I had a proactive client contact me today knowing that they were going to be buying a home in exactly 1 year, after their lease expired. She wrote, “Eric, we are starting to research buying a home but it won’t be for another year. I’m afraid we are starting this too early. I have questions though: How soon in the process do people get pre-qualified? How much down payment is required? When should I realistically begin to look at properties?
These are such great questions that so many people have or maybe haven’t even thought of yet that I thought I’d share my answer with all of you.
I don’t think you are starting too soon. I think now is the exact time you’d want to start the process. There are three main things that can be done now to help yourself for next year, making it a much smoother and less stressful process.
1. Set an automated search started online to see what the market is like. This allows you to see if your expectations for size, area, and price are reasonable. It also lets you see what you can buy for how much, so that when the time comes you have your finger on the pulse of the market and will more easily be able to identify a good deal when it comes up.
An automated search will allow you to be notified as properties become available in the area and price range you are looking for. I’m happy to do this for you. There is no charge.
(Play with this on a public site at first but have your agent do this for you, ultimately, as they will know the ins and outs of the neighborhoods and are better at setting criteria to more easily identify homes that fit your criteria)
2. Speak to a trusted lender right now. Although it sounds early, it really isn’t. It’s important to know what you would qualify for now so that you are looking at properly priced homes. Also, unless your credit score is perfect (850), the lender can advise you of a couple action items over the course of the next year that would raise your score, giving you a lower interest rate and more buying power or a cheaper payment. They can also let you know some of the mistakes homebuyers make with credit that will come back to bite you. This information will prove highly useful next year.
3. Sit down with me for a 30 minutes. Again, sounds early, but a professional can help you avoid common mistakes and save you a lot of time and money. Of course, with a purchase this large you want to meet in person to see who you are working with and that you feel comfortable with their level of expertise. When we meet we will go over your wants and needs to make sure that I’m able to exceed those expectations. I will layout the home buying process and timelines so the you are more empowered and confident moving forward. This doesn’t take long and it is a free consultation.
Regarding your specific questions….
Down payment will depend on the type of loan you choose to get and how much you wish to put down. We will discuss this when we meet to determine your best option. The lowest down payment available is at 3.5% with a FHA loan. This is a government backed loan that makes a lot of sense for homebuyers trying to keep cash in their pocket. However has a maximum amount allowed so we’ll have to see if it fits for you.
I would look online at properties now, but you won’t want to start walking into houses to start the selection process more than 60-90 days before you are willing to move in. The quality homes sell quickly and you don’t want to be disappointed when they are gone at the time you are ready.
These steps will make your life much easier when you are ready to buy. And if you need any expert advice or referrals to industry professionals I’m am always here to help. Call me to learn the questions you should be asking when you interview your agent and lender.
The Ford Team