6 Minute Read
As the days grow shorter and the air chillier, spring feels like a million miles away. But if you’re thinking about buying a home when the world is in bloom again, it’s never too early to plan.
We asked a couple of Dave’s real estate Endorsed Local Providers (ELPs) how you can prepare now for a purchase next year. Here’s what they had to say.
Rev Up Your Saving Engine
If there’s one thing you need to buy a home, it’s money. That’s why Dave recommends kicking debt to the curb first. Once you’re debt-free, you can focus your dollars on more important endeavors.
Local experts you can trust.Find an ELP
Pile up as much cash as you can to cover these standard home-buying bases:
- Emergency fund with three to six months of expenses
- 10–20% down payment on your new home
- Closing costs, which can total up to 5% of your home’s value
Dawn Kirkland, a real estate ELP in Birmingham, AL, also advises buyers to start a fund for all the extras that come with a move, like paying your moving company and furnishing your new home. This is especially important if you buy new construction, says Karl Miller, a real estate ELP in Lynchburg, VA, because basics like blinds don’t come included.
So where do you find all that cash? Lucky for you, Christmas is just around the corner—and that means lots of opportunities to boost your savings. Retail stores always need help during the holidays, so why not pick up a couple of shifts at your favorite store? It’s a win-win situation because you can earn extra bucks and save money on holiday shopping. And if you receive a year-end bonus, throw that on the pile too!
Paying cash for your home? Give yourself a pat on the back and skip this step. If not, Dave won’t get mad at you for getting a 15-year fixed rate mortgage.
“It’s never too early to talk to a lender,” Karl says. “Get your credit score pulled, have a mortgage professional review the information, and make sure there are no surprises.” Start the ball rolling with these three steps:
- Review your credit report: Do this on your own first so you can fix errors before your lender spots them. You can order a free copy from each of the three credit agencies—TransUnion, Experian, and Equifax—once a year.
- Gather documents: Applying for a mortgage requires a stack of paperwork. Here are a few documents you’ll need.
- A copy of your most recent bank statements (checking, savings, and other accounts)
- Proof and balance of any retirement accounts (401k, IRA, etc.), mutual funds and stocks
- Most recent W-2
- Most recent paystub from your employer
- Driver's license
- Get preapproved: Want to show sellers you’re a serious candidate? Don’t settle for prequalification. Preapproval means you meet all the lender’s requirements and gives you the green light for a concrete loan amount.
Fine-Tune Your Wish List
Your home is a big investment. The more homework you can do upfront, the easier it will be for your real estate agent to provide better options. The following steps can help you narrow down your choices:
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- Set your budget: Don’t base your home-buying budget on what the bank says you can afford. Follow Dave’s advice and keep your mortgage payment to 25% of your monthly take-home pay. Be sure to build room for maintenance and repair costs into your home ownership budget.
- Make a list of features: Thoughtful consideration at this stage pays off. “The one thing we know for sure is that life is uncertain,” Dawn says. “You always have to start with the end in mind.” A good real estate agent will advise you on what features could help—or hurt—resale value down the road. You don’t want to be stuck with a home you can’t sell if you have to relocate in a couple of years.
- Choose your location: Once you’ve zeroed in on the neighborhoods and school districts you like, ask your real estate agent to set up a client portal search through the local Multiple Listing Service (MLS). This enables you to receive real-time email notifications when new homes hit the market in your price range so you’ll know what to expect when you’re ready to buy.
- Visit open houses: Want to see how your budget lines up with your wish list? Karl says open houses are a great way to determine what your dollars will buy. Dawn agrees: “What if you realize your dollars are not going to buy what you thought it would? Or what if you could spend a little less that you thought?”
Find the Right Buyer’s Agent for You
Home-buying success starts with an informed decision. That’s why partnering with an expert who knows the ins and outs of the business is your best bet.
“Interview several—if not all—of the agents who contact you,” Dawn says. Look for a pro you feel comfortable with who isn’t afraid to bring pitfalls to your attention, even if it disappoints you. Don’t feel pressured to sign a contract at your first meeting. “It’s important to feel confident that your best interest is the most important thing on the table,” she adds.
Hire an exclusive buyer’s agent whose sole focus is to represent you in the transaction. A good agent can save you thousands of dollars in pricing negotiations and countless hours of paperwork by busting through the red tape. In most cases, the home seller pays your agent’s commission, so you get all that expert help for free!
Looking for a trustworthy pro to help you get the best deal on the home that’s right for you? We can connect you with a buyer’s agent in your area who’s earned Dave’s seal of approval for excellent customer service.