It’s simple buying a home, right? No prepping, no money, no worries. WRONG! There’s a lot that goes into the process, but let’s start with what you should think about before you even consider looking…. are you even ready to buy a home?
Going through this process myself and with many other clients, it’s good to have a little checklist of priority items you need completed before even considering to look at homes.
MONEY ON HAND
Got that money in the bank? I’m not saying you need to have tens of thousands of dollars in the bank but you need to have some cash on hand for a downpayment, inspection, earnest money and any other upfront expenses of items you may want to repair in the home. There are now so many great loan programs that either require zero down or just 3.5% but don’t get stuck on that. The more money that you can put down is sometimes better. It can lower your monthly payments and even lessen some closing expenses.
FHA Loans – 3.5% down payment and have great first-time home buyer programs
Conventional Loans – Minimum of 3% down payment
USDA/VA Loans – No downpayment loans are offered
Jumbo Loans – 15% down payment
Here’s how I prepped: I have a completely separate savings account that is JUST for my home savings and that is where I allocate anything and everything that I pull out for a property and put into it with repairs, etc. It helps me keep track of my cash on hand and stay organized.
GET YOUR CREDIT IN CHECK
Do you have credit cards or loans? Are you paying everything on time or in full? This will ALLLLLL come up at the end of the day when your lender pulls your credit to loan you money. Those two missed cable bills will come to haunt you so stay on top of all of those bills so the lender feels confident lending money to you.
There are also fantastic credit repair companies that can help you bump it up to where you want. I utilized my credit cards to build credit and a history for myself. I recommend stalking The Points Guy on where you can start. There’s truly a wealth of information on their site from which cards you can take advantage of at certain times of your life to how to better manage credit card points. BIG FAN!
BUDGET AND BUDGET WISELY
It’s important to know what you’re willing to spend per month when it comes to mortgage payments. This not only helps narrow down the types of properties you’ll be looking at with your real estate agent but also give you an idea of budgeting and knowing what your pocketbook can handle.
LOOKING AT YOUR FUTURE
How long do you plan to stay around the area you’re looking at buying? Are we talking six months, three years or 10 years? It takes a minimum of three to five years to recoup the closing costs of your home. Basically, if you don’t think you’re sticking around the area for long then renting is in your best interest. Buying a home is an investment and you want equity in your home when you sell not to be in the hole.
Keep job stability in mind with your future as well. If you think there’s a possibility of relocation or promotions that require moving, it may be better to rent unless you know the company has a fantastic relocation program. Some companies do, some companies don’t.
If you have every last one of these items checked then congratulations! It’s time for you to get with a lender and real estate agent to make your home buying dream a reality. If not, utilize this list and make it your homework!