Are you newlyweds looking for your first family home or just living by yourself and looking to never pay rent again? Buying your first home is an exciting milestone, but it can also be a daunting experience filled with numerous challenges and potential pitfalls. Whether you're navigating the complex world of mortgages, negotiating with sellers, or simply trying to wrap your head around the responsibilities of homeownership, it can be overwhelming.
However, with the right guidance and preparation, you can confidently embark on this new chapter. In this comprehensive guide, we'll equip you with crucial steps, expert advice, and practical tips to help you navigate the process seamlessly. So, buckle up and get ready to dive into a wealth of knowledge that will empower you to take those first steps towards homeownership.
1. Ask yourself what type of home fits your lifestyle
There are certain questions you should answer before you start house-haunting, like how does your lifestyle inform the type of home you may need? Do you like to entertain friends and family members? Do you commute to your job or do you work from home? Do you need parking for a boat, camper, or trailer? These types of questions are often not thought about by first-time buyers as they often focus more on location, bed and bath count, square feet, and cosmetic finishes but asking questions about yourself and your family’s needs will help you identify the right home regardless of square feet.
Furthermore, be prepared to prioritize which home features are absolutely a must for you, because you may have to compromise on some.
2. Start saving early and get clear on how much you want to spend
Depending on which part of Portland you’re interested on relocating to, costs will vary. Step one will of course be to save for the down payment. The average down payment for a first-time homeowner is around 7% and will also depend on the type of home loan you get.
Start by putting your money somewhere that can earn you more money, like a high-yield savings account and set up automated deposits of a portion of your income into an account for your down payment.
3. Take A Home Buying Class
One of the best things you can do when you start out your home search is to take a class. At Timber & Rose Realty Group we offer a fun and brief (45-60 minutes) class that covers all of this information and much more like the home buying process, the current market trends, financing, and answers questions any attendee has. You can check out when the next class is here.
4. Work on polishing your credit score
First off, get your credit reports and review them carefully for any errors or inaccuracies. With that as your starting point, work on:
Paying down any debt.
Increase your credit limit. Higher credit limits can improve your credit utilization ratio, which can boost your scores.
Avoid applying for new credit cards or loans until after you've secured your mortgage.
Build credit history.
Remember your credit will determine if you even qualify for a mortgage and influence the interest rate lenders will offer.
5. Shop around for mortgage lenders
Do you know which type of loan would work better for you? Get all the information you can about that and shop around for at least three to five mortgage lenders by requesting loan estimates for the same type of mortgage from multiple lenders to compare the costs.
Alternatively, go straight to the next step.
6. Start interviewing real estate agents
An agent should be able to guide you to a great lender if you don’t want to use your bank, and lenders can often guide you to some agents to interview. Once you have chosen your agent, he or she should be able to provide you with a list of questions to ask yourself to help you better identify what kind of house you need. When you work with Timber & Rose Realty Group you will receive a book we wrote titled, “Your Guide to Buying a Home” that walks you through the buying process and has all the questions you need to think about.
7. Stick to your budget
A critical rule of home buying is: don’t spend more than you can afford in the future. You might be wondering, “How is this even possible, why would the bank give me more than I qualify for? And won’t I be making more money in the future?”
First-time homebuyers tend to shop on the amount that a lender is willing to advance them. The common misunderstanding is that because the bank/lender asks you for so much information (income stubs, credit score, debt-to-income ratio) and then says you can afford a certain amount of house, then everything is accounted for. The reality is life (and homeownership) gets expensive so pay attention to the next step.
8. Make the most of 3D tours and open houses
3D home tours are a wonderful tool that will allow you to look at a home at any hour and observe details that regular photos don't catch. Of course, you will still want to visit the property, but this way you can narrow the list of homes to visit.
It’s fun to go to open houses and tour homes, but it can also be exhausting. When we tour with clients we generally try not to see more than six or seven homes in one day. Otherwise, you may not remember much about each one. With so many homes to look at, we recommend you spend more time online utilizing the 3D tours and getting picky about the homes you actually visit in person.
Pro-tip for open houses: The homeowner will have typically cleaned, decluttered, and have everything in top-notch condition. However, try to look past the décor, wall colors, etc., and look for any cracks in the ceiling, what the floor feels like (any soft spots or squeaks), any weird smells (like mustiness or fresh paint), as these things will generally cost you more to fix than the cosmetics.
9. Have some money set aside for endless expenses
Let’s talk briefly about the additional expenses of buying a home you should be prepared for. Once your offer is accepted by the Seller you will be required to submit your Earnest Money Deposit. Earnest money is usually 1-2% of the purchase price. The point of it is to show the Sellers that you are invested in the purchase of the property and are willing to put some money on the table. The 1-2% of the Earnest Money Deposit is part of your down payment. For example, if you are planning on buying the house with a loan that requires a 5% down payment, then you would deposit 1% into escrow at the acceptance of your offer (beginning of escrow) and then pay the other 4% at the time of closing (end of escrow).
Other costs that will come your way will include closing costs, which are the fees and expenses you pay to finalize your mortgage (typically 2%-5% of the loan amount), moving expenses, as well as some immediate home repairs and upgrades, an increase in utility costs, and homeowner’s insurance.
10. Pay for a home inspection
The average cost for all three home inspections usually runs about $800 and at Timber & Rose Realty Group we really see this as a mandatory part of any home purchase. In a very competitive market, the home inspection contingency can be waived to make the offer seem strong to the Seller, but in reality, it just makes both parties more vulnerable to a lawsuit in the future. It’s best in our experience to have the opportunity for the buyer to know upfront everything that is wrong with a house and then decide whether it is worth it to the buyer to move forward with the purchase.
Comments