9 Things to do LAST-Education

When you get bit by the home-buying bug, it’s tempting to jump right on an app or a website and start scrolling and clicking and favoriting.

If that was your first step, no judgement here. Not gonna lie—that’s tons of fun. The downside to starting there is that without knowing what you can afford, and being prepared with a plan, you may have expectations and hopes that are set too high or too low. Buying a home is an enormous step in your financial journey. With something this big, it’s important to take the right steps in the right order.

Here’s an overview of the things you’ll need to work on:

First-time Home Buyer Checklist: PREP PHASE

1) Credit Score Check

This is an important step, and one that could cost or save you thousands of dollars. If your credit score isn’t very good (below 750), the interest rate on your mortgage will be considerably higher—translating into higher payments each month, and a WHOLE lot more of your money in the bank’s pocket. If you’re not in a hurry to buy, and your credit needs some work, it may be beneficial to take a few months to work on building your credit score so you can get a better deal on a loan. If you want to learn more about credit, definitely make some time to work through the credit lessons on this platform [link].

2) Determine Affordability

As you look at your budget, watch out for being cash poor. What is the least expensive home you can live in comfortably and authentically?

3) Save up for your down payment

To avoid having to pay private mortgage insurance (also known as PMI, and it ain’t cheap), you’ll want to put down at least 20% of your home’s final price. This doesn’t include what you’ll need to have on hand for closing costs. Use the calculator in the Application section at the end of this lesson to figure out how much house your down payment will buy.

4) Get Prequalified and/or Pre Approved for a Mortgage

Prequalified and Preapproved are terms that are sometimes used interchangeably.  Often the differences are pretty nuanced and depend on how your potential lender defines them. For the purposes of this list, we’ve bundled them together as one step. There are two important benefits to completing this step: 1) You get a better idea of exactly how much home you can afford. And 2) If you use the lender you prequalify with (you’re not obligated to) it streamlines your formal application process immensely. Knowing how much you can get approved for will help you narrow down your search to homes that fit in that budget. Our Real Estate Expert Jenn Williamson from Berkshire Hathaway HomeServices suggests that before you start looking for the house you are approved for, you need to go back and look at your budget. She suggests starting from your budget and the amount of monthly payment you feel comfortable paying before deciding how much house you can buy. You need to base the monthly payment on what only you know about your life and what other things you wish to spend money on. A lender is going to give you the biggest amount they feel comfortable lending you. It is not based on anything but your gross income and current debt. The lender is not taking into account that you like to travel or want to pay for your kids' college. You need to take control and tell them how much you feel comfortable paying to see what price range neighborhood you can look in.

5) Find a Realtor

There’s a whole lesson on this. Check it out! [link]

6) Identify a good home inspector

This is critical. You want to make sure you’re not buying a lemon. Do you know how to check a roof? A foundation? What about the lifespan of a furnace or central air conditioning? The right home inspector will help you avoid everything from a horrible investment to a deadly mistake.

7) Make a realistic wish list 

A home is one of the biggest purchases you will make in your life.  Before you make that decision you need to get honest with yourself about what is important in a location as well as what is important to your quality of life.  If you travel all the time for work, you may want to be close to an airport. Think about how you like to live and if you love the city, don't look for homes in the country away from the action. Know what type of house you want. stand-alone, condominium, townhouse, etc. Know the features you want in your new home.  # of bedrooms, # of bathrooms, type of lot, neighborhood amenities, etc. Buying a home is not something to jump into. Weigh out all the different options and pick the area that works best when you look at all the pros and cons. Write it all down in the checklist provided in the Application section of this lesson. [Jenn video - Things to Consider Before Buying a Home]

8) Research the Market

Get to know the surrounding areas and see which areas you want to focus your search within. Your real estate agent is not allowed to tell you anything negative or specific about a neighborhood so you need to research that information before you start looking. Review census data, visit local businesses, attend local events and, if possible, talk to people in the neighborhood.

9) Start House Hunting! 

Once you start looking, be ready to act quickly.  Don’t miss out on the perfect house because you didn’t prepare ahead of time.