Getting Started for Buyers
Do This
- Check your credit report. If there are any disputes you can resolve those before a lender checks your credit score.
- Speak with a mortgage broker to determine your financial strength and home price that fits your lifestyle.
Don't Do This
- Close or open any new accounts or incur additional debt
• • • • • 11 Steps to Home Ownership • • • • •
Step 1: Check your credit and get your credit score.
Everyone is entitled to one free credit report a year. Use it to learn more about your credit BEFORE trying to buy a home. You want to ensure your credit is clean and there are no outstanding issues you may not even be aware of before deciding to buy a home. You will also learn what your credit score is and this is important to know as lenders use your score to determine the interest rate of your mortgage and to help you select the best financing option to buy your home.
Step 2: Get Pre-Approved.
It’s important to understand what you can afford before you start searching for your dream home. To help you find the perfect home that fits within your budget, know before you go. “Pre-approval” means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre-approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports. Although not a final loan commitment, the pre-approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you can go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
Step 3: Start looking at Homes.
Houses are more than just bedrooms and bathrooms. In order to not overwhelm you with options, it’s important you have an idea of what’s on your wish list. What is a MUST-have and what is a NICE-to-have? Think about school districts, commutes, styles of architecture, building materials (wood vs. brick), neighborhoods, amenities, county taxes (Clackamas vs Multnomah), and more.
Step 4: Choosing your Dream Home.
How do you know this is the one? I have had many Buyers ask me if “I am ever going to let them buy a house.” My response is “Yes, when we find the right one for you.” I don’t want you to settle – I want you to LOVE your home. No matter how long it takes and how many homes we have to preview! Trust me, you’ll know when you’ve found your Dream Home!
Step 5: Get a Loan.
There are lots of options out there for financing your Dream Home, but in general, the mortgage you choose will likely be determined by at least several key factors:
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How much down? Loans with 5% down or less are available – in fact, loans from major lenders with no money down have appeared in recent years.
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If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI, or private mortgage insurance, is required by lender to protect against any mortgage defaults). Millions of VA, FHA and PMI loans are generated each year.
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How’s your credit? The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.
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Are you a first-time buyer? It might seem that “first-time buyer” means someone who has never owned property before, but under most state programs, the term refers to those who have not owned property within the past three years. State-backed first-timer programs often feature smaller down payments and below-market interest rates.
Step 6: Make an Offer.
There are many components to an offer: price, special stipulations and closings costs to name a few. We will discuss the best strategy when presenting your offer so you are paying a fair price for the home. In a typical offer situation, we will complete an offer that we will present to the owner’s agent. The owner, in turn, may accept the offer, reject it or make a counter-offer. Counter-offers are common (any change in an offer is considered a “counter-offer”), so we’ll make sure we are in close contact so that any proposed changes can be quickly reviewed.
Step 7: Inspection
Inspections will protect you from finding problems once you own a home and are absolutely necessary. Prices are based on the square footage and age of the home. Generally, they are in the $500-$700.00 range for a building inspection. They include sewer scopes, structural inspections, surveys to determine boundaries (sometimes), appraisals to determine value for lenders, and title reviews. It is my job make sure you have all the proper inspections performed!
Step 8: Get Insurance.
Just as you cannot purchase or drive a car without insurance, the same goes when purchasing your home. There are various forms of insurance associated with home ownership, including these major types:
A. Title insurance: Purchased with a one-time fee at closing, title insurance protects owners if the title to the property is found to be invalid. Coverage includes “lenders” policies, which protect buyers up to the mortgage value of the property, and “owners” coverage, which protects owners up to the purchase price. In other words, “owner” coverage protects both the mortgage amount and the value of the down payment.
B. Homeowners: insurance: Homeowners’ insurance provides fire, theft, and liability coverage. Lenders require homeowners’ policies.
C. Flood insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government.
B. Home warranties: Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost. With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
** Proof of insurance will need to be provided to the lender and title officer before closing.
Step 9: Check Utilities.
Make sure they have been transferred to your name as of day of closing, unless the Seller has occupancy after closing.
Step 10: Closing or Settlement.
You will be closing at one of the local escrow offices and I will be by your side to insure all goes smoothly! Typically, this lasts about an hour. The title officer will tell you what to bring, but this is the short list:
- Driver’s license or proof of ID
- Downpayment (typically, this is wired to escrow a few days before closing)
Congratulations!
You officially own your Dream Home!
Whether you’re a first-time buyer or a repeat buyer, there are several more steps you’ll want to take: The papers you received at settlement are extremely valuable, so hold on to them! In the short-term, they can help establish tax deductions for the year in which the property was purchased. In the future, such papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes. About one to two months after closing, you will receive your recorded deed in the mail – there is no need to pay for this service, as it’s part of the title fees. Such records are public notices that show your interest in the property. Many owners also make a photo or video record of the home and their possessions for insurance purposes and keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it.
Let me know if I can help any way after closing. I am your friend and Realtor for life!