Your first home search may be different than you anticipate
If you’re pursuing financial stability as you purchase your first home, we should consider this purchase with a financial lens. It does not mean we have to get fancy with numbers. You do not need to understand the alphabet soup of mortgages, retirement accounts, and tax code! What it does mean is that we will think about more than, “Can you afford this number today.” Learn more about my framework for finding a great first-time home, below.
Room for improvement
This might feel a little sad. Stick with me, though, ok? Your first house might not look like what you want it to look like, at least not yet. This is actually a good thing! Great first homes are often not updated!
Typically speaking, houses with unusual paint, outdated kitchens, dated wallpaper, or worn out carpet will turn some buyers away. With fewer buyers interested in the house, there is less competition! Less competition typically means a lower price. YAY, right?
If you’re willing to either DIY or hire folks to complete the work, you get to make it look how YOU want it to look, and you’ll likely save money doing it. Win, win.
If this worries you, know that I am going to be right there alongside you! I can help estimate how hard various undertakings might be. We spent years fixing up our first house with more confidence than competence, so I can give you my take on things ; )
We may luck out and find a great first home that already looks the way you like, and at a price you can afford.
HOAs: the good, the bad, and the expensive
In my family, our rule has always been no HOAs. For us, this makes great sense! I have both been a farmer and a professional landscaper, so I don’t want to be told what to do with my yard. Plus, I like keeping chickens and HOAs in Longmont don’t allow them. In other words: HOAs don’t serve my goals, so they’re an extra expense that does not suit me.
However, if the idea of weeding on the weekends crushes your soul, you might like an HOA. HOAs have a strong influence on how a neighborhood ages over time. They bring conformity to houses and landscaping. Some even take care of the landscaping for you!
In this case: conformity can be a great thing! Conformity protects your investment. You have certainty that neighborhood yards are kept nicely, there are no cars on blocks, and no neighbors will paint their homes a garish color. Excellent.
When you go to sell that house, the conformity gives buyers the same piece of mind. They know the general look and feel of the neighborhood will not change. The HOA might also maintain neighborhood ammenities, like parks, trails, and pools. In communities of attached homes (like a condo or townhome), they often also maintain the exterior of the building and common landscaping.
They achieve these things by collecting dues (generally monthly), and using the fees to benefit the neighborhood. I have seen fees as low as $50/ year, and as high as $460/month. Yep, in Longmont. These fees are in addition to your mortgage.
When we look for your first home we can talk about what makes sense for your goals.
House hacking in Northern Colorado
House hacking (it’s a silly name, if you ask me) is increasingly common in Northern Colorado. As prices went up, so did people’s creativity. House hacking refers to sharing your house, and thus your housing expenses, with others who live there. It can take a multitude of forms: renting out a room, building a small apartment in your basement, or even buying something with two units.
One of my first-time buyers who was exceptionally financially savvy bought a split-level home. These layouts are especially popular with house hackers because they live as two very separate spaces of similar size. This particular buyer rents a room upstairs to his best friend, and rented the basement (nearly 800 sq ft) to another couple. Though the income he gets from his renters does not fully cover his mortgage, his housing costs are minimal!
House hacking can also be buying with a friend. You can buy an entire duplex in Longmont for about $550,000. Imagine you and a friend wanted to buy homes, but could not afford to do so alone. It’s possible to purchase a duplex with two people or families!
Lifestyle and commuting
People commonly think of their budget as money in silos for different objectives. You might have pots of money for your home, your groceries, and medical expenses. That makes sense for spending objectives, but I don’t think it makes sense for planning purposes.
If you think of your budget as a bunch of separate things, you forget that they are all related! The expenses of commuting make a great example for this.
If you’ve read this far, you know I aim for frugality in most things. What I don’t aim for is cheap. I am for intentional spending with the big picture in mind. Case in point: a first-time buyer I recently worked with wanted to spend less-than $400,000 on his home. He works in Loveland and has an excellent, stable career.
His hobby is working on BIG trucks, the same big American trucks that he drives on a daily basis. We found him a half-duplex in Milliken, about 30 miles from his office, that he really liked. It was less than he wanted to spend–YAY!
Except not “yay.” I didn’t think his logic made economic sense. While he would have paid a little less in housing costs, he would have spent 40 minutes twice a day commuting. That’s a lot of time in a week to spend on something you don’t like. Plus, it’s expensive: I showed him how he would have spent over $350/month just in direct commuting expenses.
It’s the one time, to my memory, I have encouraged a buyer to spend more on housing! He ended up buying a small single-family home one mile from his office, and only spent another $25,000 (or about $250 per month, a net savings in total expenses and he got a chunk of time back!). What’s more, single-family houses appreciate faster than attached homes, so he’s growing his wealth more quickly as a result.
Remember: It’s likely not your forever home
It’s possible that your first home will be your forever home (and that’s great when it is)! However, statistically that is not the case. In fact, most homeowners only own their home for 8 years.
Knowing that you might only own your home for 5-10 years might clarify your timeline. Your timeline might then help you decide what kind of mortgage to secure. While most people stick with conventional 30-year mortgages, it can be less costly to get a 30-year mortgage with a defined rate for only the first 7 years. Again, don’t worry: you don’t have to make any decisions now, and one of my trusted lenders will help you decide what is right for you.
I'm Libby Earthman. I specialize in helping first-time buyers and sellers pursue financial security on the Northern Front Range.
825 Delaware Ave, Suite 208
Longmont, CO 80501