Life at Altitude with Danielle Connor
I’ve been thinking over and over lately , “What part can I play in helping our community amid the ongoing housing crisis in Summit County? ” It feels like my responsibility as someone with influence in our real estate market to come up with creative solutions that will contribute to “keeping Summit County local”. Our locals are the thread that holds us together, and we have to continue to evolve together. After a brainstorm with Anne and knowledgeable local lender, Rob Kingsbury of KeyBank, the following emerged. Read on . . .
What’s our big idea?
Out of our brainstorming came an idea- home prices are rising, and with 30-40% appreciation last year, buying hasn’t gotten easier- and neither has renting. That doesn’t change the fact that Summit County locals want to stay, so why not stay together? While one person might have $350,000 buying power alone, two people could have $700,000. That could be a two bedroom condo in Summit, or a house in Kremmling, Leadville, Alma or Fairplay. Rather those two people paying rent to someone else, wouldn’t it make sense to pay that money toward a mortgage where they could gain equity? (Then, could you imagine the buying power of three people?)
Our thinking is this- within a community so tight knit, there have to be individuals that have business or personal relationships with someone else that also wants to stay in the county. If this sounds like you, let us help you be in control of your own future here, rather than holding out hope that you will be able to rent season after season. Let us share info with you about Summit County’s housing programs already in place, and how to prepare to buy a home.
How can our team help unrelated parties purchase together?
Before I was in real estate, the idea of buying with someone I worked with or was friends with would definitely have sounded intimidating, though I see now how beneficial it can be! Our team has guided numerous sets of unrelated parties through the purchase of second homes and investments. We want to show you how to do that, too! When two (or more) parties take title in these scenarios, they do so as “Tenants in Common”. There can be any number of tenants in common, and interests do not have to be equal, but must add to 100%. This interest can be transferred in the future by sale, gift, will, or inheritance. At the same time, each co-owner also has the right to mortgage, sell, or otherwise transfer their own interest in the property without the consent of the other owners. Taking title in this way is what would grant unrelated parties protection in their purchase, and I really think this opens doors for our community. Read more about Tenants in Common and Joint Tenancy from Land Title Guarantee Company HERE.
If/when there comes a time when someone wants to move on, there are options for doing so. The party that wants to leave could decide to rent out their room and still be responsible for mortgage payments, all parties could decide to sell and split the proceeds, or the party leaving can be bought out by other parties. All parties can benefit when it’s time to part ways.
What if I need down payment assistance?
Summit County has a number of resources for first time homebuyers, the first being Down Payment Assistance programs. One important distinction about down payment assistance, Rob with KeyBank noted, is that it actually comes in the form of a second loan with its own interest rate (2-3% for Summit options). It is a really common misconception that the assistance just comes in the form of a check- oftentimes, these are not grants and funds are required to be paid back.
The Summit Combined Housing Authority (SCHA) currently has (2) assistance programs- the Housing Development Grant Program and the Summit Revolving Loan Fund Loan Program. Each program has income requirements, meaning that borrowers must fall within certain income thresholds, as well as meeting certain property requirements and primary mortgage requirements. Through each of these options, homebuyers can obtain up to $25,000 of assistance. Those falling within the 80-100% AMI range can also ask SCHA about additional programs they might have available that aren’t listed on the website.
The Colorado Housing and Finance Authority (CHFA) also offers down payment assistance (and some coverage of closing costs) in an amount up to 3% of purchase price with no payback required for borrowers that are using one of their first mortgage loans. They also offer an option to receive assistance as a second mortgage loan in an amount up to 4% of the purchase price.
How do I prepare to buy a house?
First time homebuyers can register for the SCHA and CHFA required class HERE. This is mandatory if you’d like to receive assistance- take this (months) before you’re planning to buy. Other than taking the class, lenders will recommend checking out the following to prepare:
1. What does your debt-to-income (DTI) ratio look like? Compare your pre-tax income with any minimum required monthly debts like rent, student loans, car payments, credit cards, and auto loans- anything regular, required, and recurring. Do not include utilities, health insurance, entertainment, food, clothing, and transportation costs.
2. What is your credit score? Do you need to work on building your credit? To obtain a conventional loan, you will need to have a score of 620 or higher. If you need to build credit, consider some of these options: request higher credit limits on existing credit cards, pay your debts on time, dispute any errors in your credit report, get a department store credit card if you don’t qualify for one from a bank, look into a secured credit card, and look up how to pay your balances strategically. Don’t close any credit cards until after you purchase your home!
3. Pay your taxes and make sure you can access your returns! Have those W2’s on hand, and it’s a good idea to have two years’ tax returns on hand.
4. Rob says- reach out to local lenders early, and choose the one you feel most comfortable with. Using a local lender will give you a huge leg up, because they know our market inside and out. If two offers on a home are comparable, seller’s agents will advise their clients to choose the offer with a local lender. Also, lenders will help you with all of the items mentioned above. They can guide you through figuring out your DTI, building your credit, and will advise you as to what documents they need to get moving!
5. Get pre-qualified. I can’t stress enough how important this is- having a pre-qualification letter from your lender will show sellers that a lender is vouching for your ability to make a purchase.
If you are looking to buy with someone else, work together to get this all done and hold one another accountable to accomplishing your home-buying goal, and reach out to our team if you have questions along the way. We’d love to partner with you in your journey!