Buying a house in Denver
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If you’ve been thinking about buying a house in Denver, 2023 may be your lucky year. After more than two years of pandemic-fueled insanity, prices in the Mile High City are beginning to come back to sea level. In fact, according to a recent forecast by real estate company Knock, Denver may well shift into buyer’s-market territory by July 2023. Read on for everything you need to know to plant permanent roots in Denver.
Steps to buying a home in Denver
Why are you buying a house in Denver?
As you start your Denver home search, think about what you want out of the purchase.
Are you single and looking for a starter home? Consider a condo or townhouse, which have a median price of $430,000 — $160,000 cheaper than a single-family home, which averages $590,000, according to data from the Colorado Association of Realtors (CAR).
Are you looking for a large home with a backyard, located in a great school district for your kids? Narrow down your search to certain areas in Denver, with an eye toward local prices. For example, the median single-family home price is $615,250 in Jefferson County according to CAR — not cheap, certainly, but more affordable than Douglas County, where it’s $680,000.
No matter where you’re thinking about living, don’t forget to think about where you’ll be working, too. The sprawling Denver metro area can lead to long commutes.
Find a Denver house for your budget
How much house can you afford in Denver? Your credit score and debt-to-income ratio will both play major roles in determining your budget. Simply put, the higher your credit score, the lower your interest rate will likely be — and the more you’ll save on your monthly payments.
If you can take steps to improve your credit score before applying for a mortgage, you will be in much better shape. For example, consider the math on a 30-year fixed-rate mortgage for a $600,000 home with a 20 percent down payment:
- 5.5 percent interest rate: Monthly principal and interest payment of $2,725
- 6.5 percent interest rate: Monthly principal and interest payment of $3,033
You’ll also want to focus on saving as much money as possible for a down payment. The average down payment on a home in Colorado was more than $83,000 in the spring of 2022. While you don’t necessarily need to put down that much, a bigger down payment will make a huge difference in your long-term finances: The less you borrow, the less interest you’ll pay.
Ultimately, the best way to determine how much you can spend is to get preapproved for a mortgage. You’ll get an idea of how much a bank is willing to loan you, and you’ll be able to use the preapproval letter to show a seller that you’re a highly qualified buyer who is ready to get a deal done.
Help for first-time buyers
Homebuying help is available, particularly if you are buying for the first time. Colorado offers first-time homebuyer programs to help make financing less overwhelming. And if you earn less than $176,700 per year and have a credit score of at least 640, you may be able to get money to contribute to a down payment through the metroDPA program. It’s a deferred, forgivable loan, meaning you won’t have to pay it back if you stay in the home for at least three years.
Find and hire a local real estate agent
It’s certainly possible to buy a house without a Realtor, but it’s wiser to have an expert real estate agent by your side to guide you through the process. Real estate transactions can be complicated and confusing, and an agent helps by finding homes that meet your needs, negotiating on your behalf, connecting you with additional experts (like home inspectors and attorneys) and more.
Start your home search and make an offer
With your preapproval in hand and an agent at your side, you’ll be able to start looking at properties you can confidently afford. If you’re really looking for a bargain, explore nearby suburbs like Aurora, Derby and Ken Caryl.
When you find a place you love, your agent will provide expertise on the most important piece of the process: how much to offer. This is your initial starting point, and it’s important to avoid making that first number too big. Homes in Denver are selling for less than their listing price right now — about 2 percent less, according to CAR. That’s a huge reversal from the peak of the pandemic, when buyers wound up in bidding wars that drove prices as high as the mountains. Have a firm idea in mind of how high you’re willing to go to make a home yours, and be ready to walk away if the negotiation exceeds that threshold.
There are other important considerations to protect yourself in what will be one of the most expensive transactions of your entire life. Your agent can help you work in contingencies, such as the ability to back out based on specific potential problems. You’ll also want to think carefully about your closing timeline. For example, you may want to close and move in as quickly as possible, but that can be tough for a seller who needs to find a new home, too.
Making an offer is by no means the end of the work you’ll need to do to buy a house in Denver. Once you go to contract, you’ll need to hire a home inspector to identify any possible issues with the property. If there are major problems, you might be able to re-negotiate the price. For example, if it’s clear that you’ll need to replace the roof soon, will the seller drop the sale price, offer a credit or cover a portion of your closing costs?
If you’re borrowing money to purchase the home, an appraisal will be a necessity. The lender must verify that the house is worth at least the amount they’re loaning you. If the appraisal is lower than the purchase price, you’ll need to either get the seller to budge or come up with the funds to cover the difference.
Should I buy a house in Denver?
The housing market in Denver has been hot for a long time. The lifestyle here offers easy access to the outdoors, a great cultural scene, lots of employment opportunities and a fairly affordable cost of living — outside of housing costs, that is.
Denver’s home prices are on the high side, to be sure, but long-term property value prospects look very promising. RenoFi projects that home prices in the Mile High City will make it the 11th-most-expensive metro area in the country by 2030 (beating out Austin, Miami, Phoenix and plenty of other hotspots). So, whenever you’re ready to sell down the road, you’ll thank yourself for your decision to buy today.
Tips for buying a house in Denver
- Look at multiple lenders: When you’re looking to buy a house in Denver, you’re going to compare loads of different listings and neighborhoods. Take that same approach when it comes to finding the right financing and compare a range of lenders in Colorado. All lenders will have a different mix of fees, rates and closing timelines, so find an option that best fits your needs.
- Lock in your rate: Mortgage rates are constantly moving up and down. If you find one that looks especially attractive, lock it in to avoid increases as the pendulum swings back and forth.
- Understand your power: While Denver has made headlines recently as a challenging market for buyers, things are beginning to shift in a more balanced direction. This is no longer a whatever-the-seller-wants-goes city. As a buyer, you have more leverage than before, so don’t be afraid to use it.
- Cast a wide net: If Denver prices are simply out of reach for your budget, keep in mind that there are other booming areas nearby worth looking at. Median single-family homes in Weld County (home to towns like Greeley) stood at $475,000 at the end of 2022 — $135,000 cheaper than Denver. And Larimer County (home to Fort Collins) also offers lower-priced living.
Bottom line on buying a home in Denver
Over the past few years, trying to buy a home in Denver has felt like staring up at a mountaintop. However, things are starting to look brighter for buyers. With your finances in good shape and the right real estate agent on your side, you can blaze a trail to becoming a Denver homeowner.
This year is a better time to try to buy a house in Denver than 2022 was. According to projections from real estate company Knock, the metro area will see a huge jump in inventory this year and begin to favor buyers by the summer. While prices are still on the high side, Redfin data shows that homes are now selling for slightly less than their list price — a big change from before the pandemic began — and more sellers are dropping their prices.
If you have excellent credit, you may be able to qualify for a conventional loan that will let you make a down payment of just 3 percent of the purchase price. Based on the median sale price in Denver of $590,000, that adds up to a down payment of $17,700. Make sure to budget for closing costs, too, which typically come out to 0.7 percent of the purchase price, or $4,130 on a $590,000 home.
Home prices are beginning to fall all over the country. In Denver, it’s shifting incrementally — in December 2022, the median sale price of a single-family home was $610,000, $10,000 cheaper than one year earlier. In January 2023, the median price is $590,000, according to the Colorado Association of Realtors. While that’s lower than December, it’s actually 2.6 percent higher than January of 2022.