What to know before buying a house

If you’re looking to buy a home, I’m here to tell you a couple things that I learned the hard way. Things I didn’t come across in any internet search. 

This post is not to break down loan details, I want to let you in on some basic things that you can do (or shouldn’t do) to better prepare yourself for your big life changing purchase.

A little backstory on me. Currently, I live in the third home that I’ve bought. Hopefully this is the last because I do not enjoy packing and moving. I also went through a refinance in early 2021, right before the economy turned. I’ve always done my research and have had plenty of experience, both good and bad. 

I was always led to believe refinancing is not good but I personally saved a lot off the entirety of my loan. I dropped the monthly mortgage payment all while keeping the same payoff date. I paid I think $500 closing and got a refund check for around $200 a few weeks later. 

If interest rates ever drop back down to a reasonable rate, I will probably refinance again.

You know you want to buy a house, but what steps do you need to take first? 

Credit Score

Take a look at your credit. I know with a conventional loan, you need at least a 620 credit score. The better your credit, the better your payments will look. It will also help ensure you get a loan. Banks like to loan money to people who are financially responsible. 

If your credit is in a good place, you need to get a pre-approval letter from your bank. This is going to help lay out what price range you should be looking for. After getting this, you will have a price range to tell your realtor. 

I personally love Credit Karma. This app has been a game changer for me. It gives you the tools you need to repair your credit score and keep on a good financial path. Best part, it’s free. 

Your Budget

Know your budget. Know what you’re currently spending on rent and other monthly bills and what more can you add to that to live comfortably. 

Write it all down. Review your monthly bank statements and see what you can cut out. Do you really need a Starbucks coffee every single morning? Soda and gas station pizza for lunch? You may need to make sacrifices to get started.

Mortgage changes

Keep in mind that the mortgage amount you sign at closing is not guaranteed to be this amount forever. Your interest rate won’t change but taxes go up with the cost of inflation. 

Example; when I refinanced in early 2021, my mortgage payment was $900/month. Fast forward to 2024, I now pay $1230/month. That’s a big difference in a short amount of time. 

Don’t strap yourself in with no wiggle room for possible changes in the future.

Location

Each location is a little different when it comes to taxes. Research the community you’re moving to and what the average cost of taxes are. Example, lakefront properties usually charge more in taxes than a house in the middle of town. 

They differ between states too. Right now, New Jersey has the highest property tax and Hawaii is the lowest in the United States.

Find a realtor

Find a reputable and trustworthy realtor. Do your research. Sometimes, realtors and used car dealers aren’t far from being one in the same. 

You have your choice in realtors. You can look at houses with any realtor as long as you don’t sign a contract. Just because you start looking with one doesn’t mean you have to stick with them if you feel they’re dishonest. 

There is no reason to sign a contract prior to you putting an offer on a house and beginning the purchase agreement.

Downsize

Downsizing is a great idea early on for two reasons. One, it helps reduce what you have to move on closing day. Two, what you make in profits can be added to the closing costs or price of moving.

Take advantage of places like Facebook Marketplace.Yard sales are another good option.

Don’t Make Big Changes

Here’s a big thing nobody says. Do not withdraw or deposit large amounts of money during the process of buying a house. Banks get suspicious when there is outside income or deposits.

This was a lesson learned the hard way. I was a waitress and decided a month or two before buying my first house that I would put all the cash I had saved in the bank. My thought process was, it would look better if I had more money in the bank. I couldn’t be more wrong

I had to write letters to the bank explaining where the money came from and it was not a gift. It was scary because during this, there was the fear of being rejected because I had saved money that I had earned and put it into my bank account for the sole purpose of buying a house. 

Don’t pay off any loans. You may think it’s a great thing to pay off the car because it shows you’re responsible. It actually drops your credit score when you pay off a loan because you’re closing a line of credit and banks again want to know how you were able to pay it off meaning you will have to write even more letters to lenders. 

Keep making your normal monthly payments.

Also, another lesson is don’t change jobs while you’re looking for a house. Banks look at how long you’ve been working at your current employer as a commitment. If you’re committed to a job, you will be committed to paying back your loan. 

I’m sure there are exceptions when it comes to moving because of a career change. Make sure you talk to your realtor and lender if this is the case with you. 

These are all experiences I have had in the past.  Yes, you have your obvious know what you can afford for a down payment, what kind of loan will you need, how much are moving costs going to set you back?

Express all of this with your realtor.

I’ve had great luck in the past discussing these topics with my realtor. In the end, they are getting paid to help you find your dream house. 

Buying a home is excitement and stress all rolled into one. Hopefully these tips help in your home buying journey. 

Always,
Kerri