To help you plan, here’s the typical buying process you’ll undergo when buying real estate in Colorado.
1. Save up for a down payment.
The first step in the real estate buying process is saving up for the down payment. As we all know, the down payment, which is usually paid at closing, takes up the bulk of your initial expenses when buying real estate.
Colorado mortgage lenders typically require a 20% contribution from you to make a down payment. Government-backed loans such as FHA and VA let you avail of the loan for as low as 3.5% and 0% of the property’s price. Regular loans also allow down payments for as low as 3-5%, but the minimum amount varies with each lender.
Another initial expense to consider is mortgage insurance, which costs around 1% of the mortgage amount annually, depending on your credit score and down payment. It is usually added to your mortgage payment and paid monthly.
2. Find a real estate agent.
When buying a home, your real estate broker will make the otherwise complicated process easier for you. They will help find properties to suit your needs, show the properties to you, negotiate contracts, and direct you through the closing. Real estate agents can also help you find property inspectors, title companies, and other service providers you will need throughout the process.
Take your time in choosing a real estate agent in Colorado. According to Colorado’s Department of Regulatory Agencies Real Estate Division, it’s best to look into and interview as many local agents as possible.
When choosing a real estate broker you should also consider the following:
- The number of recently closed transactions
- Their years of experience
- Their overall review scores
- Their experience with your price range
- Their reviews
You may also consider finding a good real estate consultant to help you.
3. Get pre-approved for a mortgage.
A pre-approval letter from your lender offers to lend you up to a specified amount to purchase a property. It tells sellers that you are serious and capable financially of completing the transaction. Moreover, most Colorado sellers usually require pre-approval before showing their properties.
Although it’s not necessary to opt for a lender at this point, it would help if you compared interest rates and pre-approval amounts from various lenders to get the best terms for your home purchase.
4. Look for the best location.
The home value in Colorado is currently at $577,000 on average. Don’t worry if this price is incompatible with your budget; home prices vary significantly from different locations. It’s best to look at past home value trends, which will help you estimate how much the home’s value may increase over the coming decades.
5. Go house hunting.
Now comes the fun part: house hunting. House hunting allows you to view many homes and find what you truly want in a house. To make things easier, list all the needs and wants in your property. Prioritize the essential items to help separate your needs from your wants. Your real estate agent can also help determine if your desired things are achievable within your price range and your preferred locations.
Timing is another variable that should be considered when purchasing real estate. Property availability tends to fluctuate with the most houses being available in June. June gives you more options and better chances of finding your dream home.
6. Make a pitch.
Once you find the perfect home, it’s time to make an offer. Your real estate agent should be able to help you craft a convincing offer so that the homeowner will sell.
Most Colorado homes stay on the market for up to 61 days. However, every market experiences sporadic changes; homes tend to be snatched up quicker in certain months. Most homes sell fastest in June, when a property stays on the market for only 43 days on average. It’s best to make more than one offer on homes you like if you plan to go house hunting during busy months.
Meanwhile, January offers more time for house hunters as homes are typically on the market 28 days longer than in other months.
7. Get the property inspected and appraised.
The last step in buying real estate in Colorado is to have your property appraised and inspected. It will help you assess your home’s value and condition before you purchase it. It also allows you to renegotiate the terms with the seller if anything unexpected happens.
A licensed home inspector ensures that your home is in top shape before you buy it. Some of the things the inspector should check are your home’s foundations, HVAC system, plumbing, and electric system. They should also check your home’s roof and septic tank. It won’t hurt to have additional inspections like a mold inspection and radon testing to ensure your property doesn’t have hidden issues.
Appraisals help determine your property’s value. The lender will also require them if you’re using a mortgage to purchase your new home.
8. Close on your dream home.
Closing is easier than you think. To complete the property transfer, you’ll need to set up a meeting with the title company to present you with documents you need to review and sign. Once done, you’ll pay the closing costs and become a homeowner.
However, ensure you have read and understood the following documents before signing them:
- Final loan application
- Mortgage promissory notes
- The deed
You’ll need to pay the closing costs once you finish the paperwork. These usually include:
- Lender fees
- Title and escrow charges
- Prepaid expenses
- Additional expenses
The title company can collect the entire amount you owe and distribute it for you.
Buying real estate in Colorado is easier than you think. First, you save up for a down payment, then find a good real estate agent in Colorado. Next, get pre-approved for a mortgage and find a location. Once pre-approved, you can go house hunting and make an offer for your dream home. Remember to get your future home inspected and appraised before closing.
Buy your dream home today!
Are you looking for a home loan so you can buy land in Colorado? If so, look no further than Dillon home loans. We are one of Colorado’s top lenders with comprehensive knowledge of the area and competitive rates. We’ll help you finance and find the best location for your dream home. Contact us today.