How Much House Can You Afford?

Whether you’re buying a home for the first time or planning to upsize, downsize or relocate, thoughtful planning in terms of how much you should spend on your home makes sense. Beyond the size of mortgage you qualify for, thinking through additional expenses and your desired lifestyle before you begin the house hunt, will save time and help you make a smarter home-buying decision.

*Disclaimer: I am not a mortgage lender or financial adviser, and you should bring any and all questions of this nature to a financial professional. I do, however, have many years of experience in the Real Estate industry, and have worked with clients to buy and sell homes at a variety of price points for clients from all walks of life.

  1. Understand Debt to Income Ratio. A Qualified Mortgage will require that your debt to income ratio is no higher than 43% once you take on a mortgage. This means the sum total of all of your debts + your monthly mortgage payment can be no more than 43% of your gross income.
  2. Consider your personal financial situation. Do you have young children and accompanying daycare costs? Are you planning to have children? Are your insurance and medical costs stable? Will you need a newer vehicle in the near future? Do you plan to travel often? Know the answer to questions like these before you determine how much you are willing to spend on monthly mortgage payments.
  3. Consider all home expenses. How much will property insurance and property tax set you back? Will your loan require private mortgage insurance (PMI)? Does your new neighborhood have an HOA? Will your utilities increase significantly from your current situation?
  4. What will you do in an emergency? If home repairs arise, can you handle the additional demands on your budget? When you determine how much house to buy, consider setting aside a monthly amount to handle home repairs as they arise.

At the end of the day, information is POWER, and you should be as informed as possible in order to make the right decision about the affordability of your home purchase, and whether that purchase will fit in with your overall financial and life goals.

Are you ready to take the plunge, or move on to your next home? Drop a line. I’d be happy to help you navigate the competitive Denver Real Estate market.

Jack Meyers
jackestate@aol.com  
303.263.3050
Twitter: @jackestate

 

 

Let Freedom Ring

If you rent or crash on somebody’s couch, you’re missing out. Homeownership offers a freedom that can’t be found in renting; if you’ve never done the research — talked to a mortgage professional, consulted with a Realtor, driven around a few favorite neighborhoods to scope out what’s for sale — now is the time. Read on for a few of the freedoms homeownership offers.

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Homeownership makes YOU the boss. Who likes answering to a landlord or management company? When you own your home, you have additional responsibilities, but you also hold all the cards. So go ahead – paint the walls, hang your pictures, and make the place your own. No permission needed!

Homeownership leaves you free to seek a return on your investment. As a renter, you will never see a dime of the money that goes into your rental payments. Investing in the lucrative real estate market gives you an opportunity to gain equity over time. In addition, interest on your mortgage is tax deductible every year.

Homeownership offers stability. Rents can and do rise over time, property changes hands, and you won’t always have a choice about the ongoing terms of your rental, or whether you can remain there long term. When you own your home, it’s yours. No one can pull the rug out from under you or change the terms of your contract.

Homeownership helps you build a strong credit history. Making your monthly mortgage payments on time every month shows lenders you are a good bet for future auto loans, home improvement credit, and positive financial terms in general.

Pride of ownership is awesome! A rental is never really yours…in the back of your mind, you always know the walls, floor, ceiling — all belong to someone else. Pulling into your own garage or parking space, glancing around the kitchen from the breakfast table and knowing what you see is really, truly your own, gives you a sense of pride that can’t be met when you’re sending in a rent check to pay somebody else’s mortgage.

Have you been pondering the benefits of owning your first (or next) home? I’d love to help you take the next steps to homeownership, or trading up to your next dream home. Drop me a line or pick up the phone.

Jack Meyers

The Meyers Group
jackestate@aol.com 
303.263.3050
Twitter: @jackestate

A Denver Real Estate Health Check

According to a recent Denver Business Journal article, a report by New York-based financial services firm SmartAsset ranks Denver 9th in the nation among the healthiest urban housing markets. Factors analyzed for the study include stability, risk, fluidity (ease of sale), and affordability.

This is awesome news for local homeowners and those considering investing in the Denver Metro housing market. A couple of nifty highlights accompanying the report:

  • Homes in Denver are selling faster than anywhere else in the country at an average of 8 days from Listing to Contract.
  • The report found only 3.1 percent of Denver homes were decreasing in value, against a national average of 12.5 percent.

