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Dan Chase's Blog

By Dan Chase | Home Buyer in Texas City, TX

I want to buy a house. It will be at least one year before I am ready to buy. What should I do now to prepare myself?

I want to buy a house. It will be at least one year before I am ready to buy.
 What should I do now to prepare myself?
 
 First, you need to get your credit under control.  To me that simply means developing credit today if you do not have it. If you have credit get your debt at acceptable levels. It also means not creating more debt today that could influence your ability to buy a house in the future. Getting an education would be a worthy exception to adding no more debt.
  

If you do not have credit you will have to buy some. That means getting a secured loan from your bank (or preferably) credit union. Basically, you borrow your own money from them and pay them interest. You can have it set up so that they do automatic withdrawals and you never think about it. Just open (or use) another account. It should be locked so you can not access it. Place all of the interest the loan will need and a bit extra in that account. When the loan ends, you have paid it all off. You now magically have credit. It works, I have done it.  You can ask your local loan officer about this and other ways to establish credit.

You already have credit? Check out all of your credit cards. Make sure they are no more than 1/3 amount owed compared to available credit. If your amount of debt compared to available credit is very high it will hurt your fico score. if possible, pay down or off some of your loans. 

Use your credit cards once each month. ONLY use them once each month. Use them to pay for gas, groceries, or something else you must have. When you get your statement pay it off in full. Pay it off as quickly as possible. Early payments help your fico score. Just paying on the deadline, not so much as paying early does. 

Besides using your credit cards once each month, forget that credit exists except for your payments on debt already owed. You need to switch to a cash (or debit card) reality. If you do not have the money to buy something, you do not buy it. 

For more ideas on improving your credit look at this link 
http://www.trulia.com/blog/al_akerman/2010/01/can_i_get_a_mo… 

From now on, everything you buy is a must buy, not a want to buy. If you can live without it. Forget about it. 
When you have to buy something, buy used instead of new (if possible). Salvation army stores have a lot of good used stuff cheap. But only buy what you need. No extras, even if they are really tempting. That pair of shoes, that nice shirt, maybe a pair of pants, that was all you really needed. 

When you do buy something you need do not always worry about buying at the cheapest price. Often paying extra for quality pays for itself. For some things, it does not matter. Mustard is mustard in the end.

You need to save for a down payment. How do you get it? 

Lets look at some wasted money a lot of people throw away every month. Wasting that money makes life a lot more pleasant, but what if they did without some things? What would the results be? Lets look at some real world numbers. 

cable tv with all the channels; $100 a month. $1,200 a year. 
eating out every day at work instead of taking a bag lunch; $5 a day, $25 a week, $100 a month, $1,300 yearly 
getting coffee 3 times at $1 a cup each day; $3 a day, $15 a week, $780 a year (subtract the cost of coffee maker, thermos, and the can of ground coffee) at least $500 a year wasted. 
Watching a movie 1 time a week at $10; $40 a month, $520 a year 
Drinking 1 soda; $1 a day, $5 a week, $260 a year 
Internet access; (dial-up verses broadband) $15 a month, $180 a year 

Just the above adds up to $3,962 savings in a year. 
Imagine what looking at your expenses can really save you. 

for more ideas about saving for a down payment look here
 “How do I get a down payment to buy a house? The ideas below worked well for me. They could help you also.” 

 It comes down to one thing. Is your desire to get a house stronger than your desire to have those nice things in your life? 
 
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We are now past the financial aspect. Lets consider how to go forward in the house buying process. 

First, I would go to http://www.realtor.com Do a property search there using the custom settings. You can ask for daily updates and be specific about what you want. This gives you the opportunity to see what is out there in your price range before you "hire" a realtor.
 A local realtor could do the same thing, if you prefer. Make sure the search is slightly above your buying price. 

I would recommend looking at the Q&A section of trulia and zillow. You can look at realtors in your area and see who seems to know their stuff and is willing to help people out. You can ask a lot more questions and get answers. Once you are ready you can find the realtor who is your best fit and will work with you all the way through your house buying process. 
 
Go to open houses. No, not to buy. You are doing research now. You are looking to find out what houses in your expected price range look like. You are searching for certain kinds of layouts you like, others you do not like. Look all around, Go in the cellar, and the attic. Try out the stairs. You will notice that some things make life easier. Steep stairs, always worried about falling down them, no thanks. This house is easy to get around in, but that house is not. It seems they put a wall in the way and that will always be annoying. A wet cellar, ok, but can't use it for to much. A drop down ladder to get into the cellar, hmm... do I want to go up and down that rickety ladder ? My point is you will be educating yourself during the whole open house process. 

Decide what kinds of houses you will find acceptable. Do you only want a ranch? Do you only want a cape cod? Do you want a condo? Would a townhouse be your best fit? You are working now finding out which kinds of housing would be a good fit for you and which types of housing would not be. I would consider any house a lifetime house. When you get married (if not) and have kids (if you do not already) would it make sense to buy a 3 bedroom single floor (for living purposes) ground level house? Is it easy to get around in if you were to break a leg, or need to use a walker? If you buy a house that is easy to get around in today tomorrow will take care of itself. If you buy a house that can accommodate expected children in a good school district you will not need to move later. 

Once you are past the preparing yourself to buy a house you will need to do some things to buy that house. Look at my other blog below. It gives a lot of things to think about when you are just starting to look. 
http://www.trulia.com/blog/dan_chase/2010/01/its_your_first_…

Comments

By Barbara Q.,  Sat Jan 16 2010, 16:47
Nicely done Dan! Get your own financial house in order first. Then get to know your style. Are you a "Rancher" a "Split" or a traditional "Colonial" ? Get to know the neighborhood, values & pricing. Once you feel empowered as an educated consumer...interview a few Realtors. Choose wisely! Then shop 'til you drop...or BUY!
By Dan Chase,  Sat Jan 16 2010, 17:10
Thank you Barbara. I tried to put things in a good order.
By Dan Chase,  Sat Jul 3 2010, 09:35
One person posted the things below. Sadly, they used the posting to suggest a specific company.
I am deleting their post as it is spam, but I am leaving the non-spam things they suggested. They are in line with what is suggested above and make sense.

Two things in particular. First, save your money and make at least a 20% down payment on your new loan,when it's time. Second, contact a reputable and proven credit advisory company and have them run a credit analysis. Once the analysis is complete, take their advice and get your credit score as high as possible over the coming year. With a 20% or greater down payment and a very high credit score, you will have two of the most important items that will get you the best loan, the most leverage in negotiations, and the best interest rate.

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