Many people equate homeownership with living the American Dream. But when you’ve never bought a house before, it can feel intimidating and overwhelming. Having a guide for first-time homebuyers makes the process much less daunting.
The friendly team at Julia Monaghan Real Estate is here to calm your worries and help you find the perfect house. We serve house-hunters in Lake Oswego, OR, and surrounding areas and would love to connect. Reach out today to get started on your dream of owning a home.
The Value of Owning a Home
For most of human history, the concept of owning land and property was nonexistent. People lived in nomadic groups, following the herds that kept them fed.
Eventually, this system gave way to monarchies and nobility. Those in charge owned enormous pieces of land and collected rent money from the peasants who occupied it.
The Industrial Revolution brought tremendous change to every part of American society. And one of the most significant arrivals was the notion of owning real estate. With the demise of monarchies around the globe, land became available in smaller parcels to those who could afford it.
And now, owning real estate is almost a rite of passage in the United States. Several things make buying a home a valuable and smart decision:
- Stable Housing – Unlike when you live in a rental, you do not have to worry about sudden rent increases. And you are not at the whim of a landlord who decides to sell the property, forcing you out.
- Long-Term Wealth – Real estate rarely loses money in the long run. Historically speaking, it is one of the most stable investment vehicles you can utilize to build generational wealth.
- No New Land – Mark Twain famously said, “Buy land; they’re not making it anymore.” Although he was famous for satire and humor, the statement holds true. As the population grows, owning real estate becomes more and more valuable.
A Guide for First-Time Homebuyers
When you first start your homeownership journey, you may feel as if there are a hundred new things to learn. The jargon and terminology and seeming hurry of the process can be intimidating.
But with these five tips for first-time homebuyers, you will be able to find the perfect house without anxiety.
1. Start Saving Early
For most buyers, securing a sufficient down payment is the most challenging piece of the real estate puzzle. So even if you don’t plan to buy for months or even years, start saving now. The longer you can build your down payment, the better position you will be in to purchase your first home.
Traditionally, buyers aim to have a down payment of 20% of the sale price. This amount allows you to have more equity right away and to secure favorable loan terms. It also lets you avoid paying private mortgage insurance, or PMI.
However, there are several programs that help buyers purchase a house with a lower down payment. We’ll dig into those in Step Four, so we don’t leave you hanging.
2. Choose a Buyer’s Agent
Once you are ready to start your home search, it’s time to find a real estate agent to represent you. Take the time to interview several realtors and check their references before selecting one to be your buyer’s agent.
Their job is to work for you, and you want to be sure you like working with them. Ask questions about their availability, experience, and marketing strategy as you decide who should represent you.
An excellent buyer’s agent is your most valuable asset as a homebuyer, whether it’s your first time or not. They provide education, support, and advocacy throughout the process. When it comes time to negotiate and fill out all the forms, you will be happy to have them on your side.
3. Talk to a Lender for Preapproval
All lenders are not the same. It is crucial that you talk to a few different lenders or brokers as you decide who to choose. When they give you estimates, look closely at items such as the interest rates and closing costs so you can compare their proposals correctly.
Once you settle on a mortgage provider, ask them to supply you with a preapproval letter. This document tells sellers that you are serious about buying a home and are in a position to do so.
Some real estate agents will not work with clients until they secure a letter of preapproval. And in a seller’s market, this document is crucial to have a chance of buying the home you want.
4. Investigate First-Time Buyer Programs
Remember that hefty down payment we mentioned earlier? Many people are not able to come up with that amount when they are ready to buy a home.
Several programs for first-time homebuyers allow for a smaller down payment:
- FHA Loans – These loans originate from approved lenders and have the backing of the Federal Housing Administration. The FHA insures these mortgages, so they are less risky for lenders to offer them. With lower credit score and down payment requirements, FHA loans are an excellent option for first-time buyers.
- VA Loans – Offered to qualified current and former military members, VA mortgages work similarly to FHA loans. The US Department of Veterans Affairs guarantees the home loan so that lenders feel comfortable offering favorable terms. VA loans frequently require no down payment or PMI. They also do not demand as high of a credit score as conventional loans do.
- State Programs – Many states offer their own opportunities for first-timers. In Oregon, for example, the Oregon Bond Residential Loan program helps many people get into their first house. Approved lenders can offer mortgages under this program to qualified buyers.
5. Start House Hunting!
Now comes the fun part. It’s time to look at houses! Between open houses and private showings, you will stay busy as you search for your new home.
Your buyer’s agent will schedule viewings and help you narrow down your search. Once you find the home you want, your agent helps you determine and submit a competitive offer. And they will help you through the negotiations, inspection, appraisal, and closing day.
Rely on Your Neighborhood Expert
Even with excellent preparation, buying a home for the first time can still feel nerve-wracking. But with an expert on your side, you will see that the process is not just painless, but fun and exciting!
Connect with Julia Monaghan Real Estate to get started on your homeownership journey.