How to Find and Fix your Credit – this is such an important part of the home buying process. Know where you stand and what to do about it if you’re not where you wanna be. And if you are, that’s awesome! Good luck either way. You’ve got this.
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Hey there, new home buyers. Jeremy Goodrich here. I am that guy. That guy that bought my first home many, many years ago, and had no idea what was I was getting into. I didn’t use a realtor. I didn’t have an inspection. I didn’t have a clue what documents I was signing. I ended up, you guessed it, buying a beat up old house that I spent years fixing only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy, that guy is not you. You are two times smarter. You’re three times more organized, and you’re 10 times better looking than he was. You’re going to find the right home for the right price, and you’re gonna have fun doing it. That process starts right here with the New Home Buyers Guide podcast. We’re glad you joined us.
Hey there, home buyers. Jeremy here, and welcome to episode 4 of the New Home Buyers Guide podcast. This is episode is all about the things you should do early in the process, so if you are someone who is thinking about buying a home, maybe you want to do it soon, maybe you’re starting to look around at houses, driving by on a Sunday afternoon starting to thinking through that process, but you’re not really sure what you should be now, this episode is absolutely for you. We’re gonna break down the four things that you should be doing now, even six months a year, two years before you go into the home buying process full on. But, if you’re about to dive in, it’s still relevant. Check out these four steps that you should take. We’re gonna dig into each of them.
When you walk out of the other side of this episode, you’ll have a real understanding of things you should know about your own finances, things you should know about setting up the process, so that when you go to lenders, when you go to realtors, when you put yourself in the position of actually getting ready to buy that house, they are all gonna respond really, really well, and you’re gonna get the best deals on everything, and have the best service providers because they can see that you’re ready to rock and roll. Okay, let’s dig in.
All right. Number one is addressing your credit. Your credit score is super important, probably one of the most important parts of the home buying process. Your credit score is created by all the money interactions you’ve had with lenders over the course of really, your lifetime. That could be credit cards. That could be money you borrowed for buying a car, or something like that. That’s even the bills you get every month, so for your electric, or for your TV, those kinds of things. They’re all inside of a system, and if you keep up with your bills properly, pay your bills on time, pay back your credit cards over a course of time properly, then you’re gonna have a higher credit score. If you’ve had problems, haven’t been able to make payments, have even gone through bankruptcy, or something like that then you’re gonna have a much lower credit score and that’s gonna affect everything.
The first thing you want to do right now, way before you even start deciding to buy a house is, address your credit score. How do you do that? Well, I created a video series on exactly how to do this, so if you want to find your credit score, learn how to fix your credit score, head over to our Instagram page, and click the link that’s up in the top part. It has some freebies that we give away, the master checklist for our course, and some other stuff. One of those is finding and fixing your credit, so Get Your Money Right, I think is what that freebie is called. Go to Instagram, click that link, and then click Get Your Money Right, right behind there, and there is a three video series to teach you how to find and fix your credit. That really is one of the first things you want to address as you’re setting yourself up to buy a home.
Number two is the down payment. When you buy a house you usually are going to be borrowing money from a lender, or a bank who is gonna help you pay for the house, and then you’re going to pay them back over 15, or even 30 years. But, they expect that you put some money down at the beginning. That’s called a down payment. A lot of times that’s 3 to 5% of the purchase price, so if you’re buying a house for $100,000 that would be 3 to $5,000, and if you’re buying one for $200,000 then obviously that’s 6 to $10,000. For someone who’s buying a house for the first time that can be a ton of money. And if you haven’t thought about it ahead of time then you’re stuck without a down payment, and even though there are ways that you can buy a house with very little down payment, or no down payment at all, you don’t want to be in that situation, so start saving now.
Maybe you ask for money towards your down payment for birthdays from family members, or maybe you have a family member that can help with the down payment, a lot of people do, and a lot of people don’t, especially if you don’t have anyone else who can help with those financial down payment pieces. You definitely want to start ahead. Save $100 bucks a month. Save $50 bucks a month. Save $25 bucks a month. Whatever you can do to set that money aside.
