A Beginner’s Guide to the Housing Market

The exciting prospect of being a homeowner is within your grasp! As you shop, use this guide to the housing market to learn common lingo so you can talk the talk with real estate agents, home builders, financial institutions, and sellers. 

 

We consulted with our housing experts and the National Association of REALTORS®, to discover these top terms that home buyers should understand when preparing to buy a house in Colorado this year.

What Type of House Will You Buy?

In the housing market, you have two choices: a resale home that was previously lived in and new construction. As you decide which makes sense for you, you’ll discover the path to buying is a bit different. 

If you choose new construction, you’ll work closely with a builder’s sales team for both home specifications and financing, more than a real estate agent. This route may take a bit longer to go from dreams to keys-in-hand, but you get to customize everything from countertop finishes to interior colors before you move in.

If you select a resale home, or new construction that’s already complete and on the market, you can usually move in a bit faster and will work closely with a real estate agent. With this option comes the possibility of tackling remodeling projects to make your new home fit your specific needs and desires.

Both are wonderful options for becoming a homeowner. As you decide which path to take, consider speaking with a variety of home builders and real estate agents to get inspired.

Let’s Talk About Money

Before buying a home, identify how you’re going to finance it. If you have been saving up and can pay cash outright, kudos to you! The majority of homeowners, however, get a home loan.

 

  • Mortgage: This is the official term for a loan used to buy property.
  • Adjustable-rate mortgage (ARM): These loans entice you with a low-interest rate, but don’t be fooled. They flex with the market, meaning your monthly payments may increase, which makes it harder to budget your monthly expenses.
  • Fixed-rate mortgage: This is the most common type of loan. The interest rate stays the same for the duration of the loan.
  • Annual percentage rate (APR): Speaking of interest, when you finalize your mortgage, you will be assigned an APR. This is the percentage you will pay to your lender for the loan.
  • Amortization: This is the breakdown of your monthly payments, usually over a 15- or 30-year time span. Think of it as a schedule to know what your payments will be each month.
  • Mortgage broker: This is the middle-person who brings potential homeowners (known as borrowers) to lenders and assists with the mortgage application process.

Learning about Buyers and Sellers

Although you’re entering the market as a buyer, it’s good to know what sellers are thinking and doing in the real estate process too. Buying a home is truly a tango between the two parties to make a successful sale happen!

 

  • Buyer’s market: This is when there are more homes for sale than buyers out and about shopping. This is a good thing for buyers because you have more options, and sellers are ready to make a sale to interested parties.
  • Seller’s market: This is when the housing market is in favor of the seller. There are more buyers than properties available, so sellers know they can ask top dollar for their homes.
  • A balanced market: This is the transitional period between a buyer’s and seller’s market where the inventory of homes is nearly equal to the number of potential home buyers looking for property.
  • Appraisal: Once you find a home you like, ask to see the appraisal documents to learn the value of the home based on an unbiased estimate from a third-party. This will help you understand if the asking price is in line with what the home is worth.
  • Assessment: This is the value of the home determined by your city’s assessor office. It’s used to calculate how much in property taxes you will pay in your community.
  • Home inspection: When the seller puts their home on the market, they will likely conduct a home inspection via a third-party to ensure the property’s core structures (foundation, heating system, roof, etc.) are in good shape. Lenders look at this document too to be sure you’re buying a sound home, and their money is being invested wisely.
  • Home closing: This is the legal meeting between the buyers and the sellers where the property officially changes hands. Closing costs usually range from 2 to 5 percent of the home’s purchase price.

If you’re ready to learn more about homes in the Denver area, check out what’s available in Copperleaf from KB Home, Richmond American Homes, and D.R. Horton Homes. Here’s to your new adventure in home ownership!