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Steps to Buying Your First Home
Steps to Buying Your First Home Buying a home for the first time can be an overwhelming experience for any First Time Home Buyer. If you are new to the process, you have come to the right place.  The Denver Realty Company is your expert in the First Time Home Buyer process. Our extensive knowledge and guidance will allow you to find the home of your dreams. We pride ourselves in finding real solutions for the First Time Home Buyer.  Our process leaves the First Time Home Buyer confident and in control of the whole transaction.   The Denver Realty Company provides a step-by-step guide with instruction in the following areas:
Please view links to get started:  Home Buyer Wish List â“ Assessing Your Needs (Buyerâ™s Resources) This wish list will help you select your desired number of bedrooms and bathrooms and the geographical area you wish to live in. This is a small size file of 12 KB that can be downloaded. Home Shopping Check List (Buyerâ™s Resources) This check list will help you determine if a particular property has the specs you desire. This can help you with the home buying process. This is a small size file of 13 KB that can be downloaded. First Time Financing
First Time Financing Organize Your Documents. There are many important documents that will be needed to process your home loan. To help the process go quickly and smoothly gather the following documents ahead of time:
Your loan officer will let you know what other documentation is required for your particular loan program.  Shop Loan Programs and Rates To find the right loan to match your needs, you should consider how long you plan to keep the loan. For most buyers, the best option is a fixed rate loan. Compare different programs. Understand the relationship between rates and points. Points are treated as prepaid interest and are tax deductible. The more points you pay, the lower the rate you will get. Shopping for a loan can be difficult; an experienced loan officer will help you make a decision that's best for you. Get Pre-Qualified Pre-qualification occurs before the loan process begins, and is usually the first step after initial contact with your real estate agent is made. The mortgage broker will gather information about your income and debts and will use this information to make a financial determination of the size of loan you qualify for. By getting pre-approved you will be able to focus your search on properties you can afford. It also puts you in a stronger position when negotiating with the seller. Mortgage Qualification Calculator Mortgage Payment Calculator Apply for the Loan The Buyer (borrower) completes a mortgage application with the loan officer and supplies all required documentation for processing. Various fees and down payments are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days that itemizes the rates and associated costs for obtaining the loan. The specific loan program and rates will be determined at this time. Obtain Loan Approval Once your loan application has been received the mortgage broker will start the loan approval process immediately. This involves verifying your credit history, employment history, and assets including your bank accounts, stocks, mutual fund, retirement accounts, and equity in any property you currently own. Ensure you have filled out the loan application completely and honestly. Finally, be sure you can provide a written explanation for any late payments or collections for judgment, etc. Do not make any other major purchases until the loan is closed.  Close the Loan Closing usually occurs between 25 to 45 days after you have selected a property and signed a real estate contract. The Real Estate contract will specify the actual date of your closing. At the closing, the lender "funds" the loan with a cashier's check, draft, or wire to the selling party in exchange for title to the property. This is the point at which the borrower finishes the loan process and actually buys the house. You will be required to sign the final loan documents in front of a notary public.  Make sure that the interest rate and loan terms are what you were promised and that the name and address on the loan documents are accurate. Bring a cashier's check for your down payment and closing costs if required. Personal checks are normally not accepted. Buyers Assistance Programs
Buyer Assistance Programs - Up to $10,000 There are many First Time Home Buyer assistance programs.  Certain programs can be combined for the same purchase! For example, a property could be purchased under the HUD $100 Dollar Down Payment program, using a 203(k) Streamline Loan, while using Down Payment Assistance for closing cost.  The Denver Realty Company will verify availability once a First Time Home Buyer completes a loan application.  Colorado Housing Assistance Program - CHAC CHAC offers loan programs and supportive financial counseling to help Colorado families turn dreams into reality. Colorado Housing and Finance Authority â“ CHFA Increases the availability of affordable, decent, and accessible housing for lower income Coloradans Home Ownership Assistance Program (HOAP) The City of Aurora's Home Ownership Assistance Program (HOAP) has been dedicated to making home ownership a reality for Auroraâ™s low and moderate-income families. As a HUD-approved counseling agency, HOAP offers free pre-purchase, foreclosure, pre-foreclosure sale, and reverse equity mortgage counseling, as well as financial assistance to homebuyers.  HOAP staff conduct educational seminars (in English and Spanish) to help first-time homebuyers understand the process of buying and owning a home.  