4 Things First-Time Homebuyers Should Know

Denver is the capital of Colorado, and with a population of just over 715,500 residents, it’s the fifth most populated state capital in the United States. The "Mile High City" (so named because its elevation is exactly one mile above sea level) lies 12 miles east of the Rocky Mountains. It covers an area of about 155 square miles and was named the best place to live in the United States by U.S. News & World Report in 2016.

The median list price of homes in Denver Metro was $799,900 in December 2021, much higher than its previous median of $555,000. This seller's market means that more buyers are searching for homes than available homes for sale.

Property in Denver is definitely hot. Are you ready to move and buy your first home in Denver? Congratulations on your decision! But before you sign on the dotted line, here are some pointers that can save you money, time, and future headaches.

Buying a house doesn’t just involve a down payment

Unless you have excellent credit (which could garner you a loan rate of as little as 3% down), determine that you'll need, on average, a 20% down payment if your credit is average and you have no previous homebuying background. If the median house price for homes in Denver Metro is $800,000, your 20% down payment would be $160,000. Even at 3%, your down payment would be $24,000.

Another expense to consider is your closing costs. These are expenses associated with finalizing the house sale and can run anywhere from 2% to 5% of the loan amount. Again, using the $800,000 figure with $160,000 down, the loan would come to $640,000. Closing costs will range from $12,800 to $32,000.

A third expense comes from moving expenses. Are you moving with the help of friends or by yourself? It will still cost you money for boxes, tape, and other supplies, and if your friends assist, you can’t expect them to help for free. Are you paying for a moving company? This could cost you at least $4,500 for a move of 1,200 miles and a possessions weight of about 7,400 pounds.

Lastly, lenders require homeowners insurance before a deal is finalized. Insurance covers any costs incurred to repair or replace your new home and belongings as long as the new policy covers the damages. This coverage also provides liability insurance if you're found and held responsible for an injury or accident on your property. The bottom line? Buy enough insurance to rebuild your new home in Denver Metro if it’s destroyed.

Don’t overlook your finances

The home buying experience is often exciting, and buyers can get swept up in the excitement to the extent that they overspend. Ideally, your mortgage should not exceed two-2.5 times your annual gross income. For example, if you earn a $100,000 yearly salary, your home mortgage should be between $200,000-$250,000.

Given that $800,000 median home price mentioned earlier and assuming you’ve made a down payment of $160,000, this leaves a mortgage of $640,000. Unless you have a benefactor, profitable liquid cash flows from investments, or an inheritance, your $100,000 salary isn’t going to cover your mortgage. Given the existing numbers, you would ideally need to earn an annual gross income of $320,000 to $480,000 to cover this mortgage and still have reserves to pay for your other living expenses.

Enlist the help of an experienced realtor

Even seasoned home buyers benefit from entrusting an experienced realtor with their transactions. Realtors can help you determine your mortgage limits, explore the different mortgage options that best suit your lifestyle and goals, and help you research programs that assist first-time homebuyers looking for new homes for sale in Denver Metro. These programs vary by state and jurisdiction, but they generally combine low-interest-rate mortgages with assistance with down payments and closing costs.

Experienced realtors are trained in real estate transactions and real estate legal-ese. They're up-to-date on all local and federal legislation concerning real estate transactions and will educate you as questions arise. For example, some states allow contingency purchases — you intend to buy a new home for yourself but won't pay until your current house sells. The buyer removes the home from the market and holds it until your home sells and the down payment is made. Not all states accept this purchase method, and a realtor will help you navigate these and many other potential obstacles in the homebuying process.

Pay for a home inspection and pay attention to what you find

So, your dream home looks great, right? You figured you might save some money by skipping the whole home inspection process, so why not just wing it? Here’s why: a home inspection assesses the home’s structure and its mechanical systems. And it’s not just needed for older homes. Even new homes for sale in Denver Metro can harbor hidden problems, especially if developers take shortcuts to meet budget or time deadlines.

Ask your realtor to accompany you to the inspection or review the inspection report thoroughly with your realtor if you can't attend. Also, one inspection may not cover all potential problems. You may need specialized inspections to assess the property for radon leaks, mold, termites, or other pests that threaten the house and you and your family. Lastly, ensure the inspector can access every part of the house. If a seller is hesitant or uncooperative, that’s a red flag of a potential problem or even the need for you to back away from the deal.

Ready to start looking at new homes for sale in Denver Metro? Reach out to trusted local agent Pete Bellande of the Neighborsly Home Group for expert assistance. Find your next dream home in the Roaring Fork Valley and Denver Metro Area today!


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