First Time Home Buyers
Are you thinking about stepping into home ownership, but don’t know where to start? We have helped hundreds of first time home buyers navigate the process of purchasing their first home. Let us help you start this new chapter in life.
Step 1: Loan Pre-approval
The very first step you will need to take as a first time home buyer will be to talk to a mortgage lender. This can be a mortgage broker, traditional bank, credit union, or even a private lender.
They will determine how much you can afford and what the best loan option is available to you.
In order to get you pre-approved for a mortgage loan, the lender will ask for several documents to include 30 days of pay stubs, 2 years of w2’s, 2 months of bank statements, 2 years of tax returns, and a few others depending on your situation.
The lender will walk you through the documents they need so no need to be worried if you don’t have them at your first conversation.
CHFA (Colorado Housing and Finance Association)
– Offers programs throughout Colorado
– Can be used with FHA, VA, USDA, and Conventional Loan Programs
– Offers both a forgivable grant program and a 0% 2nd mortgage
– Does not require buyer be a first time home buyer
– Requires homebuyer education course (free in person, $99 online)
– Income limits apply but they use qualifying income
– Both 1st mortgage and 2nd mortgage (or grant) use CHFA (higher rates)
CHAC (Colorado Housing Assistance Corporation)
– Loan Amount 6% of the purchase price up to $10,000 (whichever is less)
– Loans up to $5,000 – $50 a month payment ($3,000 minimum)
– Loans $5,100 – $10,000 – amortized over 360 months
– Rate – 5%
– Fees: May include $5 monthly service fee, $100-$150 doc prep fee, $200 commitment fee, $16-$21 recording fees
– Able to combine with FHA, VA, USDA, Conventional Loans
– First mortgage provided at better interest rate (market rate)
– Requires homebuyer education course (free in person, $99 online) – also requires second more in depth phone evaluation
– Income limits apply – use household income
El Paso County Turnkey
The El Paso County, Colorado “Turnkey Plus” Mortgage Program provides a partially forgivable Down Payment Assistance (DPA) Loan to individuals and families who want to purchase a home anywhere in El Paso County, including the City of Colorado Springs.
Qualified homebuyers may receive up to a 4% soft second mortgage loan at 0% Interest, which is deferred for 30 years.
The El Paso County Housing Authority, as Program Sponsor, rolled out the “Turnkey Plus” Mortgage Origination Program on February 15, 2019.
Forgivable DPA Loan
– 0% Interest
– 30-year deferred Second Mortgage
– 60% of the Second Mortgage Amount forgiven pro rata over the first five years (60 months) at 1/60th per month.
– Remaining 40% of the Second Mortgage Amount will be forgiven at the end of the 30-year period/maturity date of the first mortgage
Step 2: Looking at Properties
After you have completed the loan pre-approval process you will receive a pre-approval letter stating the price you are approved for and what kind of loan you are receiving. We can then use this to start looking at homes.
During this process, we will find out what are your must haves, like to haves, and your can live withouts. This is an education process. As a first time home buyer, you will quickly find out it is very unlikely to find a home that will check every single box.
Spend some time writing down the criteria you are looking for, such as the number of beds, baths, desired location, etc. This will help us narrow down what properties you will be interested in.
Step 3: Making an offer
After finding a property you are ready to call home, it is time to make an offer. As a first time home buyer we will talk you through everything that goes into an offer and make sure you are putting your best foot forward for the best possible outcome.
There are 3 things that can happen after making an offer.
- Offer Acceptance
- Offer Rejection
- Counter Offer
An offer can take up to a couple of days to have a decision made so don’t worry if you have not heard about your offer within 24 hours. This is totally normal as the property may have several showings and multiple offers.
Ready To Get Started?
Step 4: The Real Estate Contract
There are several steps in the contract that will take place. Some will be your responsibility, and some will be done in the background and given to you for review. Section 3 of the real estate contract will give you the dates and deadlines that all these tasks must be completed in.
This will be your first deadline of the contract and will be your responsibility to complete. You will need to take a check, essentially what is a security deposit, to the title company to secure your purchase of the property. What is earnest money?
HOA Docs and Covenants
In the first couple of days of the contract, the listing agent will send the HOA and Covenant docs for you to review. This will tell you what you can and cannot do on your property. This is important because it can limit the size of dogs you can have, it can tell you not to park on the street, where guests can park, there may be quiet hours, it may have rules on the colors you can paint your house. It will tell you everything you need to know for that specific neighborhood. If you do not follow these rules there may be a fine enforced. Read these carefully so you understand what is and is not allowed before following through with the purchase of the property.
Title work is one of the steps that will be done in the background by the title company. The title company will be searching through all past records and owners of the property to make sure you are getting a free and clear title without any encumbrances. If anything should come up during this search you will be notified, walked through your options, and asked how you would like to proceed. This does not happen often, but still something you want to be aware of.
The home inspection is going to be one of the major parts of the real estate contract. This is where you, the first time home buyer, will be able to inspect the home for any issues. Usually, this is done by hiring a home inspector that has a system he follows to make sure nothing gets left unchecked. Hiring a home inspector is not mandatory, but for a first time home buyer, it is highly recommended. After the inspection has been completed you will be able to ask for specific items to be fixed by the seller. The seller retains the right to say no to any items chosen so be sure to only ask for items that may affect the structure of the home or the health of those going to living in it. You do not want to be the one who gets nothing fixed because you asked for a $5 light switch wall plate.
The appraisal is another very important step in the contract. This is how the bank verifies the value of the property. The bank needs to verify this because they do not want to loan you more than the property is worth. Sometimes the appraisal is below the purchase price and you will then have to reenter negotiation of the price of the home. We will guide you through this process so you can make the best decision moving forward.
After all dates and deadlines are finished and during the day of closing, we will conduct a final walkthrough. This is to make sure the property has not been damaged in any way after you had entered the contract.
Congratulations! We will meet at the title company, sign all necessary paperwork, and close on the purchase of your new home. This is an exciting time in your life and we know you will enjoy homeownership. If you have any questions after closing, we will always be here to help.