooner than later.
(Editor's note: This blog was originally published in December of 2016. It has been edited and updated to provide current information).
Contact Usaj Realty today at 720-398-2999 or email us at email@example.com
Posted by Jennifer Black
Jennifer Black champions all of Usaj Realty’s marketing publications. With a passion for digital marketing, graphic design, writing, and all things creative, Jennifer excels in the office as a crucial support staff member for our brokers and management Originally from Redwood City, California, Jennifer pioneered her way to Denver and began working for Usaj Realty in May of 2014. She loves every minute of life in Denver, which is directly enhanced by her time designing for Usaj Realty. Away from work, Jennifer enjoys escaping to the great outdoors, going skiing, hiking, and exploring local breweries and restaurants.Facebook LinkedIn Twitter