The market is hot, but that doesn’t mean you can afford to rest on your laurels. Maximizing your home’s potential as a Listing still matters, and experienced representation is vital for Buyers, who are up against a lot of competition in a market favoring the Seller.

If you are seeking a guide in our fast-paced marketplace or know someone who could use a hand, I’m happy to help. Give me a buzz or drop a line to find out what your house is worth in today’s market, or to plan the next move in your home search.

Jack Meyers

The Meyers Group
jackestate@aol.com 
303.263.3050
Twitter: @jackestate

Cosmetic Issues = Buyer Savings

In a high demand real estate market like Denver, Sellers have the advantage. When Buyer demand outpaces available inventory, the Seller is king, and they have the upper hand at the negotiating table. Don’t abandon all hope, Buyers! In any market, there are things you can do to educate yourself so as to gain an edge in the process.

One area Buyers should pay particular attention to is the cosmetic condition of properties they view. In a Buyers’ Market, Sellers have to work harder to appeal to Buyers, including staging and taking care of deferred maintenance. Sellers can get away with minor deferred maintenance or cosmetic issues when the market is in their favor. BUT – these issues can still give the Buyer a little wiggle room at the negotiating table.

The following is a list of items you can use to your advantage when trying to negotiate concessions or a lower price as a Buyer in a Sellers’ Market (or any market):

  • Overly colorful paint, or paint in poor condition. If the basement is hot pink or the exterior paint is flaking off, it is worth asking for a minor break in the price, or a “paint allowance,” to help cover the cost of updating the home. You might not get what you ask for, and you may have to offer full price with a “paint allowance” stipulation, but the answer to a question you don’t ask is always NO.
  • Damaged carpet or other flooring. I once helped clients buy a house that sounds terrible – but was really a hidden gem: listed under FMV (fair market value), but the house needed all new paint, there were no window treatments of any kind, the main level smelled like dog and the finished basement smelled like cat. UGH – right? They bought this home in a desirable suburb for about $20,000 less than it was worth, and by painting and replacing flooring themselves and purchasing quality blinds on sale, they were able to make this house shine and gain instant equity. Don’t pass up an opportunity like this because the house is a little rough around the edges.
  • Fence in disrepair. Wood fencing is a common source of deferred maintenance. I don’t know many homeowners who enjoy staining or painting the fence every year or two. Use this to your advantage. If the Seller has left the fence alone for a few years, or it has obvious damage, ask for a break in price, or ask whether the Seller will meet you in the middle on repair or replacement costs. If you’ve made a fair offer and the Seller is motivated to close the deal in a timely manner, you may be able to pick up a few bucks on an item like this.
  • Road construction or other pesky projects – current or future. Even in a Sellers’ Market, major road construction, noisy building sites, even nearby home construction can be a pain. Noise. Pollution. Ugly views. Extra traffic. None of these things are pleasant to put up with. As a Buyer, do your homework! If there is a new road going in half a block away, the Seller should disclose this information if they have it – but they don’t always do that. Learn everything you can about a city or neighborhood, and if there are projects underway or planned for the near future, use this information to your advantage. A motivated Seller with a smart Realtor on their side knows major construction projects near the home will not improve the market value in the short run, and they will likely want to sell the house before the dust begins to rise. Use this information to negotiate a better price, or possibly concessions on the home.

Buying a house is a big deal, and there are a lot of moving pieces. When you work with an experienced Realtor, you’ll reap the benefits of someone who’s got your back – and knows every in and out that could save you money and give you an edge. In a market like Denver, Buyers need all the help they can get to score a great deal. If you’ll be in the market soon, I’d love to help you find the right home and maximize your potential at the negotiating table.

Jack Meyers

The Meyers Group
jackestate@aol.com
303.263.3050
Twitter: @jackestate

 

 

Lowest Inventory in the History of Ever

According to statistics compiled by the Denver Metro Association of Realtors (DMAR), the inventory of available homes in Metro Denver hit an all-time record low since the numbers have been tracked. 

This is great news for Sellers! People want to live in and around Denver, they’re willing to pay a premium to do so, and there aren’t enough houses, townhomes or condos to go around. It’s called a Sellers Market for a reason: the odds are in your favor, and this is an excellent time to maximize your homes potential and gain a return on your investment by selling your property, if you are in a position to do so.

