How to Become a Proactive Home Buyer

Maybe you’ve decided that right now is just not the right time for you to entertain buying a house.  Perhaps you just signed a one year lease renewal hoping to save some money to put down on your first home purchase in the next year.  Maybe you are relocating from out of state and you are trying to decide amongst a couple of different locations, including Austin, TX.  Maybe the idea of home ownership had never crossed your mind until recently and you are just curious where you would start if you did in fact start to look into buying a home.

Whatever your circumstance may be, if I was thinking about potentially buying a home in the Austin area in the next year or so, this is what I would do.

STEP 1: Decide if Buying a Home is the Right Option for you in the Future

The first thing that I would recommend is to decide whether buying is even the right option for you.  Purchasing a house is not a decision that should be taken lightly.  Its a great opportunity for some – but its not for everybody.   Did you know that according to a National Association of Realtors economic study, the net worth of the typical home owner has averaged 40 times that of the net worth of the typical renter.  Study: Net Worth of Home Owners vs. Renters

STEP 2: Start to Get Your Financial Ducks in a Row

Carrie Hundley, Mortgage Banker with Benchmark Mortgage here in Austin, was kind enough to outline a few steps that you might want to take at this point in time to put yourself in the best financial position to purchase a home when the time is right.

Know your FICO Score, also known as your credit score.  Your FICO score plays a very important role not only in qualifying for a loan, but it is also the key factor in determining your interest rate options.  A lender’s credit report may differ slightly from a consumer’s credit report due to different weights or importance placed on certain aspects of a person’s credit history.  With that in mind, it’s a great idea to contact a lender and ask that they pull your credit well in advance to review your score.  This service should be provided free of charge.  With that information in hand, the lender should be able to offer valuable insight into action steps that you can take to improve the score over the coming year and thus improve your overall buying power.

Establish how much money you will need to purchase a home.  The overall sum of money needed to purchase a home includes both the initial down payment as well as closing costs.   Determining early on how much money will be required to purchase a home based on the price range and loan program(s) you qualify for will help you establish an amount to budget over the next 12 months.  You will also want to consider all of the potential sources from which you can fund your down payment and how the strategy that you select will affect your overall financial plan.

Establish how much you can afford to pay each month for home ownership expenses.  The monthly payment that you will make will include the principle and interest to pay back the loan, property taxes, home owners insurance, mortgage insurance (if applicable) and in some cases home owners association dues.  It’s important to understand your current qualification level and formulate a strategy to maintain that level or increase it depending on choices that you make in the coming months.  Equally important is to set the correct expectations within your monthly budget to assure that you are comfortable with the anticipates monthly obligations on your new home.

Want to know exactly how much home you can afford?  If so, fill out this brief form and I will put you in touch with a responsible lender who can answer questions about your qualifications and financing strategy.

STEP 3:  Know Your Purchase Timeline in Advance

I have found through experience that purchasing a house is a decision that virtually no one wants to be pressured into making in a tight window of time.  The good news is that if you are following these tips and starting to align yourself  in advance, you should have plenty of time to make a sound, educated purchase decision.

With that in mind, make sure that you are aware of and comfortable with the timeline that will need to be followed once you do finally make the decision to move forward with purchasing a home.  While not overly complex, there is a defined order that needs to be followed to make sure that your home purchase experience is as smooth as possible.

• If you are currently leasing a house, condo, or apartment, you’ll want to make sure that your landlord or management company provides you with detailed information in regards to the amount of notice that you are required to give prior to moving out, as well as what your obligations might be for security deposits and move out conditions.
• You’ll want to make sure that your lender has informed you as to how far in advance you can lock your interest rate, how long it will take to process your loan based on the program that you’ve chosen and how quickly he or she can provide a final loan approval.
• Finally, you’ll want to stay in touch with your Realtor to make sure that the two of you are on the same page in regards to when you’d like to be moved into your new home and any other hurdles that need to be cleared ahead of time.

What’s Next? If you follow this model, you will be way ahead of the game and should be in a prime position to pounce on the best home buying options that come your way.  With that in mind, you may want to read ahead to find out what you should do during the six months before buying a house.