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Once you have gotten your financial house in order it is time to go on to the next step - obtaining a MORTGAGE. (Click player for sound effect)

First Things First
Before you even start your search for a home, you should first find someone who will lend you the money (unless you are paying all cash, and if so, you can totally skip this step, and, *ahem* you are now my new BFF!)

As I mentioned in Step #1, you need to figure out how much house you can afford. An online calculator will give you a good ballpark figure, but a lender will tell you EXACTLY what they are willing to loan you, and therefore, tell you how much house you can afford.

When it comes to finding a loan you have two basic options. You can go to a bank or credit union, or you can use a mortgage broker. At first glance they don’t look a whole lot different to a consumer; however, they do work very differently behind the scenes.

Banker or Broker?
The biggest difference is that a bank or credit union lends that particular institution’s own money and decides whether or not to underwrite the loan in-house, while a mortgage broker introduces you to one of several lenders, and then that particular lender decides whether or not to underwrite the loan and on what terms. (Note: Some mortgage companies do lend their own money, therefore underwrite their own loans).

Both can show you a variety of loan types that are available and can help you choose which will work best for you. They also both collect your financial information, prepare the application and supporting paperwork, and will (if they are a good loan officer/broker) keep in contact with you until closing day.

There are a ton of loan programs out there. More than I could list here in this post, but here are some links for you to check out:

• Home Buying Institute - Types of Mortgages
• Zooage - Article on Home Loan Programs

No matter which type of lender or loan you decide to go with, pre-approval is so important when it’s time to make an offer. Sellers are much more likely to accept an offer backed-up by a lender’s letter. It gives you more control over your home buying process and shows the seller that you are a serious buyer.

Interest Rate
There are several factors that determine your interest rate. Probably the most important factors are your credit score and your debt-to-income ratio. The higher your credit score (higher=better) and the lower your debt-to-income ratio, the better interest rate you’ll pay.

Another consideration when thinking about the interest rate is the actual term of your loan. While the length of the term has nothing to do with what kind of interest rate you’ll qualify for, the amount of interest you’ll pay each month does affect your finances even further.

Breaking Down a Loan Payment
Property taxes and insurance costs must be collected and paid when they are due. In most cases, mortgage lenders will make the collection by allocating the amount you need to pay for taxes and insurance each month to your mortgage payment. These collections are placed in escrow, a depository account that the bank manages. If your mortgage does not have an escrow account (this is an option), you will be required to pay your taxes and insurance separately and show proof of payment to your lender.

You may hear the terms PITI and PMI bantered about in the loan process. Here’s a brief explanation of what the acronyms stands for:

• P & I = Principal and Interest: This is the payment that’s necessary to amortize, or pay off, the loan amount (principal) and the interest over the specified term of the loan.
• T = Property Taxes: In Oregon, taxes are paid annually. When added to a mortgage payment, each mortgage payment will include 1/12th of the owner’s annual tax assessment. This portion of your monthly payment may increase or decrease, depending on the change of your taxes.
• I = Hazard Insurance: You may be required to carry this type of insurance on your home in the event of a fire, flood, disaster, and any other natural disaster that destroys or partially destroys your home. The insurance will protect your investment (and the lender’s) and repair any damage that may occur. The annual premium may vary depending on your home area and location. You must provide proof of insurance before closing and settlement. At your closing, you may be required to prepay up to one year’s cost of insurance.
• PMI = Private Mortgage Insurance: When you put down less than 20% on a home, the lender may require you to have “private mortgage insurance” (PMI). PMI protects the lender in the event the borrower defaults on the loan.

This mortgage calculator will show you an approximate monthly payment when you plug in the information above.

Finding a Lender/Broker
Ask your friends and family and your real estate agent for referrals. How will you know if you are getting the best deal? In a word: compare. Get good faith estimates from several companies. A good faith estimate is not a guarantee of what you will pay, but it gives you the opportunity to compare apples to apples.

Next step in the First Time Home Buyer Guide - Deciding What You Want in a House

Technorati Tags: First time home buyer, oregon loans, real estate, first time buyer, mortgage, lender, broker, PMI, PITI, escrow, Portland

[where:Portland, OR]

This post is for information purposes only. Please consult a mortgage professional for more information.

For those seasoned buyers out there, you might not need to read this post. However, for those first time home buyers out there, read on. I have written a step-by-step guide to buying a home that I hope will help you in this exciting, if not a bit intimidating, process. The guide will be split into several posts for ease of reading. Topics to be covered will include choosing a mortgage, choosing a Real Estate Agent, searching for a home, the offer process, and information about appraisals and closings.

So, without further adieu, let’s get started!

