How to Prepare to Buy a Home
/
If you are thinking of buying a home, here are some tips to prepare you before it is time to buy. You want to have everything ready to go when the time comes. This is the smartest thing you can do when deciding to buy a home because the last thing you want is to find out is that you need to have "3 more boxes checked" before you can buy and then have to sign another short term lease. Many things can hold you up from getting pre-approved and knowing what they are ahead of time can set you up for success.
Things to consider while preparing to buy a home:
What does your credit look like? Typically you need a credit score of above 580 to be able to get approved for a loan, but depending on mortgage company, some need 620. However, it's not the end of the world and there are many options if your credit score is lower. If you have a lower credit score and want some advice on how to raise it, let me know! Sometimes this process can take many months or up to a year (I know this because my husbands credit score sucked when we first bought a house).
How much money should you have saved? Upfront cost to buying a home are going to include:
-Earnest money: Typically $1000 or 1% of the Purchase Price, this is like a “down payment” and gets applied to your closing costs.
-Inspections: These normally cost around $525 (includes whole house, termite, and radon) however you don’t have to do all of these or you have the right to do many more (like sewer scopes, mold test, etc.). I can help you navigate through all your options when the time comes.
-Down Payment: Depending on your loan type, you can find loans that are 0% down up to 5% for most typical loans. The more money you put down the lower your monthly mortgage payment will be. However, you can put more down to make your monthly payment lower.
-Closing costs: This cost can be different depending on type of insurance, loan costs, taxes, and other fee’s. They usually range from $2500 to $6000. But this truly can be dependent on how much taxes are for a home, price range, insurance costs, and what the lenders brokerage charges.
***Make sure you have about that much saved for when you buy a home. If you don’t there are other options, and we can talk about them now, to plan for the future. Just let me know!
Are you self-employed? If you are self employed and want to get pre-approved for a loan, you will need at least 2 years of tax income. If this is you, let me know and we can go through your options. As a Realtor, I also had to wait 2 years and have a lot of experience in finding ways for self employed people to get a home. Your Lender might also have options for you.
Should I Break my Lease?
Ok, I'm also sure you're wondering if waiting or breaking out of your lease could be an option and what might save you the most money. We can work the numbers and find a solution to see if its the right decision for you!
OUR MARKET IS ALWAYS CHANGING! Prices of homes are still appreciating and professionals in this field do not expect them to change (if you are numbers/data person let me know I can share this information with you).
So things to consider:
How much is your rent? Multiply that by how many months your least has left. That equals how much money you’re throwing down the drain into someone else’s equity (Sorry if that’s too blunt lol).
Do you know how much you are charged if you break out of a lease? Is it just first and last months rent? Just a fee? Do you just need a 30-90 day notice with no charge? Or are you responsible for all of it no matter what? Canceling and buying when you find the right home might be an option if you already have upfront money saved.
The average home is expected to appreciate at around 7% this year (2021). On a 200k house that’s about 14k. Not to mention how much equity you add by paying the mortgage for a year.
So if it costs 2-5k to cancel out of a lease early, you might be saving yourself 9-12k alone. Not to mention the equity in your mortgage payment.
If you are wanting to calculate if canceling your lease is the right decision for you, let’s connect and calculate it together!
Lastly, what are your goals for your move? What are you looking to accomplish? Do you know what the home buying process looks like? If not click HERE to read about the home buying process!
