Homebuying Timeline: What You Need To Do in Advance of Making That First Offer

House model in home insurance broker agent ‘s hand or in salesman person.
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Buying a home is a huge financial decision and not something you should attempt to do at the spur of the moment. When you know you want to buy your first home, you should ideally start planning at least two years in advance to ensure you are financially ready for all that this milestone entails.

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Here’s what you should do — and when — leading up to making that first offer.

2-Plus Years Before: Save for a Down Payment

Although you may be able to buy a home for less than 20% down, saving this percentage will save you money in the long term.

“Aim to put at least 20% down, even if it means delaying your home purchase, because you will end up paying far less in interest and mortgage insurance over time,” said Rachael Burns, CFP, financial planner at True Worth Financial Planning.

Of course, 20% down can be a hefty amount of money, so you’ll want to start saving up well in advance of making that first offer. The longer the timeframe you give yourself to save, the more you can take advantage of higher-yield investment vehicles to grow your down payment faster.

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“If you don’t intend to buy a home for at least a year or two, you may be able to earn more by investing in the market as opposed to keeping it in savings,” Burns said. “It’s important to understand the risks that come along with investing and to have a plan for converting those investments to cash as you get closer to buying a home.”

If you are within a shorter timeframe, you’ll have to save more aggressively, but can still benefit from keeping funds in a high-yield savings account.

“Take advantage of high-yield savings accounts to maximize the interest earned on your savings while still keeping the cash safe and accessible,” Burns said. “If you’re holding your savings with one of the big banks, chances are you’re earning practically no interest, so shop around to some of the reputable online banks.”

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6 Months Before: Schedule a Pre-Qualification Interview

Burns recommends scheduling a mortgage pre-qualification interview in advance of starting your home search.

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“During the pre-qualification interview, the lender gives you an estimate of how much of a loan you would likely qualify for,” she said. “You are responsible for self-reporting your financial details, so no credit check is run. This makes a pre-qualification less ‘official’ than a pre-approval, but it’s still a good first step before you get the pre-approval.”

Burns recommends doing this well in advance of looking for homes for a couple of reasons.

“It’s good to get an idea of what you are able to afford before you even start looking at homes,” she said. “It also gives you some time to work on improving your credit or saving more of a down payment.”

5 Months Before: Start the Mortgage Preapproval Process

Preapproval is the next step after getting pre-qualified.

“Having a preapproval will help speed up the buying process and make sellers take you more seriously,” Burns said. “It will give you an idea of what your interest rate will be, and in some cases can even lock in an interest rate.”

To ensure the preapproval process goes smoothly, Burns recommends being prepared by taking the following steps:

  • Check your credit. “See if there are any errors on your credit report that need to be corrected,” she said. “You may also want to pay off or pay down your existing debts to improve your debt-to-income ratio.”
  • Get your financial information organized. “You will need to gather bank statements, investment account statements, W-2s, etc.,” Burns said. “If you are self-employed, you may need to provide more documentation. Keep all these documents organized and easily accessible so you can hand them over to your lender.”
  • Keep up with your debt payments. “In the midst of the homebuying process, make all of your other debt payments on time,” Burns said. “It might not seem like a big deal to make a late payment, but this can have a huge impact on your credit score.”
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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 
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