A Guide to Buying Your First Home: What to Do and What to Avoid
Buying a Home Is a Big Step
Does the thought of purchasing your first home put butterflies in your stomach? You’re not alone. Plenty of first-time homebuyers find the prospect of buying a house to be rather daunting, and when you toss in the super competitive Portland housing market, things only seem to get worse.
But people just like you are becoming homeowners all the time, and if they can do it, you can too, right? Don’t worry: we’ve put together a handy list of do’s and don’ts for first-time homebuyers, and we think you’ll find them very helpful.
Do: Work on Your Credit Now
As you know, your credit score will be a key evaluation criterion for potential lenders. They want to see a history of prudent financial management on your part.
If you’re thinking of purchasing a home, then you should get your credit score in tip-top shape. Pay down those credit card balances. Check our credit report for errors, and dispute any that you find. The better your credit score, the better your chances of being approved for an affordable mortgage.
Do: Shop Around for the Best Mortgage
Mortgage lenders are in stiff competition for your business, and some offer better deals than others. When it comes to mortgages, a few points can save you many thousands of dollars, so it pays to shop around for the best deal. Just make sure you read the fine print so you know exactly what you’re getting into.
Don’t: Just Take Whatever Your Bank Offers
Your bank might seem like a natural fit for a mortgage lender – after all, you already have a business relationship with them, and hopefully you enjoy working with them. But don’t get a mortgage from your bank or credit union just because they’re offering one.
A quality mortgage lender will take the time to get to know you and your unique situation. They’ll consider your goals, needs and preferences, your budget, and your financial situation. Then, they’ll make recommendations from a holistic perspective.
If your bank offers great rates and you feel certain that they will provide the level of attention that your biggest investment deserves, then great! If not, definitely keep looking.
Do: Hire a Great Buyer’s Agent
You can buy a home without a buyer’s agent, but it’s a good idea to have a professional in your corner, especially if you’re a first-time buyer. A solid buyer’s agent can give you the inside track on the local real estate market, keep you apprised of new listings that fit your preferences, and negotiate with the seller on your behalf. Once again, in a market as hot as the one in Portland right now, looking at homes with a buyer’s agent in your corner makes you that much more competitive.
Don’t: Hire an Agent Just Because They’re a Friend
Okay, so your old college roommate is a Realtor. But these days, a lot of people are jumping into the real estate market. That happens when values rise and sales pick up again.
Just because someone has a real estate license doesn’t make them the best person to help you buy a home.
If your college roomie also happens to be a top-notch buyer’s agent with expertise in the type of property you’re seeking, and you trust them even though they ate your takeout that one time, then go for it. If not, hire someone else and invite your old buddy to the housewarming party when it’s all said and done.
Do: Figure Out How Much You Can Afford
Most of the time, buying a home ends up being a solid long-term investment, but making that investment can be quite expensive on a month-to-month basis. As a general rule, you shouldn’t spend more than 28% of your income on housing expenses.
If you go above that number, you risk putting a serious kink in your cash flow situation. Don’t be house poor. Know what you can afford, and stay within your budget.
Don’t: Go Into the Home Buying Process Blind
Some first-time homebuyers overestimate how much home they can afford, and become disappointed when they find out that the homes that interest them are well outside of their budgets.
When making room in your budget for a home purchase, don’t leave out the details. Make sure you account for property tax, homeowner’s insurance, HOA dues, maintenance and repair costs, and if applicable, mortgage insurance.
Do: Get Pre-Approved for Financing
The housing situation is getting extremely competitive in many markets, especially particularly popular cities like Portland and the surrounding areas. Multiple offers are common in this market, and any desirable listing can quickly become the object of a bidding war.
When you find the right home, it’s crucial that you’re prepared to strike while the iron is hot, so to speak. Having the guaranteed backing of a mortgage lender will show sellers that you’re serious, that you have the means, and that you’re actually ready to buy.
Do: Enjoy the Process of Buying Your First Home!
Buying a home can be stressful, but it can also be a very exciting time. Follow these tips, and don’t get discouraged during the process. You’ll be getting the key to your new life before you know it. Good luck!