Being a Colorado Springs first time home buyer can feel scary and confusing. It’s a giant step to take, but the investment in real estate is one of the best steps you can take for your future. Especially here in Colorado Springs! People are moving here from all over the United States to have mountain views.
To make things seem less scary I’ve put together a short and sweet list of things to think about. In my opinion there are a few things that need to be addressed upfront. Once this list of items is completed you will be well on your way to buying your first home in Colorado Springs!
1. Start saving for a down payment
One of the biggest myths is you need a 20% down payment to purchase a home. This is a MYTH. Depending on your loan type (VA, FHA, or Conventional) will dictate your down payment amount. The down payment amount can vary between 0% to 5%. We see on average that first time home buyers are putting down 3% of the purchase price. For example if a home is $275,000, you will need $8,250 for the down payment.
2. Determine how much home you can afford
The amount you can afford is based off your current income and monthly debts. To figure out your debt to income ratio, simply take your total debt and divide by your income. For example if your debt is $1,000 per month and your monthly income is $3,000, your “DTI” is $1,000/$3,000=33%. Your debt to income ratio can not be higher than 43%. Some Mortgage Lender can go higher, and that really depends on your loan program.
3. Check your credit
Do you know your credit score? If not the lender will soft pull your credit. Most lenders are looking for a score above 620. But some lenders will work with borrowers with lower scores, sometimes down to 550. But again this all depends on the loan program you picked.
4. Budget for closing cost
I get this question all the time, what are closing costs? Simply put, closing costs are costs associated with borrowing money. These are fees charged by the mortgage lender. I’m not going to get into what each fee is, but more of an estimated cost for all closing costs. As a disclosure each lender will charge different amounts, but on average these costs are about 2% of the loan amount. So if your loan amount is $200,000, your should be prepared to spend up to $4,000 to the lender to close the loan. Now again, this is going to depend on the lender, some charge less and some charge more.
5. Set aside money to move-in
The simple act of moving your stuff to the new house from your old house does cost money. Boxes, tape, bubble wrap, moving truck, moving company, etc. I would advise you to do your due diligence on how much coin this could cost you.
6. Get with a strong Real Estate Professional
Here at the Venterra Real Estate we pride ourselves on doing the best job for each one of our transactions. Our number one goal is to put a plan together tailored to each first time home buyer here in Colorado Springs. This plan includes everything mentioned 1 thru 5, but also the home search too!
Once the plan is in place and you have your pre-approval from the mortgage lender we can start previewing homes and find the one you love!