By Duane Duggan, Realtor, RE/MAX of Boulder
Article published in Daily Camera’s At Home section on Friday, Aug 23, 2019
It’s never been easy to be a first-time homebuyer, especially in Boulder County. It was just as tough 40 years ago, but the numbers were entirely different back then. When I started selling real estate in Boulder in 1978, Baseline Subdivision houses east of 30th Street and north of Baseline Road were selling for $27,000. I remember showing one to a buyer who said it was crazy for these houses to be $27,000, and there was no chance they would ever break $30,000. It seemed like so much money then, nearly insurmountable for a first-time homebuyer. Moreover, mortgage interest rates continued to climb through the mid-1980s, all the way up to 16%. Now in 2019, those same Baseline Subdivision homes are selling for over $600,000, which is the entry-level price for single-family homes in the city of Boulder. The good news is that interest rates are staying steady at a historically low rate of around 4%.
In Boulder County, real estate booms have lasted around five years at a time over the last 40 years. The recent boom starting in 2012 has run for seven years. Currently, the median-income wage- earner can’t afford the median-priced house. When that happens, a real estate market cools down a bit, inventories start to rise, and there is less competition for homes when they first come on the market – which is what we’re seeing in the housing market now. Again, it is never easy to be a first-time homebuyer, but now is the time to pay attention and get rolling to purchase a home. Interest rates are low and financing programs are available with lower than 20% down payment required.
First-time buyers usually have the challenge of coming up with the down payment to make a first purchase. In the city of Boulder, loan limits can make it even tougher due to the amount of down payment required. However, in the rest of Boulder County and into Weld and Larimer counties, home values, loan limits, and loan programs are such that they could be the perfect combination to make that first home purchase.
- Federal Housing Administration (FHA) loans – FHA loans have long been the “go- to” loan program for lower down payments and credit scores. In fact, if the price of a home and the loan limits line up, a homebuyer can be approved with a 3.5% down payment. Nevertheless, the current loan limit for Boulder County is $626,750, so it barely scratches the surface to be helpful within the city limits of Boulder since the least expensive single-family home is in the $600,000 range. The median-priced home in Boulder at the end of the second quarter 2019 was $990,000. In Longmont, however, where the median-priced home is $435,000, there is plenty of room for FHA financing. Mortgage insurance is required for FHA loans, which allows the lender to accept more risk. The disadvantage to the homebuyer is the additional expense of the mortgage insurance.
- Colorado Housing Finance Authority (CHFA) – CHFA and its lender partners have helped over 100,000 homebuyers in Colorado achieve homeownership. In fact, CHFA provides homebuyer education classes, helping first-time homebuyers learn about the home-buying process. CHFA programs generally mirror the FHA programs because the current loan limit of $484,350 makes it tough to afford a first home in most of Boulder County.
- Department of Veterans Affairs (VA) – Lacking a local military base, Boulder County has never been a huge market for veterans. However, we do have veterans that choose Boulder County as their home and they should compare VA financing opportunities to other options. Typically, VA loans are generous in terms of no down payment and tend to be more lenient in terms of qualifying. The current VA loan limit for Boulder County is $626,750, but contact your lending professional for possible exceptions to that limit.
- Department of Agriculture (USDA) – Years ago, we used to call these farm home loans. In fact, these loan programs target rural areas. When I started selling real estate in 1978, even Lafayette and Louisville still qualified for these loans. No longer! Today, you can still apply for these loans for homes in rural areas of Boulder, Weld, and Larimer counties. Even though the name implies that the property is a farm, this is not necessarily the case. Some of their programs allow 100% financing. There are geographic limits, income limits, and loan limits that can make it difficult to qualify, but it might be worthwhile to contact your lending professional to see if you do.
- Conventional-Fannie Mae and Freddie Mac – Conventional loans, widely known as Fannie Mae and Freddie Mac loans, provide a mortgage base to the housing industry. These institutions created by Congress provide liquidity to banks and mortgage companies that make loans to finance the purchase of homes. For first- time homebuyers, loans with 3% down are available as long as the homebuyer qualifies for the monthly payment. In Boulder County, the loan limit is $626,750.
- Home Renovation Loans – Maybe all the fix and flip TV shows make renovating a home a common desire for first-time homebuyers in order to save money by buying a fix-up property. There are a few loan programs out there if this is the direction you want to go. FHA 203(k) loans are designed for homebuyers who would like to rehabilitate a home. This FHA loan bases the value on the improved value of the property and thereby finances the improvements within the first mortgage. This program still comes with a 3.5% down payment. Fannie Mae and Freddie Mac also offer home renovation loans that will include the cost of improvements within the first mortgage and a 3% down payment.
- Teachers, Police Officers, and Firefighters – There are loan programs specifically designed to help teachers, police officers, and firefighters buy their first home. The benefits could include low down payment and a more attractive interest rate.
- Down Payment Assistance – CHFA, mentioned above, offers down payment assistant grants that do not need to be repaid, if you qualify. CHFA even offers second mortgage loan programs that can contribute to your down payment when you are using a CHFA first mortgage loan program.The State of Colorado has created the First-Time Homebuyer Savings Account program. A maximum of $50,000 can be contributed to it and can grow to $150,000 without accruing state income tax. This homebuyer savings account allows people other than a homebuyer to contribute to the fund, such as family members or even wedding guests!
*Check with local municipalities for other possible down payment assistance programs.
In summary, now is the time to get on track to buy your first home! Check with your REALTOR® and mortgage lender to come up with a plan that works for you.
About Duane Duggan:
Duane Duggan has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life.
For questions, email Duane at DuaneDuggan@BoulderCo.com or call 303-441-5611.