How to Buy Your First Home

Krista Reuther: Hello. Today, we’re discussing buying your first home, a significant milestone often seen as the American dream. However, many feel this dream is unattainable. My survey of renters revealed that 48.4 percent aiming to purchase a home within the next two years felt they could not. Additionally, 63.6 percent reported having less than $5,000 in savings. We’ll explore what information is necessary for this purchase and how to save for it. Joining us are experts in the field: realtors Joe and Kathryn.

Joe Seehusen: Thank you. I’m Joe Seehusen, and this is my wife, Kathryn. We work with Colorado Home Realty and have nine years of experience selling real estate in the Denver metro area, specializing in assisting first-time homebuyers. We’re delighted to be here and appreciate you joining us.

Krista Reuther: It’s wonderful to have them here. We’ll start with the basics of saving for a down payment and then dive deeper into their expert contributions. We’re here to guide you through buying your first home.

Key Takeaways for First-Time Home Buyers

By the end of today’s session, you will learn several key aspects of buying your first home:

1. How to save for your down payment – We acknowledge that accumulating a down payment can be daunting, especially in the current economy. We will simplify the process to make saving as easy as possible.
2. Understanding financing – I’ll provide information on the financing options available, so you can begin discussions with lenders about what suits you best.
3. The role of real estate agents – We’ll discuss when it’s time to involve a real estate agent and introduce some exceptional realtors who can make a difference in your home-buying journey.
4. House hacking – For those new to the term, we’ll explain how someone else can pay your mortgage. We will go over what you need to consider and understand before entering into this type of arrangement.

Now, let’s dive into the financial aspects.

Understanding Down Payments and Savings

Krista Reuther: When considering how much to save for a down payment, opinions vary. Let’s take a quick poll.

[Initiates poll]

The poll will gauge opinions on the percentage of the property price that should be saved for a down payment. Although I’m not certain if the poll is visible on-screen, I trust that Jonathan, who is managing this in the background, has launched it. The poll addresses the down payment as a percentage of the property price, and so far, we see suggestions like 20 percent in the chat, with multiple participants, including Alyssa, endorsing this figure. It’s noteworthy that while we have different opinions, some are more accurate than others—which we’ll delve into during the financing section.

For now, let’s conclude that the right down payment amount depends on your individual goals. Let’s acknowledge the challenge of saving for a down payment because it does involve accumulating a substantial sum. From the poll, most participants lean towards the idea that 20 percent is the ideal target. Considering the average house might cost around $600,000—Joe and Kathryn, do correct me if I’m mistaken, as it might be higher—a 20 percent down payment is indeed a significant amount.

Analyzing Average Down Payments and Time to Save

To provide some perspective on what to expect on your home-buying journey, let’s look at the average down payment. Typically, it hovers around 6 percent for first-time buyers. However, it’s important to consider that this figure includes individuals who pay 20 percent down and those who put down nothing at all, resulting in what can be a skewed average. But overall, the data shows that Americans, on average, are paying 6 percent for a down payment as first-time home buyers. It’s noteworthy that almost one-third of these buyers report that saving for the down payment is the most challenging step in the entire home purchasing process.

Strategies for Saving for a Down Payment

Once you establish a clear strategy, you can begin to tackle the challenge of saving for a down payment. Though you might still feel some anxiety, breaking down the process into manageable steps can help alleviate those worries. It’s crucial to be realistic and understand that, on average, it takes around nine years to save for a down payment. This timeframe can seem overwhelming, but it’s important to remember that time will pass regardless. By setting a goal and working consistently toward it, you can make good use of the time. When those nine years are up, you’ll have the opportunity to become a homeowner rather than continuing as a renter.

Regional Differences in Saving for Down Payments

Having a pleasant living arrangement with a great landlord can be a nice experience, but if your goal is to purchase a property, it’s crucial to utilize the time you have to save effectively. The average figure I mentioned, the 6 percent down payment, applies nationally. However, the cost of saving for a down payment will vary significantly depending on where you live.