The hot market we’re in right now is challenging for Buyers. Prices are strong. Inventory is low. Interest rates are on the rise. Factors like rising interest rates will eventually put a dent in the insane level of demand in our area because as financing becomes more expensive, fewer buyers will enter the marketplace. In the meantime though, if you are a buyer in the Metro Denver housing market, you need to do everything in your power to give yourself an edge.

Here are a few tips savvy Metro Denver Buyers can use to win at the game: 

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Secure financing first. Don’t begin the hunt until you are fully approved for a loan, and don’t wait to apply. If you want to move in 6-12 months, apply for financing now.

Know your timeline. If you want to move in a year, don’t assume you can wait 10 months to begin your home search. Even if the market cools a bit as the Fed raises rates, Denver will likely still be hopping in a year. Plan for the possibility you’ll be searching for a home for several months, and don’t put off the process until the moment you want or need to move.

Don’t go it alone. Unless you are an expert negotiator and familiar with the ins and outs of real estate contract law, seek expert representation to secure a legal, smooth-as-possible transaction. Things move quickly in a market like this, and if you aren’t prepared, you’ll lose out and possibly hit legal snafus along the way. Work with an experienced real estate professional to avoid pitfalls.

Whittle down your must-haves. Wouldn’t it be nice if your next house had freshly painted walls, beautiful hardwood floors, newer appliances (included, of course) and stylish high end draperies in every room? In a Sellers Market, you may have to give up on some of your wishes and hopes in order to snag a deal. You can paint, upgrade the flooring or appliances and install fancy curtains later; if you aren’t able to successfully close on a house, none of those details will matter. Choose 5 absolute must-haves and mentally prepare yourself to look past minor imperfections.

Steel yourself – there will be disappointment along the way. The reality of a competitive real estate marketplace is this: you will likely make offers (notice I said offers – plural) that are ignored completely or rejected. You may come back with a higher/better offer on a house you love and be rejected a second time. It will probably bum you out every single time – at least a little. The key is not to let yourself fall in love on the first date. Not even once you are under contract – because sometimes contracts fall through. The time to really let loose with a victorious hoot-holler-we-did-it victory dance is the moment you walk away from the closing table with keys in hand. That’s when the house is really yours, and that’s when to breathe a sigh of relief and start dreaming big dreams about your new digs.

Are you thinking about selling, and wondering if it’s worth your while? Thinking about moving closer to work, into the city, or further out into Suburbia?

Call me or drop me a line in email. I’ve been helping people buy and sell homes across Denver for over 20 years, and I’d love to help you make your next move.

Jack Meyers

The Meyers Group
jackestate@aol.com
303.263.3050
Twitter: @jackestate

Itty Bitty Houses

An RV park in Loveland is launching Phase 1 of what it hopes will be a successful tiny house movement within the community, and this is a trend that has captured the imagination of many Colorado residents.

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It is hard to deny the whimsical charm of these miniature abodes; tiny home builders consider every detail, working storage and convenience into closet-sized spaces. Like a gypsy wagon, many tiny homes can be hitched to a vehicle and roll right on out of town – although they can also be laid on a tiny foundation with demure landscaping put in place to make home-sweet-tiny-home a more permanent location.

Some tiny home owners are drawn to the idea of “living large” thanks to a smaller house payment, or the ability to pay off a smaller loan on a tiny home in a shorter period of time than a traditional 30 year mortgage. Some look to tiny homes as ideal guest houses, or second homes in another state or in the mountains – a bit like a modern day RV, but with the solid feel of real architecture. Others like the idea of customizing a home – minus the lofty price tag of a custom built traditional home.

Living small – really small – is an interesting proposition. It’s definitely not for everyone; Census Bureau data puts the size of newly constructed single family homes at 2,467 square feet on average, while a typical tiny home clocks in at 120 square feet, with tiny mansions maxing out at 500 square feet.

