Question for the Pelican Brain Trust - Moving to CO and Buying?

[Brando]

So the fun begins...

A little over a week ago I traveled to CO to work and spent a good amount of time looking around. I brought my wife out and we spent Saturday/Sunday shopping some properties. We've spoken to a realtor and also looked around some developments in the Erie CO area.

She's sold and I have my transfer approved. Now we just need to figure out what's next.

Being a young couple this would be our first home purchase. We've agreed on a price range ($200-$300k) and we can definitely afford that. But the bigger questions are:

- What do we ask the lenders?
- What kind of first-time-buyer programs are available?
- We're going to spend a good chunk of cash just moving, can we do $0 down?

And probably every other important thing I don't know about. What else are we missing? What types of hidden fees/land-mines should we worry about? We can cobble a few grand together to cover minor things but really we're relying on our low debt-to-income ratio and good credit (both mid 700s) to help us with purchasing.

Thanks!

Edit: Fixed EERIE to ERIE.

[tcar]

Originally Posted by Brando

looked around some developments in the Eerie CO area.

1. Learn how to spell "ERIE", Colorado... it will be fairly important if you move here.

2. All other questions are at least partly dependant on your crecit standing.

Good luck.

[Noah930]

I don't know if I can answer any of the questions you posted. But my wife and I purchased our first home (here in LA) about 4 years ago. We had good credit, good/steady income, and brought 20% down to the table. We had our finances in check before we found a realtor.

But there were many things we wish we knew back then, that we now know. Even if the real estate agent helping you out is a "buyer's agent" (not the listing agent), in the end they work for themselves--not necessarily you. They only make a commission when you make a purchase. So you making a purchase may very well be more important than you making the happy/right purchase. Just keep that in mind.

It's hard/nearly impossible to find that "perfect" home. You'll look for it. You may be set on your basic criteria. I think my wife and I walked through about 80 homes before we finally bought our home. Stuff looks great on the MLS, but in real life no two homes are truly alike. And when you've got a budget (i.e. not a mega-millionaire), there will be compromises. There always are. There will be things you can change (i.e. color of walls, flooring, lighting fixtures, cabinetry, windows, landscaping), and things you can't (i.e. proximity to work, neighborhood, interstate highway next door).

Based upon the above paragraph, it's worthwhile to try to get a feel for how much home construction/remodeling projects cost. Because the realtor will not be helpful at all. They'll say things like: "Oh, you can change that." And you can. For a good chunk of money. Those $5-10K projects add up fast. That's for the plumbing, water heater, wiring, A/C, heat, attic insulation, sewer line, roof, appliances, wiring, etc. Don't count on your home inspector to pick up all these things. Ours certainly missed a bunch of items, in retrospect. And that home inspection (that you paid for) to a certain extent indemnifies the realtors from any liability. How old is that water heater? Is that A/C unit the right size for this square footage home? How old is the wiring in this house? Is the electrical panel up to date? How long does it take for hot water to actually materialize after you turn on the faucet in each bathroom/sink? If the previous owners were cheap, or looking to flip the property, they're not likely to have purchased quality stuff. If they lived in the home for a long time, they may have purchased higher quality stuff...15 years ago. Our house went through a flipper, so we have a newer A/C unit....that's about 1/4 the size it should be for our home.

If you plan on having kids, ask about the school districts. Don't rely upon the listing agent to have any useful info. Actually, I found that if the home was located in a good school district, the listing agent would usually include that info online. If it wasn't as highly regarded a school district, they'd feign ignorance.

Once you buy, remember to check on property taxes. If it's near tax time, that may be included in your escrow. But if not, then you're responsible for their payment, yourself. Our tax bill got sent to the previous owners' out-of-state address. We never received it. But, as property values were declining at that time, we actually received a rebate check. I never imagined that we'd get a rebate check if we actually owed the city money. But the three offices that handle property taxation in LA don't communicate. So we were late on our first payment and were docked a 10% ($500) fine.

Get a feel yourself for comps. Don't rely upon the realtor. They may rather make a quick sale (guaranteed income) than negotiate a lower price on your behalf (and risk losing the whole deal).

When we purchased our home, we got what I thought was a decent interest rate. I didn't think rates would drop much further at that time. So we bought points to lower it even further. Well, hindsight being 20:20, interest rates did drop and we refinanced. In the end, the paying of points up front (our gamble) didn't pay off. We would have been better off with the higher rate up front and refinancing.

I'm sure I'll think of other stuff later on. Good luck and congrats!

[GWN7]

Talk to the Colorado 914 group. They will be able to tell you all about the town and areas around it.

[Gogar]

I don't know the answers to any of your questions, but my only gut reaction was:

Please don't consider doing $0 down.

If you must, make sure to do the math about:

What's your interest rate
Is it variable
How much is your PMI

What is the break even time between sucking it up now and putting some money down versus doing a $0 down and paying a higher rate and paying PMI etc.

Cheers!

[Scott R]

Welcome to Colorado!

[Laneco]

When moving to a new area, I would strongly recommend renting for a while before committing to buying.

angela

[72doug2,2S]

put 20% down. Nice area!

[foxpaws]

Originally Posted by Laneco

When moving to a new area, I would strongly recommend renting for a while before committing to buying.

angela

Excellent advice, especially if you are buying around the Boulder area (Erie)...

Rent for 6 months - talk a lot to your co-workers - get agent recommendations, area recommendations, etc from them. Do lots and lots of driving around on weekends - get the 'lay of the land'.