Looking at the provided graph, it’s evident that Hawaii presents the longest saving period, requiring nearly 18 and a half years to save for a down payment. This contrasts sharply with Iowa, where the average saving time is just over five years, a timeframe that many might find more manageable.

Therefore, it’s wise to start your homebuying research by considering average home prices in different locations, particularly if they are more affordable than in your current area. Of course, not everyone is willing or able to move out of state, and that’s perfectly fine. If you prefer to stay put, just ensure that you take the higher costs into account when planning your savings strategy. Remember, achieving your goal of owning a home is still very possible, with the right planning and dedication.

Time as a Factor in Saving for Homeownership

It’s important to keep in mind that time will pass regardless of what we do. I encourage you to remember this as you work toward your goal of buying a home. Use the passing time to your advantage by setting clear goals and consistently saving toward your down payment.

Debunking Myths about Down Payments

Let’s tackle some true and false questions to clarify common misconceptions about down payments:

• True or False: You must pay 20 percent of the property price as a down payment.
  • Answer: False. It depends. Some first-time homebuyer programs allow for much lower down payments, and in certain cases, such as with loans from the Veterans Association (or Veteran Affairs), the down payment could be as low as 0 percent. More typically, first-time homebuyers might pay between 3 percent and 3.5 percent.
• True or False: The down payment is the only cost that stands between you and owning property.
  • Answer: False. Unfortunately, other costs are involved in purchasing a home, such as closing costs and possibly private mortgage insurance (PMI), depending on the loan terms. It’s important to calculate these additional fees when saving for a home.
• Is it better to pay private mortgage insurance (PMI) instead of making a large down payment?
  • Answer: Not necessarily. It’s not a straight yes or no—it depends on your financial situation and loan terms. PMI can add to the cost of your loan over time, so it might be more beneficial to make a larger down payment if possible. Consulting with professionals like Joe and Kathryn and other lenders can help you decide what’s best for your circumstances.

Calculating the Full Picture of Homeownership Costs

It’s crucial to have a complete understanding of the various costs you need to consider when saving to buy a home. Apart from the down payment, which we have estimated at 3 percent here as a starting point, you should also plan for closing costs which typically range from 2 to 5 percent of the property’s value.

Additionally, I strongly advise that before purchasing property, you should have an emergency fund equivalent to 3-6 months of expenses. This precaution will help you avoid becoming house-poor, a situation where you’ve invested everything into purchasing your home and are left with no savings for unexpected expenses, potentially leading to reliance on credit cards and high-interest debt.

Finally, remember that your real estate agents and lenders are part of your support team. Some closing costs can be negotiable, so maintaining open communication and transparency with your team is key. We’ll discuss this in more detail later, but for now, keep in mind the importance of treating your real estate agents and lenders as valuable partners throughout this process.

Example Scenario: Calculating Costs with Real Numbers

Let’s break down the numbers using a real-life scenario. Imagine you’re a first-time homebuyer eligible for an FHA (Federal Housing Administration) loan, which requires a 3.5 percent down payment. If the average family home in your market is priced at $600,000, then a 3.5 percent down payment would be $21,000. It’s advised to also save for closing costs and at least three months of expenses. When you calculate all of these factors together, you might be looking at needing to save around $56,100.

This sum can indeed seem overwhelming, particularly if it exceeds the annual income for many renters. However, this goal is achievable, especially when considering that time is on your side. Divide the total savings goal by the number of months until your target purchase date to see what you’d need to save each month. For example:

• Saving over 12 months: You would need to set aside $4,675 per month.
• Saving over 60 months (5 years): You would need to save $935 per month.

To achieve this, you can look for ways to reduce expenses or increase income and ideally, do both to accelerate your savings timeline. Be disciplined and realistic with your savings, understanding that time will pass and it’s vital to put your savings aside in a place that’s not easily accessible for non-essential spending—yes, even tempting things like a Domino’s pizza after a tough workday. Make sure to use other funds for such indulgences, keeping your savings intact and growing towards your future home.

