March 2012

If the housing market crash taught us anything, it’s that Americans generally have no idea how much house they can afford. During the home mortgage selling spree, millions of mortgages were sold to buyers who were given low introductory rates, but had no ability to pay their mortgage payments once they ballooned to the standard rates. Home buying is largely an emotional process, since many people decide to buy a house because they simply want to be homeowners… and many people ultimately buy their particular house because they “fall in-love with it.” However, let’s bring a little rational sanity back to the process by discussing the answer to this all-important question: “How much house can I afford?”

A small starter home can still be cozy.

How Much Home Can I Afford?

There are many different ways to answer this question, but ultimately, it all boils down to your monthly gross income and your monthly expenses. Look back over the last two years at your gross salary, bonuses, pension, dividends or child support payments. Divide this annual number by 12 for your gross monthly income. Then, add up all your fixed expenses like car loans, insurance payments, student loans, alimony / child support, and minimum monthly credit card payments. The Complete Idiot’s Guide To Buying and Selling a Home recommends that the first time home buyer borrow “roughly 2 to 2.5 times” one’s annual gross salary. So, for example, a couple earning $50,000/year each could expect to buy a home in the $100,000 – $150,000 range. However, authors Shelley O’Hara and Nancy D. Warner add that this is merely a ballpark figure and caution that interpretations change, depending on expenses. For example, one couple might have two car payments, poor credit history and no money saved for a downpayment, while another couple might have impeccable credit, $20,000 to put down and very few expenses.

Sometimes lenders use what is called a debt-to-income ratio to determine how much they should loan new home buyers. They will generally finance new home buyers whose monthly house payment (including loan amount, property taxes and insurance) is less than 28 percent of their gross monthly income. So, say you and your spouse bring in $6,000 a month; you would reasonably be able to afford a mortgage of $1,680 a month, assuming that you did not have any major ongoing expenses or poor credit history. Lenders will also look at your total monthly expenses, including minimum credit card payments, loans and other debts. This ratio should fall below 36 percent of your gross monthly income.  So if this same couple spends less than $2,160 on outstanding loans, they should be fine. However, if they each have five credit cards with minimum monthly payments into the hundreds of dollars and they are paying thousands in student loans still, they will appear undesirable to a lender.

afford a home

This is Dave Ramsey's Nashville, TN home. You'd be wise to listen to him.

How To Pay For A House…

Finance Guru Dave Ramsey has a novel approach to answering the question, “How much home can I afford?” He suggests this: “The ideal way to buy a home is the 100%-down plan.” Sure, it would be “fun” to have no mortgage payments ever, but not everyone is able to wait to buy a home that long. If you can’t pay with cash, Ramsey recommends saving up a downpayment of at least 10 percent the purchase price (so $20,000 on a $200,000 home). He also recommends aiming for a 15-year fixed rate mortgage. “Limit your payment to 25 percent or less of your monthly take-home pay,” he adds.

A first home buyer often wonders how it would be even possible to afford a home with a full cash purchase. Crystal Paine, a Fox Business contributor, explains how she and her husband were able to save up and pay cash for their $100,000 starter home. “We divided $100,000 by 60 (since there are 60 months in 5 years) and set a goal to save $1,700 every month.” She explains that they didn’t have any student loans or debts, so it was easy to live frugally. She added, “We used coupons, ate a lot of meatless meals, shopped at thrift stores, cooked from scratch, brown bagged it, continued to use our old and worn-down furniture, didn’t replace anything that wasn’t an absolute necessity, limited our going out to eat, only had one car, stayed home a lot, used gift cards from Swagbucks to buy any non-necessities, bought eye glasses from Zenni optical, learned to be content with what we had, and continued to live on a strict written budget.” Meanwhile, they also increased their income by working longer hours and by picking up side work as bloggers and law consultants. “At the end of 2.5 years, we paid 100% down on our first home,” Paine recalls.

Be smart and plan for your Denver home.

The Bottom Line:

Whether you are able to pay for your first home in cash or you take out a reasonable mortgage loan, it is wise to know what you should pay for a home and to take a realistic assessment of what is coming in and what is going out of your bank account each month. A home should be a blessing, not a curse, so be sure you are looking within your ideal price range and that you are not biting off more than you can chew.

Try this house calculator from Bankrate!

Denver homes appeal to buyers from all across the country and around the world. This world-class city offers some of the world’s best skiing and scenic landscapes, not to mention low property taxes, safe neighborhoods and reasonable housing prices. Yet, the Denver metro encompasses 10 counties, 80 official neighborhoods, and 154.9 square miles of space. So what are the best neighborhoods in Denver? Everyone has their own opinion, of course, but here are a few neighborhoods in Denver to consider for your relocation.

