I know I have some future buyer in the mix here, so today we’re going to review how to get ready if you want to purchase a home in the near future. If you are not going anywhere this year, share this article with someone who wants to buy a home in 2022! (Or don’t share and just present yourself as being extremely knowledgeable about home buying.)
Not as Simple As Finding a House
Buying a home takes a lot of preparation and planning. It is critical for you to get your finances in order and complete other important tasks before you start seriously house hunting! For anyone who’s reached out to me for spring or summer 2022, I’ll be reaching out in mid-January to get a jump start on your preparations.
Confession time: When a new potential client calls me and says “I want to go look at this FABULOUS HOUSE that I HAVE TO BUY!”, I shrivel up a little inside because I know I am going to have to do some schooling and people don’t always like to get schooled. But school them I do, because otherwise I wouldn’t be living up to the Realtor I want to be.
Before we even set foot in a house together, there is legwork that absolutely must happen. (Uh, in this market you can’t even offer to purchase a home without mortgage pre-approval or proof of funds!) The prep work is not glamorous or fun and can be intimidating to buyers, but happen it must. (Yeah, I just channeled some Yoda into the mix.)
Maybe you do end up buying the first house we look at! No judgment here; you are talking to the lady who bought the first wedding dress she tried on.
My support for “love at first sight” aside, we will not be able to move fast enough to purchase that home if you haven’t done your homework.
My list below will help you stay on task. If you follow the formula, you will be ready to crush the other buyers when the time is right!
Here are some key activities you should do now to buy a home in 2022:
Learn About Mortgage Options
First off, do you understand how mortgage rates work, such as fixed rates or ARMS? Or the difference between a FHA loan and a conventional loan? Learn what is available to you now and the outlook for rates in the coming year so you aren’t surprised later on. This way you can determine what type of financing will be best for you to buy a home in 2022.
Explore Neighborhoods and Open Houses
Check out certain neighborhoods in terms of cost and features of homes. If we are working together, I will have you set up with a personalized search portal that will collect homes that fit your search parameters.
Your search portal will include open houses and current listings. If you decide to attend an open house, you should always notify the agent on site that you are working with an agent (hopefully, it is me). Remember, the agent at the Open House is not required to act in your best interest so careful what information you share.
Actually walking through homes can help you explore your wants and needs in a more tangible manner. Get a better feel on what’s important to you, such as location, large kitchen, backyard, open-concept or size of rooms. With condos, you’ll also get an idea of monthly HOA fees and amenities offered.
In practice, this time spent scoping out homes in advance provides a reality check and will make you more efficient when it comes time to really dig into your house hunt!
Get Your Finances In Order
Your home is one of the biggest purchases you will make in your life and will likely be the star of your financial portfolio. You want to be a responsible buyer and homeowner, so now is the time to focus on your finances.
Good Credit = Happy Buyers
Do not, under any circumstances, take any action that could disrupt your good credit!
It is important to strengthen your credit score and build credit history. Your FICO credit score is your gateway to a good mortgage rate since lenders use it to determine your risk as a borrower. The higher your score, the better and more cost effective your loan options will be. Purchasing jointly? Then BOTH of you will need to work on your credit!
It can take six months or more to improve your score. If your credit needs some TLC, you want to get started ASAP. Firstly, pay your bills on time. Second, do not take on any large debt or new credit. Lastly, double check your score for inaccuracies. I know I don’t trust the credit agencies to get it right, do you?
Determine Your Target Monthly Mortgage Payment
Fortunately, there is a rough formula you can use for affordability. For every $10,000 change in price, your payment changes by about $50/per month. Don’t be too tied to the big number; instead, focus on what you want to pay per month.
Plus, what a lender says you CAN afford can be very different from what you are willing to spend each month. Remember, no one wants to be stretched too thin and become “house poor.”
Accordingly, it makes sense to work backward from your desired monthly payment to calculate the price range you can afford. I can help you work through your personal situation if you would like assistance.
Save for a down payment.
Finally, cut expenses and save, save, save right now! No matter how much down payment is required for your loan, lenders want to see that you have enough cash reserves in the bank.
Remember, owning a home isn’t only its purchase price, but it includes other costs such as taxes, insurance, maintenance, and possible HOA fees. With a larger savings account, a lender knows you are financially responsible and less of a risk.
Stay Focused with These 10 Commandments
You need to avoid some risky actions that could derail your ability to get the best rate on a mortgage loan. Henceforth, follow the below commandments to maximize your purchase power.
1. Thou shalt not change jobs, become self-employed or quit your job.
2. Thou shalt not buy a car, truck or van (or you may be living in it)!
3. Thou shalt not use charge cards excessively or let your accounts fall behind.
4. Thou shalt not spend money you have set aside for closing.
5. Thou shalt not omit debts or liabilities from your loan application.
6. Thou shalt not buy furniture.
7. Thou shalt not originate any inquiries into your credit.
8. Thou shalt not make large deposits without first checking with your loan officer.
9. Thou shalt not change bank accounts.
10. Thou shalt not co-sign a loan for anyone.
As you can see, it is time to start planning now if you want to buy a home in 2022. You will be a more informed buyer and borrower, ready to buy with confidence and less stress!
Remember, I am available to help you cut through the overwhelm, especially after the crazy market we had over the last year. We can schedule a time to meet. I am happy to walk you through how you can make a new home happen for you. No matter what you think might be an obstacle in your way right now, we can make a plan.
Photo by Natália Oliveira from Pexels
