The homebuying journey can come with mixed emotions, especially for first-time homebuyers who are eager and anxious about the entire purchase process. Having a plan and preparing to buy a home can help eliminate some of the stress. Some ways to prepare are to know where you are financially, to monitor current interest rates and to track home prices. In this blog, we will discuss ways you can plan better for your home purchase.
Evaluate Financial Standing
The first step in planning to buy a home is to review your finances to see where you stand. This should include how much money you have saved for your home purchase (typical cash needs include: down payment, closing costs, moving expenses, new furniture and utility connections) how much steady income you have, and what your credit score is. All of these can be indicators to help you determine if you are ready to buy a home.
Having enough cash on hand before you buy is important. It lets you act quickly and confidently in this tight housing market so you are not outbid when the perfect home comes along. It also lets you transition smoothly into your new property without any delays due to lack of funding.
Lenders require a 20% down payment of the purchase price of a home for a typical mortgage. There are special home loan programs that let the borrower put down less than 20%, with some as low as just 3%. Nevertheless, keep in mind that there are significant benefits in providing a 20% down payment, including having existing equity in your home once your purchase is completed and avoiding private mortgage insurance (PMI), which could add hundreds of dollars to your monthly mortgage payment.
Finding the right home loan product for your unique financial situation will help you plan better, so you will be ready when it is time to apply. It can help to work with a knowledgeable loan officer who takes the time to learn about your situation and helps you stay on track.
Additionally, ensuring your credit score is at its highest will help you receive the lowest interest rate possible. Ways to increase your credit score include paying down your debts and avoiding new credit pulls by non-mortgage lenders, like those done when applying for new credit cards, especially during your home loan process.
Execute Your Plan
Once you know where you stand financially and what areas you need to work on, create actionable items for your plan. For example, if you are saving for a down payment, try to cut your spending and allocate more of your money toward saving whenever possible. To increase your credit score, pay down debt and avoid new loans and credit applications.
Do research on your preferred neighborhoods to get an idea of the cost of living in that area so you can gauge how much buying power you have. Consider things such as property taxes, seasonal home maintenance, homeowner association fees (if applicable), utility connections and any upgrades you would like to do. All of these will give you an idea of what you can afford.
Monitor Interest Rates
Getting the best rate possible is on every homebuyer’s mind. Rates tend to fluctuate daily so start by monitoring them regularly. Just a 1% change in a rate can mean a difference of hundreds of dollars in your monthly payment.
Check with your preferred mortgage lender to see what rates may be available to you.
Research Home Prices
Home prices can affect how much home you can afford. Neighborhoods tend to vary in price for several reasons. A great way to start your research is online. When house-hunting, ask yourself if you would be able to afford the down payment on the property. You can utilize online calculators to see what your monthly payment will be.
While doing your research, take advantage of open house events to visit the property in person and consult with your Realtor to stay aware of what properties are for sale. Once you have found a desired home, work quickly to submit an offer. Remain optimistic if your offer is counter-offered by the seller as this is a normal part of the negotiation process. According to NerdWallet, home sellers will continue to have an advantage over homebuyers in 2025 because of the ongoing housing shortage. By knowing what to expect once you have found a home to buy, you can plan better for the experience.
How Can Travis Credit Union Help?
Travis Credit Union is focused on your financial wellness and can show you how to plan better for your homebuying journey. The credit union offers a variety of savings products that let you save for a down payment. TCU also offers a variety of home loans so that you will be ready to buy when the time is right.
Visit the TCU Mortgage Hub or contact a mortgage loan consultant to get started today.