Buying a Home in Colorado

The Colorado Real Estate market is hot, hot, hot but buying a home in Colorado isn’t impossible! Many people are moving to Colorado for various reasons. Some for jobs, some for the Mountain adventures, some for our four distinct seasons, some for the marijuana… Whatever the reasons may be everybody agrees that Colorado is a great place to be! The significant & swift influx of people has caused inventory to drop rapidly which in turn has caused the prices of homes to increase. Although the home prices are increasing rapidly, the dream of homeownership is still obtainable for many with the right guidance. I am here to guide you! This page will give you a bit of information about the home buying process here in Colorado. Are you ready to start your home buying journey? Feel free to call or text me anytime!

Congratulations on taking a step toward home ownership! Whether you have purchased a home or two or if this is your first home buying experience, I will be there to educate you on your journey. I will reduce the stress that can be related to home ownership by educating you and I pledge to give you world class customer service to make this experience enjoyable, as it should be. I will guide you through finding your perfect home, the loan process, writing the contracts, closing day, and for any assistance I may be for years to come. 

WHY YOU NEED A REALTOR WHEN BUYING A HOME IN COLORADO

As a licensed professional Realtor, I provide much more than the service of helping you find your ideal home. I am an expert negotiator with other agents as well as provide financial guidance for my clients, and I have superb market education around local neighborhoods within the Colorado Front Range area. I am a member of NAR – National Association of Realtors and also SMDRA –South Metro Denver Association of Realtors and I also belong to CAR – Colorado Association of Realtors. Nikki Montano a professional Realtor® is your best resource when buying your home. 

LET ME BE YOUR GUIDE  

  • Realtors understand the housing market inside and out and can help you avoid the “wild goose chase.” 
  • We can help you with any home, even if it is listed elsewhere, or if it is being sold directly by the owner, or if it is a newly built home. 
  • Realtors know the best lenders in the area and can help you understand the importance of being pre-qualified for a mortgage. I can also discuss down payments, closing costs, and monthly payment options that suit you. 
  • We can be an excellent source for both general and specific information about the community such as schools, churches, shopping, and transportation – plus tips on home inspections and pricing. 
  • Realtors are experienced at presenting your offer to the homeowner and can help you through the process of negotiating the best price. I bring objectivity to the buying transaction, and I can point out the advantages and the disadvantages of a particular property. 
  • We can save you endless amounts of time, money, and frustration.

DEFINITIONS OF RELATIONSHIPS

Colorado wants you to know who works for whom when buying a home in Colorado

SELLER AGENCY 
• Agent represents best interests of the seller 
• Agent owes the seller fiduciary duties 
• Agent must give potential buyers all material facts so the buyer can make an educated
decision 
• Seller signs listing agreement contract with Agent 
BUYER AGENCY 
• Agent represents best interests of the buyer 
• Agent owes the buyer fiduciary duties 
• Agent must give the seller financial facts regarding the buyer so the seller can make an
educated decision 
• Agent must give the buyer all material facts known 
• Buyer signs Buyer Agreement 
• Agent negotiates on behalf of the buyer 
TRANSACTION BROKER 
• Agent represents both the buyer and the seller equally 
• Agent’s objective is to get a mutually satisfactory agreement among all parties 
• Agent gives all options to the buyer and the seller 
• All parties have confidentiality. Agent may do nothing to the detriment of either the buyer or
the seller 
• Both the buyer and the seller have a right to legal counsel. 

THE ADVANTAGES OF A BUYER AGENCY AGREEMENT WHEN BUYING A HOME IN COLORADO

YOUR INTERESTS ARE PROFESSIONALLY REPRESENTED 

Enlisting the services of Nikki Montano, a professional Buyer’s Agent is similar to using an accountant to help you with your taxes, a doctor to help you with your health care, or a mechanic to help you with your car. If you had the time to devote to learning everything about accounting, medicine, and automotive mechanics, you could do these services yourself. But who has the time? This is why you allow other professionals to help you in their specific areas of expertise. I will take care of the hassles of everyday real estate transactions for you and let you concentrate on your full-time job, while I do our job. I will guide you through the home-buying process and exclusively represent your interests as I find a home, present your contract offer, negotiate, and close on your home! 

