When is the right time to buy a home, anyway?
It’s a big question with big answers—and implications for your future. Most folks don’t have the cash to go out and buy the first home you fall in love with; getting a mortgage requires careful planning and savings. That still doesn’t answer the question: when are you ready to buy a home?
If that question makes you feel a little lost or overwhelmed, you’re in the right place. When it comes to financial health, we’re overachievers—we like to go beyond the basics! We put together a timeline for you, starting one year before you want to live in your new home.
Make Your Own Timeline
If at any point in this timeline you think, “I’m not ready” or “I don’t have that”, no stress! That’s exactly the time to press pause, reevaluate your financial situation, and make the changes you need to keep on track. We’ve structured this around one year, but you may need more—or less—time than that.
Here’s the simplified version of our timeline:
|Timeline||What to Do|
One year before buying a home
Nine months before buying a home
Six months before buying a home
Three months before buying a home
Two months before buying a home
One Year Before Buying a Home
You may have been already saving up for a home for years, but the bulk of the work begins about a year before you aim to purchase.
1. Check your credit report.
Secure your free annual copy of your credit score at annualcreditreport.com. You’ll be looking at several things:
- Make sure the report contains no errors or discrepancies
- Look for ways you can improve your credit score
- Evaluate how much debt you owe and consider ways to reduce it
Your credit report will be one of the most important factors in determining mortgage approval and interest rates. It’s best to go in with no surprises and a clear understanding of where you stand. Even better—by checking it a year out, you have some time to improve your score before applying for a mortgage.
2 Research lenders to find the right one.
Do your research to find a lender that you can trust, knows the community you want to live in, and offers the best rates. If you live in a small town or city, choosing a local lender might prove to be an advantage when you put in an offer on a home—in some cases, a recognizable and trustworthy lender can be the detail that gets your offer accepted.
3. Establish a price range.
This is a critical step. Your lender can provide you an estimate based on your debt load and income, but it’s up to you to figure out exactly how much you’re willing to spend on a mortgage every month. Don’t forget about homeowners insurance, private mortgage insurance, property taxes, and HOA fees!
If you want to really make sure you can cover your mortgage—and more—here are some ways to go above and beyond:
- Come up with a monthly amount to set aside for future repairs or large appliances.
- Calculate your mortgage budget around one income (if you’re a two-income household).
- If you want to pay down your mortgage early, calculate how many extra payments you could make with a lower mortgage payment.
- Don’t count on raises or promotions to help you afford the mortgage. If your budget is tight now, it might be tight later.
It’s almost always smarter to choose a lower price range rather than stretch yourself to your limit. Owning a home can offer some financial stability (compared to rent), but only if your budget can truly cover everything.
4. Assess your down payment savings.
Once you have an idea of the home you can afford, check in with your savings to see if you’re on track with the down payment you’ll need.
A down payment of 20% is often quoted, but it isn’t a requirement! A down payment of 20% can definitely be an advantage, but it’s not strictly necessary.
If you aren’t close to meeting this number, discuss your options with your lender and explore down payment assistance programs. A lower down payment doesn’t have to be a deal breaker.
Nine Months Before Buying a Home
You’ve got your budget, you’ve got your lender, you have some idea of your savings: it’s time to start thinking about your new home!
1. Research neighborhoods.
Research aspects of potential neighborhoods through sources like realtor.com and city records. Consider municipal zoning, taxes, school districts, commutes, crime rates, surrounding home values, etc. It can be helpful to drive through neighborhoods at different times—the Monday morning rush might feel a little different than a casual Saturday afternoon!
2. Start thinking about what you want in a home.
What matters most to you in a new home? Is there a particular style you’ve always imagined? You also want to consider:
- The square footage
- Number and types of rooms
- Size and style of backyard (cement, grass, etc.)
- Architectural styles and time periods
- Amenities and materials
- Energy features (natural gas vs. all electric, etc.)
- Potential (a turn-key house vs a fixer-upper, or somewhere in between!)
It can be helpful to frame these items as preferences or deal-breakers—you probably won’t find a house that checks all the boxes, but if you know you need four bedrooms, that box has to be checked!
3. Consider other expenses involved in the homebuying journey.
Beyond closings costs and down payments, there are some other expenses that will pop up throughout the homebuying process, like:
- New home inspections
- Title search and survey
- Moving costs
You may also want to set aside funds for repairs, tools, and regular maintenance once you move in. This can involve hundreds or even thousands—it all depends on your personal finances and the house you buy.
Six Months Before Buying a Home
Six months out, your search will get a lot more serious. This is when you’ll start connecting with more professionals and start to get your paperwork organized. The goal is to be prepared now to limit stress later, when you’re seeing homes and putting in offers.
