10 Tips to Buy Real Estate Without Breaking Your Budget

If you want to buy a home, but aren’t sure if your budget can handle soaring real estate prices of the number one real estate market in the country (*Ahem* Denver), there is some hope. There are things you can do to stretch your buying power and some creative ways you can get in your ideal home. With the help of your real estate agent and these 10 tips you can become a savvy homebuyer without breaking your budget.

1. Get pre-approved for your home loan.

Unless you are a cash buyer you will need to determine exactly how much you can afford to spend on a home. Getting pre-approved will help you define your search parameters, the most important of which is price range. You will also get a good indication of your down payment requirements and interest rate options. You may be able to afford more than you think!

Fortunately, getting pre-approved is not as scary as it sounds and there are ways to choose the best home loan for you. The pre-approval process is typically a quick and easy activity. Simply put, fill out a loan application with a trusted Lender and go through the process of pre-approval to obtain your “Lender Letter”.

Most lenders even have an online application that can get you pre-approved and on your way to house-hunting in minutes!

In fact, you can apply online right now with our amazingly fantastic preferred Lender, Miguel Sandoval, of Eagle Home Mortgage: apply.eaglehm.com/miguelsandoval

Besides the benefit of knowing what you can afford, having a Lender Letter is pretty much required these days. The Denver market is so hot that sellers have their pick of strong offers so if you wait to find the home of your dreams before talking to a

lender, you may find yourself scrambling to get pre-approved while someone else’s offer is being accepted!

2. Explore creative financing options. There are more than you think! During the home loan pre-approval process, ask about ways to get creative with your financing. For instance, did you know there are down payment assistance programs that offer GRANTS to homebuyers? And, in case you are unaware, grants do not need to be paid back, which equates to….FREE MONEY. For instance, you may have heard of the most well-known program, CHFA (http://www.chfainfo.com), but there are some far lesser known programs that may be an even better fit for some.

There are also some common options like first and second mortgage combinations and additional help for first-time homebuyers that might help

you afford more funding. For some, interest-only home mortgages make sense. I could go on and on but your Lender can fill you in on all the fine details and

help you determine the best option for you. There are plenty of opportunities aside from the few I’ve mentioned so don’t give up.

And remember, if you have a good Lender you won’t have to ask them to get creative, they just will.

3. Consider selling your existing home first, if possible. I wouldn’t suggest this in a slow market but right now in Denver, most homes will be Under Contract in a matter of days (even hours) after being entered into the MLS. With this being the status quo, having the ability to make a cash offer is a great advantage.

Although selling your existing home before finding new real estate to buy can be a little nerve wracking, any inconvenience will be offset by your ability to make an offer with cash-in-hand. As I’ve mentioned already, sellers have their pick of strong offers so your best chance at getting an offer to buy accepted is to come forward with cash. Cash deals are more appealing to sellers because in general they close faster and are far less risky because there is no chance of the contract falling through due to financing contingencies put in place by a Lender.

Try to avoid asking for a contingency to sell your existing home. Contingencies are great options, in some markets but these kinds of requests

do not tend to put you ahead of competing offers when negotiating so this is not recommended unless absolutely necessary. This tactic should only be applied in cooler markets, and for those few Denver homes that sit on the MLS for some reason

or another (there are some, believe it or not). A lot of times because of the lack of high quality photographs.

Overall, having your financing in order and your bags packed will give you the advantage in this fiercely competitive market.

4. Look for vacant real estate. The days of rampant foreclosures and short sales are long gone. However, there will always be circumstances when sellers are forced to move out of their home, leaving it vacant before it’s sold. Job relocations, family obligations, and other random events often force families to set out prematurely. In fact, I see homes come on the MLS every single day that have been left vacant for one reason or another.

Whatever the reason, vacancy is a motivating factor for sellers. They are often paying a mortgage on the home, and may be paying a mortgage on a

new home as well. In any case, a vacant home could be just the deal for a savvy homebuyer.

Keep in mind, the longer a house stays empty, the greater your negotiating power will be. You can’t always tell which homes are vacant based on the pictures so you will have to ask your real estate broker to verify. And don’t be afraid to submit an offer lower offer than the asking price dictates; sellers who are interested may extend a counteroffer.

5. Consider cosmetic fixers. Some of my most memorable deals fall into this category. I love the hunt for the “diamond in the rough” and buyers who are adventurous enough to go on this journey with me. The quest can be exhausting in a limited inventory market but the financial benefits usually make it all worthwhile.

Most people shy away from the cosmetically neglected or time-forgotten dwellings. Don’t get me wrong, it’s definitely nice to walk into a move-in ready home and start unpacking but in most cases of cosmetic fixes you just need a little imagination to see past the dingy paint, and the raggedy, stained carpet.

