Gearing up to purchase a home next year? Get a head start on the process by starting to think about important to-do tasks as you embark on your homeownership journey.
Understand the Market
Today’s market is vastly different from what we experienced pre-pandemic and even during the pandemic. If you’re just getting started, here are some important points to understand.
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Although inventory is improving, it’s still not enough to swing the pendulum in favor of buyers. 2025 will remain a sellers’ market.
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Mortgage interest rates are trending down and experts predict they will continue to move this way through 2025. Lower interest rates will likely bring more sellers to the market, thus helping with the inventory challenges.
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While the double-digit appreciation we experienced following the pandemic is no longer happening, because the Carolinas are very desirable and inventory remains limited, home prices will continue to appreciate at normal levels in 2025.
Build up your savings
This might seem like an overly obvious first step, but many first-time buyers don’t realize just how much savings they’ll actually need. Beyond the down payment— which can range between zero and 20%, with a myriad of options in between depending on what loan program you can qualify for—it’s a smart idea to set aside an emergency fund should something life-changing happen.
In addition, it’s a good idea to build up some reserves for items related to owning and maintaining a home. If you rented before purchasing, you likely don’t own a lawn mower, water hose, leaf blower, etc, so think about setting aside money for those expenses, too.
Clean up your credit
When’s the last time you peeked at your credit score? If it wasn’t within the last 12 months, you’d better hop on annualcreditreport.com and view your score. In addition to giving your score a once-over, ensure everything on your credit report is accurate—if there’s a piece of information you don’t recognize, deal with it now before it ruins your credit.
Feeling bummed about your low score? Start the process of inching your score up by following three simple tricks: Pay down your high balance card(s), keep credit utilization to 20% or lower and don’t close old accounts. Keep in mind, any accounts listed as negative will fall off your credit report in seven years— so don’t worry about bad decisions you made in college haunting you forever.
Get pre-approved: the most important step of all
Getting pre-approved is quite possibly the most important step you can take in the beginning of the home buying process. You should do this before you ever step foot in a agents office and before you even browse for properties online. There’s nothing worse than falling in love with something only to find out you can’t afford it.
Start the process of getting pre-approved by shopping for the perfect lender. Look for a relationship-based referral with an emphasis on trust, relatability, and experience. You want someone who will be there with you from application to closing and every step in between. Customer service could make a big difference on the road to closing, even if all offers are otherwise equal.
Unlike a pre-qualification, which is traditionally an automated review of your credit report, credit score and stated application information, a pre-approval scrutinizes every aspect of your creditworthiness. A pre-approval determines exactly how much you may borrow under a specific mortgage program. It’s also a great way to distinguish your offer in a highly competitive, low inventory market. In other words, once you’ve obtained your pre-approval you can shop for homes with confidence!
Thinking about buying a home soon? Click here to receive your free copy of our first-time home buyer ebook!
Next stop: Meet with an Agent
You’ll want an expert to guide you through your first home buying experience, and so at this point in the process, it’s wise to interview an agent to see who might be a good fit for you.
But where do I find the perfect agent, you might ask yourself. Here are some ideas to find your perfect match:
Ask friends and family
Asking your friends and family who they’ve worked with in the past and liked is a great way to get some good referrals. You can also crowdsource by putting out a request for agent recommendations on facebook or nextdoor.
Search online
Perhaps you’re interested in purchasing a home in a specific area or neighborhood. Try searching #area + real+ estate, for example, #plazamidwoodrealestate, and see what comes up. You’ll likely find many agents Instagram accounts that way.
Listing ads
If you come across a property online you’re interested in, see who is representing the property and reach out to them.
Google/call real estate companies in your area
Most real estate companies list their agents online for you to browse through. Looking for agents online is a great way to do a little extra research by reading reviews and getting a feel for their personality by viewing their bio.
Once you’ve identified your top candidate, call them up and conduct an informal interview! This doesn’t have to be serious, you really just want to have a conversation with them to get a feel for how they work and to see if they’d be a good fit for you.
