The best steps to take when buying a home for the first time in Oregon

Buying a home for the first time (or even the second) can be intimidating and overwhelming. But it doesn’t have to be! Shannon McLaughlin of Thrive Portland and Proud Realty breaks down the simple steps you need to take to become a homeowner in Oregon!

Step One: Get your finances in order!

First things first — get those budget worksheets and bank statements out and know EXACTLY where you stand financially. You’ll want to interview a few lenders (mortgage brokers and loan officers) to get an idea of how much you can afford to buy. Not all lenders can provide the same services, interest rates, and pricing. Some have to follow constricting rules, whereas others have more flexibility to adjust to your needs. Never automatically assume you can’t afford to buy a property until you talk to a lender - you may be surprised at what you can actually afford. If anything, talking to a lender will make it clear exactly what you need to do to reach your goals.

Lenders will need a few things to give you that magic number:

1) Monthly income and debts

2) How much cash you have on hand for closing costs and a down payment

3) Credit check*

Once they have all of this information, they can tell you what loan programs are available to you and how much you can afford to buy, as well as what your monthly payment would be. There are some really amazing programs for first-time homebuyers, including 0% down programs! A really good lender will know what they are and how to work the system in your favor.

Your lender might tell you can afford $2200 a month, but you feel like $1800 a month would be more doable. No problem! Your lender can work backwards to calculate what that purchase price would be, and issue a pre-approval letter. Bring a price range you’re comfortable with to your real estate agent and they should respect those boundaries and help you find a home you can afford as comfortably as possible!

As a Realtor, I typically only submit offers on homes with a buyer’s pre-approval letter from a lender. Not only does this make it more likely for offers to get accepted, it also prevents disappointment and costly miscalculations later on! I will work closely with your lender throughout the entire process to make sure that we are following all of the rules of your lending terms and working within your budget.

*PLEASE NOTE: Lenders should only run a credit check if you’ve decided to go with them and you're getting a pre-approval. They can give you an idea of how much you can afford without checking your credit, so long as you give them an accurate credit score. You can check your credit score on sites like Credit Karma or even your own bank.

Step Two: THE FUN PART (THE HOME SEARCH!)

Ok, so you have your budget, now it’s time to get to work finding a home! I definitely recommend talking to a few real estate agents before settling. You may be working with this person for weeks or even months - so you want to make sure their values are in line with yours and that they will work diligently on your behalf!

Once you’ve found your perfect representative, you’ll want to prioritize how you want your home to work for you. Things like neighborhoods and school districts might be important to one buyer, but to another, square footage and having a garage are must-haves. Do you want a fixer-upper or for it to be move-in ready? Do you like a particular style of home? How many bedrooms and bathrooms do you need? Do you want a yard? How walkable to shops and restaurants should it be?

I have a fun list of questions I ask my clients to make sure I REALLY understand what it is they want. Clients have found it helps them to realize what’s important to them too! I’ll send you a list of potential properties to look at. We’ll schedule private tours of any homes that you’re interested in, but you are also welcome to go to open houses on your own (or with me). I’m here to support you however you need me to.

Unless you have a $5 million dollar budget, there is likely going to be some compromise involved in finding a home — especially if you want to live close-in to a city like Portland! It’s likely that your priorities will shift as we start to visit homes. A great real estate agent will point out both good and bad things about a house and help you weigh what’s important to you and what’s not. Portland has a LOT of historic homes, and as someone who lives in one, I happen to be obsessed with them. My expertise is in understanding what things to look out for in older homes - and what things you can more or less ignore.

I will help you with performing due diligence on any homes you are interested in before any offers are made. Things like zoning, permit history, chain of title, and more can give us a good idea of what to be aware of when making an offer on a property.

I always recommend Portlandmaps.com to anyone who is interested in doing a little digging into properties on their own. It covers not just Portland, but the surrounding areas (Beaverton, Tigard, Gresham, and more!) It shows you everything from property taxes to zoning and permit history, what parks and schools are nearby, and even what utility companies serve your area. If you have questions that aren’t answered by that, I have city and professional service contacts that can help us get the information we need to move forward confidently with a sale!

