We frequently talk in this business about how to help someone get their home ready to sell, but buyers also have some preparation work that needs to be done. There are things you need to do before buying a house if you want to make sure that you get the house you want, when you want it and for the price you can afford. A little bit of preparation work will help make the process go more smoothly so your home-buying experience can be as positive as possible!
9 Things To Do Before Buying a House
Get your credit in order. According to Credit Sesame, you should not shuffle money around or open new credit lines. You will have to show bank statements with certain reserves (more than likely), and you need your credit score to be a high as possible (more credit lines can hurt or help your score, depending on how those lines are utilized).
Find a real estate agent. It is helpful to do this early on in the process because a good agent will have referrals in all the categories of help you will need, including mortgage brokers/bankers. And, when you build a relationship with an agent before you start to look at homes, chances are that the agent will know you better and waste less of his/her and your time looking at homes that do not fit your interests.
Please contact me if you need a real estate agent, wherever you are in the world. I am licensed in Ohio but also work with Sotheby’s International Realty’s U.S. and global referral network, and I would love to help you find an excellent agent if you are not in Ohio. Just contact me today.
Start looking at homes virtually. When a new client commits to working with me, I add him/her to a feed of homes so that my client receives all of the new homes on the market before they hit the consumer sites like Realtor.com, Zillow, Trulia and others. This also helps my client see what is available in their price range so that we can align hopes and wishes with a potential budget.
If you would like to work with me in Ohio, I’d be happy to get you on this list. You will receive new listings up to one week before they are available on public sites. Just contact me.
Have a lender pull your mortgage credit. Remember that your mortgage credit is different than your FICO score, so don’t get bogged down in your FICO score. Your mortgage credit could be 50-100+ points different than your FICO, in a good or bad direction.
Start planning for your down payment. If you are going to qualify for an FHA loan (your lender will help you with this), you will likely need a 3.5% down payment. On a $250,000 home, this means you will need to have $8,750 for the down payment. If that sounds completely out of reach, remember two things: first, family is often more than willing to help with a down payment, especially on a first home for newlyweds; and, you may be able to obtain a second loan to cover your down payment on the first loan (see your lender for these details). Check out DownPaymentResource.com for information about grants, loans and other options to help with down payments.
Understand the home buying process. We have a sheet that I give to all of my clients explaining the home-buying process, and I walk through it carefully before we start to see homes. This way, you understand not only the technical process of buying a house, but also the emotional roller coaster than may ensue. Contact me to obtain the document “The 8 Step Home Buying Process” — request it in the comments on the form.
Get a side hustle. Why? Because this extra cash will come in handy for things like appraisals, home inspections, closing costs, moving day, and other unexpected costs that may arise.
Get your documents in order. Pull together everything from the last two years — tax returns, bank statements, court orders, liens and their removal, and anything else you may have that deals with your financial situation. You will not need two years of pay stubs if you are a W2 employee, but you may need two months worth. If you are self-employed, you will need two years of tax returns and be prepared for your income to be averaged (which means averaging your first and second year’s incomes) and heavily scrutinized. Have this all in a file folder ready for your lender.
If you are renting, plan ahead. Many leases require 45-60 days notice to terminate a lease, and closing could take 30-45 on a house you buy. So, you have to make sure that you give your landlord proper notice or you could end up in another year-long lease without even realizing it. Sometimes leases convert to month-to-month after the initial period, but read your lease carefully and make sure to provide your landlord with enough notice. In addition, be certain that your real estate agent is aware of this timeline.
Sample timeline: If your lease ends on September 30 and you have to give notice by August 1, you probably want to be moving around September 15 so that you have two weeks of being in possession of two properties for the convenience of moving. In an optimum world then, this would mean that in July you want to be making offers (hopefully just one offer) on homes so that you have one accepted by August 1. Moving back in a timeline then, you could start looking at houses in June (or at least virtually in June), and have your pre-approval done and real estate agent chosen in May or April. If you are going to be extremely picky in the selection of your home, this may be too tight of a timeline. You need to be honest with your real estate agent and he/she will help you discover the best timeline for your situation. Contact me today for help in establishing this timeline for your own home buying situation.