Getting Ready To Buy A Home
One of the most important things you can do is to make a checklist as you search for, find and buy a home in the Denver real estate market. By keeping on top of your game plan at all times you will greatly increase your chances of success. To save time, bookmark this page and refer to the following checklist frequently. Follow this checklist and let it increase your house-buying effectiveness. Download our exclusive home buyer's guide.
Understanding what you can afford
One of the first steps in the home-buying process is to fully understand your finances. It's not as fun as looking at homes, but it's important and necessary to help you determine how much you can afford.
To get a rough estimate of what you can afford, most lenders suggest you spend no more than 28% of your monthly income — before taxes are taken out — on your mortgage payment, including principal, interest, taxes, and insurance.
Save for a down payment
Typically, buyers put down 5 to 20% of the purchase price but this can be as little as 3%. Buyers putting down less than 20% are required to pay Private Mortgage Insurance (PMI) monthly until they build up 20% equity in their home. The more down payment you can offer, the stronger your offer is.
While most buyers use personal savings to finance down payments, there are many other options, including gifts or loans from relatives. In addition, many state, county, and city governments offer down payment assistance programs to people in their communities who are well qualified and ready for homeownership.
As you save for your down payment, remember there are other costs related to the purchase of a home, aside from the down payment. These costs include title closing, inspection, pro-rated taxes, and possibly a survey.
What kind of home and where?
Decide what kind of home you want/need: size, location, special features (such as fireplace or fence), etc. You should consider your needs first and then your wants. Consider your home an investment. Do not buy quickly and emotionally. Carefully consider your options and view as many homes as necessary to find the home that’s perfect for you..
Find an experienced buyer's agent
You will probably want to use a real estate broker/agent to help you with your search and to write your contract/negotiate on your behalf. Interview several brokers/agents to find one you are comfortable working with, who will answer your questions and help you find a property that meets your specifications. A listing broker lists the property for sale and actively markets the property. The selling broker or buyer’s agent represents the buyer. The fees for the listing and selling broker/agent are generally paid by the seller, usually as a percentage of the purchase price.
Get "pre-qualified" for a loan before looking for a home. This means the lender will review your credit, income, and other factors to determine how much of a mortgage you qualify for. In the current real estate climate most sellers’ agents will recommend that the seller wait to see a prequalification before responding to any offer. Getting pre-qualified insures that when you find the home you love you will be able to act on it expediently, thus reducing the risk of someone else getting it under contract while you are working with the lender toward pre-qualification.
Begin house hunting
Allow time to see a number of houses, so you have a good basis for making a final decision. When you find a home you like, carefully give it your own personal inspection. You will also want to tour the neighborhood and perhaps see the house at different times of the day or on weekends to check traffic patterns and other amenities that may affect your decision.
Make an offer and sign a Purchase Contract
If you're comfortable with the home, make an Offer to Purchase, including an "earnest money" deposit. Earnest money is your assurance to the seller that your offer is serious; it is held in escrow for the benefit of both buyer and seller until such time as the contract is terminated or the property closes at which time it is credited to the buyer toward the purchase price.
Get professional inspections
Your Purchase Contract will permit you to have various professional inspections and will govern your rights if the inspections show problems. Before you make an offer and sign a purchase contract, ask your real estate agent which inspections are best for your area, and work with them to insure that you allow sufficient time to complete all intended inspections.
Finalize your mortgage details
Work with your lender to determine which program is best given your unique situation and specific goals for the purchase of this property. During the loan application process, you'll work with your lender to determine your eligibility for a mortgage, folding in the terms of your loan, property details, down payment, and other factors. If you qualify, you'll then discuss the terms and all the costs associated with the loan.
Once your offer is final, your lender will order an appraisal to get a professional opinion on the value of the home – versus how you and the seller value the home.
The appraisal is a necessary step in getting your financing secured and protects you and the bank by making sure the home’s value matches the agreed-upon sale price. For example, your lender doesn’t want to lend $200,000 on a home that’s only worth $175,000, and you certainly don’t want to pay $200,000 for a home that’s worth much less.
A day or two before closing, do a final walk-through of the property to make sure there are no new problems. This may be a good time to have the seller show you how to operate major systems and appliances.
Close the loan (also called "Loan Settlement"). This is the day you actually purchase the home. Closings are normally conducted at a title company office where you will sign many documents which will be thoroughly explained to you by the title closer. You will also sign the loan docs, present the balance of the funds due from the buyer, receive a copy of your warranty deed and the keys to your new home.
HOME BUYER'S RIGHTS
You have the right to buy any home you can afford in any neighborhood. The Fair Housing Act (Title VIII of the Civil Rights Act, 1988) makes it illegal to discriminate because of such factors as race, color, national origin, religion, sex, handicap or familial status (that is, whether you are pregnant or have children). In discussing fair housing, "discrimination" means unfairly denying someone the right to own or rent a house or apartment.
You also have a right to fair lending. No one can refuse to give you a loan for a house because of your race, color, national origin, religion, sex, familial status or handicap. A lender may offer a loan on less favorable terms or refuse to approve your loan application for other reasons, such as insufficient income, unacceptable credit history, or other factors that are not discriminatory.
It's also illegal for anyone to threaten, coerce, intimidate, or interfere with anyone exercising a fair housing right Advertise or make statements that indicate a limitation or preference based on race, color, national origin, religion, sex, familial status or handicap. If you think that any of your fair housing rights have been violated, discuss your concerns with the person or people involved. If you're not satisfied after discussing your complaints, contact the U.S. Department of Housing and Urban Development office closest to your home.
When you apply for a mortgage loan, you have a right to know the true cost or annual percentage rate of your loan, as well as the costs of closing the loan. By law, you should receive the following information from your lender:
A "Good Faith Estimate" of the settlement (or closing) costs of your loan. This is the lender's best estimate of the settlement costs, based on information available to the lender when you apply for the loan. If any of the costs are uncertain at that time, the lender will indicate which ones are estimates. The Annual Percentage Rate (APR) that you'll pay on the loan. The APR shows the costs of your mortgage loan as a yearly rate. This rate is usually higher than the rate stated in your mortgage or deed of trust note because the APR includes up-front fees (such as points) as well as interest. The APR is intended to show you the true cost of your loan. When comparing one loan to another, be sure to compare APRs to get a true picture of what each one will cost you. The finance charge (don't be surprised: the total 30-year finance charge will probably exceed the price of your house! By the time you finish paying the loan, the amount won't seem nearly so big.) Schedule of payments Late payment charges If you apply for an Adjustable Rate Mortgage (ARM) you will receive an additional disclosure explaining how and when the interest rate on your loan will change and a copy of the Consumer Handbook on Adjustable Rate Mortgages (CHARM) booklet. You should read this information carefully. This information is required by the Truth-In-Lending Act. The Department of Housing and Urban Development publishes a brochure called "A HUD Guide for Home Buyers - Settlement Costs". If you haven't yet applied for a loan, you may request the brochure from HUD or any mortgage lender.