Five Steps for Saving for a Down Payment

To effectively save for your down payment, you can follow these five steps:

1. Evaluate Your Budget: Scrutinize your current expenses to see where reductions are possible. This could involve taking on additional work, bartering services to lower costs (like offering maintenance work to reduce rent), or negotiating bills with utility companies. Though it may require time and effort, these strategies can lead to significant financial savings.
2. Research Home Prices: Start by investigating the average cost of a home in your desired location. If you’re looking at Denver, Colorado, for example, consider not just the city, but also surrounding suburbs and towns to find the best housing prices.
3. Run the Numbers: Calculate the total amount needed for the down payment, closing costs, and a minimum of three months’ worth of expenses. This will give you a clear savings target to work towards.
4. Consider High-Yield Savings Accounts: To maximize your savings, opt for an account with a higher annual yield compared to standard savings accounts. Explore offerings from local credit unions or online banks and choose the best rate available. Deposit your savings here to benefit from the higher interest rate over time.
5. Execute and Commit: Once you’ve established your savings plan, stay committed to it. Deposit your funds regularly into your chosen savings vehicle and allow them to grow with interest. When the time comes and you’ve reached your goal, be ready to use the savings for their intended purpose—purchasing your home. It will require dedication and sacrifice, but the ultimate reward of homeownership will be well worth it.

Financing Your First Home

Now we have a poll question for you: Have you contacted a lender yet? The options available in this poll are designed to understand where you stand in the process. You might have already made contact, be planning to do so soon, or maybe you’re not quite ready yet. Whatever your situation, we’re eager to hear your response.

To shed more light on this step, we’re turning to our real estate experts, Joe and Kathryn. Could you share when you think potential homebuyers should reach out to a lender in the home purchasing process? Your insights will be valuable to our attendees who are navigating this journey.

Expert Advice on Contacting a Lender

Kathryn Seehusen: Our general advice on when to contact a lender is the sooner, the better. Establishing a relationship with a mortgage professional early in the process can be incredibly advantageous. They can examine your financial situation and help you devise a plan, all without the need to immediately pull your credit or get pre-approved for a mortgage.

Joe Seehusen: Moreover, it’s important to note that you don’t need to pay anything to work with a lender. You can reach out to one right away, even if you’re not planning to buy until 2025 or beyond. A lender can provide guidance over time in areas like managing your finances, paying taxes, and building credit, all of which can contribute to securing a more favorable loan. They are an essential resource and are available for you to ask questions at any stage.

The Right Time to Contact a Lender

Krista Reuther: That’s right, it’s important not to hesitate. If you’re among the 70 percent of our respondents who haven’t yet contacted a lender, it might be time to start. And if you’re looking for referrals to find a lender, Joe and Kathryn can assist you with that. Keep an eye out for their recommendations, which we’ll also include in our follow-up email.

But what exactly are lenders looking for when deciding to approve a loan? Essentially, they want to see that you’re in great lending shape, which means:

• Having a steady income is crucial. Lenders want to see consistent and predictable cash inflow. We’ll provide more information on this, with resources to explore in your own time, which we highly recommend checking out.
• Good credit score: The higher your credit score, the better. At a minimum, aim for a score of 580. If you feel this is unattainable right now, don’t worry—there are strategies to improve your score, and we’ve linked out to resources that can help you work on this.
• Manageable debt levels: Your debt-to-income ratio (DTI) is also a key factor. This ratio helps lenders understand your financial obligations relative to your income. To calculate your DTI, sum up your monthly debt payments and divide by your gross monthly income, yielding a percentage. Ideally, aim for a DTI of 43 percent or lower, as this makes you more appealing to lenders.

Keep these factors in mind and work on them to increase your chances of getting approval for a home loan. Remember, the preparation you put in now can significantly improve your home-buying prospects in the future.

