Buying a home is a big emotional and financial decision. If you define your needs and goals clearly, it will be easier to narrow your search and make decisions.

Maybe there’s a life change ahead – marriage, a new job or a new family member – and you’d like to upsize or downsize. If you’re a first-time buyer, you may be looking for the advantages of ownership.

• A fixed monthly payment instead of rent increases
• Building up savings in the form of ownership or equity – instead of paying off your landlord’s mortgage
• Being part of a stable neighborhood or community
• Freedom to put your personal stamp on the place where you live

In the end, you’re making a lifestyle choice that reflects your values. Is location – for example, walkability, distance from work, or the quality of schools – your top priority? Or is the house itself – its size, design and features – more important? It can be helpful to approach home buying as a process of elimination. You probably won’t find the perfect home. But you’ll find one that is the best possible match for you.

For most people, a house is the biggest purchase they’ll ever make. Beyond the sale price, transaction costs are high, including sales, lending and closing fees. So is the cost of maintaining or improving your property. The point at which you buy in the real estate cycle – the average 18-year period from valley to peak to valley – affects the price you pay and when and how much land appreciates in value. For all these reasons, you should be prepared to live in your home for at least 5 to 7 years. A long-term commitment is the surest way to maximize your equity and personal net worth.

Getting mortgage pre-approval is a key step early in the home buying process. To qualify, you need good credit, a history of savings, and a ratio of recurring debt to gross monthly income of around 45 percent or less.

You can get one free annual credit report each year at www.annualcreditreport.com Scores range from 300-850. It’s best to have a credit score of at least 620 when applying for a loan and the lowest interest rates go to borrowers with a score of 740 or higher.

Lenders usually recommend looking for a home that is three to five times your annual income if you’ve saved enough for a 20 percent down payment and are carrying a moderate amount of debt. There are loan programs available with down payments of 3.5 to 5 percent and a few with no down payment. They carry the extra cost of mortgage insurance.

Whatever down payment you make, you’ll need other savings to cover closing costs, moving expenses and an earnest money deposit. Usually 1 to 3 percent of the sale price, the deposit can be thought of as part of the down payment since it’s applied to the price of the home when the sale closes.

Whatever mortgage amount your lender approves, only you can decide what monthly payment you’re comfortable with. In addition to mortgage principal and interest, you’ll need to budget for homeowner’s insurance, property taxes and any homeowner association fees. It’s also a good idea to set aside savings for repairs and maintenance. Your lifestyle is another factor to consider. Do you have an expensive hobby or a taste for travel, for example?

If you start with a mortgage pre-approval, you’ll have defined one of the two most important home search criteria – price. The bottom of your range should be at least 10 percent below the maximum set by your lender. A range of 15 percent or more will increase your options, an advantage when home inventory is low.

If the look and feel of your home is very important to you, it can make sense to buy a fixer with good bones at a price under budget. Then you can remodel with the savings. On the other hand, you may consider going slightly above your preferred ceiling if the monthly payment is still affordable or you have extra cash to make a bigger down payment.

Location is the other top factor in your home search. Distance from family and friends or work, lifestyle and schools often rank high in decision making. But it’s also wise to approach the purchase as an investment. You want to have confidence that the value of your home will be stable or increase. Consider these factors when choosing neighborhoods.

• Whether or not you have kids, homes served by good schools have the best chance of appreciating.
• Low crime rates are also a good predictor of stability or gains in real estate values – and of your personal safety.
• Look for areas with high employment, good incomes and a mixture of young and old people – all signs of economic vitality.
• Speed of sales and average differences between list and sale prices also help you to gauge a neighborhood’s desirability.

Realtors are prohibited by Fair Housing laws from commenting on neighborhood schools or crime, but they can direct you to websites that provide information. For example:

• http://www.areavibes.com/
• https://www.portlandmaps.com/
• http://www.greatschools.org/
• http://www.schooldigger.com/

The best house for you is almost never perfect. You have to compromise either on its size and features or on its location. When you find a place that feels like home, it’s best to act quickly.

Your realtor can help you make an informed decision about your offer price with a comparative market analysis. A “CMA” compares the list price to recent sale prices of similar homes in the area. The “comps” are adjusted for differences from the home you want to offer on and averaged to estimate its fair market value.

You also need to weigh list price against local market conditions. When inventory is low, you face a seller’s market and have less bargaining power. Homes tend to sell quickly near list price or above and lowball offers are dismissed. When home inventory is high, the market favors buyers and you have more bargaining power. You may be able to buy at a discount.

Though price is key, the terms of your offer can help to win over a seller or to reduce your costs. In a buyer’s market, you can ask for concessions such as seller-financed closing costs, appliances and a closing date that suits you. In a seller’s market, you’ll want to make all the concessions you can, such as offering a larger down payment and earnest money deposit, timing the closing to suit the seller, or inspecting the home before making an offer and then waiving the inspection contingency if you’re satisfied with the results.

Once you’ve decided on price and terms, your realtor will prepare the paperwork for your review and signature and submit it to the seller’s agent.

Home buyers usually spend several months in the browsing stage. And that’s all to the good. Learning about the market and your own needs and wishes will help you make better decisions when you’re ready to look seriously.

Setting up a simple search [‘search’ hyperlinked to Buy landing page] based on price and location is the best way to browse. You can have new listings that match your search criteria delivered to your email address.

If you don’t know what you can afford, click here for a mortgage calculator. If you’re new to Portland or would like to learn more about its neighborhoods, click here and here.

While browsing and researching online, you should also get out and about. Try driving, walking, shopping and dining in neighborhoods of interest at different times of the day. Attend open houses for properties you like. Opens are often announced when a new listing hits the market.

Especially if you’re a first-time buyer, it can be very helpful to meet with a mortgage broker or lender. You can start taking steps now to ensure that you qualify for a mortgage on the best possible terms. To learn more about financial preparations for buying a home, click here. [‘here’ hyperlinked to “How do I prepare financially to buy a home?” above]

If you don’t know a good mortgage broker, contact me [‘contact me’ hyperlinked to Contact page] for some recommendations.

Are you new to Portland or a job and not ready to take on a long-term financial commitment? Maybe you’re building up your credit score and saving for a down payment and closing costs. Good news! You don’t have to wait for all the comforts of home – more space and privacy, a garden, or a cozy neighborhood.

Home Partners of America offers a path to home ownership with its Lease with a Right to Purchase Program. They buy the home you choose and lease it back to you a year at a time for up to 5 years. You can exit your current one-year lease any time to buy the property with 60 days’ notice. You know at the outset what rent and purchase price you will pay in each of the 5 years you choose to stay in the home.

To be eligible for the Program, you must have an annual household income of at least $50,000, stable employment and no history of eviction or bankruptcy. Household members age 18 and above complete an online application and submit a one-time fee of $75 per household. Applications are usually processed in 1-3 days.

Once approved, you work with a realtor to find a home that meets basic criteria set by Home Partners. For example –

• You can choose a detached house or a townhouse, but not a condo.
• The property must be served by a public high school with standardized test scores in the top 50%.
• The sale price can range from $100,000 to $625,000.
• Short sales, auctions and bank-owned properties are not eligible.

For more details, click here. Or contact me with questions.