YOU GET A PERSONAL SPECIALIST WHO KNOWS YOU’RE NEEDS 

Just as your accountant, doctor, and mechanic understand your specific needs, Nikki gets to know your real estate needs and concerns. This type of relationship is built through open communication at all times. Nikki will save you a lot of time by providing you all the details about any home before you see it. In addition, your Buyer’s Agent will listen to your feedback and concerns about each home. 

WHAT IS THE BUYER’S AGENCY AGREEMENT? 

You are hiring a personal representative who, by law, must represent your best interests to the best of his/her ability. With Nikki Montano, you get a professional Realtor devoted to protecting your needs and to helping you make one of the most important investment decisions of your life, buying a home in Colorado! 

THE HOME-BUYING PROCESS 

Ok so now you have decided to hire a Realtor, now what? This gives you a run down of the timeline of a transaction when buying a home in Colorado.

Talk To Your Realtor to Determine Your Needs & WantsMost people know what they are looking for in a home. I will help you determine your needs versus your wants in a new home.
Obtain Financial Pre-Approval Via A Reputable LenderYou MUST have a lender pre-approval letter to even write offers and to know how much you can afford. I have a couple trusted lenders I can refer you to to get pre-approved.1-7 Days after application
Go Shopping For Your New HomeOnce you have filled out your lending application & received your pre-approval it is time to shop for your new home! Our current market can make this very frustrating. Hang in there! What is meant to be will be.1-100 days – This will depend on many factors
Write An Offer to PurchaseOur current market guarantees you will probably write many different offers on a few different homes. Each offer will be structured differently to the specific home you are offering on.1-100 days
Negotiations and Counter Offers, If AnyOnce we have a Seller interested in your offer, the negotiating begins. You may or may not receive a counter offer from the Seller. In our current market a Counter offer can be a great thing!1-3 days after a submitted offer
Contract AcceptanceOnce the negotiations have finished the Sellers will sign the offer or you will sign the Counter offer. Once this happens you will be officially under contract. We will have many deadlines to meet and I will keep you on track for them all.1-3 days after a submitted offer
Earnest MoneyTypically within 3 days after Acceptance your Earnest money will be due. Generally earnest money is 1% of a sale price. These funds are held by the Title company.3 days after contract acceptance
Schedule InspectionsInspections are important! Generally they must happen within the first week of contract acceptance. At minimum you should have a general inspection. Depending on the general, you may also want to have a sewer inspection, a roof inspection, an environmental inspection and so on. There are many types of inspections and all are beneficial, but not all are necessary in every home. A general inspector can help you decide if the home should have further inspections. If you find something you can’t live with or that the Seller refuses to fix, you have the right to walk away from the transaction and keep your earnest money.1-7 days after contract acceptance
The Title CompanyThe Title company will look for a liens and encumbrances on the property and insure you receive a free & clear title to your new home. They take care of all the financial aspects of the transaction.1 day after contract acceptance. The Title company begins working on the transaction the day after contract acceptance.
Finalize The Loan RequirementsThe lender you choose will most likely ask you for several more documents, letters of explanations, updated paystubs, etc to complete your loan approval. Time is of the essence with these documents. It can be frustrating sometimes, but the only reason they are asking for them is because they are essential for your approval. You won’t get the home without them.2-3 Weeks after contract acceptance
AppraisalThe appraisal is ordered by the lender and is an additional cost to you as a buyer. The lender wants to make sure the home is worth what they are lending you.2-3 weeks after contract acceptance
Closing DayYeah you did it!!! Closing day is here. This is the day you sign all your final loan and Real Estate documents officially making you a homeowner.30 days after contract acceptance
Taking Posession Of Your New HomeSometimes Sellers ask for a Post Closing Occupancy or a Rent-Back, so possession does not always take place the day of closing. Possession day is the day you actually get your keys and get to move in. This day is negotiated at the time of contract acceptance.30-90 days after contract acceptance

PRE-QUALIFICATION AND PRE-APPROVAL 

Many buyers apply for a loan and obtain approval before they find the home they want to buy. Why? When buying a home in Colorado,

Pre-qualifying will help you in the following ways: 

1. Generally, interest rates are locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make. 

2. You won’t waste time considering homes you can’t afford. 

Pre-approval will help you in the following ways: 

1. A seller may choose to make concessions if they know that your financing is secured. You are like a cash buyer, and this may make your offer more competitive. 