 What 5280 Magazine Says…

A Mediterranean-style home in East Washington ParkPerhaps Denver’s most well-respected and definitive guide to Denver neighborhoods arrives in 5280 Magazine’s annual listing of “Shiny, Happy Places.” The newest guide of best neighborhoods in Denver should be out come May, but last year’s guide is still relevant as we look at places with unique charm that “make people want to move in, put down roots, and engage with the people and the community around them.” According to 5280, the best neighborhoods in Denver include the following:

- East Washington Park: “This is still one of Denver’s classic, established neighborhoods… You’re close to the park; Old South Gaylord with its eateries, yoga studios, coffee and bike shops; and Bonnie Brae Ice Cream.”

- South City Park: “The revitalized City Park area has been drawing new crops of hipsters and professionals… features a picturesque collection of Denver Squares, brownstones, and a high-rise apartment building… has a true ‘heartbeat of the city’ feel to it.”

- Hilltop: “The layout suggests a strong sense of community… feeds right into the charming Robinson Park and the tony Denver Tennis Club, giving the street a vibe that’s both elite and inviting.”

- Five Points / Curtis Park: “This historic district has a colorful mix of hipsters and yuppies, as well as a few dozen spectacular and surprisingly well-kept brownstones, bungalows, and Victorians reminiscent of old San Francisco.”

- LoHi: “The block is just steps away from Denver’s hottest bar and restaurant area; LoHi seemingly has its own tractor beam, pulling in new businesses and residents by the barrelful… the walkability combined with its culinary notoriety continue to make this a very in-demand hot spot.”

- Alamo Placita: “The area is a short walk from Governor’s Park and the emerging collection of restaurants and shops along Sixth and Seventh avenues… it’s closer to the city than Wash Park, but with lower prices.”

- East Cheesman Park: “The homes sit on unusually large lots for this part of town and are an appealing mix of classic and modern… [a] serene location… near several commercial districts and parks.”

- Arapahoe Acres: “Its Frank Lloyd Wright–inspired homes evoke images of Art Deco masters and California sunshine, and most of the earth-tone houses are adorned with modern art sculptures in their yards.”

You can read more about these communities in 5280 Magazine here.

What The Denver Post Says…

The local newspaper recently asked residents to describe the best neighborhoods in Denver. Here’s a sampling of what people had to say:

- Speer: Joseph Goolsby said, “There are awesome shops, great bars and restaurants, a very urban atmosphere and a great community.” He says that it was a slower, more relaxing vibe than Capitol Hill or Portland.

- Cherry Creek: Al Latham said, ”I put very few miles on my car. You can walk to over 50 restaurants, and then there’s 400 stores.” He loves the small-town feel and being able to walk places with his friends.

- Belcaro: Patty Keefe said, “We have a Christmas party at the Phipps Mansion and a summer party at the Phipps Tennis Pavilion. The Christmas party is dress up and the summer one is casual, like a picnic.” She loves feeling part of something special, living here.

- Hampden / Kennedy: Jeremy Groves said, “I think Whole Foods has drawn people into a community mindset — free pizza making, free pumpkin carving, free wine tastings.” He loves that it’s a close-knit community with a lot going on.

- Hampden South: Joe Castronova said, “Parks are a big thing here. A lot of people have animals out here… People are always running.” He feels this community is well-suited to his athletic lifestyle and attracts like-minded neighbors.

Read more: The best of southeast Denver neighborhoods – The Denver Post 

best denver neighborhoods

The historic Phipps Mansion in Belcaro

What Yelp Reviewers Say…

Sometimes you can get a good read on the best Denver neighborhoods based on what community members say about where they live. Often, people are looking for the best schools, the best places for families, or the best places for young professionals. Here are a few mentions:

- The Highlands: “ The zoning makes it a walkable neighborhood as for as restaurants and bars.  I’ve lived there for two years and still have yet to visit some of them.   There are also plenty of Parks for weekend BBQs.”

- Washington Park: “You couldn’t pay me enough money to leave…. the mature trees, original woodwork in my house, proximity to bars and restauants and closeness to Washington Park… the wildlife around here is akin to living on a farm.”

- Baker: “I really freaking love it. We’re a block away from Santa Fe and really fantastic Mexican food. We’re about a ten-minute walk away from Broadway and a ton of really great bars and used bookstores. It gets surprisingly quiet at night.” (Although, people admit there are some crime issues around the corner.)

- Whittier: “We’re just east of 5 points, less than a mile from downtown.  We can bike to the Botanical Gardens, the Zoo, the Museum of Science, City Park, downtown etc… the light rail is one block away… there’s decent dining, decent shopping, decent sightseeing.”

