Questions

If you are thinking about purchasing your first home, spend some time answering these questions:

1.  How long do you plan to live in the home?

If you purchase a home and get a job transfer or decide to move after only a short time, you may end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs for buying and selling.

The length of time that it will take to cover those costs depends on various economic factors in the Denver area.  On average, you should plan to stay in your home at least 3-4 years to realize enough appreciation to cover your costs.

2.  How long will the home meet your needs?

What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you’ll need to ensure that the home has the amenities that you’ll need for the future. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space.  Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you’ll need will help you find a home that will satisfy you for years to come.

3.  How strong is your financial health?

Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good?  Reputable lenders will be skeptical if your credit history is not good. Generally, with a couple of blemishes on a credit report, you will still be considered a good credit risk, and qualify for the lowest interest rates. If you have more than a couple of late payments, you will probably have to pay a higher interest rate and fees.  Jim or Bonnie Cox can refer you to well-respected lenders in the Denver area.  Visit our Calculator to determine what you can afford.

Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it’s within your comfort zone.

4.  Where will the money come from?

Typically you will need some money for a down payment and closing costs.  You should check with your lender to determine what type of loan you can get, and how much cash you will need for the purchase.

5.  Have You Considered the ongoing costs of home ownership?

Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium, townhouse, or some planned communities, a monthly homeowner’s association fee will be assessed. Your lender will include these additional fees in the total mortage you can obtain.

If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.  Team Cox has years of experience in the Denver real estate market, and can answer any questions you may have about How Much You Can Afford to Buy.

Bonnie and Jim Cox
The Cox Team
Office: 303-400-6060
E-Mail: Info@TeamCox.com