If you’ve been thinking about buying a house for a while but aren’t sure of the steps to take, this post is for you. Let’s make 2023 the year to start working towards that goal or even achieving it! Buying a house is one of the biggest (if not THE biggest) purchase you’ll make in your lifetime so it is important to make sure to plan ahead and take all the necessary steps to ensure you’re setting yourself up for success.
Open a savings account
The first step in buying a house is making sure you have money for a downpayment. While it’s not necessary to have 20% down, it is beneficial if you can swing it. However any money down is going to help you in the long run save money on the monthly mortgage payment. There are lender programs that offer as low as 1-3% down for first time homebuyers but these might come with additional fees like mortgage insurance. Either way it’s best to put some money aside from your income into a savings account you can use down the road towards a house. We would recommend one that gains interest depending on your comfortability that way you can reach your goal faster and have your money work for you.
Talk to a lender
This is a crucial step in figuring out how much you can afford for a mortgage and the budget you’ll have to buy a house. It’s also great to get insight into what types of programs you’ll qualify for and what the best strategy will be going into the process. This will not only help you but also your Realtor because they’ll be able to set you up with the correct criteria of homes in the area and know what types of offers you’ll need to make. It’s always best to work with a local lender, someone who is familiar with the area and can provide you with the knowledge of what it’ll take to get you the best possible outcome.
Get preapproved
After you’ve found a lender to work with you’ll want to get preapproved for the loan you’re wanting. All agents will want to see this before they start working with you to make sure you do have the necessary funds to purchase a house in that budget. It also helps you show credibility. Most preapprovals last 90 days, so make sure you are ready to start actively looking before taking this step.
Talk to a real estate agent
You can either do this before or after working with a lender but you’re going to want to find a local agent that can help develop a strategy and plan of attack to find you a house. Every agent has their own style so make sure to do your due diligence and make sure you’re confident in their process. You’ll also be spending quite a bit of time with them so make sure you get along 🙂 The agent will get you set up on an automatic email that will provide you listings (houses) when they come on the market that fit your criteria.
Create a budget
You may already have a spreadsheet for your budget planning but if you don’t, highly recommend either creating one in Excel or downloading an app like Mint to help track your daily spending. This is very helpful when planning to buy a house because your expenses are going to change once you’re in a house vs. an apartment or rental. Do some research on the average water, heat, and electricity bill in the city you live in to give you an idea of what you’ll be paying. This is also helpful to see how much you can set aside towards that down payment each month. Put yourself on a strict spending limit and put the rest in that savings account!
Pay off debt
Debt is one of the main factors the bank is going to look at when seeing how much you can afford for a mortgage. It’s best to consolidate and get rid of as much debt as possible before applying for a loan. It’s still possible to buy a house with debt, your payment and interest rate are just directly correlated so the less debt you have the better these will be.
Increase your credit score
This goes hand in hand with paying off debt. The higher your credit score the better rate you’ll receive with the bank. If you aren’t sure how to increase your score, most lenders have programs that will help with this. You can also check your score online through Experian or a similar online site, just make sure they don’t ding your score by pulling the report.
We hope this helps you get your wheels turning on how to get prepared this year to work towards buying a house! These are some great starting points and once you feel prepared to start looking, we would be happy to help!
Mel & Zack Durham | PNW Homes Group | EXP Realty
360.481.2073 | melandzack@pnwhomesgroup.com | http://www.melandzackdurham.com
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