Loan Options for First-Time Home Buyers

As you’re preparing for a home loan and ensuring that your finances are in good shape with more income than debt, you should also familiarize yourself with the different types of loan options available for buying a home. Here are two of the most prevalent types of homebuying loans:

Conventional Loans: Backed by private lenders, not the government

Benefits include:

• Potentially lower interest rates compared to other loan types.
• No requirement for Private Mortgage Insurance (PMI) with a 20 percent or greater down payment.
• A variety of loan terms are available, typically 15 or 30 years for a fixed-rate mortgage, where the interest rate remains constant.

Drawbacks:

• A higher down payment is typically required.
• A higher credit score is needed for approval.

Government-Backed Loans: Insured by the government

Advantages include::

• Generally lower required credit scores.
• A smaller down payment is needed.
• More flexible underwriting standards can be beneficial for those with imperfect financial histories.

Downsides:

• Strict eligibility requirements with less room for exceptions.
• You might not qualify depending on your financial situation.

Many first-time home buyer loans are available, which can offer more accessible entry points into homeownership than conventional loans. We’ll delve into some of these government-backed loan options in the following slides, but it’s important to remember that the right loan type for you will depend on your specific needs and financial situation.

Choosing the Right Loan Type

If you’re uncertain about which loan type to pursue and you’re asking yourself which one is suited to your situation, here’s a simple rule of thumb:

• If you have lower credit or a small down payment saved up, a government-backed loan might be more appropriate for you. These loans often have lower requirements for credit scores and down payments, making them accessible to a wider range of buyers.
• – Conversely, if you have a strong credit score and you’ve managed to save up at least 20 percent for a down payment, a conventional loan may be a better fit. Conventional loans can offer benefits like better interest rates and no PMI with a significant down payment.

Remember, choosing the loan that’s right for you is akin to a “choose your own adventure” story. Your lender and real estate agent can provide tailored advice based on your financial standing, helping direct you to the loan option that aligns best with your circumstances. Work closely with them to navigate your path to homeownership.

Details on Conventional Loans

When considering conventional loans, here are some key aspects you can expect:

Fixed-Rate Loans:

• Conventional loans are typically offered with fixed interest rates.
• Common terms are 15 or 30 years, with 30-year terms being very popular among first-time homebuyers as they offer lower monthly payments spread out over a long period. It’s important to be prepared for a long-term commitment, though you can always sell or refinance the property.

Conforming Loans:

• Conforming loans meet specific guidelines set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises and not relatives you might expect at Thanksgiving. They’re major players in the mortgage market that purchase conforming loans, bundle them, and sell them on the secondary market.
• This process allows for more competitive interest rates because these loans have standardized criteria and are seen as less risky to investors.

Non-Conforming Loans:

• These do not adhere to Fannie Mae or Freddie Mac guidelines.
• This category can offer larger loan amounts, cater to lower credit scores, or finance property types that are not eligible for conforming loans.
• Examples include jumbo loans (for loan amounts exceeding conforming loan limits), ALT-A, and subprime loans.

If terms like jumbo loans, ALT-A, or subprime loans sound complex, don’t be concerned. It’s not essential to dive into these particulars at this stage. We’re focused on moving forward with the basics. However, if you have further questions about loan types, we encourage you to ask them in our survey at the end of this session, and we can provide more detailed information as needed.

Understanding Private Mortgage Insurance (PMI)

Let’s revisit PMI—Private Mortgage Insurance—which is an important concept to understand especially if you are pursuing a conventional loan with less than a 20 percent down payment. Here’s what you need to know about PMI:

• PMI is typically required for conventional loans when the down payment is less than 20 percent of the loan amount.
• The cost of PMI can range between 0.5 percent to 1 percent of your entire loan amount on an annual basis.
• It’s crucial to realize that PMI payments do not contribute to paying down your loan principal; they are a separate cost designed to protect the lender in case you default on the loan.
• After building sufficient equity in your home, often after a few years, you can request to have PMI removed, or you might consider refinancing to eliminate the need to pay PMI. Being aware of your options will allow you to potentially save money over time.

