Buying a home takes a lot of preparation and planning. It’s important to get your finances in order and other tasks done before you even start house hunting!
Keep in mind that this early stage of the buying process doesn’t happen overnight. It takes time on your part even before we start working together.
That way when you are ready to make your move, you confidently move forward to make that new home you just saw YOURS.
The only way that can happen smoothly is if you do your homework first, so start prepping and planning now if you want to buy a home in the months ahead or even a year from now.
My list below will help you stay on task. You’ll be ready to buy in no time:
Do Your Homework
Here are some key activities you should do now:
Learn about mortgage options. Do you understand how mortgage rates work, such as fixed rates or ARMS? Or the difference between a FHA loan and a conventional loan? Learn what’s available now and even the outlook for rates in the coming year so you aren’t overwhelmed or surprised later on. This way you can determine what type of financing will be best for you.
Explore neighborhoods and open houses. Check out certain neighborhoods in terms of cost and features of homes. Internet sites such as Realtor.com or MLS.com will include open houses and current listings. Actually walking through homes can help you explore your wants and needs in a more direct manner. Get a better feel on what’s important to you, such as location, large kitchen, backyard, open-concept, or size of rooms. With condos/townhomes, you’ll also get an idea of monthly HOA fees and amenities in different buildings.
This time spent “scoping out” homes provides a reality check and will make you more efficient when it comes time to really house hunt!
Did you know that there are down payment assistance programs that can make buying a home much more affordable? You’ll be amazed to see what is available for mid-income buyers, first-time buyers, veterans etc. Programs from local housing authorities can help with down payment or low interest loans; and many buyers can qualify for this assistance.
Don’t disqualify yourself before you try. I can go over with you what’s available in our area. That way, you’ll have more confidence that you can become a homeowner.
Get Your Finances In Order
Buying a home is probably THE biggest expense you will ever have in your life. You want to be a responsible buyer and homeowner, so now is the time to focus on your finances. Don’t do anything that could disrupt your good credit!
Strengthen your credit score and build credit history. Your FICO credit score is your gateway to a good mortgage since lenders use it to determine your risk as a borrower. So the higher your score, the better your loan options. And, if you’re a couple, then BOTH of you will need to work on your credit!
It can take 6 months or more to improve your score, so start today. Pay your bills on time, don’t take on any large debt, and double check your score for inaccuracies.
Know what monthly mortgage payment you can afford. I have a “Rule of Thumb” when it comes to determining affordability. For every $10,000 change in price, your payment only changes by about $65-70/per month. So, don’t be too tied to the big number, instead focus on what you want to pay per month. Plus, what a lender says you CAN afford can be very different from what you are willing to spend each month. No one wants to be stretched too much and become “house poor.”
Work backward from your desired monthly payment to calculate the price range you can afford.
Save for a down payment. Cut expenses and save, save, save (maybe find a high-yield savings account) right now! No matter if you get a 3% down loan or a conventional 20% down loan, lenders still want to see if you have enough cash reserves in the bank.
Remember, owning a home isn’t only its purchase price, but it includes other costs such as taxes, insurance, maintenance, and possible HOA fees. With a larger savings account, a lender knows your financially responsible and less of a risk.
During this time, you can even “play house” and see how you handle living with your “affordable” monthly mortgage payment. Can you handle it?
Stay Focused with These 10 Commandments
You need to avoid some risky actions that could derail your ability to get a mortgage loan. Ignoring just ONE of these items can ruin your chances for qualifying for the loan you want.
- Thou shalt not change jobs, become self-employed or quit your job.
- Thou shalt not buy a car, truck or van (or you may be living in it)!
- Thou shalt not use charge cards excessively or let your accounts fall behind.
- Thou shalt not spend money you have set aside for closing.
- Thou shalt not omit debts or liabilities from your loan application.
- Thou shalt not buy furniture.
- Thou shalt not originate any inquiries into your credit.
- Thou shalt not make large deposits without first checking with your loan officer.
- Thou shalt not change bank accounts.
- Thou shalt not co-sign a loan for anyone
As you can see, start planning now if you want to buy a home next year. You’ll be a more informed buyer and borrower, and will be ready to purchase a new home with confidence and less stress!
And, know that I can help cut through the overwhelm, especially after the crazy market we had over the last year. We can schedule a time to meet and I can walk you through how you can make a new home happen for you, no matter what you think might be an obstacle in your way right now. I’ve most likely helped a client overcome the same hurdle before and I’d love to help you too.
