If you are in thinking about buying your first home in Denver, the process is overwhelming. Most new home buyers seek a real estate broker recommended by a trusted friend or family member. Usually, the first interview meeting is filled with necessary information required by both parties. Your new agent needs to understand your concerns and exactly what you are in the market for.
Denver First Home Requirements
First you have to come to grips with how much for how long, location and size. Once that has been presumed you can get on board. Every family has very specific needs, although those needs can adjust when you fall in love with a type of property you least expected. At Katchen Company, we are your Denver urban real estate experts with unlimited expertise, and can easily guide a client, especially a Denver first home buyer, through this process.
There is particular real estate lingo every agent uses; you’ve heard these terms but just not sure how they apply to you. When you first meet with a broker, they will fill you in on all the particulars about mortgage rates. A fixed rate mortgage is a loan you can get where the interest rate remains the same throughout the life of the loan. Choosing a 30-year loan usually makes your monthly payment the lowest but you can possibly go for less length of time, like 10 or 15 years.
There are also adjustable-rate loans available and these come with pros and cons that your agent can fill you in on pertaining to your area.
Private Mortgage Insurance (PMI)
If you have a conventional loan the lender will arrange for you to have private mortgage insurance, also called PMI. This is usually required when you have a conventional loan and make a down payment of less than 20 percent of the home’s purchase price. With a Federal Housing Administration (FHA) loan, you’re required to purchase private mortgage insurance.
This is an important part of the investment that protects the lender if you can no longer make payments on the loan and have to default. The premium is usually shown on your Loan Estimate and Closing Disclosure, in the Projected Payments section. Before you agree to the loan you will get a Loan Estimate when you apply for a mortgage. The monthly payment estimate can give you a good picture of what the monthly payments should be.
Some lender offers conventional loans with smaller down payments that do not require PMI. This might lock the loan into a higher interest rate though and you might want to speak with your tax advisor about whether paying more in interest or paying PMI might affect your taxes differently.
Once you put in an offer on a property, the money surrendered is called escrow. It is a holding of funds by a neutral third party prior to closing. This “good faith” money is protected so the money is released to the correct party at closing. To protect both the buyer and the seller, an escrow account is set up to hold the funds. This deposit will stay in the escrow account until the transaction closes.
Escrow proves a buyer is serious about completing the purchase. If the contract falls through from any fault of the buyer, the seller keeps the money. When the purchase is completed the deposit will be applied to the buyer’s down payment.
The meaning of this word in any buying or selling situation, proposed by buyer or seller, is that the some of the contract can or will be changed or altered after a specific event. Either party can claim to only move forward with the sale on contingency of specified events.
A contingency clause written into in a real estate deal, gives the parties the right to back out of their contract under specified circumstances. Some contingencies are major, some are minor. But contingencies are important in real estate contracts because they limit a buyer’s or seller’s responsibility to fulfill the contract and close the deal.
Horrayy! It’s Closing Time
As first home buyers wade through this important day, buried under a large a stack of legal paperwork, know that typical closing costs for Colorado buyers range from 2-4% of a purchase price. These costs include transfer taxes, title fees, attorney fees, home inspection fees, and more. So, if the average sale price for Colorado homes is $366,800. That means purchasing a home in the Centennial State could cost you up to $15,000 — on top of your down payment. This is important information to know before you take that first step forward.
If you want to learn more, when thinking about buying a first home in Denver or anywhere else, there is a tool online called Smart Assist, where you can see per zip code, an estimate of what your closing costs will come out to. It can help you realize approximate total closing costs and amounts needed at settlement. Good news if you want to be aware of everything up front!