Wednesday, December 10, 2014

Buying That First Home May Not Be As Impossible As You Might Believe

[Published Dec. 11, 2014, in the Jeffco editions of the Denver Post's YourHub section. An abbreviated version also appeared in five Jefferson County weekly newspapers.]

This week’s column is inspired by a blog post I read last week.  It asserted that the group of young adults known as millennials will become the largest home buying age group (42%) by the end of 2015.

That comes as a surprise, given how that group is known for preferring renting over buying. They don’t even want to buy cars, becoming the largest source of customers for Car2Go and similar car share services.

For myself, I can’t remember anyone under 35 walking into our Golden office who wasn’t looking for a rental.

If millennials do in fact start buying homes, they’ll need to deal with several misconceptions that they share with other first-time home buyers. 

Myth #1: Lending requirements are too tight.  In fact, lending guidelines have loosened significantly in the past few years since the over-reaction caused by the housing crash of 2008-2010. You owe it to yourself to speak with a reputable loan officer to find out how much of a loan you qualify for. Do not go online to find a lender. Ask a Realtor like one of us at Golden Real Estate to recommend a loan officer we know and trust. We don’t have any captive or “affiliated” lenders.  If we recommend a loan officer, it’s not because our company makes money on the loan, it’s because he or she has served our past clients well.

Myth #2: You need to have a 20% down payment.  Even in the depths of the recent recession, this was never true.  The FHA loan still requires only a 3.5% down payment, and there are conventional loans available requiring 5% or less down without the burden of FHA’s mortgage insurance. If you get your loan through the Colorado Housing Finance Authority, you can buy a home with as little as $1,000 out of pocket!  If you’re an honorably discharged veteran, you may qualify for a VA loan which, as always, offers 100% financing.  

And don’t forget the Mortgage Credit Certificate program, which grants first-time home buyers the ability to declare 20% of the loan interest as a tax credit instead of a tax deduction for the life of the mortgage loan. Think of it as a rebate of 20% of your mortgage interest every year. This unbelievably generous program has been in effect throughout the recession and continues in effect today.  Not every lender or loan officer is authorized to enroll you in this program, so be sure to ask about it.  In addition to first-time home buyers, this program is available to anyone who buys in a designated distressed area, as well as to veterans.  We know loan officers certified for this program, so you could ask us.

Myth #3: You can get a better deal by buying without a buyer’s agent.  This belief comes from a real misunderstanding of the home buying process. As a buyer, you need an agent on your side, not just to negotiate the original purchase contract, but to shepherd you through the closing process.  You need an agent to coach you on valuation, on inspection issues (including selection of a trusted inspector), and countless other matters that will arise before a closing can happen. The listing agent, at best, can only treat you fairly. He will not be on your side in a transaction. You need a an experienced buyer’s agent.


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