Buying an Affordable Home in Colorado Springs, Colorado
The Realtors® at Wolff Real Estate Group would say that that the more you tell them, the better they can represent you and your interests. In the state of Colorado, real estate agents are required to disclose their duties to you as your fiduciary. As your agent, we are obligated to put your interests ahead of our own, or face severe professional consequence. Although we are not financial or tax professionals, we work hand-in-hand with many related industries, including your mortgage lender. The more you can tell us about your personal background and future goals, the easier we can help you accomplish them.
What are the annual costs of home-ownership?
In Colorado Springs, experts agree that the average yearly expenses of home maintenance and repair is between 1% and 3% of the purchase price. Typical maintenance items include painting, attention to plumbing, replacing worn appliances, gutter and patio repair, window sealing and replacement, and et cetera. Purchasing a home warranty may cover some of the costs associated with replacing or repairing broken appliances. Newer homes typically cost less to maintain than older homes, depending on how well an older home has been maintained over the years.
“Debt-to-Income Ratio”: What is it, and how does it affect your purchasing power?
Most first-time home owners in Colorado will go through a bank they trust to finance the purchase of their home. Mortgage lenders use a standard ratio, known as “Debt-to-Income”, to determine a borrower’s ability to assume the monthly costs of home ownership. Depending on the type of loan (FHA, VA, conventional, etc.), this ratio sets a limit on a borrower’s mortgage payment, up to ~28%; when combined with other debts, total monthly debts are limited to ~36% of a borrower’s total monthly income. Typically, a larger down payment will have the greatest effect on lowering the monthly costs of home ownership. Your mortgage lender should only offer you a loan that you can afford to pay back!
Who can help me figure out what I can afford?
Before searching the newest homes for sale in Colorado Springs, you should speak with a Certified Financial Planner™ to determine what you can afford to pay when you begin to look for your next home. Typically, favorable lending standards dictate a mortgage payment that’s less than 28% of a borrower’s monthly income. Lenders also prefer a borrower’s total debt burden, mortgage included, to amount to less than 36% of their monthly income. Those considering applying for a home loan should discuss their options with a small selection of lending institutions, especially those with which the borrower already has a strong relationship. Factors that improve your home affordability include:
- Gross monthly income
- Cash necessary for a down payment (typically 20%+) and closing costs
- Amount of outstanding debts
- Credit history
- Mortgage type and repayment terms
- Current interest rate environment
When is the "Best Time" to Buy a House in Colorado's Competitive Market?
In many markets, home prices are comparatively lower in the winter months; the supply of homes is also lower in these months. However, Colorado's market is not traditional. In our high-demand market, low supply can increase competition among buyers, and keep prices stable. The concepts of home ownership and micro- and macro- economic performance are closely related, and the “best time” to buy a home is impossible to predict. Sometimes, waiting for home prices to drop may result in a higher price being paid if the market dynamics encourage price growth during that time.
Generally, the prospect of home ownership is worth consideration when:
- You have cash funds for a minimum 20% down payment, and can easily afford the monthly payments and annual maintenance expenses (see: Debt-to-Income)
- The interest rate environment is favorable (resulting in lower finance costs)
That being said, those considering home-ownership should view it as a long-term proposition. The costs of buying a home include lender fees and closing costs that can amount to more than 10% of the sales price -- not including interest-paid over the life of the loan, annual maintenance expenses, property taxes, and the cost of hazard insurance.
What is Fannie Mae's "Low-Down" program?
Fannie Mae is expanding the availability of low-down-payment loans in an effort to help more people attain the American Dream. Two of the most common obstacles to home ownership are low savings and a modest income. The Home Ready program provides 97 percent financing on a fixed-rate mortgage with either a 10-, 15-, 20- or 30-year loan term.
Click here to learn more about Fannie Mae's services for home buyers.
How long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. The circumstances surrounding the bankruptcy can also influence a lender's decision. You should consult a Certified Financial Planner™, click here for a CFP near you.
How do you determine the value of a troubled property?
Buyers considering a foreclosure property, or REO, should obtain as much information as possible from the lender, including the range of bids expected. It is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition. It also is possible to do your own cost comparison through researching comparable properties recorded at the El Paso County Clerk and Record or the El Paso County Assessor.
Where do I find information on the Pikes Peak Region’s housing market?