Interest rates are still attractive, and inventory is creeping up, which means now is a great time to jump into the housing market! Here’s the thing, though. While “Zillowing” has become one of America’s favorite pastimes, actually buying a home isn’t as simple as jumping into the market. Unless you’re a cash buyer. In which case, bravo to you!
For the rest of us mortals, buying a home involves preparation and proactivity, so if the time to buy a home is right around the corner, you should get your ducks in a row now.
Thankfully, there are a few things you can do to prepare to buy a house.
Work on Your Credit
This is not as intimidating as it sounds. When it comes to things you can do to prepare to buy a house, the first step is really the easiest: request your credit report from one of the three major credit bureaus: Experian, TransUnion, or Equifax.
Look the report over, note any errors or questions you may have, and then call the appropriate bureau if you need more information. If you need to dispute or clarify anything further, it’s best to call the company associated with the activity on your credit report.
From here, one of the best things you can do to prepare to buy a house is manage your debt. Take stock of all your monthly bills and outstanding balances, including auto loans, student loans, credit card bills, medical bills, and any other expenses.
If you have numerous outstanding debts with varying interest rates, it might be time to come up with a plan. Whether you tackle the highest interest debt first, or attack according to balances due, this entails creating a budget. Once you see what’s coming in and what’s going out, you can determine how much you can reasonably put toward paying off your debt. The lower your outstanding debts, the better your application will look to a mortgage lender.
Oh, and one last thing . . . don’t forget to pay your bills on time. Yes, responsibility is rewarded and your credit score will thank you. It may go without saying, but part of paying down your debt is also making sure you don’t acquire any new debt—so go easy on the splurges. Ask yourself if you really need that food delivery and hold off on any big-ticket purchases that may add to your debt-to-income ratio. We have several resources available to help you understand credit, as well as workbooks to help get you (or keep you) on track. Click here to find them.
Build Up Your Savings
Let’s say your credit is not exactly where it needs to be (ideally above 740, if you can swing it). That’s fabulous! Maybe you’ll have no problem qualifying for a home loan, but what about the other half of homebuying the equation? You know, the down payment part? While there are many first-time homebuyer programs available, many buyers put down 10% to 20% in this competitive market.
Gathering a sizable down payment isn’t something to overlook when determining things you can do to prepare to buy a house. Of course, creating a budget and saving more each month is a simple way to reach your goal faster. But let’s say you’re already doing that and you need a little more help.
You’re in luck. The popularity of the sharing and gig economies means it’s easier than ever to take your everyday skills and assets and put them to work. Sites like Fiverr, Upwork, and Freelancer allow you to advertise your products or talents for a fee. There are also rideshare and food delivery sites that can earn you extra cash.
Don’t have the time? No problem. Secondhand sites like Poshmark and Mercari let you list the items you’re no longer using in exchange for cash. The same end result can be achieved through a garage sale, or by coordinating local sales through sites like Facebook Marketplace and Nextdoor. Be sure to keep safety in mind, though, if you’re meeting a buyer in person.
Your inner circle, neighbors, and even your current employer may be additional sources of income. If you’re an hourly employee, you might try asking your boss for more hours or special projects. And don’t forget, bonus and commission checks are a great way to save your down payment faster. Neighbors, friends, and family may be interested in paying for large projects or services as well. Babysitting, house painting, pool cleaning, lawn care, furniture moving, car maintenance, and even errand running can line your pockets with extra dough.
Finally, don’t overlook your investments. Have you been sitting on a few crypto coins or stocks, waiting for a time when you might need that money? This may be that time. It’s never a good idea to make risky bets in the hopes of coming into quick, easy money, but if you’ve been a diligent investor and feel confident about selling, a down payment on a home may provide the perfect catalyst to pull the trigger.
It’s easy to look at your income, debt, and your hefty down payment goal and feel discouraged. This doesn’t have to be the case. There are many, many ways to turn up extra cash that can go straight into a down payment fund—and this is outside of your traditional budgeting! We have a great budgeting workbook available for free download to help get you started.
Get a Full TBD (Property) Loan Approval Before You Start Shopping
All right, you’re killing this list of things you can do to prepare to buy a house, but there’s one more thing to consider before you enter the housing market. Though buyers aren’t having as much difficulty as they were a few months ago, it is still really competitive out there when it comes to being the winning bid.
A strong credit score and credit report, paired with a sizeable down payment, is really just the cost of entry nowadays. You still have to win over those sellers who, in many cases, are entertaining multiple offers. That’s where a TBD loan approval comes in.
Short for “to be determined,” a TBD loan approval is for borrowers who haven’t found their home yet but intend to purchase a home shortly. Now, this might sound like a pre-approval to you. The big difference between a pre-approval and TBD is you have a conditional approval, meaning your loan application has been underwritten with the only conditions being those associated with the property.
This lets sellers know this buyer is serious, qualified, funded, and ready to go. TBD loan approvals come with a written letter from APM telling the seller you have your financing in place and are just waiting for an accepted offer. What’s more, when you pair our TBD approval with our Keys on Time program, you get a commitment to close on time, or we’ll pay you up to $2000! With that kind of backing, a TBD loan approval paired with Keys on Time is almost like an all-cash offer.
Not all lenders offer such a strong commitment, but APM does because we believe in our borrowers. We’re happy to go the extra mile and give sellers the confidence they need to choose your offer above the rest. With these three tips, you’ll be well on your way to picking, winning, and settling into your dream home.
Click here to find an APM Loan Advisor near you and get started on buying a home today.