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A few things to consider if you’re thinking small:

  • Where will you park it? Do you have a large yard? Can you rent space or buy a plot of land?
  • How will you insure your tiny home? This will take a bit of research on your part, as insurability and costs depend on size, mobility, location, etc.
  • What features do you want and need in a tiny home?
  • What is your tiny home budget?
  • What if it turns out you are a bit claustrophobic, after all? What is the resale value of tiny homes, and how will this affect you financially?

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Have you or anyone you know been bitten by the tiny house bug? Tell me about it – share a picture if you’ve got one. Let me know what your journey to tiny home ownership was like.

Jack Meyers

The Meyers Group
jackestate@aol.com
303.263.3050
Twitter: @jackestate

Millennials Wonder…

Millennials Wonder…Will I Ever be Able to Afford a House? 

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The FED’s recent rate hike, tight housing market and other factors leave many Millennials wondering – will I ever be able to afford a home of my own?

This rising generation is waiting longer than ever to marry and have children, and having fewer children once they do start a family. More of them are continuing their education past high school, which means they’re saddled with hefty student loan debt right about the time they’re settling into careers and considering a home purchase. Rental rates – in the Greater Denver area and across the country – have skyrocketed as the housing market has gotten tighter, so renters are able to put less money into emergency funds, retirement accounts and a piggy bank designated for the future down payment on a home.

Other than sharing the sturm und drang of this situation on social media, what can this group do to rise above the challenges preventing them from entering the housing market? Read on for tips on how the Millennial in your basement (or renting the apartment next door or bunking on campus) can pick herself up, dust herself off and prepare for home ownership.

Clean up that Credit. The thing about youth is, it lacks experience. If you went out and got yourself a couple of credit cards, a car, a personal loan and maybe bounced a few checks for good measure as a poor broke college student, quit doing that and start digging yourself out of the hole. There’s no shame in admitting you don’t know how to clean up your credit. Ask a trusted friend, colleague or mentor for advice or referrals to a service that can help, then take action. And if you have no credit, research what you need to do to build a positive credit history from scratch – before you start house hunting.

Scrounge up a Down Payment. Traditional financing will require a 20% down payment to avoid the additional expense of PMI (private mortgage insurance.) One good way to plan your extra savings is to use an online mortgage calculator to figure out what you can afford, tally other likely costs of home ownership like HOA + utlities, and start “paying your mortgage” now. If your rent + utilities is $1500 per month and the mortgage you can afford + other housing expenses = $2000, begin putting $500 per month away as soon as possible. This will help you save up toward the down payment, and when you do purchase a home, you’ll already be used to the monthly expense.

Educate Yourself about Home Ownership. Home ownership is not “renting with different paperwork.” The expenses, challenges and responsibilities of home ownership vary greatly from those of a rental property, and you should know the ins and outs of home mortgages, homeowners insurance, how an HOA works, how owning a home will affect the rest of your financial life, and have a plan in place for what to do if you lost your job, became ill or needed to move suddenly. Life happens – whether you own a home or not. Before you make the largest financial investment of your life, know your stuff.

Consider Your Lifestyle. Buying a home in your 20s is different than buying a home in your 30s, 40s or beyond. Are you single now? What will you gain or lose if you meet someone and decide to sell the home in three years. Are you entrenched in a career with a particular company, or are you on the lookout for the next great thing? A mortgage company will want to see steady job history, so don’t change jobs close to when you’ll apply. In addition, consider whether the size, price and location (location, location) of your home search will be a fit for the next five years. If you aren’t a millionaire investor, you might not be financially prepared to sell and move in a year or two. Purchase a home when you are reasonably certain you’ll be happy for a few years time.

Be Realistic. Owning a home is still the American dream for many people, regardless of age, level of education, religion, cultural heritage – owning a home of one’s own is a big deal. Dream big – but plan realistically. You may have grown up in a five bedroom McMansion with a spacious yard and professional landscaping, but your first house might not fit that ideal. Know which five or so items are non-negotiable on your list, and don’t begin the search for your home until you are pre-qualified for a home loan and have selected a Realtor to work with. If you fall in love with an out-of-reach home, the home you end up with will feel like settling. If you wait to begin your search until you know what you qualify for and have done some soul-and-pocketbook searching to know what you want, you’ll fall for the right home – a house you can afford that meets your needs for the next 3-5+ years.

Jack Meyers

The Meyers Group
jackestate@aol.com
303.263.3050
Twitter: @jackestate