In the beginning of 2020, I decided to stop playing around about one of my major goals, and make homeownership become a reality. Homeownership was a long-term goal that took a very long time to achieve. I started the journey in 2017, but I was not prepared back then. It wasn’t my time. I had to make a lot of changes in my personal and professional life. I had to improve my financial situation and money management.
Side note: one thing about me, I’m resilient. If I need to reach a goal or get on track, I’ll give up some comforts to make it happen.
In 2019, I moved out of my cozy apartment, and moved into a relative’s duplex. Renting the duplex was significantly less than renting my old apartment. I knew when I moved into the duplex, it was going to be temporary. My goal was to stay less than two years. I knew back then that the next move would be my own home.
In 2020, I started the process during the early summer of the pandemic. Although my small business was slightly affected by COVID19, I didn’t let that discourage me from taking action. The crisis made things easier for me to save more money (I did not need all of what I saved due to the down payment assistance). I stayed focused on the prize, not the crisis.
After getting pre-approved, I searched for a home that was affordable and suitable for my needs. Homeownership is a big dream that most people don’t think they’ll ever achieve. That wasn’t a limited belief in my mind. With prayer, patience, and preparation, I knew I’d make it a reality. The process was both overwhelming and liberating. I was excited, stressed, and nervous. Nonetheless, I found a 90-year-old fixer upper. I put in an offer which got accepted in a matter of three days, and after three months of waiting, I closed on my first home.
If homeownership is on your goals list, here are eight things to consider as you start the process.
1. Take a homebuyer’s course
Have you taken a homebuyer’s course? If not, make that your priority. It shows you are serious and prepared. Everyone from realtor agents to lenders asked if I took the course. The course is filled with a lot of information that will help you understand the process, different terms, and it will help you determine whether you’re ready to purchase a home. The course is necessary if you are planning on applying for grants.
2. Meet with a financial advisor
Don’t be too proud to meet with a financial advisor. Making an appointment to meet with one is a wise decision. Purchasing a home is a huge investment and applying for a loan is a commitment. You want to be sure you can afford the mortgage payments before you apply for a loan. Your advisor will help fit your mortgage payment into your monthly budget.
3. Check credit & Debt-to-income
Is your credit score at least 650-670 or higher? Do you have outstanding credit card bills that you need to pay down? Have you filed bankruptcy within the last five years? Did you purchase a large item like a car within the past year? How is your income? Is it consistent? Make sure you are knowledgeable about your credit, and don’t let your poor credit history discourage you. Make sure you’re knowledgeable about your debt-to-income ratio. If your debt is higher than your income, you’ll probably have a harder time getting approved. If you’re self-employed, you’ll have to prove your income has been consistent for at least two years.
4. Save & spend wisely
Save your money because you’ll need it for your down payment, closing costs, and even after closing. Learn to budget and live without expensive things and put a pause on taking vacations. If you have monthly subscriptions, put a pause on those to save money. If you have credit cards, don’t use them. And don’t open any new credit cards or apply for anything otherwise it could affect your approval at closing.
5. Research/apply for grant programs
There are grant programs established to help with down payment, closing costs, and home improvement funding. Credit Unions and banks offer special programs called, The Homebuyer Dream Program. Do your research, ask questions, check their requirements, and apply to see if you qualify.
6. Research mortgage loan options
There are three or four types of mortgage loans you can choose from. A conventional loan and FHA are probably two loans you may be familiar with. I got a conventional loan through my lender. Your credit score determines what you can qualify for. Check with your lender to see what they offer. And check with the seller, too. This listing should show what the seller approves. Also, shop around with different lenders if you get denied for a pre-qualification.
7. Get a good agent
Make sure you choose an agent who will serve you. It’s hard to trust realtors when we hear a lot of negative things about them, but honest and trustworthy agents do exist. Don’t get discouraged if you go through a few before choosing one that is the right fit for you. The worst thing to have is an agent who will make purchasing a home extremely difficult and discouraging. Check reviews and their portfolio. Some agents prefer first-time homebuyers, so they will explain the process, and make the experience a lot less stressful for you. Ask a lot of questions, take notes, and put everything into a binder.
8. House shopping
Shopping around for homes is exciting, However, the discouraging part is shopping for homes that you can’t afford. That’s why getting a pre-approval letter and meeting with an advisor should be done first. Of course, you can shop for a home before getting approved. I looked for homes years before getting approved, but they were out of my price range. Keep in mind that some agents may require a pre-qualification letter before showing you a home.
There’s a lot to this home buying process. It can take months and months from putting in a purchase offer to closing on the house. Everyone including the seller, lender, realtor, lawyers, appraiser, inspector, and advisors are working to make this purchase final. Communication is key, and everyone communicates differently. Be respectful and patient but ask as many questions as you need, because this is your home.