Del Norte â“ Neighborhood Development Corporation Del Norte's mission is to create and preserve housing and other opportunities for underserved households, including those that are low and moderate income, Spanish-speaking and those with special needs. Adams County Housing Authority â“ ACAH Provides down payment and closing cost assistance to low and moderate-income first-time; benefits under the program are limited to buyers purchasing homes in Adamâ™s County. Denver Housing Authority's mission is to promote adequate and affordable housing, economic opportunity, and a suitable living environment free from discrimination in Denver. Law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence. The main purpose of the VA home loan program is to help veterans finance the purchase of a home with favorable loan terms and competitive interest rates. For VA housing loan purposes, the term "veteran" includes certain members of the Selected Reserve, active duty service personnel and certain categories of spouses. This Program allows people to take advantage of the buyer's market, by purchasing a home owned by HUD with a small one-hundred dollar down payment. FHA's standard down payment requirement of 3.5% is waived.  Closing costs, homeowners insurance, property taxes, and even repairs can all be financed using this special federal purchase-money loan program. The loan amount is limited to 100% of the "as is" appraised value of the home.  HUD Homes are foreclosed homes which were secured by FHA-insured or VA mortgages. HUD homes are popular with investors because they are often sold at below market prices. For the first 10 days these homes are on the market, they are available exclusively to bidders who will be owner-occupants  In other words, anyone who wants to buy a HUD home as their new primary residence has priority and gets the first chance to take advantage of these deals.  Before making an offer on a HUD home, the buyer must be pre-approved for the necessary loan amount. A pre-qualification letter is not acceptable. Prior to submitting an offer on a HUD home, the lender must take an official loan application, approve supporting documents, and issue a preliminary loan commitment.  FHA loans are not limited to first-time home buyers or low-income borrowers, and there are generally no geographic restrictions. The FHA $100 HUD Home Program is a special FHA program available in Colorado. The inventory of HUD homes changes frequently. So check your property email notifications from The Denver Realty Company often. FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser. FHA Standard 203(K) is intended for major repairs and more complicated renovation plans. There is no cap repair cost for this program; however, all work must be performed by licensed professionals. $8000 First Time Home Buyer tax credits
      This does not have to be paid back like the previous 2008 tax credit! First-Time Home Buyer $8000 Tax Credit: 6 Things to Know The $787 billion stimulus bill that President Barack Obama signed into law in Denver includes a measure designed to help revive the real estate market. Here are six things you need to know about the $8,000 First-time home buyer tax credit.  1. Eight grand, new buyers: The credit a homeowner ultimately receives will be equivalent to 10 percent of the purchase price of the home--although the credit is capped at $8,000--and applies only to first-time home buyers and principal residences.  2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit. 3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it. 4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits. 5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability. 6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)       Please, contact your tax professional to find out more details. Making Your Offer
Making Your Offer Structuring the offer Once a property has been selected, the offer a First Time Home Buyer makes on a home will be in the form of a Real Estate contract. This contract specifies the terms and conditions under which the Buyer is offering to purchase the property.  The Denver Realty Company will conduct a Comparative Market Analysis of the value of the property to ensure it meets the sellerâ™s asking price.  How to Make a Strong Offer Complete Contract The listing agent and the seller will take the contract seriously if the application is completed with no omissions or errors.  Get a Lender Letter The Contract should always be accompanied with a lender letter. The Buyer receives this letter after getting pre-qualified through the lender. The Seller will not take the home off the market unless the Buyer can obtain a loan.  Earnest Money Submitting the earnest money with the purchase contract will ensure your offer appears stronger to the seller. The seller is more likely to take an offer with earnest money presented over an offer with no earnest money.        A professional, clean, complete contract stands out above the rest.  Negotiating Your Offer Negotiating a home sale is a little like playing chess. Both sides are advised to play cautiously, revealing to the other players only what is necessary. Sellers will not know how much buyers can afford to increase their bid on the home. Buyers will not know exactly how low sellers are willing to drop the purchase price.  The Denver Realty Company will keep these goals in mind when negotiating your offer and will:
