Home Purchase Planning
You might be thinking you want to buy a home. Well, what do you need to do to be ready to purchase your new home? Your journey to a new home could be just around the corner. There are a lot of options and things to prepare in your home purchase planning process. We have a lot of resources for helping with the home purchase planning on our resources page.
Home Purchase Planning: Finances
Savings are Important
The earlier you start saving the better. It is important to start saving early in your home purchase planning process. You have a lot of costs to prepare for when buying a home. This is one of the biggest deterrents to why people can’t purchase a home. Your lack of savings is the first barrier to solve when buying a home. You need to save up for a down payment, closing costs, and moving expenses. Inviting some friends over to help you move in exchange for food is a great way to limit some of those costs.
What Can you Afford?
When planning your home purchase it is important to figure out what you can afford. Don’t just start looking at homes that are all different costs. Falling in love with a dream home out of your budget can be detrimental to your home buying process. If this is your first home this is especially crucial.
Check on your credit score prior to looking for a loan. This should start happening years in advance. Start by paying all your bills on time. Then start lowering your credit card balances. Keep them as low as possible to lower the percentage of credit you are using. Don’t close any credit cards either as this will also change the percentage of credit you use.
Explore all the options! Bankrate does a great job at explaining all the multiple different types of mortgages out there. You also have different lenders to go through to get a loan. Today we have the options of local and online banks more than we ever did previously. There are also different types of mortgages available that can help you. Some of these options allow you to have different sized down payments so you don’t have to save as much initially. But remember that you will have to make up for that with your monthly payments. Also, if you aren’t over 20% you may have to pay private mortgage insurance (PMI) on your loan.
Compare all the mortgage rates and fees out there. Talk to the different lenders and once you decide on one visit with your lender to get preapproved. A preapproval is the process of your lender writing a letter outlining the amount you are preapproved for. This will help you be a serious buyer in the eyes of the home seller. It may also be the difference between you and someone else getting the home.
These letters typically expire after about 3 months so don’t go through this process too early or it might affect your credit score. Getting multiple approvals can sometimes affect credit score if expanded further than 30 days.
Home Purchase Planning: Shopping
House and Neighborhood
Start looking at listings and seeing what kind of houses you like. Is it something newer, is it a condo or townhouse? Look through all the different styles and find one that fits you. Use that as your benchmark and example to help when you start talking to your realtor.
Plan what kind of neighborhood you want to purchase your home in. What does your ideal neighborhood look like? Does it have a park nearby or within walking distance of restaurants and shops? If you’re someone who hates long commutes getting a house close to work might be ideal for you.
Choose a Real Estate Agent
Find someone you get along with but also won’t push you into looking at homes outside your budget. A good real estate agent will take what you want in your ideal home and search the market to try and find the right one. Get to know your agent and see if they are the right fit for you.
Stay within Budget
You created a budget for how much you can afford for a reason. Don’t go expanding it just because someone else says you can have this much money. It is better to buy a home you can afford versus being stressed each month about trying to keep up with mortgage payments and day to day living expenses.