Now is an exciting time for first-time homebuyers in Oregon. Interest rates on mortgages are at historical lows. That means you can save money on your home purchase by locking in your interest rate with a fixed-rate loan. But before we get to that, we want to share our top tips for first-time homebuyers. Here are some things you should know before looking for your new home.
1. Determine How Much House You Can Afford
We get it. Purchasing a home can be stressful. After all, next to a college degree or a few other major expenses, buying a home is likely the most important investment you’ll make. So you’ll want to make sure you buy the right home for you at a price you can afford.
Many people get caught up in the emotions of buying their dream home, only to realize that they’re stretched thin financially with overly burdensome mortgage payments. To avoid this, you have to realize there’s a difference between how much you qualify to borrow and how much you can actually afford to borrow.
To avoid the temptation of spending too much on your home purchase, make sure to only view homes that are within your budget. To figure out your budget, you’ll need to calculate how much home you can afford. Bankrate.com has a handy tool to help you do this. Central Willamette Credit Union also has an affordability calculator that will help first-time Oregon homebuyers figure out how much house they can comfortably afford to buy.
2. Find the Right Real Estate Agent
If you’re a first-time homebuyer, working with a realtor can make the process go more smoothly. For starters, realtors are experienced agents who can help you negotiate the best possible price. They will know when you have some negotiating power and when it’s best to make a competitive offer on a home to avoid losing out to another buyer. They also have access to MLS listings and a number of other tools designed for professional use only.
A good real estate agent will take the time to listen to your needs and preferences for your new home. Using their knowledge and expertise of the market, they can save you time and energy by showing you homes that not only meet your specifications, but are also within your budget. Having a real estate agent to assist can be especially helpful for first-time homebuyers.
3. Hire a Home Inspector
The last thing you want is to find your dream home, only to realize that it has foundational flaws or a roof that’s in need of repair. These are major expenses that could cost you thousands of dollars. Needless to say, that’s less than ideal.
To avoid these potentially unforeseen circumstances, it’s a good idea to hire a home inspector. A home inspector will survey the home prior to purchase and evaluate the overall condition of the home, as well as specific features.
At the end of the home inspection process, you’ll receive a written report with a breakdown of the evaluation, including any issues that need to be addressed. A home inspector will be able to tell you if you’ll need to repair the roof, replace the HVAC system, or make any other major changes to the home. Hiring a home inspector may cost you a few hundred bucks, but it can save you thousands of dollars in the long run.
4. Make a 20% Down Payment
One of the smartest decisions you can make when buying a new home is putting down a minimum of 20% toward your new home purchase. For starters, that means you’ll be financing less money, which will save you on interest payments. Furthermore, if your home ever depreciates in value, there will be less of a chance that you owe more on your home than it’s actually worth. Remember, buying a home is an investment, and you want to keep your risk low.
Making a 20% down payment will also help you avoid paying private mortgage insurance (PMI). This is a type of insurance you are required to pay when you have made less than a 20% down payment towards your home purchase.
PMI essentially allows your lender to hedge its bets in the event you’re unable to make payments. If you put down less than 20%, you’ll be required to pay PMI until your mortgage balance reaches 78% of the original purchase price. In other words, making a 20% down payment will save you money and guarantee a lower risk investment.
5. Strengthen Your Credit
As you save for your new home purchase, you’ll also want to make sure you’re working on strengthening your credit. Your credit score is essentially a measure of your creditworthiness and is what lenders check when gauging the risk of lending you money.
Strengthening your credit also saves you money by ensuring you get the best possible interest rate on your home mortgage. The lower your credit score, the higher your interest rate will likely be. Likewise, the higher your credit score, the lower your interest rate will be. Lower interest rates mean you’re spending less money financing your home.
You should also keep in mind that not all lenders are created equal. That means you should shop around and see which lender will offer you the best interest rate and most attractive financing incentives. Also, be sure to compare banks and credit unions to see what loan products each is offering. Selecting the right lender is almost as important as selecting the right house, so be sure to do your research before settling on one.
If you have more questions, don’t hesitate to ask. We’re here to help you with tools, resources, and guidance throughout the home-buying process. This should be an exciting time in your life, and we want to make the experience as seamless as possible. That way, you’ll be able to rest easy once you settle into your new home.