Closing Costs

Whether you've bought a house before, or if you're thinking about buying for the first time, you likely heard the term "closing costs" and wondered what these mysterious things were.

The costs due at closing can be broken down into three basic categories – Loan related fees, title related fees, and pre-paid/escrow costs.

Loan related fees include an origination fee that covers everything your lender takes care of on your behalf from going under contract to closing - processing, underwriting, document preparation, and administrative work. They also include third-party costs like an appraisal fee, a credit report fee, and a flood certification.

Title related fees cover the services the title company provides to help close your transaction – a closing fee, a lender’s title insurance policy, county mortgage note and deed recording fees, tax stamps, and transfer tax.

The final cost is that to set up your escrow account. This is basically a reserve account for your homeowner’s insurance (HOI) and property taxes so your lender can pay them on your behalf when they are due throughout the year. You will also pay pre-paid interest to cover the initial month you take ownership of the home before you start making a mortage payment. (Note: With some loan structures, you can opt not to escrow your HOI and taxes and pay them separately)

If you purchase a home with an HOA, a new construction home, or a home in a condo community you will also have some costs associated with those specific situations.

You are able to negotiate credits to help pay for these costs if it makes sense for you individually with your specific property and scenario!

Now it probably makes sense why everyone just generalizes “closing costs” - there is so much that actually goes into them it could make your head spin. Hopefully this helps show how important it is to sit down with someone who can walk you through all of these costs, and what you can expect as you prepare to purchase a home!

Information courtesy of my go-to local lenders, The Strive Mortgage Team

Down Payment

One of the key components of getting ready to buy a home is saving money for your down payment. There’s a lot of incorrect or misunderstood information floating around out there about what amount of money you actually need to provide for a down payment.

For starters, you don’t need 20% down! It’s been years since that was a requirement. In reality, for the most commonly used loan programs, Conventional and FHA, you only need as little as 3% or 3.5% down respectively. For a VA loan program dedicated to current and former military members, no down payment is required at all.

Your down payment can come from a variety of places, so feel free to get creative. The most common sources are personal checking/savings accounts, gift funds from family members, pulling the money from personal investment or retirement accounts, or through equity from the sale of a previous home. Realistically, the down payment usually comes from a combination of these sources.

Cash (like cash in a shoe box or a personal safe at home), cannot be used for down payment at the closing table. Underwriters are required by the loan investors to “source” your down payment, or be able to show a paper trail of where that money came from. If you have cash you’re planning to use, you’ll want to put it into a bank account for at least 60 days to meet requirements. Also, be prepared to verify where any large deposits into your bank accounts came from that cannot be clearly understood from your bank statement transaction history.

Getting your down payment in place is a big step in making your home purchase a reality. Hopefully this helps you to realize that you don’t actually have to save up an exorbitant amount, but rather that with the low minimum percentages required and the various options of sources for down payment, it may not be as overwhelming as it may have seemed!

Information courtesy of my go-to local lenders, The Strive Mortgage Team

Under Contract Period

So you’re “Under Contract” on a home...now what??

First of all congratulations 🥳! You’ve found a home you love...you and the seller have agreed to a price and terms...and you have a closing date on the books. Now it’s time to get past a few checkpoints before getting your pen ready for the closing table.

Inspection. You will have the opportunity to have a third party Inspector come in to do a comprehensive evaluation of the home. You’re not necessarily looking for a home to be perfect, but you will want to pay attention to health and safety issues and potentially costly issues relating to the home’s structure, plumbing or electrical systems.

Title/HOA/Due Diligence Document Review. Your Realtor will make sure that you receive these applicable documents, understand them, and are okay with all of the details and terms.

Appraisal. If you’re purchasing the home with a loan, an appraisal is required by the lender. While the listing agent and your buyer’s agent have completed home valuations, an appraiser gets the final say in determining the home’s value. If it differs from the agreed upon sales price, your agent will walk you through negotiations.

Loan deadline. Your lender will give you a “clear to close” meaning they’ve reviewed, underwritten & approved your full loan file. Your lender and the title company will work together to finalize your closing costs.

The Colorado Contract to Buy and Sell Real Estate offers opportunities at all the above deadlines for the buyer to cancel the contract and get their earnest money back if any issues or objections arise!

Earnest Money

Earnest money is a required part of most real estate transactions...but what exactly is it?

