No one can avoid the news we’ve been hearing for quite a long time now: home foreclosures are at record highs, putting a lot of homes on the market at very reasonable prices. So is this weak real estate market a good time for young professionals to get into their first home or begin investing in rental properties? I asked Denver-area Realtor® Elizabeth San Miguel what she thought about twenty-somethings getting into real estate. Here are her insights and advice:
Q: Everyone knows that homes are being foreclosed on in record numbers all around the country, and the Denver area is no exception. Is this kind of market a good opportunity for a twenty-something first-time buyer, or should they wait on the sidelines a bit longer?
A: This is a great time for first-time homebuyers! There are a number of first-time homebuyer programs available that help with the down payment, plus prices are low and interest rates are great. In addition, if you don’t have 20% to put down, there are even some banks that are offering 0% down with no mortgage insurance on a 30-year fixed loan, which is another way to save on the monthly payment.rnAdvertisement
Q: Are there any special incentive programs still available for young, first-time buyers?
A: Yes, CHFA is still around and many of the counties offer assistance such as The Nehemiah Program, Neighborhood Gold, etc, until they run out of money. These programs change continually so talking to a lender is the best thing to do to find out what’s currently available. Also, for lending purposes, ‘first-time homebuyer’ usually refers to anyone who has not owned a home in the last three years.
Q: I assume that most young, first-time buyers will be exploring the low end of the market. How has the Denver market been performing in the lower price brackets?
A: In the Denver metro market, there is a lot of competition for homes priced under $200K. Homes that are in good shape in that price range are selling quickly—both first-time homebuyers and investors are competing for these homes. In fact, because of that, Denver was recently recognized for being #1 in the nation for shortest time on market. At this time of year, we normally see houses staying on the market longer, but inventory (the number of houses available for sale) is down by about half from last year, so I don’t think we’ll see that happening.
My advice to buyers is: if you find something you like, make an offer right away and make it a decent one. Having the same number of buyers competing for half as many properties makes for an interesting market. Interest rates seem to be bouncing around the low 4’s and high 3’s, so that’s record-breaking. There really is no better time to buy a first home, a bigger home, or even start investing in homes to use as rentals for sustained income and wealth building
Q: How does a young professional determine what they can comfortably afford as far as a purchase price and monthly payments?
A: The best thing to do is to talk to a lender and get pre-approved (not just pre-qualified). They will look at your financial obligations, income, and credit to determine the best price range for you. I always recommend staying below the top of that range in order to have some cushion built in. As a homeowner you’ll be paying for the things the landlord used to take care of such at appliance repair and replacement, paint, exterior upkeep, etc. Those things need to be taken care of when necessary and yard maintenance needs to be dealt with on a regular basis, too. And don’t forget to include any HOA or condo fees when figuring out your monthly budget.
Q: Besides finances, what else should a young professional considering home ownership be thinking about before making the biggest decision of their life?
A: In my opinion, since you are going to pay to live somewhere, home ownership is your very best option. Just be sure to take into consideration your future plans over the next few years, the resale-ability of the home you’re considering, the location and that the community you choose enhances your style of living.
Q: For a twenty-something who’s getting tired of paying rent and wants to explore their home ownership options, what do you suggest they do as a first step?
A: I can recommend several reliable customer service-oriented lenders who can assist first-time buyers in getting pre-approved. Your lender will need your current income, monthly bills, and credit score to determine your price range. Be sure to have that information available when you call them. The next step will be about verifying all that information, so you’ll need to provide paystubs, bank statements, and tax returns for the previous year, then they’ll pull your credit score from all three reporting agencies. Once a price range is established, we can start looking for the style, size, and location of the home that will best suit that new homebuyer’s needs.
So, the bottom line is: if you’ve been itching to get out from under paying rent, take a serious look at your finances, your lifestyle, and your goals. If real estate is in the picture, take the time to gather your personal financial information, do your research, and make the best decision for you…then move on it!
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Elizabeth San Miguel has been in the real estate business for nine years and has a background in administration, banking, and customer service. She has the distinction of having recently received the Bronze medal for Sales Achievement from Keller Williams and is a member of the 2010 Cappers Club. She has the CDPE Distressed Property designation and currently works throughout the Denver Metro area helping growing families, empty nesters, first-time homebuyers, and investors with all their real estate needs.