The Denver real estate market continues to stay strong with high demand from buyers ready to make a move. As we begin a new year, the Denver housing market is still very much in the favor of sellers. Housing demand is high and inventory is still generally low. If you are ready to buy, here are three must-do items as you start the purchasing process.
Check Your Credit
Chances are you will apply for a mortgage loan to purchase your next home, and your credit score will have a dramatic effect on the programs and interest rates you qualify for. Although there are programs that allow for lower credit scores, a FICO score of 620 is typically the minimum score you need to qualify for a loan. The higher your score, the better your options for interest rates and programs.
By law, the “big three” credit bureaus must provide a free copy of your credit report to you every year. You can get your copy by going to www.FreeCreditReport.com. Before you start working on your home purchase, get a copy of your credit report so you know if there are any problems up front. You can also get help from your lender. A good lender will often be able to assist you in reviewing your credit report and guide you in resolving issues in order to get your loan.
Be Prepared Financially
As you get ready to purchase your next home, make sure you are ready for the costs that will come along as part of the transaction. While most of the costs can be rolled into your loan, you will have some that are paid up front. When you find the right home and your offer is accepted, you will need to put down earnest money to show your commitment to the purchase. Earnest money amounts will vary, but a typical amount is about one percent of the purchase price. The good news is the earnest money you put down will be applied towards your purchase of the home.
Depending on the type of loan you are getting, you will likely need a down payment. This will run between 3% to 20% of the cost of the home, which you will pay in cash at closing. There are a variety of loan programs available, but typically you cannot borrow the down payment from another person or source, so you will want to have this money in the bank.
Once you are under contract, you will want to have an independent inspection of the property by a qualified home inspector. Your Realtor can assist you in finding the right person to inspect the home. Depending on the size of the house, the fee will range from $350 to $600 or more, which will need to be paid when the inspection is complete.
Once the transaction is complete and you have closed on your new home, there are additional costs to be prepared for. Moving expenses, utility deposits, re-keying and changing locks, painting and decorating are just a few of the potential items that could come up. Plan ahead and find out what different items cost beforehand so you are prepared financially when you move into your new home.
Plan Ahead for the Good and Bad
As you start the process of looking for your next home with your Realtor, discuss what part of the Denver metro area you want to live in. Different cities and neighborhood can have significant price differences.
Be clear on your specific needs in the number of bedrooms, bathrooms, multiple levels, garages or parking options, heating, cooling and more. Knowing what you are looking for will help your agent find the perfect house for you.
Have a plan for the different possible outcomes of the transaction as you go through it, and be clear with your agent on your specific needs. If you must be out of your current home by a certain time, be sure to have a back-up plan if the home search or transaction takes longer than anticipated. On the flip side, if the home purchasing process goes very quickly, are you going to be ready to move sooner than expected? Every transaction is unique, so plan ahead for good and bad scenarios.
The more preparation you can do before your start the process of purchasing your next home, the better. The home buying process can be a stressful time, and spending time up front on credit, finances and planning can make for a much more enjoyable experience.
Jim Brown is a Realtor® and agent success leader at Private Label Realty in Denver, Colorado. He advises, assists and mentors agents at all levels to help them succeed and grow their real estate business. www.JimBrown.me