Implications for Parties When Buying a Home in Boulder

The United States and many places around the world face daily challenges and issues brought about by economic crises, which are reflected much more strongly in the real estate market. However, these problems do not always affect all areas or cities equally; there are zones where this economy has a greater impact.

One of the areas that has had to suffer the consequences of these ongoing market crises is Colorado, more markedly in the northern part of the state. There, the cost of housing has increased significantly over the years. This issue of rising prices for affordable properties has made it increasingly difficult for first-time buyers to enter the real estate market, especially in Boulder.

It is worth highlighting that in such a competitive environment as the search for an economical and affordable home, it is crucial to act as soon as possible. Although a buyer always hesitates and waits a long time to decide whether to buy a particular property, believing that perhaps a cheaper one will appear, these decisions should be made as soon as possible since it is proven that housing prices increase every day while buyers’ savings decrease.

In addition to the long time it takes a buyer to decide whether to purchase a particular house, there are other factors that are constantly fluctuating and can cause the initial value of the property to change, such as interest rates and insurance costs. For example, property taxes have skyrocketed by more than 30% in some areas of the country this year.

Although in many cities it is not mandatory for a property to have insurance, in Colorado, many homeowners have noticed that insurance premiums have increased by more than 30% due to constant claims for fire and hail damage in the area. Therefore, the fact that these two factors alone have changed means that the price of buying the same house today is significantly higher than it was a couple of years ago.

For this reason, it is always advisable that whenever there is an opportunity to buy a home or obtain a mortgage loan that is accessible to a person and their financial resources, they should proceed immediately and take advantage of the opportunity that the real estate market is offering that day, rather than waiting for costs to continue rising.

A common tactic that a person wishing to buy a house for the first time should consider is the possibility of obtaining a guarantor or co-signer. The implications of obtaining a guarantor are important, so a close relative or friend is usually the best option. However, it is important that both parties fully understand the agreement and what they are getting into before proceeding with the process.

The first step the buyer should take is to consult with a mortgage loan agent or qualified person to analyze the budget they can afford on their own and not with the help of a guarantor. It is also advisable for both parties to consult their personal or trusted financial advisor to help them make a good and informed decision. This advisor should inform them whether the operation or loan they are about to sign is viable or not. Often, the primary borrower may end up borrowing more than they can afford, which could force the co-signer to step in, potentially jeopardizing the relationship.

However, this is just one of the minor consequences the debtor would face if the agreement is not fulfilled. Just as the buyer must consider certain aspects before purchasing, the guarantor should consider other consequences that will affect them if the buyer does not comply.

The first of these is that if the buyer does not make timely mortgage loan payments, it could affect the credit reports of both parties, which could lower the co-signer’s credit score and affect their ability to obtain their own loan. Therefore, when the guarantor signs the mortgage with the buyer, they are affecting their own credit.

By serving as a creditor, one is jointly responsible for the loan. This means that if the primary borrower or buyer loses their job, the creditor is responsible for continuing the mortgage payments to protect their credit.

Another factor the guarantor should consider is that the loan signed by the buyer will be added to the total debt ratio they wish to obtain. This would not be a problem if the co-signer does not plan to obtain a mortgage loan for themselves. However, if they do, the signed loan will be included in their total debt payments and could affect their ability to qualify for a loan.

Most lenders will no longer consider the monthly debt after the loan has passed a year if the co-signer applies for another mortgage or loan. Therefore, it is important to consult with a lender to know the details related to the loan program.

Finally, the guarantor or creditor should not forget that, like the buyer, they must also go through the same loan application process as the primary borrower, so they will need to provide all the financial information requested for credit evaluation. It will not be enough to just sign the mortgage closing. This can be a significant process and requires a lot of time.

For all the above reasons, it is important that both the buyer and the co-signer carefully consider the entire process of buying a home, taking into account the implications this action could have for both parties. They should always consider seeking the best advice from qualified and knowledgeable people in the field who can offer them the best possible solutions and assistance that can benefit them both.

Both the buyer and the creditor should know that if the proposed or signed payments on the mortgage exceed what the primary borrower can afford, the co-signer may be forced to make them, which is manageable if they are prepared and able to do so.

Consider, and if you have the ability, donating enough so that the loan amount is low enough for the primary borrower to qualify independently. A 20% down payment in Boulder, Colorado can eliminate private mortgage insurance on conventional loans, making it easier for the buyer to qualify.

Another point to consider is the possibility of lowering the interest rate to reduce the payment to a level where the primary borrower, based on their income, can meet the requirements or qualify on their own for the mortgage loan.

There are many implications that the parties to a sales contract must consider, which is why it is important to hire a professional real estate agent, a lender, and a trusted financial advisor who can guide them to make the right decision when the time comes.

Available Foreclosures:

Boulder County: 15 homes available.

Northern Colorado: 22 homes available.

By Elias DaSilva | September 26, 2024