For those interested in exploring financing options or even becoming a landlord so that your tenants can help pay your mortgage, we have an e-book that will be released in the new year. This resource will dive deeper into financing options and the steps to purchasing property. Be sure to let us know if you’re interested, and we will send you a copy of the e-book at no cost.

Moving forward, let’s discuss some standard lending requirements for conventional loans as a baseline:

• Credit Score: A minimum credit score of 620 is generally needed for approval.
• Down Payment: The minimum required down payment is typically at least 3 percent.

These are just guidelines and can vary depending on the lender and other factors. Remember, each financial situation is unique, so it’s essential to consult with a lender to determine the exact requirements applicable to you.

Conventional Loan Requirements

When you’re preparing to apply for a conventional loan, there are several key factors lenders will consider to determine your eligibility:

• Reliable Income: Lenders typically want to see steady income for at least two years. Expect them to review your bank statements to verify consistent cash flow.
• Clean Credit History: A history free of recent bankruptcies or foreclosures is preferred. Lenders aim to finance borrowers who pose a minimal risk, meaning you have a track record of managing your debts responsibly.
• Local Loan Limits: The amount you can borrow is subject to limits set by the Federal Housing Finance Agency, which vary by region. In the presentation materials, there will be a link provided to check the loan limits in your area.

Keep in mind that lending requirements can vary between financial institutions. It is advisable to compare offers from at least three different lenders to ensure you’re getting the most favorable terms and rates. Don’t hesitate to shop around; doing so can make a significant difference in the loan you secure and the financial obligations you commit to.

Government-Backed Loans Overview

Having discussed conventional loans, let’s delve into government loans to give you a comprehensive overview of the options available. Here are three main types of government-backed loans, which might be especially beneficial for first-time homebuyers:

1. FHA Loans (Federal Housing Administration): These loans are well-known for being accessible to first-time homebuyers. They offer lower minimum down payments and more lenient credit requirements than conventional mortgages.
2. VA Loans (Veterans Affairs): These loans are available to eligible veterans, active duty service members, members of the National Guard, reservists, and qualifying spouses. One of the great benefits of VA loans is that they may not require a down payment at all.
3. USDA Loans (U.S. Department of Agriculture): Although less commonly utilized, USDA loans are aimed at assisting low- to middle-income buyers in designated rural areas. Like some VA loans, USDA loans may also offer the option to buy a home without a down payment.

It’s important to explore each of these loan types to determine which one aligns with your qualifications and needs. Government loans can ease the barrier to homeownership by providing terms that are not typically available with conventional loans. If you qualify, they can offer a path to buying a home with more manageable upfront costs and requirements.

Qualifications for Government-Backed Loans

When considering government loans, you’ll need to meet specific qualifications and accept certain conditions. Here’s a brief overview of the qualifications and some potential drawbacks for each government-backed loan type:

1. FHA Loans (Federal Housing Administration):

• Qualifications include a credit score of 580 or higher and a minimum down payment of 3.5 percent.
• Although the down payment is lower than a conventional loan, you will need to pay an upfront mortgage insurance premium and ongoing monthly insurance payments.

2. VA Loans (Veterans Affairs):

• A Certificate of Eligibility is required, demonstrating service qualifications such as active duty, reserve member, etc.
• You can potentially secure a loan with 0 percent down, but remember that there will still be closing costs to consider and save for.

3. USDA Loans (U.S. Department of Agriculture):

• You must meet an income cap of 115 percent of the median household income to qualify.
• Citizenship requirements apply, and the property must be your primary residence.
• One limitation is property location—USDA loans are for designated rural areas as identified on specific maps.

If you’re interested in exploring these government-backed loans further, more detailed information will be provided in the presentation deck for you to review and determine what might work for your situation.

