2 Years Prior to Buying a House
- Comments off
The emotional stages of buying a home:
Excitement = I’m buying a house!!
Overwhelm = We just saw the loan officer and there’s just SO much we didn’t know.
Defeat = We’ve saved and saved, and we want to buy, but we just can’t find the right thing. We’re never going to buy a house at this rate!
Hope = There’s this house…let’s schedule a viewing.
Shock = They accepted our offer. We’re finally buying a house!
Worry = Did we budget right? Did we overbid? Did we do the right thing?
Elation = We bought a house. I can’t believe it’s ours!
You get the picture. Buying a home comes with a full range of emotions. It may sound like a sales pitch, but it’s really important to have a loan officer you can trust to partner with you during this time. Granted, we want your business, but more importantly we want you to feel comfortable with the financial decision you’re making. (Ask for a loan officer at Signet!).
When you first meet with your loan officer, you’ll be given a lot of information that may feel a little overwhelming. You may not know the questions to ask or exactly what to expect, but that’s OK. They’ll walk you through the process, just come armed with questions and be open to all the answers.
We know that waiting even 6 months can feel like two years when you’re ready to own your own little piece of property. But, take your time and know you’re ready to take that step before you find the house of your dreams.
Let’s say you’re a year or two away from being financially stable enough to purchase a home. Here are a few things you can do so you’re actively waiting:
- Don’t Google what you can afford. Do the math yourself.
Here’s the thing, a lot of loan calculators online will give you an estimate that is much higher than what is realistic. Remember that these calculators aren’t taking into account that you feed 3 other humans every month. They’re not factoring in the 1 week vacation you love taking every Fall. They’re not calculating in the 3 more years you have to pay off your new car. This is why it’s so important to do the math yourself and then go over it with a trusted friend or family member to ensure you’re not forgetting anything. For instance, one couple we talked to recently said an online calculator listed they could afford a $400,000 home. But, their calculations said they could only sustainably afford a $200,000 home with 10% down. Do the math so you’re not searching for and falling in love with something that’s out of your price range.
- Schedule an appointment with a loan officer before you’re ready to buy. This gives you a few different benefits. 1.You’re able to learn about the home buying process and the different things you need to be saving for. 2.You’ll be able to check your credit score and talk through with them where you’re at financially. 3.They’ll be able to counsel you on how to increase your credit score or other actions you might need to take to prepare for buying a house. This preliminary meeting helps you build a game plan for reaching your home buying goals. Plus, once you get closer to purchase, you can go ahead and get pre-approved so you are ready to put in an offer as soon as your dream home hits the market.
- Build your credit. If you’ve never had a loan or a credit card, now is the time to start working on building your credit. It’s one of those things that you need to have a track record of paying consistently on loans to then be eligible to receive a larger loan.
- Set up automatic payments for your bills or set reminders on your calendar. Missing a payment for your electric bill, rent, credit card, etc. can potentially hurt your credit. So, take every precaution to ensure you’re making every payment every time. For a loan, you need good credit. For good credit, you need good credit history. For good credit history, you need documentation that you’re responsible and reliable in paying your bills. Do yourself a favor and automate this process so you never miss anything.
- Check your credit report once a year at annualcreditreport.com. This doesn’t ding your credit but will allow you to ensure there are no surprises or credit lines open that you didn’t know about. The last thing you want is to win an offer but then discover your identity has been stolen or you have an outstanding bill you can’t pay and therefore now you can’t get the loan you were counting on.
- Start saving for:
- Down Payment (at least 5%-20% of the total listing)
- Closing Costs
- First year of homeowners insurance
- First year of property taxes
The amount needed here is different depending on the home and the loan you choose. Most loans with a decent interest rate will require at least a 10%-20% down payment. But, your mortgage isn’t the only thing you need to be calculating. These other factors come into play as you plan what you can and cannot afford.
As you go through each emotion that comes with this exciting time in life, just remember you’re not alone and you have someone you can quickly email or call to ask questions throughout the process.
Let’s get started!