I know what you’re thinking, you don’t want to deal with the hassle of pre-move-in work and maybe you’re not handy. Like, at all. But you don’t have to be a general contractor to purchase a home that needs some minor TLC. If you know someone who’s handy with a paintbrush, a toolset and gardening equipment, you can accomplish a lot.

A property that lacks curb appeal needs minor handiwork or the yard overhauled could end up being the home of your dreams for a price you can afford. You just need to look beyond the ho-hum to see the potential of a cosmetic fixer.

6. Buy a home that’s a major remodel project. Not everyone wants to (or can) purchase a home that needs a complete overhaul so if you’re able, you can find some amazing deals in this category.

It’s no secret that fix-and-flip investors snatch up “fixer-uppers” and resell them a couple months later for considerable profit. Oftentimes, homebuyers

find themselves outbid by the investor base; however, there are many instances these homes need too much work for the investor to make a profit.

Find a fixer-upper on my website

[www.denverfixeruppers.com]

These homes, although they are not good candidates for flips, still make financial sense for a homebuyer who intends to live in the home. You can buy at a discount and make improvements the home over time, as finances allow. As an added benefit, the improvements you make will certainly increase your property value and if the time comes when you want to sell, you will be in great shape! On regular basis you can always check the value of your home online

7. Don’t discount bank foreclosures.

I’ve already mentioned that there are far fewer foreclosures than in recent years. While that’s great news for our economy, it’s not super news for the budget-

conscious or restricted homebuyer. The good news is there are still opportunities out there for the [very] patient homebuyer.

Your real estate broker can easily parse listings to find available foreclosures. The U.S. Department of Housing and Urban Development can also be an excellent resource for foreclosed properties, or set up an automated search to have HUD homes emailed directly to you as they become available on most real estate brokers’ websites. (Ahem….like mine! www.evolutionhomerealestate.com). Because HUD houses are sold at market value, your best bet will be homes that need cosmetic work or even major repair. Repeat numbers 6 & 7…

8. Land with a “tiny” home.

This is probably the most fun option I can think of and I’m dying to find a buyer who wants to do this. There is land out there and if you’re into the tiny house movement, you can be living large in no time…see what I did there?

In all seriousness, sometimes, to buy a home on a budget, you need to really think outside the box. Tiny homes are popping up everywhere (even right here in our own backyard – talk to Greg at Rocky Mountain Tiny Houses www.rockymountaintinyhouses.com) and they are far less expensive than a 3-bedroom home in the suburbs for obvious reasons.

You can find a fantastic (relatively inexpensive) piece of land in an outlying area (or an infill lot within city limits) where you can make your minimalistic dreams a reality. And this is the part I really love…as your budget increases, you can add onto these tiny homes, making a tiny multi-functional compound all your own.

P.S. For the less petite-inclined, this concept also applies to manufactured and/or mobile homes.

The bottom line is, if you can’t find the perfect opportunity, create it!

9. Buy an older or smaller home.

Older homes that haven’t been remodeled or updated are typically priced less than newer construction and don’t tend to create buyer bidding wars. If you can enjoy life in an older and smaller home in a neighborhood or suburb off the beaten path, this could be your ticket to real estate ownership.

You can secure a reasonable mortgage payment and address the avocado-colored appliances over time.

It’s always recommended to get a home inspection prior to purchase, but it’s especially important in an older home. In other words, older homes can be a bargain but be sure to verify it’s not priced low due to defects.

10. Buy the cheapest house in the best neighborhood.

If you’re like most, you may have your heart set on a specific (and expensive) neighborhood. Maybe it’s the top-notch schools, or perhaps it’s the close proximity to downtown, Washington Park, or superb mountain biking trails.

There are plenty of amazing neighborhoods in Denver and the surrounding cities, so my first suggestion is to give some of these other places a chance. Don’t eliminate based on neighborhood without going to see the home; a lot has changed around town, and it’s changing still. In fact, as we speak, luxury condos are being built where my favorite gas station used to be. Changes. All. The. Time. Unless you are a UPS driver, you probably don’t get a city-wide tour as often as you would need to keep up with all the changes.

If you are simply unwilling to consider an alternative location, a budget-savvy buyer will look for the least expensive home for sale in the neighborhood. If you’re not in a hurry, you can even play the waiting game to see what properties come on the market during the winter months when real estate is considerably less expensive (Fall-Winter).

Buying real estate without breaking your budget will require research and compromise, persistence, and patience. And patience. Did I mention you will need patience to find a bargain in this market? And at some point you may need a reality check. Your real estate broker might need to politely redirect you to more suitable search criteria for your budget but don’t give up. There are probably options and if there are no options, create one.