2. You can select the best loan package without being under pressure. 

HOW MUCH HOME CAN YOU AFFORD? 

There are three key factors to consider: 

1. The down payment and closing costs. 

2. Your ability to qualify for a mortgage and the monthly payment. 

3. Homeowner Association (HOA) fees, taxes, insurance, mortgage insurance, special assessments. 

DOWN PAYMENT REQUIREMENTS:

Most (but not all) loans today require a down payment of at least 3% to 5%, depending on the type and terms of the loan. If you can pay 20% or more down, you can usually eliminate mortgage insurance. There are a number of down payment assistance programs available to help with both the down payment and with closing costs. 

CLOSING COSTS:

You will be required to pay fees for loan processing and other closing costs. These fees must be paid in full at the final settlement, unless you are able to include them in your financing. Total closing costs can range from 2% to 5% of your mortgage loan, and include the loan origination fee, processing costs, pre-paid fees, title insurance, and escrow fees. The seller will sometimes agree to pay some or all of these fees. 

QUALIFYING FOR THE MORTGAGE:

Most lenders will allow your monthly payment range to be between 28% and 38% of your gross monthly income, depending on your other monthly obligations. Your mortgage payment to the lender includes the following items: 

  • The principal on the loan (P) 
  • The interest on the loan (I) 
  • Property taxes (T) 
  • The homeowner’s insurance (I) 
  • Private mortgage insurance (PMI) 

Your total monthly PITI and all debts (from installments to revolving charge accounts) should not exceed 38% to 43% of your gross monthly income. The following are the key factors that determine your ability to secure a home loan: Credit Report, Assets, Income, and Property Value. 

“THE TEN RULES NOT TO BREAK WHEN BUYING A HOME IN COLORADO” 

It is not unusual for a mortgage company to check your credit the morning of closing, just to make sure your credit status hasn’t changed. So once you have applied for a Real Estate Loan, breaking any of these 10 “commandments” may result in the loss of the loan and your new home, and possibly your earnest money. After closing, these “commandments” will no longer apply. 

1. DO NOT change jobs, become self-employed, or quit your job. 

2. DO NOT buy a boat, car, motorcycle, truck, or van or you may be living in it! 

3. DO NOT use charge cards excessively or let your accounts fall behind. 

4. DO NOT spend money you have set aside for closing. 

5. DO NOT omit debts or liabilities from your loan application. 

6. DO NOT buy furniture, televisions, or any other “big ticket” items. 

7. DO NOT originate any inquiries into your credit, or open new lines of credit. 

8. DO NOT make large deposits without first checking with your loan officer. 

9. DO NOT change bank accounts. 

10. DO NOT co-sign a loan for anyone

THE NEIGHBORHOOD 

When buying a home in Colorado, there are many factors to consider when selecting a neighborhood that is right for you. Below are just a few of the many factors — You may think of others that are important to you. Please write them on your Home Search Criteria form so they are not forgotten. Neighborhoods have characteristic personalities designed to best suit single people, growing families, two career couples, or retirees. Investigate to determine if the neighborhood matches your lifestyle and personality. 

Scout out the Neighborhood

  • It is important that you scout the neighborhood and talk to neighbors. 
  • Drive through the entire neighborhood at different times of the day during the week and on weekends. 
  • Look carefully at how well other homes in the area are being maintained. Do the homes need paint? Are the yards well cared for? Are the parked cars in good condition? Does this look like a neighborhood where you would want to live? 

