The golden principles associated with first-time home buying are basic ones: Set a realistic budget, run a credit report and save enough money to cover a down payment and then some. But signing the paperwork still can be daunting for many first-time buyers who may be wary of brokers and have some doubts about ending years of renting.
Kristin Hoff, a 40-year-old health insurance agent and single parent, moved into her first independently purchased home off U.S. Highway 550 North with her three girls this past spring.
Size, location, quality and opportunity to build equity contributed to her selecting her new north Durango townhouse and vacating her two-bedroom apartment on Florida Road where she paid $1,000 a month to live with her three kids. The purchase was prompted by a single factor, she said: “unaffordable rent pricing in Durango, Colorado.”
Hoff was “entirely uncertain” about the buying process but had two critical takeaways since she began searching for a house in spring 2014 – the first was that there are multiple housing organizations locally and in the state that can assist in home buying, and, secondly, that establishing or fixing your credit record is a lengthy process even when an outside organization is providing financial assistance.
“Some people think if they go through the Regional Housing Alliance, the process will be quicker, but it took me a year,” Hoff said. “You have to be dedicated.”
Another common trap that ensnares many buyers is failure to investigate the resale value of affordable dwellings. For example, there are dwellings such as mobile homes that federal agencies will not finance after the home reaches a particular age.
“If a low-income family could only afford a mobile home, depending on the particular mobile home, another low-income family could not get a loan to purchase it in the future after a certain amount of time,” Hoff said, adding that she was surprised to learn that fact. “That isn’t disclosed. You have to inquire about the future sale of anything you’re thinking of purchasing.”
Hoff leaned heavily on the RHA, which can move buyers into their new homes with less than a 3 percent down payment, when she began the home-buying process in 2014 by enlisting in the alliance’s Homebuyer Assistance Program. The program offers mortgage assistance on the stipulation of attending a free, eight-hour education class that covers what buyers need to know before and after to make an educated purchase.
Pam Moore, deputy director of the RHA, recommended prospective buyers attend the monthly class.
“This is the biggest financial commitment a family will ever make,” she said. “Be educated and thoughtful about the decision.”
Classes are next available Oct. 15 from 5:30-8:30 p.m. and Oct. 17 from 8:30 a.m.-2 p.m.
Early this year, the National Association of Realtors published a report detailing first-time buyer demographics, which have been consistent over the past nine years. The study found that more single women, at 22 percent, purchase homes than single men, at 12 percent. However, the percentage of single men buying their first homes has stayed about the same over the past decade, while the percentage of single women has seen a 5 percent decrease.
Based on the report, the majority of first-time buyers – 52 percent in 2014 – are married couples, which is where newlyweds Tyler and McKenzie Miller fall. With a dog, a 2-year-old and another child on the way, the Millers wanted to forego their condo for a single-level ranch home with a garage and backyard.
Finding a fairly new Durango house with at least three bedrooms without breaking the bank was a difficult feat, McKenzie Miller said, but eight months of searching led to a home in Durango west.
“Usually you either have to live in Bayfield or Forest Lakes or somewhere further out to be able to find something affordable and not the size of a shoebox for $300,000,” Miller said. “That’s what took the most time.”
Miller, 27, and her husband, 35, trolled real estate databases such as Zillow and Trulia but ultimately enlisted a real estate agent’s help.
The expense of closing costs and the increase in insurance costs for rural homes were both surprises to the Millers.
“A lot of first-time buyers don’t realize that closing costs are very expensive and don’t come out of your home loan,” Miller said. “The costs are additional that you have to have in your bank account, and they can be thousands, based on how much your home is.”
New buyers should note that radon testing is not included in the standard home inspection, and an estimated one-third to half of Colorado homes contain excess levels of radon. They should also be prepared for their insurance to go up if they purchase a rural home, Miller added, because the trees surrounding a home present a higher fire hazard.
“We had to drop the insurance we were on and switch because they wouldn’t insure our new home,” she said.
Her family expects to close on the home Nov. 5.
jpace@durangoherald.com
Preparing to buy
If you’re buying a home for the first time, do:
Create a proposed budget detailing what you can realistically pay for the home as well as utilities, repairs and maintenance. The Department of Housing and Urban Development defines an affordable housing payment as one that consumes 30-35 percent of a buyer’s income.
Start saving now. You will need enough money to make a down payment and for a reserve fund for emergencies after you close on the home.
Review your credit report and credit score, which will establish what loans are available to you and the rate you will be charged.
