A home is typically the single largest purchase a person makes in their lifetime. And with so much riding on choosing the right home at the right price, the challenges can add up quickly.
If it’s been a while since you’ve bought a house or it’s your first time, the process can be daunting. Just as in many other areas of life, getting organized can reduce stress and improve outcomes for potential homebuyers. Before you start making offers, get the essentials in order so you can optimize your home-buying strategy.
Here Are 5 Ways to Smooth the Home Buying Experience
1. Review Your Finances
The prospect of finally moving out of your thin-walled apartment can quickly morph into pie-in-the-sky dreams of your new home. But without a solid understanding of the costs involved, you’re setting yourself up for disappointment. Avoid heartbreak and homebuying delays by first reviewing your financial standing.
Start by downloading your last three months of transaction history across all accounts. Consider how much you’re spending on your current lifestyle. Determine whether you have room to take on a mortgage payment potentially larger than your current rent. And remember, owning a home comes with more costs than renting. Making repairs, replacing appliances, and handling surprises all come along with the benefits of owning.
Once you’ve reviewed your accounts, seek out mortgage pre-approval to see what lenders think. They’ll review your credit score, verify your income, and determine your debt-to-income ratio. Depending on what type of loan and amount you’re approved for, you may need to make some adjustments. Some loans allow a low down payment but require borrowers to carry private mortgage insurance. Review your lender’s determination and weigh your options — so you know how much to save.
2. Prioritize Your Needs
Buying a home isn’t a financial move to take lightly. Before you book a weekend full of showings, reflect on your needs and prioritize your goals. Aside from the long-term wealth-building opportunity associated with home ownership, think about what you’re trying to accomplish with a purchase. No goal is too large or too small, so don’t limit your wishlist. Remember, your needs are unique, and since you’re the one paying the loan, they’re also the most important.
Some buyers hope to secure a home in a great neighborhood to raise their families. Others want to settle down in a quiet spot away from the hustle and bustle of city life. Some yearn for a balance between commute-friendly connectivity and entertainment. No matter your goals — create an exhaustive list. Then, batch and rank them based on what’s most vital to you and those with whom you plan to share your home.
Naturally, you should consider the house itself along with its location. Jot down the pain points in your current living situation that you’d like to resolve in your new home. No point of frustration is too small, so resist the urge to edit your pain point log. If two outlets in the garage will be insufficient for your woodworking hobby, add that to the list. The more detailed you can be, the better you can craft your search.
3. Consider Your Lifestyle
After a long day at work, maybe the first thing you want to do is strap on a backpack leaf blower. But if your face twisted at the idea of starting your second shift as a homeowner, take note. The lifestyle shift required by homeownership is real, and it’s not for everyone. Cross-check your goals alongside your lifestyle expectations to land on a home search sweet spot.
Determine what concessions you can make in exchange for a residential upgrade. If taking on yard work isn’t your idea of a good time, determine whether your budget can handle outsourcing it. Perhaps your geographical shift will even lower your housing costs — a more common occurrence thanks to remote work — but don’t count on it. Use this exercise to craft your search to obtain the home you want and the lifestyle that suits you.
If you wish to own property but expect to spend substantial time away from it, research entertainment and amenities nearby. As people do in European town centers, consider the city your backyard and tour potential communities with similar scrutiny. If you’d rather get away from it all, become familiar with the concessions you’ll make in a rural setting. Your drive to the grocery store may be longer, but it may be worth it for the comparative tranquility.
4. Start Making Adjustments
Now that you know how much you can borrow and what your goals are, it’s time to practice. Start by adjusting your monthly budget for the changes you expect with a new home. If your pre-approved loan amount is $300 more per month than your rent, schedule an automatic transfer into savings for that amount. If that difference makes your budget too tight, it may be a sign that you need to adjust. The best time to make alterations to your budget or expectations is before you close on your loan.
Some of your homebuying concessions, like location and amenities, can seem OK on paper but surprising in reality. If your target neighborhood brings a longer commute, adjust your morning routine now. This exercise can help you determine whether the trade-up is worth the trouble. If it is, getting into the routine ahead of time can make the change easier to handle when it’s your new reality.
Those moving into a smaller place will be shocked at how many of their prized possessions they’ll need to offload. Start editing your decor now, so the task of moving is more manageable. If your total square footage or room count is decreasing significantly, practice living with less space. Modeling this scenario beforehand can help you determine whether the shift is doable before it’s too late.
5. Organize Your Documents
Given the increasingly digitized world, the art of organizing one’s personal paperwork may be more challenging than expected. While some documents are accessible online, others remain strictly analog, adding complexity. Plus, a multitude of login credentials and secure passwords means potential buyers have a lot to keep track of.
First, confirm that you can easily log in to your financial accounts. Some may require password resets or even texted authorization codes. Ensure smooth account access now to avoid costly delays, which can impact interest rates and what housing inventory is available. If you’re a freelancer, you’ll need to make certain your income statements and secured contracts convey reliability. Ideally, amass all the documentation you need before you engage with a mortgage lender.
Review your free credit report to ensure the data on your record is accurate. If you see anything unexpected, reach out to the creditor to resolve it. Generally, creditors report data every month or so, but there’s no guarantee your issue will be resolved immediately. Obtain documentation that disproves the inaccurate report and share it with your lender as your credit is cleaned up. Moving forward, set up alerts to stay in the know about reported data so you can initiate corrections immediately.
Prepare Today and Reduce Homebuying Stress Tomorrow
Now that you’ve done the work to create your homebuying game plan, you’re ready to launch your search. Review your goals, dreams, and expectations with your real estate agent to ensure you’re on the same page.
Work together to identify potential properties that align with your goals and budget. In doing so, you’ll enjoy a more focused home search that has a greater chance of success. And since you got organized early, you’ll have less stress all the way through closing.
Featured Image Credit: Photo by Kampus Production; Pexels; Thank you!