Neighborhood Factors to Consider 

  • Look for things like access to major highways and shopping. 
  • Listen for noise created by commerce, roads, railways, public areas, schools, etc. 
  • Smell the air for adjacent commerce or agriculture. 
  • Check with local civic, police, fire, and school officials to find information about the area. 
  • Research things like expansive soils and water restrictions. 
  • Look at traffic patterns around the area during different times of the day and drive from the area to work 
  • Is the neighborhood near parks, churches, recreation centers, shopping, theaters, restaurants, public transportation, schools, etc.? 
  • Does the neighborhood belong to a Homeowner’s Association? What are the monthly/yearly fees? What do they cover? 

• Are there covenants? Do you want to live in a neighborhood with covenants? (Increased property value vs. restrictions on what you can and can’t do. Covenants also restrict what your neighbor can and can’t do.) 

MAKING AN OFFER 

Once you have found the home you wish to purchase, you will need to determine what offer you are willing to make for the home. It is important to remember that the more competition there is for the home, the higher the offer should be – sometimes even exceeding the asking price. Be realistic. Make an offer you want the other party to sign, or at least counter. You will also need to decide if you are going to pay the closing costs out of your pocket, or if you need the seller to help pay them. I will also need to work closely with your lender to determine how to structure the financial aspect of the offer. 

To communicate your interest in purchasing a home, I will present the listing agent with a written offer. When the seller accepts and signs an offer it becomes a legal contract. When you write an offer, you should be prepared to pay an earnest money deposit. This is to guarantee that your intention is to purchase the property. This earnest money will only be returned to you under certain circumstances. This could be based on the inspection, inability to secure affordable insurance, or your inability to secure adequate financing. In those cases, I must notify the seller in writing by certain deadlines. If you decide for any other reason that you do not want to go through with the purchase, you will likely lose your earnest money. 

After I present your offer to the listing agent it will either be accepted, rejected, or the seller will make a counter offer. In today’s market, it is common for offers to be outbid and for clients to make multiple offers on multiple homes. Don’t get discouraged, I will find your perfect home! When an offer is accepted, this is when I will negotiate the final price and terms of the contract. Asking the seller to fix certain items in the home after the inspection is a separate negotiation. 

The purchase agreement/contract constitutes your offer to buy and once accepted by the seller, becomes a valid, legal contract. For this reason, it is important to understand what is written on the offer to purchase. I will go over the contract with you before you sign. 

BEHIND THE SCENES 

WHAT HAPPENS NEXT WHEN BUYING A HOME IN COLORADO? 

Now that you have decided to buy your home in Colorado, what happens between now and the time you legally own the home? A Title Company may handle the following items. NOTE: In different parts of the country, attorneys, lenders, escrow companies and other persons who are independent of title companies perform some or all of these functions. 

Earnest Money

Once the contract is signed, the Earnest Money check is delivered to the Title Company or the listing brokerage. The check will be cashed and placed in an escrow account until closing. The earnest money can be used by the lender toward down payment or closing costs. 

Finalize Loan Application

Once you submit final loan application, it is subject to a credit check, an appraisal, and sometimes a survey of the property. 

Tax Check

What taxes are owed on the property? The Title Company contacts the county assessor. Title Search – Copies of documents are gathered from various public records: deeds, deeds of trust, various assessments and matters of probate, heir ship, divorce, bankruptcy, and liens are addressed. 

Examination

Verification of the legal Owner and debts owed. 

Document Preparation

Appropriate forms are prepared for conveyance and settlement by the title company. 

Settlement

An Escrow Officer with the title company oversees the closing of the transaction: seller signs the deed, you sign a new mortgage, the old loan is paid off, and the new loan is established. Seller, Realtors, attorneys, surveyors, Title Company, and other service providers for the parties are paid. Title insurance policies will then be issued to you and your lender. 

Title Insurance

There are two types of title insurance provided on a transaction: 

  • Coverage that protects the lender for the amount of the mortgage 
  • Coverage that protects your equity in the property, OEC – Owners Extended Coverage 

Title examiners search public records to determine who has owned any piece of property and these records may not reflect irregularities in the property. 