Then have a sense of how much you want to buy a house for. What’s the cost of the house that you think is going to fit you? Is it $100,000? Is it $200,000? Try to at least get a 3 to 5% down payment. There’s some people out there that say you shouldn’t buy a house unless you have a 20% down payment. If you have the luxury of making a 20% down payment, you can avoid some costs associated with that sale, but just start with 3 to 5%. What’s it gonna take to save up 3 to 5% to have for the down payment at the point that you’re ready to purchase that house?
The third thing you need to start thinking about right now is, what your budget is going to be for your home payment for the payment of the mortgage on your home? Obviously, you’re gonna be borrowing some money, and if you went out and got a $500,000 house then you’re gonna have a $3,000 a month mortgage payment. You’re probably not gonna be able to handle that. It’s going to be totally bad. You want to understand right now exactly what you can borrow, so you can start thinking about what kinds of houses are available in your town. I think the best way to do this is, if you’re paying rent right now, think about how much money you’re paying in rent because if that’s working out then you know then that’s a fair amount of money that you can pay out on a monthly basis and it would be okay. It would fit your budget, right.
Then you can go online and look at mortgage calculators. There’s tons of them. Just Google it, you’ll find a ton of them. Figure out how much you could borrow, what the total amount you can borrow is, so that you would have a monthly payment that’s similar to what you’re paying in rent right now. That’ll give you a great sense of how expensive the house can be that you can buy in your market. Now you’ll know, okay, if I want to pay basically the same amount I’m paying in rent right now then I can buy about $150,000 house, or something like that. It gives you a great sense right away of exactly what price the house can be that’ll fit into your budget.
Finally, number four. It’s time to start understanding the local real estate market. You want to get a sense a little bit of where things are at? Are prices going up, and up, and up, or are prices going down? Why are either or those things happening? Real estate markets are similar to the stock market, or anything else. They can go up because of demand. They can go down if there is less demand. That’s the way the market works. The better you understand that before you even get involved in it the better you can know when you decide to start looking for a house where the market’s at, what you can expect as far as competition, are there going to be 10 people trying to make an offer on any good house in this town immediately when it goes onto the market, or is the market a little softer and you might be able to offer a little bit less money then maybe the person who’s asking, and still have a good chance of getting that house because the real estate market is working in your town?
Obviously, a realtor is a perfectly good way to deal with this situation. We’re definitely going to suggest that you get a realtor when you get closer to the actual buying process, but having some knowledge by going online and looking what houses are for sale, by driving around and seeing what the prices are, you’re gonna know where the market is at, and be able to jump in with that realtor when you’re ready to buy the house with full knowledge of how the process works. And then the realtor will give you even more knowledge. They’ll say, “Okay, well this is how it’s working right now, and here’s some inside information that you’re not going to get from going on Zillow, or Realtor.com, or whatever.” They’ll help you take it to the next level when you’re actually in the process of buying your own home.
Okay, so to review. Step one, deal with your credit. Start addressing it right now. Find out what your credit score is. If it’s not good, go find your credit report, figure out how to start fixing it.
The second thing is a down payment. You need to start saving right now, or planning for how you’re gonna make that down payment at least 3 to 5% of the purchase price of your new home.
Number three, you want to figure out how much you can afford to buy. I suggest using the amount you’re paying for rent right now, and figuring that out with an online mortgage calculator to understand exactly how much a house could cost that would fit into your budget.
And then number four, finally get a sense of the real estate market in your purchase area, or your local area if you’re going to buy a house in your own space. Figure out if the prices are going up, if the prices are going down. If there’s very few houses on the market and that means it’s going to be a hard market. It’s going to be tough to get a house, or if there’s lots of houses on the market and very few buyers, and then it’ll be a little bit easier to get the house of your dreams.
Episode 4 hit the surface of the four things you need to do before buying a house. But, as you already know there is oh so much more to this process. If you want a comprehensive online course that walks you all the way through the home buying process, we have created it for you. There are checklists, and videos, and a private group just for members. You can find all of this at newhomebuyersguide.net. If it isn’t the best bit of home buying advice you’ve ever experienced, we will gladly refund your money. But really, when you see the price even a third of the information we provide, and the community that is behind that pay wall would be 100% worth it. Until the next time, Happy Home Buying.