Top 10 Myths That Trip Up Potential Home Buyers in Colorado
If you are looking for homes to buy in Vail, Colorado or the Denver Metro there will be no dearth of friends and family to offer advice on how to go about it. Additionally, there are ample platforms like TV shows, social media, and news segments that seek to cash in on the entertainment factor of a house-buying process.
Typically, these segments over-simplify things but in real life, planning for houses to buy is not so easy. They follow the traditional pattern of home-buying, thereby making it a tough call when you have to sift through all the information and segregate the myths from the reality.
For home buyers in Colorado or for that matter anywhere in the world, investing in a dream house is generally a once-in-a-lifetime decision. Hence, you must tread carefully, acquire the necessary knowledge about home buying, and have a team of experienced and qualified real estate professionals to handhold you through the process. This is crucial for the financial well-being of you and your family in the long term.??
DON’T FALL FOR THESE COMMON HOME BUYER MYTHS
Myth #1: You need a 20% down payment.
The first scary part (and the most worrisome) for home buyers in Denver is to put together the down payment. A simple 20% on a $800,000 house comes to a whopping $160,000 and that corpus is not easy to put together.
Fortunately, this 20% benchmark is a myth and plenty of homebuyers are acquiring properties for far less. It is not uncommon today to buy a home with as little as 3-5% down. Your mortgage loan officer will walk you through the various loan programs that are available with very low down payments and advise you on the best option.
However, when you opt for a low down, the risk of the lender increases in comparison to the typical 20%. In such cases, you will most likely be required to pay mortgage insurance as part of your monthly payment.???? ??
Myth #2: Real estate agents are expensive.
For home buyers in Vail, the thought of paying hefty commissions to real estate agents will surely crop up in their minds. This is more so as a real estate agent is available through every step of the home-buying journey, from searching for the ideal house to closing the deal.
The reality of course is different. You do not have to pay anything as fees to your real estate agent. The commission, that is a certain percentage of the sale price of the house, will be paid by the seller and factored into the price of the property. You do not have any out-of-pocket amount to pay upfront to your agent. ????
Myth #3: Don’t call a real estate agent until you’re ready to buy.
The earlier you bring in an agent to help with the purchasing process, the better. Even if you’re in the very early stages of casually browsing Zillow, a real estate professional can be a huge help.
They can create a search for you in the Multiple Listing Service (MLS), so you get notifications for every house that meets your criteria as soon as it hits the market. The MLS is typically more up-to-date than popular home search sites like Zillow and Trulia. Setting up a search a few months before you’re considering?buying?gives you a good idea of what’s out there in your town that’s in your budget. Reviewing the MLS and speaking with an agent as soon as possible can help you set realistic expectations for when you actually start the house hunting process.
Myth #4: Fixer-uppers are more budget-friendly.
We’ve all watched the shows on HGTV that encourage people to go after fixer-uppers because they’re more affordable and allow buyers to eventually renovate the home to include everything on their wishlist. But, this isn’t always the case.
Sometimes, homes that need a lot of work also require a lot of money. Big renovations, like add-ons, a total kitchen remodel, or installing a pool, take a lot longer than it looks on TV. If you’re really interested in a fixer-upper, ask your agent to show you a mix of newer homes and older homes. If you fall in love with an older home that needs a lot of work, get some quotes from contractors before you buy so you know the real cost of the renovations and see if you can work them into your budget.
Myth #5: Your only upfront cost is your down payment.
The down payment is a substantial amount that you must save for when thinking of homes to buy in Vail, Colorado. But that is not the only savings that you must aim for as there are many other upfront costs that you should make provision for in your house-buying project.
Let us check the other costs that form an integral part of expenses for houses to buy.
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Make provision for these expenses along with the down payment when deciding on homes to buy in Vail, Colorado. ???
Myth #6: You need a high credit score to buy a house.
This is one myth that needs to be busted if you want houses to buy. Your perfect dream home is for the taking only if you have a perfect credit score is not true. Ask your real estate agent for mortgage loans that are sanctioned with lower credit scores. These are good for people who have had credit issues in the past.
However, just like loans with low down payment, mortgage sanctions to people with low credit scores come at a price. Be prepared to get stiffer mortgage conditions like a high down payment or interest rate. These are to cover the additional risks lenders take to advance mortgage loans to a low credit score borrower.? ??
Myth #7: You can’t qualify for a mortgage if you’re still paying off student loans.
You do not need to pay off student loans to qualify for a mortgage even though it helps in the long run to lower your monthly outgo on loan servicing. What is important for home buyers in Vail is to ensure that they have an acceptable debt-to-income ratio, based on which mortgage loans are sanctioned.
How is this ratio calculated for borrowers needing houses to buy? All your total monthly debt payments are added up and divided by your monthly income. This is to ensure that you can pay your monthly mortgage payments together with your other debts. Typically, a DTI ratio of 45% is acceptable while 36% or below is considered very good.
If you have a satisfactory DTI ratio, having outstanding student loans will not come in the way of getting mortgage loans for homes to buy in Vail, Colorado.?? ?
Myth #8: You should base your budget on what your lender approves.
How much house you qualify for and how much you can afford are two totally different numbers. When you prequalify for a mortgage, your lender will look at your income, debt, assets, credit score, and financial history to determine how much money you might qualify for.4?For some people, this number might be much higher than you thought because lenders tend to approve for the highest amount they think you can afford. But that doesn’t mean that’s how much you should borrow.
Instead, figure out how much house you can actually afford.?An online mortgage calculator?can be a good first step in determining this number. We recommend thinking about what you want your monthly payment to be as a starting point. And remember to include your principal, interest, taxes,?and, insurance. You should also think about ownership expenses that aren’t part of your monthly payment, like HOA dues and maintenance.
Myth #9: It’s all about location.
You’ve heard the phrase. Location, location, location is basically the real estate industry’s motto, but we’ll let you in on a little known secret: It’s not always true. Yes, location is great to consider when it comes to school districts and commute times, but you also need to think about how the home will function for you and/or your family’s lifestyle. If a family of five is choosing between a one bedroom condo in the bustling city center and a 4-bedroom home out in the suburbs, the latter is probably the best, most functional choice for them. Also, by buying in a less sought after neighborhood, your property taxes will most likely be much lower!
Obviously, you might still want to choose an area with great resale potential, and this is something that your agent can speak to you about. They’re an expert in your city and are constantly monitoring buying and selling trends.
Myth #10: If you look hard enough, you’ll find a home that checks every box on your wishlist.
You’ve seen that famous house hunting show. And while we have our suspicions about how real it is, the one thing they get right is that almost every buyer needs to compromise on something. Yes, the perfect house that meets every item on your wishlist is probably out there, but it’s also probably double or triple your budget.
A long wishlist can be a great starting point for figuring out what you want and don’t want, but we recommend narrowing that wishlist down to the top five things that are important to you in order of priority. We also recommend noting on your wishlist what your absolute deal breakers are, like “must have a yard for our dog,” and noting what you can live without, like “heated bathroom floors.”
This is a great list to discuss when you first start talking to an agent. A good real estate agent will be able to look at your list and find properties that might work for you. By coming to that first meeting with realistic expectations and knowledge about home buying rather than a bunch of myths heard here and there, you’ll be able to start the process off on the right foot and be in your new house in no time.
WE’RE HERE TO HELP
Whether you’re a first time buyer or a seasoned homeowner, there’s no reason to go through the?home buying?process without an advocate on your side. We’re here to answer your questions and do the hard work for you, so you can spend your time dreaming about your new home. Call us today to schedule a consultation.