Step Three: MAKE AN OFFER

Once you have found a property you’re really into, we’ll put together an offer. The offer will include a pre-approval letter, a “love letter” (if the seller accepts them), and your initial offer amount. Making an offer is a really big deal - by this I mean, it’s a binding contract. If your offer is not accepted, there may be an opportunity to counter. If it IS accepted - woohoo!!! We’re on our way!

If your offer is accepted, you will need to deposit your earnest money (usually 1-2% of purchase price, counted towards your downpayment/closing costs) into escrow, which is held by Title. I know that’s a lot of lingo. Earnest money is assurance to the seller that you’re serious about buying the home. Escrow is essentially a neutral bank account where funds are held until the deal either closes or is cancelled. “Title" is the neutral party (like First American or Chicago Title) that holds the escrow account and helps facilitate the sale.

Ok, so we’ve entered a contract, but we still have the opportunity for an inspection period and an opportunity to negotiate. So if things look too crazy with that leaning chimney or knob and tube wiring, you have the option to pull out and also get your earnest money back. The seller will provide you with a series of disclosures to review (smoke alarms, property disclosure, lead based paint, etc.), and I can help interpret these.

Once things that’s super important is to have a really good general inspector. Having a really good general inspector will help us find everything that is wrong with the property so that we can determine what adjustments we’d like to make to the original offer (if needed). But they just give a general overview. We’ll likely also schedule things with specialty professionals like a sewer scope and tank locate, electrical and plumbing inspections, and a roofing inspection. Your lender will also order an appraisal on the property to make sure it is what it says it is. All of these inspections usually take place over a week. Once the inspection results come back, we can review them together and see what major concerns there are. Then, depending on your risk tolerance, we can ask the seller for contributions/repairs to address those concerns and go from there!

In a really competitive market where there are other buyers waiting for your deal to fall through, we may need to adjust our strategy and how we approach negotiations. This inspection period is the most critical time for you to decide where your boundaries are and what you are willing to negotiate, and what would make it a definite no-go for you. I and the other professionals involved will provide you with as much information as you need to make an informed decision.

Please know that you are ALWAYS permitted to choose your own inspectors. Your real estate agent may have a list of recommendations, but you can go with whomever you like. If you feel pressured to choose a particular vendor, you have the right to push back. Just make sure whoever you choose is vetted, reputable, and experts in their field. Inspections can cost anywhere from $600-$1500 or above, but this is something you definitely don’t want to cheap out on! You want to know exactly what the issues are so in 3 years or so you’re not surprised by something like a major electrical fire or a collapsed oil tank.

Step FOUR: CLOSING

So you’ve submitted an offer on your dream home, it was accepted and you made it through negotiations…now what? Now we wait. During this time, the lenders submit the final accepted offer to their underwriters, the seller will complete any repairs as requested (which will be confirmed by the lender), the title company prepares the balance sheets and makes sure all money is where it needs to be, and we take a deep breath and drink some pour-over coffee while we wait to close. During this time, the lender or title may ask for additional documentation and that is totally normal. The title company will send you information on how to wire the remainder of your net closing costs (fees + downpayment). This could take a few days, but could also take a few weeks, depending on the complexity of the purchase and loan.

Once all of that is done, you’ll go to the title office to sign the paperwork and deposit your closing funds (if you haven’t already), and voila!! You are the brand new owner of a house.

Now if that all seems like a lot of rigamarole - it’s because it is! Buying real estate is a very complicated process with a lot of rules in place to protect you, the consumer. As a real estate agent, I am here to help guide you through every step of the way, no matter the circumstances.

So just to summarize, here’s the basic home buying process broken down:

1. Get your finances in order

2. Find the right home

3. Make an offer

   • Deposit earnest money

   • Review disclosures/inspect the property

   • Negotiate Repairs

4. Sign Closing Documents

This is, of course, a general overview, but there are a few other things you’ll need to do like set up utilities, and pack your belonging, and whole lot of in-between things. I have a checklist and a timeline to make sure nothing gets swept under the rug.

I am happy to go into depth about any step of the process with you. It’s an exciting adventure, but you don’t have to go it alone. Feel free to send me a text or call me. I look forward to helping you find your new home!

Cheers,

Shannon

Licensed Realtor in Oregon