Oct 9, 2020
When you begin thinking about buying a house, whether it's your first time or you’ve owned many homes in the past, there are several things to keep in mind, research, and prepare for. The more time you spend planning and researching, the easier the process will be for you in the long run.
This is a high-level overview of what you should expect and think about as you plan to buy a house within the next year.
- Get your credit in order and understand your financial readiness.
- Research different mortgage types and understand your different options and rates.
- Understand your housing needs and outline your priorities.
- Find a great realtor — they'll make the process easier and can save you time and money.
- Understand your budget and total cost of house ownership.
- Get preapproved for a loan.
- Start your house search.
- Make an offer.
- Sign paperwork and receive keys.
What should my credit score be to buy a house?
The answer to that question depends on the type of loan you choose, your down payment amount, your income, and more. The short answer, however, is you should have the best credit score that you possibly can. Reviewing your credit 12 months in advance can allow you time to improve your score if necessary.
Review your credit score with all three credit agencies to ensure all of the information they are reporting is correct. Reach out to them to fix any errors that may be on your record. In addition, try not to buy anything leading up to your home purchase. Even a credit check like car shopping or taking out a new credit card can reflect negatively on your credit report.
What are the different mortgage options available?
Because everyone has different financial needs, lenders have developed several different types of mortgages to allow for more people to buy a house. VA loans offer as little as $0 down with attractive rates if you are VA eligible. There are conventional loans, Jumbo loans and ARMs (adjustable rate mortgages).
What are your housing needs and priorities?
When it comes to buying a house — as with most things — there are needs and wants. Do you need three bedrooms due to the size of your family? Do you need an office because you work from home? Do you need to live close to transportation, family, friends, doctors, or entertainment?
There are many things you’ll want to consider as you think about your needs and begin to prioritize.
- School rankings
- Pet friendly neighborhoods
- HOA (homeowners associations)
- Travel time to and from work
- Noise in community — airports, traffic, trains
- Yard needs
- Maintenance costs
- Open floor plan
How do you find a great realtor?
While it might seem helpful to hire a mutual or family friend to be your realtor, it may be more worth your while to find someone who is familiar with the area you are researching to live. These local experts understand the comp values — what other homes that are similar in value have sold for — the schools, and much more. A great realtor can be worth thousands of dollars to you whether you're buying or selling. Realtors do this for a living, and you should consider your interview with prospective realtors just like you’re interviewing them for a job. They are, in fact, doing just that to represent you and your housing needs.
Do you understand your budget and the total cost of home ownership?
You can work with your loan officer to better understand what you may be preapproved for. Your loan officer will look at your income and expense base before doing a deep dive which will give you the necessary preparation you need for your home search. While this isn't a guarantee that you'll be approved for a loan, it's a great first start that also shows a seller you're a serious buyer.
You should also understand all of the additional costs that go into home ownership. For example, there are costs and fees involved with the closing of your home. After you've closed, you need to understand you're now a homeowner with expenses like potential repairs, upgrades, and more.
Here's a short list of things you may want to consider when thinking of additional costs that come with being a homeowner. It's also smart to keep a cushion in your savings — just in case.
- Repairs on appliances, roofing, fencing, plumbing, and more
- Lawn care — whether you hire someone or do it yourself, you need to think about buying a hose, a lawnmower, and more
- HOA fees
- Property taxes
- Water, gas, utilities
How do you get started with your search?
Once you have a good understanding of your budget, needs, and what you can afford, you can enjoy the home search process. It can be frustrating at times finding the perfect home, but even the search process can provide a great learning experience. You'll see a lot of different houses in different areas and fine tune your needs and priorities.
Getting to the point of finding your perfect home and placing an offer, all starts with doing your homework in advance. If you've allowed for one year in advance, you will likely be very well prepared. The processes will go smoothly, and you’ll have enough time to fix any issues or roadblocks that can make the process more difficult.