As we look to take further steps in choosing a lender, we suggest the following:

• Use Google to search for loan types and property locations, e.g., “FHA loan in Denver.”
• Read testimonials and reviews for mortgage lenders online.
• Narrow your options to at least three mortgage lenders and request loan estimates from each one.
• Evaluate the responsiveness and customer service from these lenders; they should treat you as more than just a number.
• Don’t hesitate to ask for recommendations from friends, family, or professionals in the real estate industry, such as Joe and Kathryn, who can make referrals regardless of your location.

It’s crucial to have trust and clear communication with your lender throughout this process, so choose someone who makes you feel valued and understood.

Incorporating Realtors Into Your Home Buying Process

I’ll hand the conversation over to our expert guests, Joe and Kathryn, for their insights.

Advice from Realtors Joe and Kathryn Seehusen

Kathryn Seehusen: Hi everyone, we’re delighted to join this webinar. Having participated in many sessions geared towards first-time homebuyers and those new to real estate, I can attest that the information Krista has provided is a perfect foundation. We’re grateful to be involved.

I want to emphasize that you can’t bring a real estate agent or realtor into your process too early. If you’re seeking advice and education on the home-buying journey, know that dedicated real estate professionals love to help. They will be proud to assist you, regardless of whether you’re planning to buy within the next month, next year, or in several years. They’re eager to support and guide you every step of the way.

Joe Seehusen: Exactly, there’s no such thing as too early. We are here to help you connect with a realtor. If you’re not acquainted with one, rest assured that we have a strong referral network across the country and we’re more than willing to find a trustworthy professional in your local area.

Choosing the Right Realtor for Your Home Buying Journey

Kathryn Seehusen: As Krista mentioned, you can certainly use Google to start searching for real estate agents, but you should exercise caution. When you enter your contact information online, it can get sold quickly, so it’s best to be discreet in your approach. A more reliable method is to ask friends, family, and industry contacts for their recommendations. It’s beneficial to work with someone who comes with trusted endorsements and has proven they can deliver a positive experience.

It’s vital to find a partner who’s knowledgeable about the location where you want to reside. Your real estate agent should be someone who can clearly educate and guide you, pointing out aspects of the neighborhood or nuances in construction you might not know. They should also be up-to-date on local developments, like new parks or coffee shops, as these details can influence your decision.

Joe Seehusen: It’s equally important that you feel comfortable communicating with your agent, which is why it’s okay to ‘shop around’ if the initial interactions don’t feel right. Remember, they will be guiding you through a significant journey, so effective and responsive communication tailored to your personal needs is essential.

Kathryn Seehusen: We also recommend you ‘date neighborhoods.’ Explore different areas, visit open houses, and familiarize yourself with what’s available. Have your real estate professional send you a list of open houses within your budget—this is a great way to determine what you can afford in different locations. It also helps you to gauge floor plans, lot sizes, and home features first-hand, since online listings can be deceiving.

Good agents will be happy to accompany you on home tours, providing insights even before you’re ready to make an offer. They can ensure you’re well-informed and comfortable moving forward whenever you decide you’re ready.

Joe Seehusen: And don’t forget, we’re here as a resource too. If you have questions or need help finding an excellent agent, we’re just a reach-out away.

Krista Reuther: That’s great to know. With the follow-up and the deck, we’ll share a link to help facilitate these connections. It’s great to hear more about how to select the right agent and what to consider. Thank you for your recommendations.

Connecting with the Right Real Estate Agent

Kathryn Seehusen: Absolutely, understanding the differences between working with a single agent versus a larger team can guide your choice. If you prefer a hands-on and personal approach, a single agent may be your best bet. However, with a larger team, you experience a diverse set of specialists handling different parts of the transaction. It’s about preference and the kind of experience you’re looking for.

Concerning the status of the agent, remember that realtors are held to a code of ethics and higher standards compared to just a licensed real estate agent. Find out how involved they are in the community, which can indicate their level of commitment and engagement.

The relationship with your agent is not just transactional; it’s a potential lifelong partnership. So, ask detailed questions about their experience, communication style, availability, and how they run their business. It’s completely reasonable to inquire about these aspects to ensure they align with your needs.

