Ready to make 2019 the year you buy your first place?
Buying your first property can be a liberating, exciting, albeit exhaustive experience. Are you ready to jump in? I work with many first-time home buyers as they plan to purchase a home in the Portland area and love being a part of the process. Here’s what you need to know:
1. Know your financial snapshot if you need a loan:
a. Credit Score: Know where you land as your score impacts your financing options and interest rate. When you get prequalified the lender will formally pull your credit.
b. Debts/Budget: Make a list of your credit cards, student loans, car payments and other debts and expenses so that you know what you can afford and are ready to complete a loan application.
c. Down payment: Conventional loans require at least 20% down but there are other options requiring less that range from 3%-10% down, and even loans that are 100% financing if you qualify. The less you put down, the higher your monthly mortgage payment so saving up has its advantages.
d. Monthly payment: It’s not uncommon for people to qualify for more than they prefer to spend, so knowing your comfortable budget BEFORE you speak to a lender can help you stay level-headed. If you currently pay rent, don’t forget that utilities are not included in your mortgage payment.
e. Extra expenses: When you buy a property there are out-of-pocket buyer expenses before closing that add up quickly for inspections, appraisals and fuel reimbursement. Plan for a minimum of $1,500 for inspections and speak to your agent or lender about closing costs.
2. Get representation: Find someone you trust to represent you. Why not simply reach out to the listing agent for a showing? It seems like a harmless thing to do but here is a breakdown of reasons why having a dedicated buyer broker is beneficial:
a. A listing broker represents the seller only. They have a legal and ethical obligation to represent their seller client and to sell the property for the best price and terms possible for the seller. A buyer broker’s main objective is to represent the best interest of their buyer clients so that they can make an informed purchase and negotiate the best price for the property based on the current market. Unless the list agent also signs a buyer agreement with you, they are looking out only for the seller’s best interests.
b. A buyer broker will protect your confidential information. If you disclose confidential details to the listing broker, such as your pre-qualification amount, motivation for moving or other financial information, it’s likely it will be shared with the seller since it is in the best interest of their seller client to know. There are times during negotiations that you will not want the seller to be aware of certain details.
c. Buyer representation costs you nothing out of pocket. Industry standard is for the buyer broker’s commission to be included in the purchase price of the property and paid at closing. Only in rare instances is this not the case and if not it is known at the time of the showing. You are not required to have representation, but you are paying for it in the purchase price regardless of whether you have buyer representation or not. The seller, if represented, has already signed an agreement with their broker for the total commission, normally 4-6% of the purchase price, and a portion is paid to the buyer broker. There is no financial loss in having someone in your corner helping you to navigate through the process.
d. A buyer broker will share their knowledge of local inspectors, contractors, plumbers, public and private water/sewer inspection companies and other professionals that will be invaluable to you when you need to conduct inspections, get quotes or obtain test results within a short due diligence time period of 10-12 business days.
e. A buyer broker will dig deep for you, provide you with comparable properties and market information, ask questions you may not know to ask, visit the town hall to review public records for you when you go under contract, help you to discover defects of the home that could impact its value, negotiate on your behalf and listen to you when you need to vent.
3. Contact a lender: Before writing an offer it’s wise to be prequalified for a loan. The current market is fast-paced and there can be multiple offers on new listings, so you’ll want to be prepared to put your most competitive foot forward. Many sellers will not accept an offer without a prequalification or preapproval letter. I suggest to my buyer clients that they find a knowledgeable local lender since they will know the inventory and understand local market trends, not to mention knowing inspectors, title companies and others to help ensure a smooth closing. Need a few referrals? I have you covered.
4. Timing: A real estate transaction typically takes about 45 days to close, start to finish. Your first mortgage payment is normally due at least 30 days beyond that. Learning as much as you can about the process before you go under contract on a home will help to keep your stress levels in check!
If you’re comfortable with the above information, you may be ready to start looking at properties! A good real estate broker will set you up with an online search for new listings and steer you in the right direction from the start. Lean on the professionals you’ve hired to help you, don’t be afraid to ask questions and CELEBRATE when you get your keys to the perfect place!