Things To Do And Think About Even If You’re A Year Out From Buying A Home

In 2016 I came to the conclusion that I wanted to buy a home. I was living in NYC and had just got a job where I was making a little more money so I wanted to invest it wisely. I was also tired of having a landlord and paying rent that just kept increasing.

 I had been living there for a year and had been spending a lot of money eating out, drinking and traveling ( which I don’t regret). It was all fun and games but one day I thought to myself I need to have a better plan and way to invest my money in the long term. 

For some reason I had a thought  of talking to my grandkids about my thirties and how much fun I had technically “ spending money”. In this same vision I was living in a small apartment thinking to myself “ Man….. James you should’ve invested smarter back then”. So with that thought I decided to change my habits and build myself a plan. 

How many times have we heard someone say “ Oh I wish I would’ve invested in google back in the day” or “ I wish i would’ve bought a home in 2008 during the market crash.” I didn’t want that conversation to be with my grandkids 30 years from now. I wanted them to be living in the homes I bought when I was younger. 

Lastly, a huge portion of the wealthy got to where they were via real estate. I had read about Dr. Jerry Buss past owner of the Lakers, decided to venture into the real estate space which eventually made him enough capital to buy the Laker in 1979. As you do your research the list goes on but we will save that for another day. The focus for today is how do we start!

Whether you are thinking of buying a home next month or a year from now there are a few things you should do to get started. No matter how much you have saved, the status of your credit score, or you don’t think you can buy a home you will never know until you ask the right people the right questions. 

Below I will talk about things I did to prepare and then things I should’ve done sooner. Let’s Go! 

Things I Did

1. Work on Building my Credit Score 

I didn’t get my first credit card until 2015. Growing up it always seemed like credit cards were the devil so I decided to stay away from them. The only reason I got one is because I was going to Europe for the first time and someone told me it would be better to use a credit card then your debit card when abroad. Honestly it was probably for the best that i held off for how recklessly I had been spending in my 20s.

Then it all came to bite me in the butt when I moved to NYC and had to put double the security deposit down just to rent the apartment. Apparently my credit score was too low so they needed extra security just in case I didn’t pay.  

At that point I knew I needed to  build my credit and with some help of a coworker who was savvy with credit cards that what I did.

I applied for a Chase credit card with the best points and used it over cash/debit as much as I could. I gave myself a spending limit and stuck to it on a monthly basis. 

Whenever a new credit card offer came my way without an annual fee I got it. After they came in I hid them in my closet. I would only use the card with the best points and still do to this day. The larger the line of credit I had the better it made my score. About a year later my score increased dramatically.

Once again I am no finance advisor so please do your research. I am just telling you what worked for me.

2. Built A Plan to Save Money

 I knew I couldn’t buy a home without a plan and budget to save money. I gave myself a budget that would still allow me to enjoy life but cut out items I didn’t need. I didn’t need the venti caramel cappuccino and the everything bagel everyday. So I bought a Keurig and ate oatmeal when I got to work. I didn’t need to eat out at all the delicious places NYC had to offer everyday for lunch. So I went to Trader joes and got a $4 salad, a protein bar and some type of $2 fruit drink they had everyday. I bought groceries and made food at home then went out for drinks instead of dinner and drinks. I always remembered my end goal. To become a homeowner.

I made sure I was putting away a fixed number into my savings every month. It felt good getting paid, moving that money into savings knowing everyday you are getting closer to homeownership. I didn’t take away all the fun. I just made a few adjustments in my spending.

Whether you use excel or have an app on your phone I advise you to make a plan on how to save money.

3. Had a long term plan

I knew I wanted a home that I could do Airbnb with. Whether it was a duplex or to do house hacking I wanted to make some passive income on the home. I had used airbnb in most of my travels and when I did the math on what people could be making it just made sense to go that route. I also wanted something I could easily rent out if I ever lost my job or something happened to my health.  

Whatever that plan looks like for you, have it in mind. I like to give my clients the Big Dreams Exercise that lays out a few questions for you and anyone else to involved to help with your long term and short term goal planning

Things I Should’ve Done

1. Talked to a lender earlier

One person I wish I would have spoken to sooner ( at least a year to a year and a half out) was a lender. This way I could’ve had more time to strategies on the different loan options there are out there. There are so many loan options out there for every situation so it is key to get this conversation started sooner than later to see what works best for you. There are also first time home buyer programs that can help you if you don’t have enough for a downpayment or closing cost. We will take more about a few in the next few weeks.

Also knowing how much you can afford BEFORE you start looking at homes is key. I am even talking about homes you see on Zillow or any other online source.

 Think monthly payments first and foremost. Do not focus solely on the purchase price. Why? Because what you pay every month could be very different if you are looking in different areas due to changes in taxes, condo fees and other factors. Your payment could be very different between two properties even if the purchase price is exactly the same! 

Get pre-approved by a lender before you start looking at homes too seriously but make sure they are approving you for what you want to pay per month, NOT what you possibly could afford. They may approve you for more than you are comfortable spending per month, so ask them to approve you for the monthly payments you want to spend, not just the highest purchase price possible. You also should take into account not just the cost of the home but utilities, repairs and maintenance.

2. Talked To A Realtor Earlier

Honestly, I think this was one of the hardest parts. There are so many Realtors out there and all of them may not work for you. I chose my Realtor because it was someone I knew and they had great content on Instagram that made me feel like they could help me through the process. I am glad it worked out and was a key part in helping me prepare for my first home. 

I wish I would’ve spoken to a Realtor when I was a year and a half  out to get more insight on the process, information on the area and to get a feel on what they’re seeing in the markets I like. 

Talk to a few Realtors in your area to get a feel of how well they know the area, the process and if it is someone you want to work with. You are going to be spending a lot of time looking at houses and on the phone with this person. Make sure it is someone who is knowledgeable and you want to work with going through the process.

3. Looked at areas I wanted to buy

Having a general idea of the areas you would like to live in and why can be helpful when starting the home buyer process. From there you can talk to a realtor about the areas and get feedback from them about the options that fit your needs in those areas. 

I hope this help you all on your journey. This is a big next step and doing the right groundwork will help  the process go smooth.

If you are in this phase feel free to reach out to me by email at James.Daniel@exprealty.com or calendly.com/jamesdanielrealestate. Looking forward to speaking with you soon!