There’s no denying that today’s younger adults are waiting longer to buy a house than previous generations. But home buying is still a dream for many Americans and, when done right, it’s one of the best investments you can make to secure your future.
According to a 2019 study by Lending Tree, Denver still has the most competitive buyers’ market in the country. But it’s because of this fact (not in spite of), that purchasing a home in the Mile High City or along the Front Range can be a wise decision. Purchasing your first piece of property isn’t a decision to be taken lightly, though, which is why we talked to local realtors to develop this beginner's guide to home buying in Denver.
Find a Trusted Real Estate Agent
If it’s your first time buying a home, you likely don’t want to be on your own during the process. A professional real estate agent will provide the expertise and guidance you need to navigate the real estate market successfully. The best resource to find a trusted realtor is to get a referral from a family member or friend—don’t just pick a realtor at random. You will want to discuss your wants and needs (budget, location, timeline, etc.) with your potential agent to make sure it will be a good fit. You may also consider finding an agent who specializes in working with first-time home buyers.
In order to be considered a serious buyer in the Denver real estate market, your financing needs to be pre-approved by a lender before shopping around for homes. Whether they’re private or referred through a bank or the Federal Housing Administration (FHA), lenders will use your debt-to-income ratio to determine how big of a mortgage loan you can afford. In addition to the monthly mortgage payment, you also need to consider property taxes, HOA fees, homeowner’s insurance, and putting aside money for unexpected repairs. To cover these added costs, it’s recommended to budget 6-to-8 percent of your mortgage, which is about $150 per $2,000 monthly payment.
Then there’s mortgage insurance, which is required on all conventional loans (usually obtained through a bank) where the down payment is less than 20 percent of the property’s overall cost. An FHA loan, which usually caters to first-time home buyers, can ask for as low as 3 percent down. Loans through the FHA also require homeowner’s insurance, but unlike a conventional loan, which eliminates the mortgage insurance after you’ve built a certain percentage of equity in the house, an FHA loan typically requires mortgage insurance for the life of the loan if you have less than a 10 percent down payment at the time of purchase.
Certain professionals might be eligible for the Homes for Heroes program, which caters to active military members, firefighters, and teachers by connecting them with an affiliate real estate agent. The program can reimburse you up to $700 for every $100,000 spent on the house.
Do Your Due Diligence
Touring your first potential home can be overwhelming. Rather than using a scrutinizing eye, you may find yourself distracted by imagining how you’d decorate each room. This is normal, but make sure you also remove the rose-colored glasses and check the house’s big-ticket items. The water heater, furnace, roof, and windows, among other features, are all highly expensive to fix or replace, and you don’t want to be replacing more than one or two of those items soon after moving in. A good agent will point out these things to you during your first showing.
After your offer on a home has been accepted by the seller, you’ll need a professional inspection. Your agent can refer you to a reliable inspector if you don’t have one in mind already. Though they may make sure a property meets government regulations and is generally safe and sound, inspectors will also examine all the items mentioned above, along with the house’s HVAC, plumbing and electrical systems, and structural features such as the foundation, attic, and basement.
As the buyer, you can sometimes leverage wear-and-tear and anticipated replacements to negotiate a lower purchase price, or upgrades that you’d like done before taking ownership. You can also consider getting a home warranty (the cost of which can sometimes be negotiated onto the seller during closing) to ensure that you’re not forced to replace any big items soon after moving in.
Think Like an Investor
If an area’s buyer’s market is at its peak, there will be slower appreciation (think: Wash Park or the Sloan’s Lake area). But up-and-coming or less central neighborhoods such as Val Verde, Barnum, or parts of Park Hill—along with certain suburbs—will have a larger inventory of affordable homes that likely, over five or more years, will have a much higher appreciation than areas that have already peaked.
While we can’t predict the future, most real estate agents we’ve talked with think it is unlikely that another 2008-level downturn will happen. Of all the housing markets in the country, the Front Range is one of the most foolproof areas, with a low chance of steep depreciation over the next few decades. If you’re in a position to leverage your money to invest in property and take the plunge into home ownership, you should strongly consider it—just make sure you do it wisely.