Tips for Planning to Buy A House In 6 Months

Purchasing a house is one of the largest financial decisions you’ll make, and the process is often complicated, time-consuming, and emotional. In order to limit the burden, you’ll want to take the time to start preparing at least six months prior to making a purchase. This can minimize the stress of buying a house and put you in a much better position once you’re ready to buy. Explore these tips for planning to buy a house in 6 months to help put you in the best possible position.

Get Your Financing in Order

Buying a home is far more complicated than simply finding a property you like that’s in your budget (though that alone can be plenty difficult). The home buying process and the required financing that goes with it can take up to a year. When starting out, one of the first and most important steps is deciding on your budget. A lender can give you a prequalification letter, which gives you an idea of how big your mortgage could be. Keep in mind that this letter is NOT a loan guarantee. It simply provides a reasonable estimate of how much you can expect a lender to provide. Use this information as a guide to help you figure out where you should be looking. In addition, when considering your budget, don’t forget to include property taxes and closing costs in your calculations. 

Work on Your Credit Score

Before purchasing a home, you’ll want to work on boosting your credit score. A higher credit score can improve your odds of being approved for a loan and help you get a lower interest rate from a lender. Small differences in interest rates (which are based largely on your credit score) can mean major savings over time. Ideally, you’ll have a credit score above 740 before purchasing a home, but if you can’t get it that high, even small changes can help. Take a look at some ways to improve your credit score:

  • Check your credit report for any errors. It can take months to have errors removed.
  • Minimize credit card debt. A major factor in your credit score is your “utilization rate,” which is the percent of credit you use out of all your available credit. The lower the better.
  • Pay down other debt. Paying down other debt, such as student loans or car payments, can also help raise your credit score. If you only have a few payments left, consider working to pay off the debt completely.
  • Reduce your charges. In the months leading up to your home purchase, charge as little as possible. Even temporary purchases that you pay off right away could hurt your credit score.
  • Avoid applying for a new credit card. This can temporarily lower your credit score. 

Bulk Up Your Emergency Fund

Ideally, you already have an emergency fund. If you don’t, you’ll need to create one prior to buying a home, and if you already have one, you’ll want to bulk it up. Your rainy-day fund needs to be much larger once you’re a homeowner since any issues that arise are now your responsibility.

Besides helping you cover the costs of any unexpected home emergencies, a larger emergency fund can also help improve how lenders perceive you. Lenders like seeing that you won’t immediately fail to make your mortgage payment if something unexpected, such as a layoff or large medical bill, occurs. There is no magic number for how much you should have in an emergency fund, but make sure that you do have a number that you feel comfortable with prior to buying a home. 

Shop Around

Begin house shopping before there’s any immediate pressure to buy. See what’s on the market, check out different neighborhoods, and talk to realtors and buyers to get an idea of what’s going on in your area. You may have one neighborhood in mind, but after checking out homes in other neighborhoods, you may realize there’s another area that you like just as much or even more.

Once you’ve seen a few homes, create a wish list and write it down. Make sure you know which items are requirements and which you would like but could live without. Sacrificing in one area often gives you more leeway in another. 

You’ll also want to take the time to consider your mortgage options. You can start requesting fee and interest rate estimates thirty to forty-five days prior to when you want to buy a home. Small percentage differences can mean major savings.

Once you’re chosen your lender, you can request a preapproval letter. A preapproval letter holds more weight than a prequalification letter since the lender does more research. In addition, a preapproval letter may give you an advantage over other buyers. 

Talk to Your Financial Advisor

These tips for planning to buy a house in 6 months should help you feel more prepared for this major decision. However, before committing to a home purchase, you should speak with your financial advisor to make sure this purchase fits within your holistic financial plan. Contact our team at Good Life Financial Advisors of Mt. Pleasant for assistance!

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