Step #1 - Get Your Financial House in Order and Investigate Resources

This is such an important first step to buying a home. With our recent mortgage crisis still affecting us, it is more important than ever to be on top of your finances when buying a home. Some legwork and planning is required on your part:

• Obtain a free annual credit report at www.freecreditreport.com. Check the reports for any incorrect information and contact the credit reporting agency to clear up any unresolved items such as charge-offs or defaulted student loans. Knowing what your credit report says beforehand will go a long way in preparing you to buy a house.
• Eliminate your debt Hold off on major purchases - no automobiles, no boats, no nuthin’ - not even major purchases on your credit cards. Period.
• Get an idea of what you can afford There are online calculators to help you do this. Here is one from Yahoo! Real Esate.
• Save some money for a down payment 10% is good, 20% is better. This may take some time and diligence on your part and may mean giving up a few nights on the town to make it happen. These are they days when lenders want to see that you are willing to take some of the financial risk of home ownership. Get Rich Slowly, a local Portland blog, has a great post on the best high yield savings accounts to help you grow your down payment a little faster.
• Check into home buying programs that assist first time buyers. Many offer classes that help you better understand the home buying process and some offer financial assistance. Here are some Oregon programs that I have found:

1. Portland Housing Center
2. Oregon Bond Loan Program
3. Oregon Veterans Home Loan Program
4. FHA Home Loan Program (Federal Housing Administration)
5. Acorn Housing Home Buyer’s Program
6. African American Alliance for Home Ownership
7. HUD Good Neighbor Next Door Program
8. Portland Community Land Trust
9. Portland Development Commission Home Loan Program (PDC)
10. Portland Online’s Home Buyer Fair Calendar
11. Clackamas Community Land Trust
12. Clackamas County Community Development
13. Habitat for Humanity

Next topic in the First Time Home Buyer’s Guide: Mortgages

Technorati Tags: First time home buyer, oregon loans, loan assistance, home buying classes, Portland Housing Center, FHA, Veterans

[where:Portland, OR]

The term “green” has been tossed around a lot lately and it seems to be filtering in to all parts of our everyday life. It makes sense then, that in my line of work, the question I hear most often is, “Just what is a green home, anyway?”

Here’s the “elevator speech” example explaining a green home:

The difference in a green home is in the details. They are designed and constructed to provide a variety of health and ecological benefits such as improved indoor air quality, energy and water efficiency, a cleaner environment, a smaller carbon footprint, reduced construction impact and lower maintenance costs for the owner.

In essence, it’s about living a better quality life with the least amount of impact on the world around us.

Another part of the explanation is determining green vs. sustainable. Green products are those that have less impact on the environment (Energy Star appliances, engineered lumber); sustainable products are fully renewable (bamboo products, clay flooring) and has the least amount of harmful impact on the environment. Many homes can have a certain degrees of green, but few homes are completely built with 100% sustainable products.

So, what are some of the things you might find in a green home?

• Insulation added to attics, exterior walls, basement walls and floors
• High-efficiency, dual or triple-glazed windows
• A high-efficiency heating system
• Sealed ducts and potential air leak areas
• Energy-efficient appliances and lighting
• Improved Daylighting (natural light)
• Water-efficiency - low flow toilets, showerheads and faucets
• Improved indoor air quality by removing toxic materials in the home and by making sure home is properly vented (no vinyl, low or no VOC (volitile organic compounds) paint, no asbestos, and no mold
• Solar Thermal (hot water) or solar photovoltaic (electricity) system installed
• Energy efficient water heater
• FSC (Forest Stewardship Council) certified wood
• No carpeting unless it is green certified or recycled

In addition, a smaller home is a greener home. Less square footage (1,500 square foot or less) takes less energy to heat, cool and light. Maintence is less on a smaller home and they require less stuff to fill them such as building materials, appliances and furniture.

Be watching for my next post on Green Living - Green Home Certification Programs.

Technorati Tags: Green living, eco home, sustainable, Energy Star, Portland home

An article out today by Ryan Frank from the Oregonian gives a run down on the latest S&P/Case-Shiller Index. Yes, the nationwide housing market is spiraling downward and the numbers listed in these latest reports only back up what we already know. This kind of data makes home sellers cringe and home buyers smile.

Also in the article is a link to a table showing the month to month and year to year change in appreciation over the last 7 years. It is a huge table, but I posted it below because it shows some interesting data about how much rates have declined since our most recent real estate price run-up in 2005/2006.

Portland’s big lurch looks like it started in the spring of 2005 with several months increasing over the previous month by over 2%. Prices were certainly out of control. Adjustments were in order and over the past 5 months we have actually seen a negative trend in appreciation rates. The market will always adjust itself - it’s the nature of the beast.

The good news? This report tells us that the Portland housing prices are still ticking upward over last year. Barely.

Will it last? Readers, what do you think?

Portland Real Estate Appreciation, 2000-2007

Technorati Tags: Portland Oregon Real Estate, appreciation, Case-Shiller, S&P, report

[Where:97204]

Wondering how much rental rates are in Portland, Oregon? I occasionally get asked this question from out-of-state clients who are going to move here and rent before they buy. Zilpy gives you median rental rates for different neighborhoods and will even give you rental data for particular block areas. They break it down by apartment size, dollar per square foot and rental history. They also show demographics data for specific neighborhoods. Enjoy!

Here’s a nice video celebrating Portland, “America’s Most Livable City”. It was done by StreetFilms and it’s about 30 minutes long. So, grab yourself a cup of coffee and settle in to learn more about why Portland is such a great place to live.

If you don’t see the video box below, you can view the video here.