There are many pitfalls for you to avoid when purchasing a home, especially if you are a first time homebuyer. Information and knowledge is key to saving money and making the right decision.
Here are some real estate resolutions that you can make this year to help you navigate through this complicated and expensive process.
Get a handle on student loans
The average age of a first time homebuyer is 33 and these people are buying a home while also being saddled with enormous student debt. While you can repay your loans at the same time you are paying off your mortgage, for many people this is simply not an option.
Look into refinancing your student loans in order to make sure you are getting the lowest possible interest rate. This will free up the cash you need to buy your first home.
Set your budget
Most first time homebuyers are surprised at all the fees they get hit with when purchasing a new home. On top of paying on the principal and interest every month, you will also be responsible for mortgage insurance if your down payment was below 20 percent of the purchase price. Then you have to factor in homeowner’s insurance as well as your taxes.
While you are working out your budget, file away all your important documents. For example, lenders will require you to show them pay stubs, bank statements, information about outstanding debts, tax filings and W2s. If you have all that gathered together you will be prepared for when you are asked to show it.
Consider your lease
A 2016 Redfin survey found that 25 percent of first time homebuyers claimed that high rental prices are why they wanted to buy a home of their own. Unfortunately, timing matters and you can’t always find a home right when your lease is up.
Find out what your landlords termination policy is. Do they offer short term leases, can you rent month to month and how much notice does your landlord require? These are all important questions for you to consider.
Get fully underwritten
Getting preapproved for a mortgage is great but having your lender fully underwrite your loan is better. This is not always possible however, as many home sellers prefer all cash offers over loans since loans can fall through if there are issues with the lender.
If you are like most and an all cash offer is not in the cards, getting a loan commitment letter from your bank that you can submit with your offer can go a long way towards easing the mind of the home seller.
These letters are better than pre-approval letters and they show that you have passed the underwriting guidelines.
In all areas of the homebuying process information is power. Understanding the market that you want to buy into is vital to you getting the best deal on that dream house. It is also important to take a good long, honest look at things like nearby amenities, commute times as well as what schools are in the area.
Use your real estate agent for research purposes. Ask plenty of questions and make sure you understand the neighborhood as well as the bidding strategies in those target areas. Do the homes often sell over the list prices? How long do these homes stay on the market and will there be a bidding war? These are all important questions to bring up with your Portland real estate agent.
These resolutions will help you make the right decision when buying a home for the first time. Always remember that the more you know, the better off you will be.