Joe Seehusen: People usually start by talking to a real estate agent, as we’re often seen at the top of the home-buying hierarchy. We can link you up with various essential services, making the process smoother. A good agent will be connected and have a solid list of referrals for any home services you might need later.

Kathryn Seehusen: A great agent will not only assist you through the transaction but will also be there for you after closing, providing a reliable network of local contacts and vendors for any issues that may arise, taking care of you beyond just selling you a home.

Krista’s Take on Partnering with a Real Estate Agent

It’s crucial to recognize the value that a good real estate agent or realtor brings to the table, beyond just facilitating a purchase or sale. They can be a rich resource for connecting you to various service providers as needs arise throughout your homeownership journey. Taking the time to find an agent who matches your communication style and understands your needs will pay off in the long term, as they can assist you with various home-related matters even after you’ve moved in.

Now, let’s turn our attention to the concept of house hacking. While it’s a catchy term, house hacking is more than just a clever play on words—it’s an innovative strategy for managing your mortgage payments by renting out part of your living space. It can serve as an entry point into real estate investment by reducing your monthly expenses and potentially allowing you to accumulate funds for future investments or other financial goals.

However, house hacking requires careful consideration and planning. It’s not just about finding a tenant; there are various implications to think about, such as abiding by the terms of your loan, handling landlord responsibilities, and ensuring legal and zoning compliance.

If house hacking intrigues you, here are two important steps to take:

1. Explore Resources: Take advantage of available resources designed to guide you through the process of house hacking effectively.
2. Communication is Key: Discuss your plans with both your real estate agent and your lender early on. This is imperative if you’re planning to use a government-backed loan or any loan that might have occupancy requirements or other conditions that could be affected by house hacking.

Being upfront about considering house hacking is vital to ensure you don’t accidentally breach the terms of your mortgage. Always involve your team in these discussions so that you can navigate this process with the full support and accurate guidance of professionals.

The Concept of House Hacking

House hacking certainly presents a unique opportunity for homeownership and real estate investment. Letting your real estate agent and lender know your plans is fundamental because it will influence the type of property you look for—one that can support the goal of renting out a portion to offset your mortgage costs.

If you’re curious about house hacking and would like more in-depth information, Krista’s upcoming ebook will be a valuable resource. To receive a free copy once it’s published, simply share your email address with us (don’t worry, it won’t be displayed publicly), and we’ll ensure you get it.

Now, as promised, here’s a brief highlight of the pros and cons of house hacking:

Pros:

• Partial or full mortgage payment covered by your tenant.
• You provide housing, contributing positively to your community.
• Build equity while saving up for future investments or expenses.

Cons:

• When you house hack, you step into the role of a landlord, with specific legal and financial responsibilities.
• It’s critical to have a financial buffer if your tenant can’t pay rent to avoid potential foreclosure.
• Being a landlord involves commitment and communication, including handling tenants’ issues and upholding a legal contract.

Switching gears, let’s hear from Joe and Kathryn. One common question is about the preconceived notions first-time homebuyers often have. Could you share some insights on these misconceptions, and what advice would you give to dispel them and help new buyers approach the home buying process more informed?

Realtors on First-Time Buyer Misconceptions

Kathryn Seehusen: It’s great to dispel some common misconceptions about the home buying process. The number one thing we hear is, “This was way easier than I thought it was going to be.” Many people approach the table with the notion that the process is daunting and they’ll need to handle many things independently. However, clients are often pleasantly surprised to learn about the full extent of a real estate agent’s role, which includes helping with inspections, liaising with lenders, and managing crucial dates and deadlines.

Joe Seehusen: Our role is, in essence, to alleviate the stress from our clients. It’s all about setting clear expectations and being there for every step—inspecting the house, understanding the age of the systems, and ensuring you’re informed throughout our time together. We aim to make transactions as smooth as possible.

Kathryn Seehusen: Financial aspects can also hold misconceptions. Not everyone realizes that you don’t necessarily need to come up with all the funds on your own. Family and friends, along with down payment assistance programs, can offer support. Also, openly discussing your homeownership goals can lead to valuable advice and resources from others in your life.

