7 steps to take before buying a home

Buying a house can seem like a daunting task if it’s your first time going through the process. The prospect of saving thousands of dollars for something, and having a sizable commitment for the foreseeable future, is enough to rattle the most even-keeled people.

In reality, the steps you’ll take in the months leading up to buying a home are easy enough and will make the overall process go more smoothly.

Here are seven things you should do before you buy a home.

1. Evaluate your budget
This might seem obvious, but check your income against your expenses. How much can you really afford for housing? How much can you feasibly save for a down payment and closing costs? And remember, owning a home comes with added expenses. If the water heater breaks, you no longer can rely on a landlord to fix it. Those dilemmas need to be factored in when estimating how much house you can afford. “You need to budget not just for purchasing the house but for maintaining the house once you’re in it,” stresses Scott Elliott, director of communications at the Pennsylvania Housing Finance Agency. “This just means that every month you need to put away a little extra to build up an emergency fund for those unexpected expenses that inevitably will occur, and for routine maintenance.”

2. Check and manage your credit rating
Your credit score has large implications when you apply for a mortgage. If you have great credit, you will get approved more easily than someone who doesn’t, and at a better interest rate, which can save thousands over the life of a mortgage. Avoid making any large purchases or borrowing money in the months leading up to applying for a loan. “The better your credit score, the better your interest rate could be,” confirms Elliott. “That’s why it’s smart to take steps now to improve your credit rating. It can save you considerable money over the life of your mortgage.”

3. Start saving
Despite the old rule of thumb, you may not need the typical 20 percent down payment for a home with some of the loans on the market today, but you will still need a large chunk to close on a house. If you go with a loan that allows a lower down payment, you won’t need as much money up-front, but you should not forget about closing costs. Check with your municipality or county, and your lender, as there may be down payment and closing cost assistance programs available. 

 4. Plan out a timeline
Sure, you want to buy something now and move into your dream home. But life doesn’t always accommodate that. Know when your lease is up so you aren’t paying for an apartment you won’t be living in. You’ll want to start looking three or four months before your lease is up. That way, you have time to find a place without rushing, but also plenty of time before you need to be out of your current residence.

5. Get pre-approved
Getting pre-approved for a loan seems like one of the last steps in the process, but there is incredible value in having it done before you start looking on Zillow or with a realtor for houses. You’ll know roughly how much house you can afford, so you don’t throw off your own expectations. It’ll also give you a head start when you do finally find a home on which you want to put an offer. “In a competitive market among homebuyers like we’re seeing now, getting pre-approved for a bank loan will give you a big advantage over other buyers,” Elliott stresses. “Keep in mind, however, that just because you’re approved for a certain dollar amount doesn’t mean you should spend that much. Make sure you stay within your budget when making your offer on a house.”

6. Make your list and check it twice
Make a list of the home features you want most. Have everyone in the family participate so the house reflects everyone’s wants and needs. Then prioritize your list from the most-critical items down to the nice-but-not-necessary items. Also decide on the location – the school district, close to your job, shopping, etc. – that that will work for your family. Sure, you might not get every feature you want in your house in the exact location. But putting your ideas down on paper helps everyone get to a shared vision of the place that will make you all happy. This list will help your real estate agent understand what you want most in a house, too.

7. Get in touch with a real estate agent
You may not think you need one, but there is no cost to you if you are buying a house. They can help you search for the home you want, set up showing appointments and provide insight about the areas and homes you’re considering. They can be a resource for you every step of the way, right to the settlement table.

For more information about how to go about buying your first home, head to www.PHFA.org to learn all the ways you can own a home of your own. Once there, look in the black bar for the “Homebuyers” drop-down menu of items. Also know that PHFA offers free homebuyer counseling to help you prepare for your home purchase.

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