If you’re in the market to buy a home for the first time, congratulations! You’re in an exciting stage of life, and about to realize the sense of pride and wealth of benefits that come with homeownership.
You’re also part of a U.S. trend. Last year some 560,000 houses were sold nationwide, a 73 percent jump from the 323,000 sold in 2010.
“If you’re looking for an edge, interest rates are near historic lows so now appears to be a better time than most for purchasing a home,” reports Dan Moskowitz in an August 2017 Investopedia article. “(But) the best approach is to buy a home when you can afford it. Don’t attempt to time mortgage rates and home values; they’re almost impossible to predict. If you find the home you want and you can afford to, buy it.”
That said, you’ll be in a better position to secure your ideal new home if you plan ahead. Consider how this timeline can help the process proceed in a logical order that may even save you money.
One Year Ahead
- Ensure you’re on track with the down payment you’ll need to qualify and secure better interest rates. Several programs allow you to bypass or reduce down payments, but conventional loans can require cash savings of up to 20 percent of the sale price.
- Secure your three free annual copies of your credit score at Annualcreditreport.com, then take steps to minimize any issues that make it lower than necessary. Some recorded information may be inaccurate, while some may be reparable, given time and effort.
- Establish a price range for homes you can afford. Your lender will provide you a maximum based on your debt load, but you must apply common sense when deciding how much of your income you’re comfortable allotting toward payments. In general, lenders want to see a total debt load (including your mortgage) of 43 percent or less of your gross income. Amplify offers helpful calculators here.
Nine months ahead
- Think hard about what will matter most in your new home, since your choice will heavily impact the quality of your life. Your top criteria should revolve around location: Consider area amenities, safety, privacy, transportation factors and the characteristics of your neighbors. But you should also predetermine the home size and room types you’ll need, identifying preferences, must-haves and deal-breakers when it comes to architectural styles, features, materials, energy features, etc.
- Research aspects of potential neighborhoods through sources such as Realtor.com and city records. Consider municipal zoning, taxes, school districts, transportation routes, crime rates, prevalent home values, etc.
- Start setting aside money (probably several hundred dollars) for upcoming expenses such as your new home inspection, title search, property survey and homeowners insurance. You may also want to allot funds for unanticipated repairs and maintenance once you move in.
Six months ahead
- Pull together your paperwork. The short list includes the following: your W-2 forms for the last two to three years (or business tax return forms, for the self-employed); your personal tax returns for the last two to three years; a recent pay stub; your last credit card and loan statements; a list of your addresses over the past seven years; any brokerage account statements over the past four months; and your last 401(k) or retirement account statement.
- Narrow down potential lenders, checking their websites to compare offerings and perhaps asking family and friends for recommendations.
- Choose a real estate agent who can act as your buyer's agent. Seek referrals from those you know and read online reviews.
Three Months Ahead
- Seek pre-qualification for your loan through your lender of choice. The process involves a credit check and some paperwork; then your lender will inform you of your mortgage ceiling so you can shop for homes in that range.
- Work on a budget that incorporates your probable mortgage payments plus costs related to homeowners insurance and maintenance.
Two Months Ahead
- Since closing on a home typically takes four to six weeks, you’ll want to make the final selection of the home you want to purchase, particularly if you have a hard move-out date for your current home.
- Contract for a home inspection; it may reveal major issues that need remediation before closing and/or may result in a lower price.
One Month Ahead
- Conduct a final, critical walk-through of your new home a day or so ahead of closing.
- Double-check that your paperwork is in order, ensuring any issues have been settled. Ask for clarification if something doesn’t make sense.
- Ensure that your homeowners insurance is established before your closing date (bring documentation).
- Procure a cashier’s check or bank wire (not a personal check) for the final amount you’ll need at closing.
Finally, get ready to celebrate your new adventures as a homeowner. Enjoy the fruits of your labor and get ready to customize your new abode to your heart’s content.