The "How To Buy A House" Timeline!
It usually doesn't work to say, "The lease is up in two weeks or in a month so it's time to buy a house!" Most of the time you're going to need to put in more thought and little bit more planning.
So what does that timeline look like?
6-12 Months Before Moving
1) Check Your Credit Score
Your credit score is basically how trustworthy are you in paying back debt. If your credit score is too low, you may have a hard time qualifying for a home loan. (And I don't know about
you but I don't have $150-350k just laying around in the bank waiting for me to buy a house!)
Typically, 620-680 is considered fair credit and is a great place to be in order to qualify for a home loan. Above that is usually considered excellent and below that means you'll need to put some work into your finances.
After you check your credit score, start making a plan to increase that credit score as high as possible. The higher your credit score it, the more loan options and better loan options you have available to you.
2) Start Saving For A Down Payment And Closing Costs
You'll want to begin or continue saving for down payments and closing costs.
I'm going to be honest with you - when we bought our first house, I knew about down payments... I didn't know about closing costs! Fortunately we had enough in savings to
cover closing costs, but that was a several thousand dollar surprise that we weren't planning on. Down payment and closing costs are things that are going to come up 99% of the time as expenses for homebuyers.
How much is enough? Well... it depends! There are some low or no down payment loan options as well as more traditional loans. Generally, somewhere between 3.5-20% of the home price will be your down payment amount. Closing costs are generally 3-8% of the home price.
What does that look like? For a $200,000 home, that's $12,000-$56,000.
For a $250,000 home, that's $15,000-$70,000.
For a $300,000 home, that's $18,000-$84,000.
That may seem like a huge range, but a reputable lender can help you work through the options. Email me if you'd like a few recommendations for lenders.
3) Start Considering How Much Home You Can Afford
It's fun to go window shopping, to jump on Har.com and see what's out there! But just because it's out there doesn't mean we can afford it... And if a bank preapproves you for a certain amount, it may or may not be the right fit for you to spend the whole amount.
When we bought our home, we got pre-approved for a bit more than we were comfortable spending and ended up staying a good $30K under our preapproval limit.
It's important that you really consider home much home you can afford because it's terrible to fall in love with something out of that range... then, no home you look at is ever going to measure up to the one you love and can't have.
To get a BALLPARK (just a ballpark estimate!) of a home's monthly payment... take the list price and divide by 100. That is a general ballpark of what the monthly payment could be. (The exact payment will, of course, be dependent on the exact property taxes, home insurance, interest rates, and more.)
Another way to figure out home affordability is to take your current monthly paycheck (pre-tax) and divide it by 4. That will give you a solid estimate of the monthly payment you can afford. Multiply that by 100 to get your potential price range.
Let it be noted that these are all estimates and any financial planning or mortgage information should be sought out from licensed mortgage lenders or financial planners. Please email me if you'd like some recommendations.
4-6 Months Before Moving
1) Narrow Down Where You Want To Live
Houston is a BIG place! Everywhere from The Woodlands to Galveston, Katy to Baytown can be considered "the Houston area." Where do you really want to be? What's important to you?
If you commute more than a few miles to work, drive home from your office to the area you're considering at your normal commute time and see how the traffic goes.
If you have kiddos, consider if you'd want to have them change schools or stay zoned to the same schools. Is there a baseball league or house of worship or family member that you need to be close to?
Take the general area and really zoom in on where you want to be or what you need to be close to (or far from!).
2) Make A List Of Your Must Haves, Your Wants, And Your "Hard No's"
This will help focus your efforts on homes that are truly the right fit for you. Maybe a one story is a necessity whereas a big backyard is a want but not a deal-breaker. Maybe any home with a pool is an "absolutely not" for you.
I can help you find a home that meets the list, I can help you make an offer and buy the home... only YOU can make the right list for your family.
This is especially helpful if you are buying the home with a spouse or another person. It will foster some discussion not only about what you want in a home, but your shared vision for the next few years!
3) Check Your Vacation Day Balance
This may seem like a weird recommendation! Let me tell you why: closing on a home involves usually at least half a day of walkthrough and signing all the papers. Closings (aka the appointment where you sign everything) happen at the title company, which is typically only open regular business hours. You're more than likely going to need to take off work. You'll also need to do the moving! And there may be some changes you want or need to make like painting or being there to let the carpet guy in.
Making sure you have a couple of vacation days stashed if you need them can really smooth out the process for you.
When my husband and I bought our home, we both took the whole day off. We went to the closing appointment and then came back to our brand new house for Chick-fil-a lunch on the back porch. We just relaxed for a few minutes together (and I may have shed a few happy tears!). We worked so hard to save for our down payment and improve our credit so we could access the loan we wanted... it was nice to take some time to celebrate! Then we got to work
3 Months Before You Move
1) Get Pre-Approved For A Mortgage
About 3 months before you want to move, you want to contact a lender (or several lenders) and go through the pre-approval process. This means talking to a mortgage lender, credit union, bank or other chosen mortgage options and having them look over your financial information to pre-approve you for a loan.