Closing Costs are customary costs above and beyond the sale price of the property. These are Buyer expenses and must be paid to cover the transfer of ownership at closing; these costs vary and include but are not limited to: Title Fees, Appraisal, Property Insurance, Survey, HOA Fees, Loan Origination, Property Taxes, etc. These costs are typically detailed to the borrower on a form after the borrower submits a loan application. Closing Costs are typically 2% to 6% of the purchase price. For example, if the Buyer is purchasing a $200,000 property, the closing cost can range from $4,000-$12,000. Closing Cost can be included in the purchase price.  The Denver Realty Company will always negotiate to have the seller cover all or a portion of these costs. While this practice is not uncommon in todayâ™s buyerâ™s market, please keep in mind that due to the number of distressed properties on the market certain sellers will be unable to cover these costs.  View Having the Seller Pay All or Part of Your Closing Costs in our money saving tip section.  Countering Your Offer Everything is negotiable in a real estate transaction. However, one of the most effective means of reaching an agreement is to rely on consistent standards or norms whenever possible.  There are âœnormalâ costs that the Buyer and Seller incur in the transaction. For example it is common practice for the seller to pay for title fees and for the buyer to pay the appraisal cost. Using accepted standards prevents Buyers and Sellers from disagreeing or negotiating every cost. Working within the accepted "norms" helps to legitimize offers and to focus the negotiation on the main issues.  The Seller can counter the asking price, dates, earnest money amount, etc. If the Buyer is unsatisfied with the counter, a new offer can be presented or the original offer can be terminated.  Accepting Your Offer Once the Buyer and Seller agree on the terms and the offer is accepted, the Buyer moves to the last stage of the transactionâ¦Closing.  Managing Your Transaction
Managing Your Transaction Once you have found the perfect home and your offer is accepted, the next step is to manage the âœunder contractâ transaction until closing.  There are a number of important tasks that must be satisfied on specific dates as set forth in the contract. These tasks must be completed in a timely manner in order to complete the transaction by the closing date. Earnest Money This is money placed into escrow by a potential Buyer to demonstrate he or she is serious about purchasing the home. Earnest Money becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the Buyer terminates the contract without cause or fails to satisfy certain requirements before the deadline.  The Earnest money deadline usually falls with-in the first three days after the contract is signed. The money is given to either the real estate company (Listing Agency) or a title company. The amount varies depending on the property.  The Denver Realty Company will always negotiate an appropriate earnest money amount. If the Buyer is unsatisfied with the results of any of the items below, and the buyer adhered to the deadline dates for each of the items, the earnest money is returned.  Inspection It is important that a home inspection is conducted on the property. Purchasing a home is a big investment. An inspection could provide information on expensive repairs down the road. It benefits the Buyer and may benefit the seller as well if the seller is unaware of certain conditions on the property. An inspector provides an examination of the structure and mechanical systems to determine a home's safety; and will inform the potential homebuyer of any needed repairs. A home inspection can help the seller and buyer make critical decisions that will affect the outcome of the transaction. The inspection is usually scheduled in the first week. If an inspection uncovers any issues that need to be resolved, the buyer has several options:Â
Some Bank Owned / Foreclosed properties have a buy âœas-isâ policy. Typically, the seller (i.e. Bank) will not negotiate on any seller fixes.  The Inspection is an out of pocket expense ranging from $300 to $400 dollars depending on the size of the property. The Denver Realty Company will find an inspector if the buyer does not wish to find one on their own.  The Denver Realty Company provides a Consumer Home Inspection Kit to its clients to aid in the home inspection process. Title The title company will draft a title report by checking public records to ensure the seller is the recognized owner of the property and that no unsettled liens or other claims against the property exist on record.  If the report shows title to the property is not clear of undisclosed liens, the buyer may terminate the contract. An example of an unclear title report is one that discloses mechanical or tax liens on the property.  Title insurance protects the lender from claims arising out of ownership disputes, easements, and other title issues. This coverage is also available to homebuyers.  The Denver Realty Company will have an in-house experienced real estate attorney explain title work and the implications of title policies at no additional cost, upon your request.  Title work is usually requested with-in two weeks of being âœin-contractâ. Appraisal An appraisal is a document that provides an estimate of a property's fair market value; an appraisal is generally required by a lender prior to loan approval to ensure that the mortgage loan amount does not exceed the value of the property. The appraisal cost is usually not an out of pocket expense. The expense is often included in closing costs.  If the value of the property does not meet the contract price, the Buyer can ask the seller to drop the purchase price to meet the appraisal amount. The contract will then be amended. The Buyer can also terminate the contract.  