How to Prepare to Purchase Your First Home in the New Year
As 2021 gets closer, we’re all starting to think about new plans and goals to set for ourselves. A new year can bring with it new possibilities. The type of goal you set for yourself will most likely depend on where you feel you are at in this stage of life. Maybe it’s time to get back into your workout routine, or maybe you feel like 2021 is the year you find your dream career. For many people, it will mark the beginning of their plan toward home ownership. Home buying can be a long process and may include many steps. Beginning this process at the start of a new year gives you plenty of time to plan, organize, and execute on this major life milestone.
Oftentimes, it’s easy to only think about the actual home hunt part of the process, which on average is said to take about 10 weeks. But, there are a few important steps before you begin your hunt which can actually help you cut down on that two-and-a-half-month timeline. The first is to plan out your finances.
To start your financial planning, take a look at the area where you want to buy a home. What is the average home price like? Do the houses usually go for above asking price? This will help you gauge how much you will have to spend to get the house you desire. Based on this information, you can then take a closer look at your bank accounts to see where you stand and if you’re ready to buy now or if you need a little more time to save. If you aren’t comfortable with where you currently sit financially and think you need more time, create a budget that will help you put away extra money each month that will go toward your down payment. Another helpful tip is to have money automatically taken out of your paycheck each pay period that goes directly to a savings account. This way you won’t even have to think about it or have the opportunity to spend that money on something else. You may also want to add more into your savings and consider over preparing, so if you get into a bidding war on your dream home you have extra funds to fall back on.
You may realize you need more help planning for this purchase than you expected. In that case, you can always consider working with a financial planner, who can help you answer questions such as how much home should you buy, rather than how much home can you buy.
When possible, try to get ahead of the game. Essentially this means take care of anything you can in advance that may hold you back later down the line. This can help during each step of the process such as finding a realtor, talking to a bank, and when making the offer.
One thing that can help you prepare early on and stand out in an oversaturated seller’s market is to look into a mortgage and get preapproved before making an offer on a home. This step will help determine how much you can afford and may also point out any discrepancies or problems that could keep you from getting approved. If you know ahead of time, you can begin working to fix these issues before moving on in the process.
On the other hand, if you’re in a good financial place, mortgage pre approval will help move the process along quicker when you do eventually find a house. Not every home buyer gets preapproved before finding a home, which can slow the process down and may add unwanted contingencies. If you make an offer and have been pre approved beforehand, it will help you stand out amongst the rest and make your offer more attractive to the seller.
Begin the House Hunt
Once you have all your finances in order and have been preapproved and know exactly what you can afford, it’s time to find a realtor and begin the hunt!
To get yourself prepared for speaking with a realtor, you should have in mind exactly what you’re looking for. The better idea you have, the better they will be at finding exactly what you want. You may ask yourself questions like:
- What neighborhoods or school districts do I like?
- How many bedrooms do I need?
- How big of a backyard would I like?
- Do I need a basement?
- Am I okay with an HOA fee?
Questions like these will help your realtor narrow down a list of homes for you and ensure both parties are in sync when it comes to what you’re looking for. Take time to talk with your realtor and tell them about yourself. This is another great way for them to understand what you want, and what your lifestyle is like. With this knowledge, they’re able to bring you a list of homes that all have potential, rather than a long list of no’s.
The Final Steps
It may take some time, but eventually you will find a space that is perfectly suited for you or a home you believe you can work on and make your own. Once you’ve made an offer and it has been accepted, there are a few other hurdles you need to cross before the home is officially yours.
As the buyer you have a few responsibilities when it comes to the closing of your new home. You’ll need to plan for closing costs by opening an escrow account, hire a lawyer who can help you with the final paperwork, and schedule a home inspection. Once the home inspection has been completed, and if you haven’t agreed to buying the home “as is”, you may even need to renegotiate the price of the home. An inspector may find things that need to be addressed by the seller before you can move in.
Once you’ve agreed upon the price again, you then need to get the title of the home and secure title and homeowners insurance. Title insurance ensures you have ownership rights to the property and no one else can try to step in or take over. On the other hand, homeowners insurance will help you protect your home in case of damage as well as legal and liability responsibilities. With both of these forms of insurance, you will even further reaffirm you own the property and can protect and care for it as best as possible for years to come.
All of these “little” things may feel like a lot, but it’s important you cover all your bases before finalizing the sale. Each step ensures you are getting the home in the best shape possible, and for the best deal. Finally, when all of these steps are taken care of, it’s time to close and sign on the dotted line. After all of the planning and preparation, you are now able to call yourself a homeowner. Although it’s a stressful process, it can also be one of the most rewarding. At the end of the day, don’t forget to take time to enjoy and celebrate this big milestone you’ve been planning for all year long.