Spring will very soon have sprung — which means “For Sale” signs will be in full bloom — and if you’re hoping to buy a home this year, get ready for a competitive market. Thanks to the Federal Reserve’s continuing rate hike teases and some economic improvements, you can expect to run into plenty of other people while looking at prospective properties.
Fortunately, there are steps you can take now to help make sure your offer on a new home is as competitive as this year’s hot market. Here are 50 ways soon-to-be house hunters can get ready for the homebuying season.
1. Make a Wish List
“You’ll waste a lot of time if you don’t know what you want,” Brian Davis, director of education for Spark Rental, says. “Know how many bedrooms you need, which amenities are must-have, and which are desired but not mandatory. Most of all, know your price range and stick to it.”
2. Consult Your Co-Buyer
If you’re purchasing the home with a loved one “make sure you both are on the same page,” Patrick Gobin, associate broker with District Realty Team at New York Living Solutions, says. “Conflicting opinions makes the process very difficult. Example: One person wants a ranch and one person wants a two-story house.”
3. Determine Your Debt-to-Income Ratio (DTI)
Here’s how. Remember, a DTI (how much you make vs. how much debt you’re already paying off each month) over 50% or more will severely limit your ability to borrow.
4. Check Your Credit Score
Because it’s going to play a major role in whether you can actually get a mortgage and what rate you’ll pay. You can view two of your credit scores, updated every 14 days, for free on Credit.com. (P.S. If you have a co-buyer who’ll be on the mortgage, they’ll want to check their credit, too.)
5. Pull Your Credit Reports
There may be a few things you can do to clean up your credit before you apply for a mortgage. Plus, you’ll want to make sure there aren’t any errors weighing your scores down. Speaking of which …
6. Dispute Any Errors
Credit bureaus have 30 to 45 days to resolve disputes and remove inaccurate information, so if something’s amiss, now’s the time to address any errors that you may find.
7. Pay Down Credit Card Debt
Getting rid of big balances can improve your DTI and creditworthiness — and relatively soon, because issuers generally update the credit bureaus on your charges each month.
8. Continue to Tidy Your Credit
You can find 11 solid ways to soup up your credit here.
9. Decide on a Down Payment
A 20% down payment is considered ideal, since any amount below that will have you paying for private mortgage insurance (PMI). There are programs out there that help homeowners get a mortgage with much less down, which brings us to …
10. Know Your Loan Programs
Most homebuyers have two options: a conventional home loan bought and sold by Fannie Mae and Freddie Mac or an FHA loan insured by the Federal Housing Administration. Veterans can also consider VA loans, which notably feature a 0% down payment.
11. Research Rates
Your interest rate is going to play a big role in determining your monthly payment, so be sure you know what current rate ranges are being offered — and what you’re likely to qualify for, based on your credit.
12. Prepare for Property Taxes
Yup, you’ll have to pay the government each year for your land — and you’ll want to get an estimate of how much money you’re likely to owe, since it will seriously affect your housing budget. You can find a full explainer on property taxes here.
13. Account for Closing Costs
They generally run between 3% and 5% of your purchase price, depending on location and other factors.
14. Feed Your Emergency Fund
Because buying a home is going to put a serious drain on your bank accounts and you don’t want to be down to your last dollar. Experts generally recommend you have at least six to 12 months of income as backup reserves.
15. Figure Out How Much Home You Can Afford
This will be affected by your DTI, credit scores, prospective interest rate, down payment, property taxes and whether you’ll be paying for private mortgage insurance, among other things. (More tips here for how to get a rough estimate on how much home you can comfortably buy.)
16. File Your Taxes
Your mortgage lender is going to ask for at least two years’ worth of tax returns, so it’s a good idea to shore up with Uncle Sam — and print out or download your returns from two prior years.
17. Pick a Neighborhood
“Location is one of the most important factors when finding a home,” David Lewis, owner of full-service real estate agency The Lewis Group, says. “It’s also the only one that you can’t change. Knowing what areas you’d like to live in prepares you to make the jump when it is time to move forward with an offer.”
18. Study the Market …
You’ll want to know what you’re in for: What’s the median home price in the area you’re looking to live? Are you in a buyer’s or seller’s market? Are solid homes going for more or less than list price?
19. … & the Process
Oh, if only the homebuying process were so simple. Unfortunately, there are a whole lot of steps between finding a home and closing on it. Get familiar with all the major steps: pre-approval, home inspection, home appraisal, title search, closing, etc.
20. Hit the Open Houses
A little window-shopping can do a house hunter good. Visit some open houses ahead of your formal search to get an idea of list prices in your preferred area(s) — and whether your list of “wants” is realistic with your budget.
21. Get a Pair of Flip-Flops …
… or some other kind of easily removed shoes, because most homeowners or listing agents are going to ask you to leave your kicks at the front door.
22. Search for Schools
“If you have kids, carefully examine the school choices and districts available to you,” William Mayben, CEO of consulting firm Wm Mayben and Associates and former division president for National Public Builders, says. There are sites online that can help you pinpoint school ratings, crime rates, etc.
23. Calculate Your Potential Commute
The length of your commute can seriously impact the enjoyment of your home. How much time are you realistically willing to spend in the car, on the bus or on a train?
24. Find a Realtor
You don’t have to use one, but there are certainly benefits to enlisting the services of a reputable Realtor or agent. Case in point: They can give you insights into the current market and walk you through the homebuying process. Bonus: The seller pays their commission.
25. Consider a Specialist
“If buyers are looking for ranches in the Stoney Gardens neighborhood, they should find a realtor who specializes in (drum roll please…) ranches in the Stoney Gardens neighborhood,” Davis says. “The best Realtors know a specific segment of the market inside and out, and can help borrowers who want that specific market segment.”