Buying your first piece of Salem, Oregon, real estate is a huge life step. Many first-time buyers go in with incorrect expectations, high levels of anxiety, and uncertainty over what to do. It's a steep learning curve, but fortunately, your Salem realtor is here to help with these essential steps.
Fix your credit
Very few of us are fortunate enough to be able to buy a home in cash. You are going to need a mortgage, and that means you’ll want to get your credit score to be as high as it can be. Start by ordering your credit reports and go through them with a fine-tooth comb, looking for any items that should not be there.
Establish your budget
Work out what you can afford, which can be hard to grasp with the intricacies of mortgages, interest rates, and credit scores. You will want a downpayment of about 20% (or more) in ready cash, and then you will need to determine what you can afford to pay monthly for your mortgage. Don't forget property taxes in your calculation, too!
Explore your mortgage options
Many lenders offer mortgages targeted at first-time buyers. These loans have a lower down payment, but be careful; a low down payment means you will have to pay Private Mortgage Insurance, where you pay premiums to protect the lender if you default.
1. Conventional mortgages are not guaranteed by the government. This is your best option if you have a good credit score. Some conventional mortgages fall under the auspices of Fannie Mae or Freddie Mac, which place limits on them. These conforming loans have a dollar limit set annually by the Federal Housing Finance Agency. The average limit is $647,200. Many luxury homes fall outside this range. Mortgages for higher amounts not backed by Fannie Mae or Freddie Mac are called "jumbo" loans. Jumbo loans tend to have higher interest rates.
2. FHA loans. These are guaranteed by the Federal Housing Administration, which allows the lender to take more risks. Typically the downpayment is about 3.5%. You can also get an FHA loan with a lower credit score, and closing costs are typically lower. FHA loans may be a good option if you haven't been able to save up enough for a higher downpayment. You will still have to pay for mortgage insurance. Because of this, many people take out an FHA loan and refinance it into a conventional loan when they can. This removes those pesky insurance payments, but you will have to pay another round of closing costs to get the new loan.
3. USDA loans are helpful if you can get one. A USDA home loan is a zero down payment loan, but the catch is that these loans are only available for people who live in rural areas. If you are happy with living a bit out of town, especially if you don't have a daily commute, this can be a great option. There are many homes available in the Willamette Valley that could use this loan.
4. VA loans. These are for service members, veterans, and surviving spouses. These loans are primarily for people who have been living on base and need a home when they return from service.
Decide what you want
Start looking at what you want in a home. Do you want a condo, a townhouse, or a single-family home? Where in Salem do you want to live?
Get a home inspection
Once your offer has been accepted, it’s time to schedule a professional home inspection. You should make your offer contingent on the inspection not showing any major defects the seller did not disclose.
Try not to fall in love with a house until it is time to close. Emotions can easily cloud your judgment and cause you to make an offer on a home that is outside your budget or has issues. You can also be painfully disappointed if the house doesn't work out. You need to be prepared to walk away and to be patient. Many home buyers go through several properties before closing on the right one.
The process isn't finished when you walk through the front door with your keys! Make sure that you do a few things right away. First, make sure to change your address everywhere. Watch out for online vendors. Sometimes they will store an older address, and you won't notice until after your order is placed. Get the utility bills, cable, and internet transferred to your new home, too.
Ready to start searching for your first home?
Rebecca Donaldson is an award-winning Oregon real estate agent with a leading sales record and a passion for matching people with the perfect home. With properties in numerous neighborhoods all over the Willamette Valley, Rebecca and her team are ready to help you find your first home.