8 Essential Steps to Prepare for the Homebuying Process
It's key to prepare ahead of starting the homebuying process. Here are 8 essential steps you need to take to ensure you're ready.
If you’ve decided you’re ready to start the homebuying process, it’s essential you get prepared before you even begin your home search. By taking key steps to get ready and up-to-speed, you can help ensure the homebuying process goes smoothly.
8 Essential Steps You Must Take to Prep for the Homebuying Process
As you get ready to kick off the homebuying process, know that jumping right ahead and looking up your list of dream homes isn’t exactly the order you want to go in.
Instead, follow these 8 essential steps to keep your home search and homebuying process on the right track, from start to finish.
#1. Work On Your Credit Score
As you’re deciding to start the homebuying process and gearing up to prepare, it’s critical you know what your credit score is, the role it plays in the homebuying process, and how you can ensure you’re prepared no matter where you rank in credit bureaus.
Before you jump into the home search process, aim to keep your debts to a minimum, make your payments on time (or early), and try to not take out any loans or open new lines of credit unless absolutely necessary.
#2. Get Crystal Clear on Every Aspect of Your Budget
The costs incurred of purchasing a home add up — and quickly. Before you start house-hunting, sit down with a good old-fashioned spreadsheet and sketch out every single aspect and angle of your budget.
As you work through your budget, make sure to address and answer the following questions:
- What’s your annual gross income?
- What’s your adjusted gross income?
- How much do you have in savings? How about your retirement plan?
- What are your long-term financial goals?
- How much debt do you currently owe? How long will it take you to pay it off?
- What’s your debt-to-income ratio?
Each of these questions and aspects of your budget will empower you with a realistic, data-backed view of your home buying power. It will also begin to equip you with a view of how much you’ll need to borrow for a mortgage lender.
#3. Identify Your Price Range for Buying a Home
Now that you have a clear grasp of your budget, you can start to clarify your budget for buying a home. Set your price range, which will help you on your home search to ensure you’re looking into homes you can actually afford to purchase.
Depending on your financial standing, you can set a firm maximum, or leave some wiggle room with a lower and higher end of a price range. If you’re not sure where to begin, consider using a variety of online calculators to help you decide.
Just remember to cross-check in real life against your budget, line by line.
#4. Save Up for a Down Payment (and Other Expenses)
The typical down payment for a home is 20% of its price; so, for a $475,000 home, you should have $95,000 saved up.
If you don’t have 20% saved up, and you’re not in a position to secure these funds, you’ll need to secure private mortgage insurance (PMI). In turn, your monthly mortgage payment will increase. This isn’t a bad thing, and there are plenty of loans that allow you to make a smaller down payment — so long as you also secure PMI.
Make sure to also save funds for costs related to the actual buying process, like closing costs, earnest money, or purchasing mortgage discount points. You may also want to consider saving up for any repairs, renovations, or upgrades you may want to make in case your future home isn’t exactly as you’d like it to be.
#5. Define What “Dream Home” Means to You
Your idea of a dream home doesn’t have to look anything like what you see on Bravo or HGTV. You know your budget like the back of your hand, you have a strong idea of your price range, and you’re securing stronger financial standing.
To define what your dream home looks like, sit down and draft up a list. Identify your non-negotiables along with your nice-to-haves and use this to inform your home search process.
For example, if a home with a pool would be a plus, put it under the “nice-to-have” column. But if a home with a 2-car garage is an absolute must with no room to budge, it should go under your “non-negotiables”.
#6. Understand Your Motivations to Buy
Why are you interested in buying a home now? Are you undergoing a major life change, like expanding your family or going through a divorce? Are you moving for a new job or opportunity? Have you been saving up for years and you’re ready to take the plunge?
Understanding and being clear on why you’re preparing to buy helps shape your timeline, urgency, and even the nice-to-have versus non-negotiable list you just made.
#7. Start Understanding Mortgage Loans and Lenders
Your home buying process is getting closer, so make sure you’re up to speed on all things mortgages. Look into loan terms, interest rates, market conditions, and what’s happening in your local market.
You should also take a look at potential mortgage lenders and what they’re offering, and then how it lines up with your budget and price range. If you’re really ready to jump into buying, consider getting pre-approved for a mortgage so you’re ready to start making offers.
Familiarizing yourself with the mortgage loan process and identifying your top candidates for mortgage lenders can help the buying process go much quicker and smoothly than finding your perfect home and then trying to start to understand the mortgage world.
#8. Connect with a Professional Real Estate Agent
Last, but certainly not least, if you want to ensure your home search process, homebuying experience, and beyond is as seamless as possible, make sure to hire a trusted, professional real estate agent. A pro agent comes with a wealth of knowledge to work with your financial standing, budget, and goals to find a home that’s the perfect fit for you.
Take the guesswork out of the buying process and let a top agent take care of it all. If you’re ready to start the homebuying process, make sure to get in touch with a top-rated agent in your area on RealEstateAgents.com!