Loan Commitment A Loan Commitment is a written document that indicates a lender has agreed to loan a precise amount of money at a particular rate of interest for a definite period of time to a specific borrower. It may contain sets of conditions and a date by which the loan must close. If the terms of the New Loan are not satisfactory to the Buyer, (interest rate, loans conditions, terms, etc.) the buyer must provide the seller a written notice to terminate the contract no later than the Loan Conditions Deadline.  Property Insurance The Buyer will need an insurance policy that provides coverage against damage or loss to the property and its contents. The coverage must contain protection against claims of negligence or inappropriate actions that result in someone's injury or damage to property. Property insurance is included in closing costs. However, if the allowable property insurance terms are not satisfactory to the buyer, the contract can be terminated.  The Denver Realty Company will coordinate with an insurance company to provide adequate coverage if the buyer does not wish to find their own.  The Denver Realty Company partners with a professional transaction company to help facilitate your closing. Our Transaction Coordinator will:Â
Closing Your Home
Closing Your New Home Final walk-through It is during the closing that the property is officially transferred to the buyer and all remaining documents are signed.  In most instances, the buyerâ™s real estate agent, the loan officer, the Seller, the Listing Agent, and any other real estate agents or attorneys involved, will meet at the closing agentâ™s office.  Several things take place at this meeting, which officially closes both your mortgage loan and the sale of your new house: A general understanding of what takes place in the transaction will help prepare you for your closing.  Documents are Examined and Signed  Remaining Fees and/or Down Payment are Paid  Title, Loan, Documents  HUD-1 (Settlement Sheet) Truth-in-Lending Statement  The Mortgage Note  The Mortgage  Remember that while you have possession of the property, the lender shares ownership with you until your loan has been fully repaid. The lender can demand full payment of the balance of the loan (i.e. accelerate the loan) or foreclose on the property upon default.  Affidavits  The Deed  Owning Your Home
Owning Your Home Now that you own your home, there are several incentives that come with home ownership. Pride of Ownership You are no longer a renter. This means you can remodel the house to suit your needs, turn up the volume on your MP3 player, and decorate the inside of your home anyway you like. Home ownership gives you and your family a sense of stability and security. Buying a home is an investment in your future. Mortgage Interest Deductions When you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually reduce state taxes. This will save you a lot of money each year. Property Tax Deductions You can also deduct the property taxes you pay as a homeowner. IRS Publication 530 contains Tax Information for First Time Home Buyers.  Capital Gains Tax A taxpayer must have owned the home and used it as the primary residence for two out of five years preceding the sale. The periods of use and ownership do not have to be concurrent. If a taxpayer qualifies, he or she can exclude up to $250,000 in capital gains from income. A married couple filing jointly can exclude up to $500,000 in gains. For example, if a First Time Home Buyer lived in their home for at least 2 years and made $100,000 in equity when they sold, there would be no tax penalty on the profit.  Appreciation If the transaction is structured properly, the value of your home should continue to go up. In some markets, the value will either remain stable or even go down. The Denver Realty Company will help you find the right home for the right value. However, being a First Time Home Buyer in todayâ™s market is almost certain to give you equity in the future. Home prices are at their lowest level in years. There may be no better time to purchase a property!  Using a Professional Agent Â
Using a Professional Agent The Denver Realty Company - Your Buyer Experts Real estate agents have access to services that will help you find the right home sooner than you could on your own. An example of such a tool is the Multiple Listing Service, MLS. Using MLS, your agent can efficiently search a large database of properties to find the homes that match your needs.  A quality real estate agent will not only save you time but will save you money by protecting your interests. You could shop for a home by checking newspaper ads, visiting open houses, driving through neighborhoods looking at for sale signs and visiting new home developments.  But youâ™d be at a serious disadvantage because listing agents work for the seller and have agreed to protect the sellerâ™s interests.  Even though they may appear to take a neutral stance, their first priority lies with the seller, not the buyer. For example, itâ™s possible for two different buyers to purchase identical houses in a new development and pay two different prices.  The Denver Realty Company will represent your interests by:
.  Exclusive Agreements When you enter into an exclusive buyer agency agreement with The Denver Realty Company, you hire a professional who will represent your best interests. A quality agent will give you all the information you need to buy a home.  This includes disclosing information about the property and negotiating the best price and terms. Additionally, it doesnâ™t cost you anything to work with an agent when buying a home because the real estate commission is paid out of the sellerâ™s closing costs.  A quality Real Estate Agent is one who represents and protects your interests during every step of the First Time Home Buying process.  âœI welcome the opportunity to work with youâ. â“ Michael Mancha, Owner |