One of the most common conversations I have with clients getting ready to purchase a home tends to center around what they can do to get ready to “take the leap” in the next six months to one year. I’m fortunate to have some really great experience on the finance side of the industry as well, so here is a general guide around some of the most important things you can do to help smooth the path to owning your own slice of the city.
Step One is not going out to view/walk through properties. That’s the fun and exciting part and it comes a little further down the line. Here’s a hard truth: The current market moves at a high velocity. If you aren’t ready to make an offer and close within the next 30-60 days, you may very well set yourself up for heartache by falling in love with a home that is likely going to sell before you’ve prepared your financing and transition plan from your current residence.
Unless you are paying in cash, step one is to find out what your loan options are, how much cash you need to have on hand for closing and down payment, and discover any credit blemishes or errors that need to be addressed. You are entitled to review your credit report once every twelve months for free (read more about it at https://www.consumer.ftc.gov/articles/0155-free-credit-reports). Obtaining your annual credit report from http://www.annualcreditreport.com is a great place to start. Beware of impostor sites seeking to steal your information or charge you for something that the major credit agencies are required by law to give you for free once per year. You can always navigate to the correct site from the FTC.gov site I linked above. Check for inaccuracies and verify the credit lines that show up on your report are actually yours. Whether you are a first time buyer or have been a homeowner for years, this is a great tool to make sure your credit history is up to date and accurate.
Talk to a mortgage professional. If you don’t have a relationship with a lender already, I can recommend a few. (Or if you’ve made the questionable and heartbreaking choice of working with another agent, they should be able to recommend a few reputable lenders as well). A good loan officer is going to be able to take a deeper dive into your credit and income history and guide you from there on what loan amount you qualify for, down payment amounts, and more importantly, what purchase price and payments you are comfortable committing to. This is 100% my personal opinion: Be careful with the large online-only lenders. A reputable local partner is likely going to be more accessible, responsive, and familiar with your market area and have long term relationships with local closing attorneys and appraisers.
Gather the paperwork that the lender is going to need to document and underwrite your loan. A good starting point is your last 2 years of W-2s, 30 days of pay stubs, 2 months of bank statements for your checking and savings accounts, statements from investment accounts and 401ks, and possibly the last 2 years of your tax returns (mostly applicable to independent contractors or self-employed buyers). Here’s a pro-tip: Have all of this ready, but only send the loan officer what they specifically ask for after you’ve submitted your loan application. Modern automated underwriting systems will sometimes issue waivers or ask for less documentation than manual underwriting requirements. Extra or unrequested documents that make their way into your application can cause more work for you, your lender, and may very well end up requiring even more back-up documentation in the end. Keep it simple and provide requested documents promptly with all pages, account numbers, and account holder information visible. If you are sending this documentation electronically, make sure that it is over a secure method of transmission.
Nail down your timeline. When is your current lease or rental agreement due to expire? If there is no hard end date, how much notice does your landlord require you to give? If your lease ends on the 30th of next month, planning to close on your future home on the 29th, completely move out, and immediately move into your new home in a 24-48 hour period is most likely not realistic and could create a crisis if an unavoidable delay in the transaction occurs. A buffer time period where you have access to both residences can take a lot of stress out of the move and allow for some personal touches, paint, or upgrades to be completed for your new home before you move in.
Put some thoughtful effort into deciding what area or neighborhood you want to own a home in. This is the time to start investigating school system ratings, commute times, and how the area will fit into or enhance your lifestyle. Some things to consider here are walkability or bikeability, proximity to parks and outdoor activities, ease of access to shopping/grocery centers, the vibe of the neighborhood, crime statistics, entertainment and dining options, and access to public transit. Once you reach this stage, you’ve got a handle on your buying power and what housing expense you are comfortable with. Its time to start talking to your agent (that’s me) about what you are looking for in a location and make sure your budget matches up with the price range of the neighborhood or development.
Sit down and have a conversation with your agent (me, of course). Your time is valuable. My role is to advise, guide, and represent your interests in the transaction. I can also save you more of your valuable time down the road and set up our relationship for success with an initial meeting with you in my office where we can have a focused discussion, get some paperwork out of the way, and take a deep dive into what you are looking for in your future home. The more information I can gather upfront, the more legwork I can do on your behalf behind the scenes so that we are not wasting your time on properties that simply aren’t a fit for your needs.
Communicate, communicate, communicate. Tools enabled by today’s technology allow me to put an amazing amount of information and statistics at your fingertips and to conduct a focused home search faster than ever before. The more feedback you can give me about what you do/do not like about the listings I’m providing you, the more focused and tailored to your tastes listings I send you in the future search will be. I don’t want to just sell you any house; I want to help you buy the right house for your needs and lifestyle.
That brings us to the point where you are active in the market and ready to purchase. A little planning, preparation, and forethought can take some of the stress out of the process and allow you to enjoy the excitement of buying a place to call your own. It really comes down to lining up your financing, determining a timeline, making some decisions about where you want to live and what you are looking for in a home, and developing relationships with a few good professional partners to help you along the way.