Buying a home is a HUGE step for most people. It is one of the most important financial decisions we make in our lives. That kind of a move requires some careful planning. We work with clients all the time who are not going to buy for a long time. Often they mistakenly think that because they are so far away from actually making a purchase, there is nothing to do but wait. It’s not true. There are many things you can be doing to actively wait until the right time to buy. So, whether you are 6 months or 6 years away from buying a house there are some things you can do now to prepare. Let’s break it down:
1. Get a FANTASTIC real estate agent and have a consult.
Your real estate agent will be your friend, legal buffer, teacher, coach, shoulder-to-cry-on, and personal real estate champion! It is pretty important to make sure you snag a good one. That being said, not all real estate agents are created equal. So, shop around, do some interviews, and go in for a consult. Remember that your agent is your employee and it is vital that you are able to trust them. Here is a list of great questions to ask potential agents.
Once you have chosen a great agent, meet with them. You may think you are too far out to care what the market is doing or that your agent won’t have anything helpful to share. It is still a fantastic idea to meet with them. A consult will get you on the same page. It will get you informed about the market and your agent informed about your situation, needs and preferences.
2. Meet with a Loan officer and get pre-approved
These first two steps are ordered by importance because a great loan officer is just as vital as a great agent for many of the same reasons. Your loan officer is going to champion your loan process. Here are some great questions to ask while interviewing your loan officer.
As with your real estate agent, you should meet with your loan officer and have a consult. They can make sure you are keeping track of all your important documents and tax statements so your pre-approval can go smoothly. They will also help coach you on when to get pre-approved and suggest any changes you may want to make in the way you use credit.
3. Learn about the process
The home buying process can be wildly difficult, convoluted, and cumbersome. However, it doesn’t have to be. Perhaps the most helpful thing you can do for your sanity, after getting a great agent, is to learn about the process. Learn the steps to getting an offer accepted on a home and then learn about the steps that come between acceptance and closing (yes there are steps after the offer is accepted and yes there are many). Here is a great infographic that can walk you through the basics of the process but the steps can be different depending on where you live and the state of the market you are buying into so your best source of information will be your realtor. A good realtor will usually go over the home buying process in the initial consult.
You will also want to learn some useful tips and tools to use when viewing potential properties online. All home search sites are not created equal and they often have the information listed incorrectly. Your agent can help you learn how to navigate your own home search. It would also to learn some tips on how to approach open houses, model homes, builders, and for sale by owners.
4. Determine your wants and needs
Determining what you want and need in a house can be life-saving when it comes time to house shop. Sit down with your significant other or other concerned parties and pull out a sheet of paper (or several if you are feeling meticulous). Make a list of all the things that you can imagine having in your dream house. Have fun with it. Explore what a dream house would look like to you. Be specific. Then sort each item into one of 2 columns “wants” and “needs”. After you have sorted them, it would also be helpful to rank your wants and needs. Decide what are your top needs and top wants. You may need 4 bedrooms for your 10 children and want a pool. However, you want a gas stove more than a pool. When you are house shopping you can then easily see how one house compares to another. Buying a home can be an emotional process and a wants and needs list can keep everyone on track.
5. Get your finances in order
You have been saving all of your receipts, right? No? Don’t panic! Even if you are looking to buy your very first house, you don’t need filing cabinets full of gas station receipts. While you are waiting to buy or buy again, here are some documents you want to be sure you do have on file.
- Pay stubs
- Your tax documents
- All Income Sources
- Bank Statements
If you work for a paycheck, you are going to want to have a year of consistent pay stubs and proof of you paying your bills on time. If you work on commission, banks like to see 2 years of income and bills.
If you are a little upside down financially, talk with your loan officer about some tips and ideas on how to get straightened out. You also might want to check out Dave Ramsey’s steps to getting out of debt and becoming financially independent.
6. Get a handle on the market and keep tabs.
While you are waiting to buy a home, you are in a position to keep an eye on the market and buy at a great time. The housing market goes through cycles. Some of those cycles come around every 10 or so years, some every 5 or so years, and some every year. It may be more advantageous to buy in the summer where you live. Maybe you should buy in the winter. Even in the proverbial “seller’s market” you can still strategically plan your purchase to get the most house for your buck.
Become an expert by asking your agent for market reports. They should be able to send you out monthly or quarterly reports on the housing market in the area you are planning on buying. Watch the trends, talk to the experts, and become an informed buyer.
7. No New Debt!!!!
One of the most common issues we see buyers face is working hard to get their credit sorted out, getting pre-approved and then, unknowingly, shooting themselves in the foot by making a big purchase. Buying a car, other property or even new furniture can throw a major wrench in your ability to qualify for a loan on a home. This is a problem for many people because most people don’t know to be cautious. The new debt problem is an easy one to avoid. Just wait to buy that fancy new truck until you have a fancy new garage to park it in. Remember to get all the way through the home buying process before you start other buying processes.
8. Save for a down payment
This is the chunk of money you will be paying upfront for your home. Most experts recommend putting 20% down on a home. However, that is not a requirement. There are types of loans that require as little as a 3% down payment and even a few that have no down payment requirement. Although a smaller downpayment can get you into a home sooner, it’s still important to remember that you will end up paying more over the life of the loan if you start with a smaller down payment. While you are waiting to make a purchase, saving a solid down payment is a stellar idea. Here are some helpful tips about how to tighten your budget and get a hefty amount down on your new home.
You deserve to be well informed and ready to buy your home. The steps to buying a home shouldn’t be a mystery and you should be able to have people on your team that you trust! These steps will help you achieve your home ownership goals.