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It looks like the housing market may be starting to rebound—finally! However, there are probably still some bargains in your area that will help you go from renter to home owner in 2013.
Here are 10 essential steps to help you get the deal done.
1) Maintain Stability
The first essential step is really a series of things you shouldn’t do as you’re getting ready to join the homeowner club. Credit rating services lower your score whenever you take out additional credit or others start looking into your credit. Don’t take out more credit cards, even when you get those attractive “zero percent interest” offers for balance transfers. Also, don’t start moving around your money and you probably don’t want to do any job hopping. Stability is the watchword here.
2) Gather your Financial Records
You’re going to need a better picture of your overall finances than you’ve ever had before. Pull together all your records and organize them. You’ll be meeting with at least one mortgage broker—maybe more—so make it go as smoothly as possible. Also, review a few months of income and expenses to really get a good picture of your finances. Don’t miss anything. If you spend $75 on fast food each month, you need to know that.
3) Meet with a Lender
Find a mortgage broker or banker you can work with. Get recommendations from family and friends. This is where the rubber starts to meet the road. You’ll find out what kind of loan you would qualify for, how much money you’ll be able to borrow and what kind of downpayment you’ll be required to make. Do whatever it takes to get yourself pre-approved for a loan.
4) Determine your Price Range
After meeting with the lender, you’ll have a good idea of the top price range you can afford, technically at least. Don’t forget that insurance and taxes will be included in your monthly payment, so that’s going to bring down the price of the home a little. We’re going to revisit this issue in step seven.
5) Improve your Credit Score
You probably got a pretty good feel for your credit score and how it affects your mortgage when you met with the mortgage broker. Some mortgage brokers also offer services to improve your credit. If there is room for improvement, start working on this.
6) Save for the Downpayment
How much more do you think your mortgage and other home owner expenses will be when compared to your current monthly rent? Take that amount of money and sock it away toward your downpayment. Also, look at all the things you own. De-clutter and simplify your lifestyle. Sell off items you can live without and put the money into your savings. If there are things you can’t sell, donate them. With your mortgage interest deduction, you’ll be itemizing your income tax this year, so you can deduct the value of your charitable donations.
7) Try on your Mortgage
Once you decide it’s time to buy a house, force your family to live on a budget that allows for your proposed mortgage payment and other expenses associated with owning a home. Remember, you can’t call your landlord anymore to come over and fix a leaky faucet. If you absolutely hate having to pinch every penny, then maybe homeownership isn’t for you. There’s nothing wrong with renting.
8) List what you want in your New House
Now the fun part (sort of) begins. Sit down and list all the features you absolutely must have in your new home. What size yard do you need? How many bedrooms and bathrooms? How big does the kitchen have to be? What neighborhood do you want? Honestly prioritize the items on your list. When you really start shopping, there will be tradeoffs.
9) Find a Real Estate Agent
If you have friends or family members in the area who have worked with a real estate agent, talk to them and see if they would recommend the person they used. You want someone who knows your area and has a proven track record. Experience counts a lot. Share your priorities with your agent and ask for an honest assessment when judged against your budget. Also, get a feel for how long homes are on the market. If the market is heating up, you’ll have to be ready to “pull the trigger” when you find something you like.
10) Start Looking at Homes
If your downpayment is together and you’ve decided you can live within the budget constraints of a monthly mortgage and the expenses of owning a home, start looking at homes. As we said above, if the housing market is start to pick up in your area, you may need to make a fairly quick decision when you find a house that seems to be a good fit.
If you follow these 10 steps, there’s a very high likelihood that you’ll find yourself in your new home before 2014 rolls around.
One of the main things is to overcome your first home buying butterflies. These can come from a number of sources. And many concerns that people have about home buying are not based on fact. People should be far more nervous about renting for the rest of their lives than with buying their own home.