Ok, have I lost you already?

Full disclosure: as a home buyer myself the lending side of real estate has always bored me to tears. In the past, I would just let Jeremy handle that part, since we all know my strengths lie in shopping for the home (smile). On the flip side, when assisting my clients meet their real estate goals, my antennae are up when it comes to learning about new loan programs and educating them about the options. By and large, the folks I know who are ready to make the leap to buy their first or next home fall into one of two groups.

Group 1: Folks who think they are far off from being able to buy a home. They want to remove debt, improve their credit score, look more attractive as a buyer. Many of the folks in this category are actually closer than they think to being able to compete in Denver’s market- consulting a skilled lender could help identify purchasing weaknesses, if any.

Group 2: Those who think since they don’t have 20% down they can’t be in the running for a property. The fact is one can put less than 20% down, sometimes 3% or less with down payment assistance. Even though you’ll end up paying Mortgage Insurance (MI) included in your monthly payments, it is extremely affordable right now compared to previous years. If you know you’re far off from being able to put the 20% down, then you might think about buying now with low MI rates. Since your MI obligation is roughly three years, you may be able to get out of it once rates go up again. To avoid MI altogether, think about lobbying a loved one for a gift for the down payment vs. down payment assistance, which would lower monthly payments. After it’s all said and done you can invite them over for dinner at your new home to show appreciation- or perhaps offer to let them awhile stay for a visit!

Some other considerations:

Interest Rates- have come down at least a quarter % in the last two weeks, back down to 2012 levels (3.5% or lower) but they will most definitely go up from here. Even if you’re not in the market to buy, consider refinancing if you haven’t done so already. I was able to help a client of mine from last year refinance and remove his MI- cha ching! Now he can invest that saved money into home improvement projects that build equity and value.

Shopping- If you do decide to go shopping with a realtor, make sure to have a pre-approval letter in hand, ready to attach to an offer. Some listing agents insist on it (and they should). There is a difference between “Pre-Qualified” and “Pre-Approved.” A buyer is pre-qualified after they have completed a loan application and a preliminary automated underwriting process. A buyer is pre-approved after their application has completed underwriting with all required documents- things like W2’s, pay stubs, etc. All the buyer has to do now is wait for the right property and make an offer. If your lender can call the listing agent to advocate for you during a bidding war, they are much more equipped to do so if you’ve been through the pre-approval process.

Timeline- Even though there have been new disclosure regulations passed down by the Feds, closing timelines can be as short as 30-35 days, depending upon the circumstances, on both the buyer and seller end.

Rentals- What renters will pay per month is predictably on the rise, it’s just completely unpredictable to tell when your landlord might join the crowd. Too many times I’ve heard the story of an owner who is going to increase the rent- they know they can get away with charging a ton right now. Why pay someone else’s mortgage?

Jumbo Loans: The limit for jumbo loans (large loans for higher priced purchases) was $417K. There is now a conventional jumbo loan of up to $458,850. Let’s say you want to buy a home at $500K, you now will have to put less down to get to that loan amount of $458K as opposed to $417K.

Think positive in this Denver market!

Similar to hiring a trainer to put together workouts for you (or to simply talk to you while you’re working out to make the time go faster) or a financial advisor to plan your next investment, talk to your lender. If there really is no way to get into a first home or “right size” for your next home, your lender can at least provide you with a game plan to do so in the future.