1. Choose a real estate agent.
Choosing a real estate agent can be one of your best moves when buying a home. Real estate agents:
- Know the market and can help you find a great home based on your needs and budget
- Are familiar with local regulations and laws that may affect your purchase
- Can help guide you through the process and paperwork
- Have access to up-to-date listings, which may include homes that are not yet on the open market, giving you an edge in finding your ideal home
- Can have access to a huge network of inspectors, contractors, and other experts you may need
- Can have a network of other agents that are looking to sell homes
A real estate agent isn’t legally required, but it is highly recommended for anyone who isn’t a professional homebuyer or investor. The homebuying process is complicated, and in many cases, you’ll run the risk of getting your home offers rejected without an agent.
2. Get your documents together.
You’re going to need them at some point, so it’s smart to start now! Having this info handy and organized will be helpful when it comes time to apply for a loan.
Here’s the shortlist of necessary documents needed to apply for a mortgage:
- 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
- Recent pay stubs
- 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
Three Months Before Buying a Home
Three months out, the search starts to get real. Grab your paperwork and let’s go!
1. Get prequalified for your loan.
It’s time to get prequalified for your loan through your lender of choice. The process involves a credit check and some paperwork. Your lender will inform you of your mortgage limit, so you can shop for homes in that range.
Not only does it give you an idea of what you’ll be approved for, but a prequalification makes you more competitive as a buyer. Keep in mind—it’s a prequalification and not an approval. The lender isn’t guaranteeing an amount. That’s why it’s important to be as honest as possible during prequalification!
2. Finalize your budget.
With your prequalification, you can settle on a budget that includes your potential mortgage payments plus costs related to property taxes, homeowners insurance, closing costs, and other potential expenses.
Compare this number to your current spending on housing—does it feel realistic? Are you including all of the relevant information?
If your mortgage budget feels high, tweak the numbers until you’re more comfortable. If you’ve found a little more room in your finances, keep this original number in mind—but know that you can go a little higher if you need to.
3. Start looking seriously for your new home.
It’s finally time for the fun part— looking for your home! Your real estate agent will be able to give you listings to look through that meet your needs.
4. Optional: Make a Plan B
Many folks find themselves in a strange position: they have a hard move-out date or end of their lease, but they don’t have another home yet!
Don’t panic. Make a backup plan that includes a storage unit and a place to stay. If you can’t stay with friends or family, there may be temporary rentals in your area that are far less expensive than staying in a hotel.
You may not need this plan, but it might come in handy!
Two Months Before Move-In Date
Your new home is right around the corner. You’ve got your prequalification, your real estate agent and loan officer, and you’re ready to go.
1. Place an offer on a home.
Have you found your future home? Time to place that offer! Closing on a home can take four to six weeks, so it’s time to press “Go” on your plans, especially if you have a hard move-out date for your current home.
2. Get a home inspection.
Getting a professional inspection is one of the most important things you can do before closing on your new home. Some waive this contingency in a hot market because their offer has a higher chance of being accepted that way—but it can open you up to all kinds of issues.
A home inspection can’t and won’t tell you everything, but without a home inspection, you’re trusting that the homeowner is telling you everything that you need to know and not hiding damage.
3. Get homeowners insurance.
It’s time to rate shop, talk to agents, and make sure you have the coverage you need. If you’re in a flood-prone or tornado-prone area, make sure you understand exactly what your coverage includes and when it can be used. In almost every case, disaster-prone areas need an extra level of coverage.
4. Get an appraisal.
Technically this isn’t something you will initiate, but it does happen! Your lender will order an appraisal for your new home to make sure that the value of the home is equal to or more than the amount of your offer.
There isn’t anything for you to do. Your lender will let you know the results of the appraisal well before closing.
Right Before Closing
Before you sign on the dotted line, there are just a few more items to check off your list.
1. Conduct a final walkthrough of the home.
Conduct a final, critical walk-through of your new home a day or so ahead of closing.
2. Double-check that your paperwork is in order.
Double-check that your paperwork is in order, ensuring any issues have been settled. Ask for clarification if something doesn’t make sense.
3. Wire transfer closing costs
Your lender will tell you exactly how much you need to wire to cover closing costs, and who to send it to. Your closings cost will be held in escrow, a third-party account that is used for the sale and mortgage.
Make sure this is done on time—your closing can’t proceed without it, and in some cases, the home sale may be canceled if you’re late!
Hot tip: Amplify has fee-free wire transfers!
3. Sign on the dotted line.
There’s nothing left but signing and getting those keys! You’ve put in a year’s worth of effort, and it has finally paid off. It’s time to move in!
Welcome to Your New Home
Buying a home is both an exciting and intimidating process. Prepping ahead of time can alleviate stress and create a smoother process with fewer hiccups. With these steps taken, you will be able to confidently and confidently purchase a home that meets your needs, your budget, and your expectations.
Do you need a little more time or more in-depth information? Check out our post on “How to Become a Homeowner in 5 Years”.