59% of Americans consider home ownership to be part of the American dream.
You don’t just want to purchase a property eventually, though. If you are interested in buying a house in one year, read on for the tools to make that dream a reality.
Here’s how to save and prepare for one of the most significant expenditures of your life as a first-time homebuyer.
1. Know Your Credit Score
The majority of buyers cannot pay for their homes upfront. Instead, they need a mortgage, a home loan that will cover the property’s price tag. Monthly payments will go to the bank or financial institution who okayed the loan.
Whoever gives you your loan will shuffle through a handful of factors to determine if you can have a mortgage or not. One major factor is your credit score.
Your credit score will show lenders that you can — or can’t — be trusted to pay your mortgage each month. If you’ve been diligent with your credit cards, you should have nothing to worry about on this front.
However, if you look at your credit report and see a low score, you will have to spend the next year or so working to improve that figure. You don’t need perfect credit to buy a home, but a higher number will give the lender peace of mind.
2. Bolster Your Savings
You can’t buy a home with just a mortgage. You’ll also need to fork over a decent amount of cash at the time of purchase. This sum is called the down payment, and it’s typically a small percentage of the property’s price.
So, if you haven’t already, start setting aside money to cover this expense. For added incentive, savings can help you when you apply for a mortgage, too. That’s because you have to show lenders that you can cover the monthly cost of your new home.
Let’s say you’re currently paying less in rent than you would on a home you want to buy. However, you’re spending every penny each month, so you have nothing in savings. This behavior will set off an alarm for lenders — you won’t be able to cover your mortgage payment in your new home if you can barely do so now.
In the next year, then, make saving a priority. It’ll help the home-buying process go smoothly — and the mortgage-finding one, too.
3. Find Assistance Programs
It’s expensive to buy a home — anyone can tell you that.
That’s why there are thousands of down payment assistance programs meant to help people like you. They provide financial boosts to people based on their income, occupation or credit scores. You can find some programs tailored to first-time buyers, too.
Start your search with the Department of Housing and Urban Development website to see what your state has to offer. Or, just start Googling keywords, for example, “down payment + teacher” to see if there’s anything specific to you and your career or lifestyle.
You may not find anything, but it’s still worth a shot to search, especially if you’re planning to buy in a year.
4. Know What You Can Afford
Your pre-purchase research should also include some financial statistics. Namely, you should know how much house you can afford before you start searching. You can figure this out in a multitude of ways.
For instance, if you want to calculate it on your own, try an online mortgage calculator. These handy tools can tell you how much your mortgage will cost depending on the house price, down payment, interest rate, and other factors. Then, you can see if you can handle the monthly payments at that particular price point.
A mortgage lender can help you uncover the same information. Alternatively, they can pinpoint a monthly mortgage payment in the range in which you feel comfortable spending. They can tell you about private mortgage insurance and mortgage rates, and even give you pre-approval for your loan, too.
No matter how you calculate it, knowing your budget is vital in the home-buying process. It keeps you grounded as you peruse homes in — and out — of your price range. So, figure out this number long before the search begins.
5. Get Familiar With the Real Estate Market
Perhaps you already know the area in which you want to buy your home. If you don’t, though, use the year ahead to start narrowing down your dream neighborhoods.
You can make it a weekend activity, searching the nearby areas for neighborhoods that fit the bill. It’s not just about aesthetics — look at factors such as transit options, property taxes, school quality, and more.
Once you’ve narrowed down your search area, start attending open houses. Such an event will give you an idea of what you’ll get for your money. But it can also help you see what’s most important on your must-have list — perhaps location is essential, while a renovated kitchen can wait.
Ultimately, those decisions are up to you. But knowing the market and what to expect will help you when it’s time to embark on homeownership.
6. Find Your Agent
Finally, you’ll need some help in the home-buying process. Your real estate agent will be with you the entire way, and it’s up to them to find homes that fit your wants and budget.
Don’t wait until the last minute to find a realtor who understands you — it can take some searching. Instead, start looking for the right candidate now.
Start by asking friends and family for referrals. Then, do your research into each candidate and narrow down the field to at least three. Set up a meeting with each one to see with whom you gel the most.
It may seem insignificant — a real estate agent’s job is to find you a home, after all. But partnering with someone you like and trust will make the process so much easier for you. And, with a year to plan, you have no excuse but to find the right agent for you.