Some examples: an unknown, but rightful heir to the property shows up after the sale to claim ownership; conflicts arise over a will from a deceased owner; a land survey showing the boundaries of your property is incorrect; one or more unrecorded liens on the property. 

For a one-time charge at closing, title insurance will safeguard you against problems, including those events an exhaustive search will not reveal. 

HOME INSPECTION 

If you are buying a home in Colorado, I highly recommend that you have a professional home inspector conduct a thorough inspection. I can help you find a suitable inspector based on your needs and budget. The inspection will include the following: 

  • Visual Roof 
  • Siding, trim, driveway, sidewalk 
  • Appliances 
  • Plumbing 
  • Electrical (Watch out for FPE electrical panels and aluminum wiring) 
  • Furnace, water heater, and air conditioning 
  • Basement floor, walls, crawl space 
  • Attic 
  • Foundation, drainage, sump pit and pump 
  • General Structure 
  • Radon Test 
  • Sewer Scope 
  • Environmental Test 

The inspection is not designed to criticize every minor problem or defect in the home. It is intended to report on major damage or serious problems that require repair. Should serious problems be indicated, the inspector will recommend that a structural engineer or some other professional inspect it as well. After the inspection, if there are major problems that you do not want to deal with, I can terminate the contract at that point and get your earnest money back. 

Normally, the inspector will not “fail” a home. He will report on any and all areas of the home that are in need of repair or maintenance and make recommendations. I will then determine which items to include in the Inspection Notice that we will ask the seller to address. Sellers are generally agreeable to make most of the repairs indicated in the Inspection Notice, as they are anxious to sell the home. 

The seller may be willing to make some or all repairs, they may offer a credit for completion of repairs, or they may not be willing to fix anything. This is the second round of negotiations. If the seller is not willing to address the issues, you can decide if you are willing to make the repairs, or if you want to back out of the contract. In addition to the home inspection, you may wish to have separate tests conducted for Radon Gas, Environmental Conditions and/or Sewer Lines. 

I recommend that you be present during the inspection. This is to your advantage. You will learn more about your home during the inspection than at any other time. In addition to learning about any problems, you will learn how and where to shut off the water, electricity, furnace, how to replace filters, etc. You will be able to clearly understand the inspection report, and know exactly which areas need attention. Plus, you can get answers to many questions, get tips for maintenance, and get a lot of good information that will help you once you move into your new home. 

WHAT IS A REAL ESTATE CLOSING? 

WHAT IS A REAL ESTATE CLOSING? 

A “closing” is where you and I meet with some or all of the following individuals: the Seller, the Seller’s agent, a representative from the lending institution, and a representative from the title company, in order to transfer the property title to you, when you are buying a home in Colorado. The purchase agreement or contract you signed describes the property, states the purchase price and terms, sets forth the method of payment, and usually names the date and place where the closing or actual transfer of the property title and keys will occur.

If financing the property, your lender will require you to sign a document, usually a promissory note, as evidence that you are personally responsible for repaying the loan. You will also sign a mortgage or deed of trust on the property as security to the lender for the loan. The mortgage or deed of trust gives the lender the right to sell the property if you fail to make the payments. At closing, you will be required to pay all fees and closing costs in the form of “guaranteed funds” such as a Cashier’s Check, or by having funds wired to the title company. Your lender will notify you of the exact amount required at closing. Bring your driver’s license. You have to show a photo ID to prove you are who you say you are. 

WHAT IS AN ESCROW ACCOUNT? 

An escrow account is a neutral depository held by your lender for funds that will be used to pay expenses incurred by the property, such as property taxes, special assessments, property insurance, or mortgage insurance premiums which fall due in the future. You will pay up front 3-6 months of the amounts needed as part of the closing costs, and then you will pay one-twelfth of the estimated annual amount of these bills each month with your regular mortgage payment. When the bills fall due, the lender pays them from the special escrow account. HOA fees are separate and are to be paid by you monthly, quarterly, or annually, depending on the HOA. Some HOAs also require a “working capital” fund that will be part of your closing costs. This amount should be refunded to you when you sell the home.