May 12, 2011

How To Prepare To Purchase Portland Real Estate

These days many potential home buyers ask how to best prepare for a home purchase in the next year or two. There are many other ways to prepare but I am just going to touch on a couple of general topics.

 

How much do you need for a down payment?

If possible, 20% of the purchase price is a good down payment. Anything less than will usually give way to Mortgage Insurance which can equal hundreds of dollars a month on your mortgage payment. Absolutely none of the mortgage insurance premium will go to the principle balance of your loan. If you can save a 20% down payment, you should be able to avoid mortgage insurance altogether.  Your payment goes down because you don't have to pay mortgage insurance, but also because you are financing less.   Not having to get mortgage insurance will significantly lower your monthly payment. While it could allow you to qualify for more home, you have to take into account that, if you raise up the cost of the home, you will need also need to bump up your down payment.

To many people, 20% would be out of reach in the time to purchase a home. If one cannot save the 20% as a down payment, try to shoot for 5-10%. While the minimum amount required for common financing is 3.5%, anything less than 20%, you will likely have mortgage insurance up-front, monthly, or even both.

In addition to mortgage insurance you will also have some additional expenses beyond the down payment. These expenses are referred to as "closing costs" and can include such things as loan fees, appraisal, pre-paid property taxes and homeowner's insurance, title insurance, etc.
Down payment recommendations: 20% or more if possible, 5-10% minimum.

 
What to do before the house hunting starts?

Before you take off running in search of your new home, one of the first things to do is save up for the down payment. Then save a little more.  It is also very important to continue paying any bills on time. They can be car loans, student loans, personal loans, credit cards, cell phone bills even utility bills. Keeping your credit score as high as possible will allow you to qualify for the best interest rate available. High credit scores will make it easier for you to qualify for financing than someone with poorer credit.  I have

Deciding that buying makes more sense than renting.  I know this sounds like a dumb statement for a post about preparation for a real estate purchase but stick with me.  Are you ready to settle down, take root and make one of the many Portland  neighborhoods your home for  5-10+ years?  If you know you will not be in the area for at least a few years, continuing to rent and to save for a future purchase may make more sense.  Especially if you don't have the 20% down.
 
Talk with a Buyers Agent 

Even though your neighbor's cousin's roommates hair dressers bought a house through the listing agent, you might want to avoid contacting the listing agents directly. Listing agents are not working for the Buyer or truly representing them in a transaction. A listing agents job is to sell the homes they have listed which is why the sellers have hired them.  They are looking out for the sellers best interest. Their fiduciary responsibility is to the seller.

Side note:  The listing agent is the one who pays the buyers agent for bringing in the buyer.  Not the buyer nor the seller.  The seller and listing agent have already worked out the commission or flat fee to be earned by the sale of real estate.  That commission will be paid to the listing agent when the home sells.  If there is a buyers agent working with the buyer, the listing agent then pays the buyers agent.  If there is no buyers agent, the listing agent takes the entire percentage or flat fee.

In the state of Oregon, real estate agents do a co-broker agreement where the listing agents split their commissions with buyer agents who help to bring buyers to their property’s.
Since sellers usually have professional representation (there are for sale by owners but you will severely limit the number of available homes by only searching out these), why shouldn't buyers too?  Using a Portland buyers agent can level the playing field and possibly even to give them an advantage in negotiations. Would you want to represent yourself in a court of law without a lawyer?  Especially when the other attorney is willing to pay for your lawyer?

A buyer's agent can give you information on market trends, home values, help you with loan shopping, etc. The job of a buyers agent is not to "sell" you any particular home.  Their fiduciary responsibility is to you the buyer (not the seller) by making sure the you are protected and aware of all your options as you try and buy the best home you can at a price and terms most favorable to youWhen do we start getting serious?

 

The time to start getting serious is when you are about 90 days from wanting to be in your new home. Getting your pre-approval for your financing is the first priority.  That will give you a solid idea of what how much Portland real estate you can afford and will give us a target to search within.  Once we get that info, we can set up showings of available properties.  Take a look at the buyers guide I put together (click here) to get a better idea of the entire process.

Doing some preliminary research prior to the 3 month mark is great.  You will want to have a professional to help you with your searching, financing and other preparations when you are ready to pull the trigger..

If you have any additional questions on Portland real estate, please don't hesitate to call, text or email me.

  

 

Rich Peralta is a real estate professional in the Portland Metro Area, including Lake Oswego, Tualatin and  West Linn Real Estate.

He can be reached at 503.961.2181 or by e-mail at rich.peralta@exprealty.com

Contact him  for more information on Portland,  Lake Oswego or West Linn Real Estate!

Also posted on West Linn Real Estate.

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