Preparing for a Home Purchase

home for saleImage by Mohamed Hassan

One of the most common goals for many individuals in their adult life is to find and live in their dream home. Whether this be a simple home for a smaller family or a multi-acre property, the idea of finding “the one” brings joy to many of us. However, finding your dream home can be as challenging as it is exciting. There’s no rule book on how to get everything you want in a home at the right price given many variables that exist in the homebuying process. However, one of the best things that you can do to ensure that you are making the best choices throughout the process is to effectively prepare.

1. Cut Back in Your Current Lifestyle

Before you begin the process, you should start by looking for areas within your current lifestyle where you can comfortably cut back. Whether it’s a few dollars every month or a large, one-time savings deposit, making the choice to slowly adjust how you spend early on in the process can be much more effective than you would think.

Something as simple as limiting the number of times you go out to eat in a month can make a huge impact. Some even go as far as learning how to refinance a current mortgage and save. This can be an ideal strategy when you begin to think about making a new home purchase but haven’t taken any steps to get there just yet. Given it can sometimes be years before you find and move into your dream home, the savings you can gain over time can be extremely helpful once the purchase does finally come.

2. Explore the Market

One of the most underrated steps to help you prepare for home buying is truly exploring the housing market in your area. This can give you an idea of when it is the best time to buy and when you may just want to wait it out.

Many prospective buyers have chosen to hold off on home purchases during the pandemic simply because of the drastic economic changes seen throughout the country. With a house being such a big purchase, it was just too risky to purchase early last year. However, by keeping an eye on the housing market, many buyers are beginning to notice the upward trend in the number of purchases and purchase prices while interest rates are still relatively low. For those who chose to wait on their purchase over the last year or so, this may be a perfect time to buy.

While house sales and prices have increased, they are not exactly back to normal so it is very likely that they will become more and more expensive over time. But again, mortgage rates have remained around 2%, allowing buyers to find their dream home at a reasonable price and interest rate this year.

3. Determine How Much You Can Afford

You will always want to create a budget prior to beginning your search. Many prospective buyers make the mistake of browsing listings well before they have determined how much they can actually put toward a new home causing them to spend far above their means and have unmet expectations when searching.

However, when you take the time to lay out all the costs and fees associated with the purchase and determine how much you’d be willing to spend overall, you can go into the buying process with full understanding of what you can get for that price.

You’ll want to budget for closing costs and other fees that come about throughout the process to make sure you have a budget for your down payment and your mortgage. Establish a range that you are aiming to stay within for both payments but try not to communicate this completely to your real estate agent. Real estate agents will commonly push your established budget in hopes that you will fall in love with a house that is high in price. So, to avoid that, sharing a budget max that is well below your price ceiling can be extremely beneficial for you in the long-run.

4. Save, Save, Save!

Now, with a clear understanding of how much you can spend, you can make efforts to save. Some common ways that many individuals build up fund for a home purchase are:

A. Developing a side hustle

Side hustles have become increasingly popular in recent years and allow prospective buyers to dedicate the entirety of their income to their future home purchase

B. Searching for a new job entirely

Sometimes, however, a small job on the side just won’t cut it for the dream home you’re going after, so instead, looking for a new position may be more effective. Take advantage of the new remote and hybrid-style workforce that the pandemic has brought on and explore the benefits of positions across the country. You can find the perfect position for you and your family without limiting it to those in your area.

C. Automatic deposits to a savings account

Designating a portion of your income directly to a savings account is a great way to avoid spending unnecessarily as soon as you get paid. In a way, it keeps a portion of your funds out of sight and out of mind until you are ready to use them for your home purchase.

D. Cutting back or holding off on retirement savings

Investing early and at a higher rate is always ideal. Not only does it allow you to compile a greater amount in a retirement or investment account, but it also allows you the flexibility to cut back when needed. In this case, putting a pause on your retirement savings won’t be detrimental in the long-run, as long as you have a plan for investing again after your home purchase.

Each of these are common and effective ways to save for your dream home without having to change how you live and spend completely.

5. Take Your Time

Lastly, it is important to know that you can take as much time as you need to find your dream home. Oftentimes, we can get caught up in the ideas of those around us and think that we have to rush to find the perfect price or style of home when in reality, the market is always changing and ultimately leaves the opportunity for a great purchase in many seasons.

Take your time to find the best real estate agent, lender, and financial advisor for your needs. Not every highly rated realtor can be successful in finding your perfect home for you so it is important to utilize any resource you have to find the best fit, not the fastest one.

Similarly, make sure that even with the best realtor, you are allowing yourself to browse and search on your own time, not what is ideal for your real estate agent. Ultimately, this will be a choice that you will have to live with for a large portion of your life so this may be a good idea to abandon the people-pleasing mindset and truly find what’s best for you in your own time.

While these tips can be helpful in preparing to purchase your dream home, you will likely develop your own ideas and methods that prove themselves to be more effective for your home buying journey — and that is perfectly fine. Understand that your experience may be very different from those around you and even from your previous home buying experiences. This is why it’s so important to use these tips as a baseline and expect changes throughout the process. Before you know it, you will feel fully prepared and ready to find your dream home.

For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and Microsoft Start.

This article is intended for informational, entertainment or educational purposes only and should not be construed as advice, guidance or counsel. It is provided without warranty of any kind.