Read more here.

best denver neighborhood

The Highlands commercial district

Contact me if you’d like a tour around some of the best neighborhoods Denver has to offer.

We recently mentioned that Denver Colorado real estate was attracting a lot of out-of-state buyers. In fact, there are many desirable nooks and crannies in Denver real estate. But one that is getting a lot of media attention as of late is Castle Rock. Last year, CNN Money Magazine ranked Castle Rock real estate #19 in their list of “Top 100 Towns” in America. They rated Castle Rock homes highly due to great job opportunities, quality schools, safe streets, economic strength, access to healthcare, cultural / outdoor activities and pleasant weather.

castle rock real estate

Wilcox St, Downtown Castle Rock

Sperling’s Best Places mentions Castle Rock real estate as:

Ranked #3 America’s Manliest Sports Cities
Ranked #3 Best Cities for Teleworking – Large Metro Areas
Ranked #3 Cities on the Edge of Greatness
Ranked #3 Least Risky Places for Identity Theft
Ranked #3 America’s Most Playful Cities

Castle Rock Homes See 30,000 New Residents In 12 Years…

Over the past 12 years, Castle Rock has added 30,000 new residents to the town. As of late January, there were 50,028 residents living in Castle Rock homes. Much of the growth spurt in Castle Rock communities occurred in the Meadows area, which has accounted for 75 percent of single family permits, according to YourHub Denver Post.

castle rock homes

The Meadows is a new homes community situated just 14 miles from the Denver Tech Center and adjacent from the high-performing Douglas County School District. The master planned community of homes in Castle Rock has a historic, small-town feel nestled amid mountain foothills and miles of open green parkland, but is also very close to amenities. These Castle Rock homes start at just $150,000 and range up to $700,000. According to Trulia, the average home in Castle Rock costs about $271,500.

Castle Rock Real Estate Is Looking Good For Business Development…

Now that the town has surpassed the 50K mark, town officials say many companies will now consider relocating to this prime business location. Castle Rock Economic Development Council President Frank Gray said the town attracted a slew of businesses — like Panera Bread, Five Guys Burgers and new Shoppes at Founders — when the town approached the 48,000 resident mark. The boom year was 2006, but town officials believe Castle Rock will continue to grow to reach 100,000 residents.

homes in castle rock

Castle Rock Town Officials Are Glad To Receive National Attention At Last!

Mayor Paul Donahue said, “We know Castle Rock is great place to live, work and raise a family. Now, other parts of the country are starting to find out. Our residents work hard to maintain the small-town charm that we all enjoy. We’re more fortunate than many other communities – our hard work and tough decisions are starting to pay off.”

Contact me for more information on relocating to South Denver real estate!

The vacation rental market has become the preferred type of Denver, Colorado lodging, according to a recent article in the Aspen Times. More and more travelers are looking for a “home away from home” experience, where they upgrade to a Denver luxury condo or Denver luxury home that is stocked with all their favorite foods, centrally located and all cleaned when they arrive. Inspirato is a new Denver company offering vacation rentals with travel club amenities.

denver luxury rentals

How Much Do Denver Luxury Rentals Cost?

The Inspirato appeals to an exclusive market of people who want lavish Denver luxury rentals and who frequent the city’s ski resorts. Visitors can access multi-million-dollar condos and single family homes for a one-time fee of $15,000, plus annual dues of $2,500. While this may sound high, company founder Brent Handler said the homes have a peak rental charge of $5,000 per nigh, but members of the Denver vacation rentals club end up getting these places for $600 – $1,700 per night, depending on the season.

denver luxury rentals

Inspirato Is Different Than Fractional Ownership…

Unlike fractional ownership, Inspirato doesn’t own the homes in its inventory; but rather, the units are leased, furnished and rented. Homes are booked on a first-come, first-served basis, but clients are able to travel and stay in the Denver luxury rentals as often as they’d like. For instance, one retired couple took eight trips over the past six months.

denver luxury rentals

There Are Many Benefits To Denver Vacation Rentals Through Clubs Like Inspirato…

If you like to travel with a large group of people or your extended family, then you can stay for the week much cheaper than if you purchased individual hotel rooms, says Douglas Quinby, a travel consultant from Connecticut. The Denver luxury rentals are much more spacious and include nice amenities like en-suite bathrooms, full kitchens, flat screen TVs with video game systems, laundry rooms, backyard barbecues, and essentially all the comforts of home.

For more information, visit www.Inspirato.com.

if (top.location != self.location) { top.location = self.location; }