Joe Seehusen: Exactly, and it’s quite common for parents to gift down payment funds to their children. We also observe many couples opting to invest in a home rather than spending on a lavish wedding.

Krista Reuther: Indeed, it’s about being open with your goals. Sharing your intentions to buy a house can sometimes result in unexpected support, like receiving a pre-inheritance gift to help with the purchase, as happened with a colleague of mine. Being vocal about your goals is essential; while not everyone can contribute financially, they might offer invaluable guidance or refer trustworthy real estate professionals.

Now, a question has come up regarding where Joe and Kathryn practice, which could be of interest to participants looking for agents in specific areas.

Realtors Joe and Kathryn’s Practice Area

Kathryn Seehusen: Our primary area of service is the Denver Metro area, including the seven surrounding counties, with a particular focus on the northwest regions near Arvada. Generally, we guide clients within the area west of I-25, ranging from Boulder to Littleton. We do occasionally venture further out, as far north as Fort Collins and as far south as Castle Rock, depending on specific circumstances and our availability at the time.

However, don’t worry if you’re looking outside these areas. We have a vast network of real estate professionals who share a similar mindset and approach, valuing genuine care over typical sales tactics. If we don’t have someone readily available in your area, we’re committed to helping you find and interview top agents to ensure you receive the best possible care and service.

Joe Seehusen: Denver is a unique place where many residents are transplants from other areas, and there’s a significant amount of mobility in and out of the city. Whether people are moving to Denver to be close to family or relocating elsewhere after some time, we’re well-connected to assist with real estate needs across the nation.

Krista Reuther: It’s great that you offer such extensive support both locally in Denver and beyond, leveraging your professional network to help clients wherever they may be. Your willingness to extend your services and resources to help others find the right agent is truly commendable.

Real Estate Agent’s Role and When to Get in Touch

Kathryn Seehusen: Regarding first-time buyers’ reflections, two main things come up. Firstly, during COVID, it was tough for first-time buyers because of the competitive market driven by low-interest rates. Buyers sometimes felt they had to settle on a home that wasn’t ideal because they were forced to rush due to the competition. Now, with a more buyer-friendly market, there’s no need to make rushed decisions, and buyers can take their time to consider their options more thoughtfully without competing against so many offers.

Another common point is the significance of the home inspection process. Some buyers express they did not pay close enough attention, leading to missed insights that may have influenced their purchase decisions. We try to be thorough, educating clients on the costs of major repairs and modifications, like replacing a roof or removing a wall. It’s essential to take the inspection seriously and consider whether the property aligns with your needs and budget after any desired changes.

Additionally, choosing the right location is vital, as it’s one detail about your home that can never be changed. In the rush of the past few years, some buyers didn’t realize the impact of smaller details, like being further from a grocery store or adding ten minutes to their commute, until after they moved in. Our approach is to have clients clearly outline their non-negotiables and hold them accountable to prevent them from making compromises that they may later regret. We urge buyers not to feel pressured, either externally or internally, into making a hasty decision, but to take their time finding the right fit.

Joe Seehusen: It’s important to find a real estate agent with whom you have a compatible communication style. If you don’t feel comfortable after initial interactions, don’t hesitate to talk to another agent. It’s crucial to work with someone attentive, who responds well to your needs, and with whom you feel at ease.

Kathryn Seehusen: We also suggest that buyers get acquainted with various neighborhoods by visiting open houses and understanding the various home features in their price range. This helps form a realistic picture of what’s available and may introduce buyers to areas they hadn’t considered.

Joe Seehusen: Remember, we’re a resource for you. So if you have any questions or need assistance finding a good agent, we’re here to help.

Krista Reuther: We will include a link in the follow-up and within the deck to help everyone connect with the right agent. Thank you both for your invaluable advice on ensuring a smooth home-buying experience. Now, let’s move on to any additional questions from the audience.