Conduct a financial plan to determine whether you can really afford to take the plunge. Assuming that you have squirreled away your 20 percent down payment, there are still plenty of markets around the country where renting makes more sense than buying.
1. Be an informed buyer:
You’re not going to buy a house simply because there’s a pretty photo posted online, but you can conduct a lot of price research. That said, there’s nothing better than talking to people in the neighborhood for “on the ground” intelligence that can be invaluable.
2. Find an Agent:
As much as everyone complains about realtors, I still think that it’s tough to go through the home buying process alone. In some markets, buyers brokers are available, but the most important qualities in brokers are: honesty, experience, good connections with other agents; and good referrals from buyers like you.
3. Building your savings:
Building your savings is something you should do over and above saving money for the down payment and closing. Your lender wants to see that you’re not living paycheck to paycheck. If you have three to five months’ worth of mortgage payments set aside, that makes you a much better loan candidate. And some lenders and backers, like the FHA, will give you a little more latitude on other factors if they see that you have a cash cushion.
That money will also help cover maintenance and repair issues that come up when you own a home. While repairs are sporadic, items such as a new roof, water heater or other big-ticket items can hit suddenly and hard.
4. Line Up Your Down Payment Early:
Have a conversation with your loan officer about how you plan on putting together the funds required for down payment and closing. In the months leading up to close, avoid moving money from account to account. If you do move money, keep a detailed “paper trail” of all withdrawals and subsequent deposits. If you are self-employed, it pays to think ahead and take your salary draw well in advance of loan application.
5. Avoid Sleeper Costs
The difference between renting and home ownership is the sleeper costs. Most people just focus on their mortgage payment, but they also need to be aware of the other expenses such as property taxes, utilities and homeowner-association dues. New homeowners also need to be prepared to pay for repairs, maintenance and potential property-tax increases. Make sure you budget for sleeper costs so you’ll be covered and won’t risk losing your house.