Earnest money essentially a security deposit that demonstrates to the seller that the buyer is serious about completing the home sale.

If the buyer defaults in the contract, the seller will get to keep the earnest money. However there are several steps within the transaction (Inspection, Appraisal, Loan Deadline, etc) where the buyer can legally terminate the contract and get all of their earnest money back.

It is typically 1-2% of the sale price of the home, and is due by the buyer within a few days of going under contract. The buyer will give the earnest money to their agent, and typically it is held by a title company until closing.

The good news is that as long as everything goes smoothly, the earnest money is applied to the buyer’s closing costs and down payment at closing, so it is money that the buyer gets to keep and use!

Being Competitive in a Seller's Market

We’re getting into spring time (even though is doesn’t feel like it around here 🥶), which means more buyers are entering the market and it’s so important to submit solid and competitive offers on homes.

So what can you do to be competitive in Denver’s seller’s market without just throwing more money on the table?

Start with a fair and reasonable offer price! Your agent will take the list price into consideration, but should also look at nearby for sale/under contract/recently sold properties to see what other comparable homes are selling for and how quickly. A lowball offer will likely be ignored. Come in with with a strong offer price at the beginning to get your offer accepted and put yourself in the best possible position in the case of a multiple offer situation.

Get completely pre-approved and work with a reputable local lender. You want someone who has a good reputation of completing a thorough pre-approval process and has a track record of smooth and successful transactions. It can go a long way when you have a lender who is willing to call a listing agent on your behalf, advocate for the solidity of your financing, and be able to say that they’ve never had someone they’ve pre-approved not be able to close!

Be willing to compromise on inspection and repair requests. Major health and safety issues should be addressed, but the minor things should probably be let go. Getting a home warranty (or working with an agent who will purchase one for you 🙋🏻‍♀️) is a great option to give you peace of mind as a new homeowner, especially when it comes to the unexpected repair or replacement of appliances and home systems...and it will cover many of the concerns that may arise during an inspection.

Be flexible on possession date. Some sellers want a quick sale, but some want a little more time after closing to find a replacement home and move. If you’re open to a seller rent-back, you may be able to offer a lot of convenience to the seller that could make your offer more compelling.

The Best Time of Year to Buy a Home

When is the best time of the year to buy a home?

There are pros and cons to buying during both the hot market spring and summer months and the cooler market fall and winter months.

In the spring and summer, inventory goes up, which means more options...but so does the number of active house hunters, which means more competition, potentially higher prices, and fewer days homes stay on the market. You may have to act quickly if you want a home, and you may end up in a multiple offer situation.

In the fall and winter, inventory goes down, so there are fewer options out there, but there are also less potential home buyers. The average number of days on market goes up, which may give you some leverage to negotiate a lower price or inspection terms if you find the right home.

Ultimately, the best time of the year to buy a home is when it makes sense for your family! Is it important for you to be settled into a new home before a baby arrives? Is it most convenient to not disrupt kids with a move during the school year? Do you need to save a little more money up after an expensive holiday season?

There is always new and changing inventory, so the best time of the year to go house hunting is the time that works best for your personal situation!

Home Updates Before Selling

One of the most frequent questions I get from prospective home sellers is what updates they should do to their home before listing. It’s a great question, as you don’t want put a ton of money into a house you’re about to sell, but you also want to get the most out of the sale.

In order to do this, you need to appeal to as many prospective buyers as possible. You want to catch people’s attention through your listing photos and get them through the door for showings.

This post could easily be super long debating the pros and cons of so many different upgrades and projects, so I’m going to keep it really simple and focus on some easy and inexpensive cosmetic DIY fixes that home owners can tackle themselves before listing.

Patch holes in the walls and paint. Get rid of vibrant accent walls, and stick to a neutral color (whites and grays) that will make your home look bright and clean. Don’t forget to touch up the trim too.

Replace dated light fixtures and ceiling fans. There are actually a lot of affordable options and install is not that difficult. Make sure all light bulbs are working as well.

Update hardware - door knobs, faucets, drawer pulls, etc.

And lastly, while this one requires a little more effort...painting builder’s grade honey oak cabinets and adding new hardware to the doors and drawers can TRANSFORM a dated kitchen or bathroom and attract a lot of potential buyers who want something a little more move-in ready.

Good Photos Sell Homes

Even in a seller’s market like Denver, there is so much more to selling a house than just putting it on the MLS (Multiple Listing Service)!

