First time home buyer tips
Vail CO, Colorado
EAGLE COUNTY, Colorado ” No one in the real estate business likes saying no. But “no” is becoming more common in the vocabulary of brokers and lenders, especially when it comes to first-time home buyers.
Bob Finlay is the broker for the Red Draw condominiums in Edwards. The former apartments for the Saint Clare parish in Edwards were converted to for-sale units earlier this year. The two-bedroom, two-bath units are priced just under $270,000, what passes for entry-level housing in the Vail Valley these days.
Since May, Finlay has closed on two of the units, with eight more for sale. The slow sales aren’t for lack of interest, but Finlay, or, more precisely, a lender, has had to say no to nine people who wanted to buy a place at Red Draw.
Even a couple of years ago, Red Draw would probably have been sold out by now. The real estate market was roaring, and credit was a lot easier to get.
“It’s not as easy as it used to be,” Finlay said. “Today it’s going to be hard for a first-time buyer without pretty good credit to buy a place.”
Brad Seaton, a broker for Chase Mortgage, said people can get one free credit report per year from the three major credit-reporting companies. Anyone even thinking about buying a home should get a credit report first, then get to work repairing any mistakes or problems.
Difficult, not impossible
While it’s harder to get a loan these days, Seaton said his experience is that a lot of people who think they can’t qualify for a mortgage actually can, or they could with a little work.
The biggest challenge is coming up with a down payment. A couple of years ago, lenders were making loans for 100 percent of a home’s value. People could get those loans without much documentation.
Today, it’s virtually impossible to find a loan for 100 percent of the purchase price. Most mortgages require a 20 percent down payment. On a Red Draw unit, that comes to more than $53,000. Not many first-time home buyers have access to that kind of cash.
The good news, though, is that the Farm Home Administration, or FHA, will still make a loan for 97 percent of a home’s price. Eagle County also has a down payment assistance program available for first-time buyers.
Eagle County Housing Director Alex Potente said that program has loaned more than $500,000 to first-time buyers in just the last couple of months. Applicants have to meet income requirements, and also have to have full-time work in the county. And they need to remember that the county assistance is a loan, not a gift.
The loan is repaid when the home is sold, and the interest is based on how much a home has appreciated over the years.
To make the math easy, say a buyer bought a $100,000 home with a $10,000 county down payment loan. If that home’s value is $200,000 when it’s re-sold, the original buyer owes the county $20,000.
Back to school
Anyone who wants to participate in the county’s down payment program is also required to take a four-hour class for first-time home buyers.
Leona Perkins of the county housing office said she’ll usually bring in a mortgage broker and a real estate agent to go over the pile of information that goes along with buying homes. The classes are free, as is the one-on-one credit counseling Perkins can provide.
Perkins said between 20 and 50 people per month attend the classes. Some are ready to buy their first homes. Others aren’t. Others didn’t sign up in time to do the work they need to do to get their credit scores where they need to be.
Perkins advice to potential buyers is to get in early. Credit repair can take time. It can also take time to get tax returns in the condition they need to be in.
That’s especially important for people who work in restaurants, Seaton said.
“If your job’s based on tips, you can’t use that income unless you report it on your income taxes,” Seaton said.
Income and credit are just a couple of hurdles first-time buyers face. The main rookie mistake home buyers make is taking on other debt before buying a home. Everyone interviewed for this story put it simply: Don’t buy a car, or a living room set, or a big TV, in the year or so before buying a first home.
A good time to buy?
For those who do qualify, this is a pretty good time to buy a home, Perkins said.
“It’s definitely a buyer’s market right now,” she said. “There’s a lot on the market, and the market is flat.”
And, while it seems there’s never a good time to get into the market, Finlay said there’s simply no time like the present.
Andrew Forstl, the lead broker for the Stratton Flats development in Gypsum, said he’s had to say no to several potential buyers. But he added, he’s also been able to steer people into homes they can qualify for in his development. People who might not qualify for a single family home at Stratton Flats can probably qualify for a townhome or condo.
And, across the valley, there are a variety of plans and programs for units.
The important thing, Finlay said, is to buy.
“You have to get in where you can and build some equity,” Finlay said. “Then you can buy something else in a few years.”
Forstl said buying a first home is tough, but first-time buyers won’t know what they can qualify for until they start the process.
“The first step is to get them to come in,” Forstl said. “Then we can get people credit coaching if they need it. They can take the homebuyer classes.
“It’s a scary process,” he added. “But once you buy, you’re on your way.”
Business Editor Scott N. Miller can be reached at 748-2930, or email@example.com.
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