As a first time home buyer specialist in Denver and the suburbs, most of my clients start out with the idea that they can’t buy a home. In many cases that simply isn’t true. It’s all about taking the proper steps and allowing adequate time to get the ducks in a row with expert help.
Next, after you choose a competent, full-time Realtor to advise you, the next step is to choose a lender. No, not Pete the Wells Fargo Teller or Random Bob over at Chase. Start with someone local who specializes in first time home buyers.
Why Lenders are Important
First, one of the top questions I ask lenders before I recommend them is: “Do you have a direct line to your underwriter?” If they can’t pick up the phone and talk to their direct underwriter (the person who will ultimately be making your loan “happen”). I strongly suggest you find someone who does that.
Unfortunately, the “Big Box Banks” just don’t seem to have the level of service that the smaller, local mortgage brokers have. You want to feel extremely comfortable with your lender, just as comfortable as you are with your Realtor. They are going to be your best friend during the entire process. Which is why they will help you avoid the most common mistakes first-time home buyers make.
Most local mortgage brokers who specialize in first-time home buyers also have credit repair help. They WANT you to be able to qualify for a loan. They often have some department or expert that focuses directly on credit repair. Also, they’ll run your report, help you settle debts and even get you on payment plans.
Typically, medical debts and student loan debts don’t work against you if you are current on your payments. Getting your credit in good shape is important and not as hard as you think! The first place to start is to learn how credit works. I find this video to be quite helpful and it’s only 5 minutes long. So, inform yourself and watch it.
Use The Best Denver MLS Search
After you choose your trusted Realtor who knows how to advise first time home buyers, it’s fine to use an internet MLS search. It’s a good way to “kick some tires” without being hassled by a salesman. That way you can search homes for sale easily. But, be careful. First, use a local MLS search like the one on this website. It updates listing every 15 minutes directly from the Denver MLS, Metrolist (reColorado.com).
National search engines like Zillow do not currently get their information on listings from the MLS. Instead, they rely on individual brokers go upload their listings. As a result, national search engines often do not have all the listings. Lastly, their data can be dated and include sold listings.
Also, be sure to stay in touch with your first time home buyer Realtor. Hence, she can keep an eye peeled for new listings before they come to the real estate market. You might be able to be the first to see a new listing that suits you perfectly.
First Time Home Buyer Seminar
Credit Score Tips
Smart lenders typically advise clients to pay their card down and let $5 carry over to the next month as that helps build a great credit profile. If you pay a credit card off entirely, there’s a good chance it will hurt your FICO credit score. However, it is good to have low credit to debt ratio so you will get more “credit” for having a card with a $100 balance on a $1000 limit card, as opposed to a $100 balance on a $500 limit card. You don’t necessarily need a $0 balance but you need to make all your payments on-time and try to do at least $5 more than the minimum payment.
If you’re at least a year out of buying, you can call your credit card company and ask them to raise your limit.
Have a family member or close friend who has good credit, a high limit credit card with a low balance and pays on-time every month put you as an “authorized user” on their credit card. They don’t have to give you a card or anything – and your “less than stellar” credit won’t affect them by doing this. It’s a good way to get some good points. However, be cautious with this, as sometimes, depending on the loan program, more documentation can be required from the parents to prove that the account is in good standing.
Also, open up a secured credit card. It’s a credit card that you will have to put down all or a percentage of your limit. Use this for one small purchase a month and then pay it off. Make sure to get a secured credit card that reports to ALL THREE credit bureaus. This is one of the best, from my personal experience: http://www.capitalone.com/credit-cards/secured-mastercard/
Other than the two examples above do not take out new credit cards, lines of credit or incur any new debt. And, don’t close any credit cards!
As a result, I was able to raise my credit limit almost 100 points in about 8 months when I started the buying process by doing the above. Everyone is different but those things couldn’t hurt your credit. Again, the key is having a good lender who specializes in first time home buyers to help you out.
Affording A Down Payment
Next, once you get your credit all ironed out, the next question is: “How do I afford a down payment?” There are lots of programs from the government to help people with their down payment. These are always changing so make sure to ask your trustworthy lender about what programs you may be able to qualify for. The government does provide most of the programs for first-time buyers, however, there are conventional options too.
Remember, allow yourself plenty of time to get those duckies in a row, because you don’t want to get ahead of yourself and start window shopping for homes before you know how much of a mortgage you can obtain.
So, if you live in or near the Denver Metro Area, here are my favorite lenders to work with, they would be more than happy to help you! However, you might contact me first to see if there are any newer lenders on my favorites list for first time home buyers.