In the modern digital world of online shopping, most buyers start their home searches on the internet or on apps browsing through listings. In fact, most buyers narrow their list down to single digits before they even step foot in a potential house for a showing. This means your home’s representation online makes a huge difference in getting buyer’s attention and getting them through your front door.

High quality PROFESSIONAL photos are an absolute must. It makes me cringe every time I see dark, dingy, haphazard photos on a listing that make the house look unappealing. Your Realtor® should be invested enough in the sale of your home to hire a photographer, and not just snap their own photos on an iPhone or a point and click digital camera!

A photographer will capture your home in the best light, have equipment and different lenses to accurately show the size of rooms, will shoot at multiple angles to give a good representation of the home’s layout, and will edit the pictures to make them look like they belong in a magazine.

Good photos will result in more interest...more online views...more showings...all making your home more likely to sell faster!

Home Inspections

Home inspections are a very important part of the home buying process. The buyer has the opportunity to bring in a third party professional for a comprehensive evaluation of the home.

If you are buying a pre-owned home, it is important to go in with the mindset that it won’t be perfect and there are bound to be issues that need attention or repair that will be pointed out by the inspector.

Prioritization is key. Immediate health and safety concerns should definitely be addressed. Problems with the major components of the home - structure, electric, sewer and roof - should also be considered as they can potentially be very costly to repair!

Your Realtor should guide you through the inspection objection, negotiation and resolution process, taking into consideration the current climate of the local market and the terms of your specific contract.

What is a Buyer's Agent?

If you want to buy a home, you probably know that you need to work with a real estate professional...but what are your options for representation?

In Colorado buyers can either be represented by a Buyers Agent or a Transaction Broker. A transaction broker simply facilitates a purchase transaction (completes contracts and paperwork and ensures deadlines are met) without being an advocate or agent for the buyer or seller.

A Buyer’s Agent has additional specific duties they must fulfill for their client - promoting the buyer’s interests with good faith, loyalty & fidelity...seeking a price and terms acceptable to the buyer...and counseling the buyer as to any material benefits or risks of the transaction.

The best part is that a Buyer’s Agent’s commission is paid by the seller, so your representation is FREE

Mortgage Pre-Approval

So, you are READY and you want to buy a house. Time to go out and look at some homes right?

Not quite...One of the first things your Realtor should advise you to do is speak with a lender and get pre-approved BEFORE going home shopping.

A lender will help you determine a comfortable price range after evaluating your credit, income and debts. With this information, your agent can ensure that they’re only showing you homes that are within your budget.

A pre-approval is often required if you want to submit an offer on a property. In a market as competitive as Denver’s, you don’t want to be scrambling to get a last-minute pre-approval and miss out on a home you love!

If you would like recommendations on a reputable and local lender, just let me know!

New Construction Homes

New construction homes are a great option for some buyers. You can completely customize and build the home from the dirt up, or purchase an already built unit that is about as move-in-ready as it gets. They are gorgeous, have contemporary design, and are so shiny and NEW.

A big misconception is that buyers should go directly to the builders and don’t need to use a Realtor as an agent to represent them.

However, builders use their own private sales contracts and not the standard Colorado purchase contract that is state regulated and designed to protect buyers and allow for termination of the contract if certain issues arise.

As always, a buyer does not pay for representation from an agent (the builder/seller does)...so essentially you’re getting free representation from an unbiased third party who has your best interests in mind, and will walk you through the sales contract, inspection, and other steps leading to closing. Win-win.

First Time Homebuyers

Are you thinking about buying a home but are confused and overwhelmed by the process? Here is an overview of the basic steps in the home buying process.

Meet with a real estate agent (🙋🏻‍♀️) to discuss your time frame and what you’re looking for in a home As a buyer, your agent’s commission is paid by the seller, so representation costs you nothing

Get pre-approved. A mortgage lender will work with you to determine a comfortable price range

Search for homes! Your agent will utilize their tools and systems to find all homes that meet your criteria and schedule showings

Find the home you love & make an offer. Your agent will handle negotiations & preparing a contract

Perform due diligence (conduct an inspection, order an appraisal, finalize terms of your loan, etc). Your agent will keep track of necessary tasks and deadlines

Closing Day - the transfer of funds and ownership. Lots of documents to sign, then you get the keys to your new home!