The beginning of the New Year is the perfect time for goal setting and planning, especially for big life changes like buying your first home. Even if you’re planning to buy later in the year, and it seems like a distant goal, figuring out what you need to do early can help you to put your best financial foot forward and avoid any surprises.
Take a look at this post to see what you can do now to meet your goal of buying a home this year.
The very first thing that you need to do is to get a solid idea of your current financial situation. That means more than figuring out what you make and spend each month. To discern whether you are in a good position to buy, you’ll need to dive deeper into your current financial situation and also consider projections for the future.
One of the best places to start is to make an appointment with a financial advisor at your bank. These meetings are usually free and can provide you with invaluable information about what you need to do to strengthen your chances of getting approved for a mortgage.
In the meeting, be sure to cover:
- Your current income to debt ratio. Be honest and don’t leave anything out. Make a list beforehand of any credit card debts, student loans, vehicle payments, etc.
You may find that your income to debt ratio is currently too high, so this is where you pivot and make a short-term goal of paying off a chunk of your debt while still heading towards your long-term goal of buying a home.
- Your credit standing and history. Your financial advisor will be able to provide you with a credit report and will likely evaluate it with you.
If you find that your credit score isn’t as strong as you had hoped, now is the time to make a plan to improve your score based on any advice the financial advisor provides you with. This could mean paying off debt, closing some open credit cards, or building your score by using your card more.
- What you can afford for a down payment. It helps to briefly look into housing costs in your desired area of purchase prior to the meeting so that you have an idea of what you will need to spend.
If you already have substantial savings, you may have enough (or just about) for your down payment. The more that you put down, the smaller the payments you could have, and the less interest you will be charged. If you don’t have any savings at all, it helps to come up with a reasonable plan and timeline for how much you can save by when.
- What your job situation looks like. Do you have a full-time, permanent position? How long have you been there?
To get a mortgage, banks like to see steady employment history at a salary that can support your mortgage payment and other bills. If you only have a part-time position, or you have changed jobs multiple times without holding a position for long, that can reflect negatively on your chances of getting a mortgage.
After speaking to your financial advisor, and possibly getting a quote on what sort of mortgage they could provide you with (amount, terms, and length), you can use the information that they gave you to form a detailed plan that suits your goals.
Remember that you always have the option to shop around as well, so feel free to talk to more than one bank or lender to see what other offers may be on the table.
Whether you want your first home to be a fixer-upper or a turn-key property, you should probably have your ideal home figured out before you talk to a realtor or a bank. This can help you to figure out a budget and to make your real estate agent’s job easier.
At the very least, you should consider:
- What neighborhoods and areas you prefer.
- What type of home you want (duplex, single-family, condo, etc.).
- How much you are willing to spend on repairs, upgrades, or renovations.
- How long you want to live in the home.
- When you want to buy.
If you really aren’t sure what you want, start looking around at homes for sale in the city or area that you are interested in. Get a feel for prices, what’s on the market, and what’s important to you by browsing through galleries and visiting neighborhoods you may want to live in.
After you figure out what you want your future home to be like, you need to make a few other preference-based decisions, such as:
- Whether or not you want a realtor.
- Not just what your total budget is, but what you are willing to pay each month towards a mortgage.
- When you want to either start looking formally, or when you plan to buy.
- If you want to look into both banks and brokers.
Planning for Pivoting Property Goals
Since there are so many different aspects in buying your first home, it’s important to create a plan that can move with you. That way, if the unexpected happens, like a financial emergency, your plan will still be relevant even if you have to move it up by a few months.
In order to make a property purchase plan that you can stick to, keep the following in mind:
- Don’t set specific dates. Getting too far into the details can lead to disappointment and a feeling of failure. Buying a home is an unpredictable process, and you never know what other factors can play into your timeline.
- Ask friends, family, and professionals for advice. Chances are, you don’t know quite what you are doing, and that’s ok. Use what other people have experienced to form a strong plan that has a high success rate.
- Be conscious of what you can and can’t do. If your financial advisor thinks that you can save $500 per month, but you certain that’s going to be too much for you to do, stick with what makes you comfortable.
Making Your Goal a Reality
Chances are that you will experience a few ups and down while moving towards your goal. Perhaps you will get an unexpected raise, or maybe you’ll have to put some money into fixing your vehicle. Whatever happens, remember to keep moving forward. Goals are meant to be flexible, and buying your first home is something that doesn’t happen overnight.
Figure out your finances, decide what you are looking for, and pivot when you need to so that you have the best chance of becoming a homeowner this year.