When you’re buying a house (especially if it is your FIRST house) it’s hard not to be a little freaked out. Everyone is telling you what to do and what not to do. It seems there’s an entirely different language associated with the process (escrow!? MLS!?) One of the things I tell my friends and family is “Call me a year before you want to buy your house.” By communicating with your Realtor and lender a year in advance and following the tips below you will be smart, educated, and ready to rock when it’s time to start house hunting!
1. Call your Realtor.
“What?” You ask. “I said I’m not buying for a year, I don’t want to find an agent now.”
Trust me, grasshoppers. It’s great to start early. A good agent can listen to your plan and help guide you so that you’re ready in a year. They can also help you remove any roadblocks to buying that may be out there (or connect you with people who can.) Most importantly, a good Realtor is going to encourage you and keep you pumped, which is totally important- especially when you gotta…
2. Save some money
One of the main questions buyers have is “How much do I need to save?” The answer is $0-20%, depending. Interestingly enough, even if your credit is kind of “meh” you can still get a low down payment loan. If it’s super stinky (see step #4) you will need to do a bit of work, but if it is over 620 you should have no problem finding an FHA loan, which requires only 3.5% of the purchase price for a down payment. If you are going VA it is 0%. Putting 20% down will help you avoid mortgage insurance (the policy you buy for your lender that covers their loss if you default). Mortgage insurance costs a couple hundred dollars per month, so it adds to your payment. That said, there is a big difference between saving $7,000 for your first house and $40,000 for most people, so sometimes it is worth it to just buy the house with 3.5% down. It’s a big conversation though (and contrary to what is often reported, pretty straight forward and easy to get a loan if you’re a first timer) so you will want to…
3. Get a Great Lender
Your Realtor probably knows some good lenders. Here is how I define a good lender:
Someone who is kind and respectful and worthy of seeing all of your intimate financial information. Someone who is honest about what kind of loan they can get you. The number they give you when they pre-qualify you should be the SAME ONE you see the day you close on your house.
When I first became a real estate agent 7 years ago I didn’t know what a really wonderful rare beautiful thing a good lender is- now I know. I know a few lenders who are TRULY great. Ask your Realtor who their best person is. Your Realtor may be the difference between a smooth ride and a bumpy one- but a smart competent lender could be the difference in getting the house or losing it.
4. Fix Your Stinky Credit
First, let me start by saying, NO JUDGEMENT PEOPLE. My credit stank, then I worked really hard to fix it, then the housing market crashed and I got divorced and OH MYLANTA. I fixed it again, but it took time, focussed attention, and good advice. This is the main reason I recommend getting ready to buy your a house a year in advance. Even if your credit is pretty great, there are often things you can do to spruce it up even more so that you can have a cheaper interested (and a lower payment!) when the time comes to buy. If it turns out your credit stinks to high heaven (No judgement!) a year is often enough time to get things straightened out. A good lender (see #3!) will be able to tell you the most important things to take care of before house hunting.
