It’s always smart to lay the groundwork early for buying a home, and it’s especially important in today’s competitive market. So if buying a home is your big goal for this year, now is the time to start getting ready.
Fortunately, there are some pretty simple steps you can take to get into the game on strong footing. Here are our top five things to do sooner rather than later. (You’re going to love number five.)
1. Educate yourself
Educating yourself about the homebuying process is smart no matter what’s happening in the market. But there are at least two ways that it can help you get ready to buy a home in a competitive environment.
First, confident decision making. Things can move fast in a tight market, and homebuyers often have to make quick decisions. If you do your homework and understand each step of the mortgage process, you’ll have the confidence you need to make the best decisions for you no matter what.
Second, access to first-time homebuyer programs. Homebuyer education can qualify you for programs that make it easier for first-time buyers to afford a home. For example, Fannie Mae’s HomeReady mortgage lets you put down as little as 3 percent, as long as you take homebuyer education (Fannie Mae has partnered with Framework for that).
2. Figure out how much you can (really) afford
When you’re getting ready to buy your first home, it’s essential to hone in on how much money you’re actually working with. Your bottom line is more about what you’re truly comfortable with than what a lender will give you. Sometimes, those two numbers can be surprisingly different.
And why is this extra important in a tight market? Because when there’s a lot of competition, with multiple offers and even bidding wars, it can be tempting to spend more than you really should. If you’ve taken a hard look at your numbers, you’re less likely to get carried away — or get in over your head.
3. Get a handle on your credit score
Without a healthy credit score, it’s hard to qualify for most mortgage loans. A good, high score can earn you a lower interest rate, which, besides saving you thousands of dollars over the life of the loan, helps you qualify for a larger loan now. A little extra can come in handy in a tight market.
4. Research down payment assistance
Most buyers could use some help with their down payment and closing costs. The good news is, there’s quite a bit of help out there. And income caps are higher than they used to be, so don’t assume you’re going to come up dry.
5. Window-shop at open houses
Finally, something fun! By and large, open houses aren’t the best for serious shopping (although in hot markets, an open house is sometimes your only chance to see a property). But they’re great for looking.
What’s available out there? What exactly can you get on your budget? The reality check can be a bummer, we admit, but when you’ve “tried on” enough homes, you’ll recognize a solid, well-priced property when you see one.
That’s another tight-market-plus: once you do go into buying mode, you can act fast with confidence knowing that you’re getting the right house at the right price.