If you need a recommendation on lenders, just shoot me an email and I can send you several great options. Preapproval lets your lender, your realtor, and, most importantly, the home seller know that you are serious about buying a home. Loan preapproval is what moves you from "window shopping" to "buying a house."
Most home sellers will not seriously consider an offer to buy a home without an added pre-approval letter. Sellers only want to go under contract with serious buyers who can afford the home - a preapproval letter proves just that.
2) Choose A Real Estate Agent
You can absolutely choose are real estate agent before the 3 month mark (and I'd love to be your agent anytime!).
But choosing an agent at the same time you're getting your preapproval in order allows you to start seriously house hunting as soon as the lender gives you the green light.
A good real estate agent for buyers can help guide you to some good lender recommendations if you're working on preapproval options. Your buyer's agent will help you sort through your wants/needs/no's list and the area you want to live in. In Houston, your buyer's agent will have access to more information on HAR.com than the general public. We can look at the seller's disclosure, notes the listing agent has left for other agents, the history of the home, and more.
Your buyer's agent will also set up showings for you, tour homes with you, help you craft a strong offer to present to the sellers, and take care of all the communication with the seller's real estate agent.
A good buyer's agent will contact the listing agent ahead of time to make note of any priorities the seller has that you can work into your offer. This also show's the listing agent you and your buyer's agent will communicate well and easy to work with. A little friendly communication from your agent goes a long way in potentially getting your offer accepted. Typically, a buyer's agent is compensated through the seller and seller's broker at no upfront cost to you. You do not have to work with a buyer's agent, but the vast majority of the time a seller will have a real estate professional on their side looking out for their best interest. Don't you want the same on your side?
3 Months Before Moving
1) Serious House Hunting
You've got your preapproval letter. You've got an awesome buyer's agent on speed dial (or text - my favorite clients speak GIF!). It's time to do some serious house hunting. When you find "the one," your agent will help you create a strong offer and present it to the seller's agent.
You may go through the process of making an offer on several homes before a seller chooses yours - that's just the nature of the beast, especially in a seller's market. Your agent will walk with you every step of the way.
Having a target moving date is good, but you will likely not land on it exactly. This is because no one can predict which homes will go on the market exactly when. It usually takes a couple of weeks to a couple of months to find the right home and go under contract.
2) Go Under Contract
What does that mean? This is the exciting part! Going under contract means you've found a home you love and the seller has agreed to sell it to you! The vast majority of the time, a deal that goes under contract will make it to the finish line and you will get the keys!
How do you go under contract? Your buyer's agent will complete the contract with the terms they have helped you create so the seller may choose your offer. This includes the overall offer price, the option and earnest money amounts, the assigning of the title policy, and more.
After all of that's been decided, your agent will complete the contract, send it over to you for signing, and then off it goes to the seller's agent. There's often some negotiating back and forth before a contract is accepted and this is another reason it's so important for a buyer to have a buyer's agent in their corner.
If the seller chooses your contract and signs it, you're under contract!
1-1.5 Months Before Moving
1) Home Buying Begins
You've been at this for several months by now, but you're finally on your way! Once you're under contract, the lender and the title company get the ball rolling. Your closing date will typically be set 30-45 days from the date your offer was accepted, but there will be several things that happen in the meantime.
Your agent will help you deliver the option and earnest money to the title company within 3 days of your offer being accepted. This is usually a couple thousand dollars (commonly around 1% of the purchase price).
2) Home Inspection
Your agent will help you get a home inspection set up to check the home from top to bottom. The home inspection is primarily concerned with five major systems: foundation, HVAC, electricity, plumbing and roof. Even though the inspector is primarily looking for issues with the major systems, they'll also note tiny issues like a loose door knob.
If there are major issues with the home, your buyer's agent will help negotiate repairs with the seller. Your agent will also walk you through options if the seller refuses to make repairs.
Your lender wants to make sure the home is worth the money they're lending you. A few weeks before closing, they will send out an evaluator called an "appraiser." The appraiser assesses not only the home you're buying but also similar nearby homes that have sold recently. This helps set a value for the home. Whether the home does or doesn't meet appraisal, your buyer's agent will walk you through the next steps based on your contract and available options.
4) Read and React
The last major hump in the process is appraisal, so after that, the buyer's job is to read and react. If the lender or title company asks you or your agent for information or signatures, you'll collaborate with them to get the information needed. Besides that, it's time to start packing because you're almost there!
YOU MADE IT!
Closing Day is here! You'll sign a whole bunch of papers, the loan will be funded, and you get the keys!