And welcome to Colorado - one of the best gosh darn places on earth!

[dennis in se pa]

"When moving to a new area, I would strongly recommend renting for a while before committing to buying."

Absolutely. Save yourself from making a $300,000 mistake.

When you do buy filter through the agents who, as mentioned above, are working for you as a buyer's agent but still have their own best interests at heart. Real estate agents are like most people. No better nor worse. Most will be looking out for themselves before you. Talk to enough until you find one you trust.

Good luck.

[Jim Richards]

When you do get around to buying, I recommend using Redfin real estate agents for your purchase. Our experience buying our house in SoCal was excellent, head and shoulders above working with agents from the traditional real estate companies. Good luck in CO.

A Better Way to Buy Your Home | Redfin

[john70t]

Originally Posted by Laneco

When moving to a new area, I would strongly recommend renting for a while before committing to buying.

I second this, and all the advice here.

Before signing in blood:
You should already be researching Zillow for long-term trends, and Trulia for comps.
You should compare tax rate$.
You should know the average prices of every area, and what is to be considered 'high' or 'low' for a basic starter home.
You should know all attributes and detriments in each neighborhood.
You should walk around an area at night and feel comfortable.
You should experience the rush hour commute from each area. Some really really suck.
You should make sure potential rental rates are much more than bank payments.
You shouldn't reveal any unnecessary information to Realtors when looking. They are not your friend.

1). Make charts and practice sample amortization tables.
It is an investment first, which you'll use in the meantime.
The money is made (not lost) when you purchase.

2). Practice looking together on weekends, for kicks.
Talk to people in coffee shops. You might discover a lot.

3). Let 'That Perfect House' get sold without you. Over and over.
Stick to your price point. There will always be another one. Don't ever fall in love.

[RWebb]

the bigger questions are:

1. what is the fire hazard where you buy (fires will get worse in the future)
2. how good is the water supply (it will also get worse)

mtg. rates will rise so don't wait too long

[911boost]

Welcome to CO.

I drive the front range all the time, are you deadset on Erie?

I also agree about the down payment. I rented for a litte over a year after my divorce, and the reason I do not have the 911 Turbo anymore is due to using the money from the sale to go towards the 20% down on my house purchase in Fort Collins.

Good luck!

Bill

[ODDJOB UNO]

i'd buy a home RIGHT NEXT DOOR TO GOGAR!

that is if yer musically gifted/inclined like him. if not....................you'll probably have to build a BABY POO YELLOW BLOCK WALL!

that gogar plays a mean/wicked keyboard and steel git-tar.

[72doug2,2S]

Watch out for 2007 Chinese drywall.

[Brando]

Wow everyone - thanks for the input. Oddjob, I don't think I'll be living next to GOGAR. I doubt I can keep any property I get up to his expectations

My wife and I are still in CA - trying to line up an official move before year's end (or at least have a CO address for all intents and purposes).

We're looking at properties every night. We've refined our price range to $200-$300k and are looking all over:

- Broomfield
- Erie
- Federal Heights
- Frederick
- Lafayette
- Longmont
- Northglen
- Westminster

Unfortunately moving from SoCal to CO will pretty much drain any and all savings we have. We're expecting the cost to be $9000 (including our $3k lease-break fee - thanks Irvine Company Extortionists). If we can save that we'll be in a much better place. We have to look at getting 4 vehicles + all our crap out there.

I've been renting for 10 years, the last 2.5 living with my (now) wife. We're spending almost $1900/month here. If we can get into a decent $0-down loan and just scrounge together any 'earnest money' needed we can do fine. We would just put the difference of what we were paying in rent towards the principle.

I've seen the term "PMI" used all over - what exactly is that? I know there's the Principle (price of the home), Interest (profit for the bank), APR and PMI, then taxes, then HOAs (if necessary). So many other items I'm probably missing.

There's also a big difference between New vs. Pre-Owned when it comes to homes. MANY good examples on the market in the 5-10 year-old range. New homes have a lot of 'premiums' attached to the price tag but the added benefits of everything being new and additions can be tacked on easily.

Pre-Owned (as stated above) run risks of items being old/worn and inspection costs, appraisal costs, escrow, etc etc etc. It makes me wonder why someone would buy a used home for these prices? My wife and I have the added benefit of keeping our 'California' levels of pay when moving here which helps our buying power.

TLDR version:
- We have good credit (740s-760s)
- We have $0 saved up
- We have goo debt:income ratio (20%)
- No idea what hidden costs there are
- We really like the area.
- Timeline is Q1.5 2014

[Scott R]

65 and sunny as usual today.

[Noah930]

PMI is what you pay when you don't have 20% down. It's basically insurance against you backing out of your mortgage responsibility. You effectively don't get anything out of PMI--it doesn't pay down the principle or interest. It's there for the lender for its protection against you defaulting on the house.

I second the above recommendations to: 1) rent for 6-12 months before you buy. 2) Use redfin to at least guide you in your property search. They also can work for you as your buyer's agent, but will kick back to you something like 1.5% of the purchase price at the conclusion of the deal. But you don't have to use their agency services to use their website's search features. I thought it was the best property search listing service out there. When you find a house you're serious about, see if propertyshark.com lists CO properties. It gives super detailed info on that specific property (from a taxation/public registry perspective).

[Hetmann]

Try to buy a house on higher ground.