Preparing to Buy a Home – Your First Steps
There is no one size fits all when it comes to preparing to buy a home. Everyone’s circumstance and goals differ. In general the below is what I would recommend to buyers as they look to take those initial steps towards buying a home.
- Know Your FICO Score: Become familiar with your credit score and optimize it. Check out my What is Your Credit Score/FICO Score? blog post for more on this.
- Live on a Budget: Practice living on the money you are likely to have after your mortgage payment
- Build up your Down Payment: Ideally 20% or more but you can buy with as little as 3.5%!! There is a cost and an inconvenience to having to wait and this should be discussed further with your Realtor and lender.
- Get a Realtor: Sooner rather than later discuss preparing to buy a home, your situation and goals with a professional Realtor. Doing this can avoid delays and issues when you are going through the buying process and have less time. I am happy to chat months before a client gets off the fence and is actively looking for a home.
- Get a Lender: Likewise, a good lender will be happy to speak with you months before you’re preparing to buy a home. Doing this early can put you in a much better situation. I am happy to recommend some fantastic lenders that have your best interest at heart.
- Purchases: Avoid buying expensive items on credit such as a car, home furniture etc. This can negatively affect your credit score which impacts your loan terms. Especially, do NOT buy expensive items on credit during the closing process. Buy these items after you officially have the home to avoid any issue with financing.
- Get Pre-approved: Unless you are a cash buyer you will need a pre-approval letter that will accompany any offer you make and convey security to the seller. Without this you won’t be taken seriously by sellers. It also gives you a clearer picture of what you can afford to buy. I recommend contacting a minimum of three lenders but be careful they don’t run your credit!!
- Know the Numbers: From your discussions with your lender and Realtor you should have a solid understanding of your rate, monthly payment and closing costs at your preferred price and max price. These won’t be exact as they differ depending on the home but they will be reasonably close.
I have seen buyers put the horse before the cart by seeing a home and wanting to make an offer, but they literally can’t as they don’t have a pre-approval letter or get surprised with a low credit score, etc. Furthermore, in their hast they have not vetted the Realtor (which is likely some agent they know nothing about), nor the lender!!
Of course, things can be done quickly but its less likely you will be successful and protected in a market where speed is crucial to win.
If you would like more detail on the above or have questions about the buying process, I am happy to chat with you.