RENTING RUT

Eliminate barriers to homeownership

By Hunter Harrell

he Southwest Colorado housing market is still hot.

Regionally, the increased demand and low interest rates raised the median price of single-family homes here by 20.5% from $478,500 in 2020 to $576,750 this year. According to the Durango Area Association of Realtors reports, more people working remotely and relocating from larger cities continues to contribute to the thriving real estate market.

For Four Corners renters, the lack of inventory and high demand means more barriers to entering homeownership – not to mention that rent costs in Colorado increased 9.5% year-over-year. Many renters typically spend more than 50% of their income on housing and utilities, though experts recommend spending no more than 30% of gross income on housing.

According to a report published by the nonprofit organization National Low Income Housing Coalition, Colorado residents must work 72 hours at the minimum wage to afford (spending less than 30% of gross income) rent in a one-bedroom space. Those that want to limit work hours to 40 each week must earn at least $22.19 an hour

Tfor a one-bedroom space or $27.50 to afford a twobedroom space. Of course, buying a home is a big step financially. With the rising cost of living, saving for a down payment and securing the appropriate financing can be the most difficult part as rent costs rise. Luckily, there are several steps every person can take to prevent themselves from being stuck in the renting rut. Review finances

Property is a huge expense, so it is often difficult to estimate what people can afford without diving into the dirty financial details.

Gather W-2s, 1099s, proof of assets, copies of monthly bank statements and two years of tax returns. Tally all outstanding debts, check your credit score, and review available savings to better understand your current financial standing. Improve credit scores by paying off high balances or building a stable credit history. Address debts

The next step is to address any outstanding debts to reduce future financial stress. Paying off debts with the highest interest first will free up financial resources for other expenses. It also helps raise your credit score by lowering your debtto-income ratio. Because debt settlements will appear on a credit report, it is always a good idea to pay these dues before pursuing a loan. Set a new budget

Compare current monthly expenses, then draft an example of what monthly spending might look like after purchasing a home. Practice living on the new budget to determine what to spend on a monthly mortgage payment. Don’t forget to work in the extra costs that come with owning a home, such as utilities, property taxes and insurance as well as potential repair and maintenance fees.

Consider performing a personal expense audit to identify unnecessary spending. Pausing a monthly subscription, ordering smaller portions at restaurants and brewing coffee at home are easy ways to begin saving money. Place the funds into a savings account for a down payment. Work with a lender

Before looking for homes, remember to find a lender. Compare banks, credit unions and other independent lenders to get the best deal on rates, fees and terms. Nearly one-third of homebuyers who receive multiple quotes were able to negotiate lower interest rates. For most buyers to ensure the purchasing process goes smoothly, securing a preapproval for a mortgage loan is key. Sellers are often hesitant to accept an offer that comes without a pre-approval. Find a real estate agent

Finally, while current renters may want to do some house hunting on their own terms, connecting with a local real estate agent can help potential buyers identify prospective homes. Not only do agents work to understand the buyer’s needs, they often provide valuable advice on topics that buyers might not consider. Some examples include local insight into crime activity, school districts, HOA covenants and even insurance risks associated with the location of the property.

For most buyers, the decision to purchase property isn’t always easy. After all, there are both risks and rewards associated with homeownership. While finances are usually the primary concern, residents that rent must consider if they are ready to earn equity and settle in one location. However, buyers eager to invest in their own slice of paradise in Southwest Colorado can take several steps to prepare for the financial commitment. Fortunately, working together with local industry professionals can simplify the process for both buyers and sellers.