You hire a real estate agent and lender once you’re actually ready to buy, but how do you get to that point?  What if you don’t feel quite ready to sign an agreement or get pre-approved?  Below are the steps you should be taking if you are just starting to think about buying.

You’ll want to begin following these steps about 3-6 months before you plan to actually start looking at homes.  That way if you discover you need more time to build your credit or your savings, or if you are accepting gift money as part of your down payment, you will have enough time to do so before officially applying for a loan.  

1. Get a sense of your credit.  Having a credit score above 620 is a good start.  The higher your credit score, the better your interest rate, and therefore the lower your mortgage payments.  A higher credit score can also give you the option to put less money down.  Lenders will use the middle score from the three credit bureaus.  If you are buying a home with a partner or spouse and using both incomes to qualify, the lender will use the lower of the two middle scores.  You can visit to get a free credit report.

2. Get a sense of your savings.  You’ll need to have enough money saved for the down payment and closing costs.  Assuming a good credit score (and with a few exceptions involving 100% financing), you should plan to put at least 3% down.  So if you are looking at homes priced at $400,000, you’ll want to have at least $20,000 cash for the down payment.  You’ll also need to build in a cushion for closing costs, which can start at around $8,000 on average.

3. Look online and visit open houses.  This will give you a great idea of what is available for what prices in the area, as well as help you decide what neighborhood might be a good fit.  You will feel more comfortable taking the next steps if you already have some sense of the product you’re buying. 

4. Meet with a lender.  Common misconceptions of meeting with a lender are that you must be ready to apply for a loan, divulge all your financial information, or commit to that lender that day — None of which are true!  The meeting can be as advanced as the above if you choose, but it can also be as casual as discussing how you can improve your credit, how you can save for a down payment, and what types of loans are available.  It’s never to early to have a conversation with a lender.  Other common concerns are that a lender will reject your application, tell you your income doesn’t qualify, or give you a loan amount that is less than you were hoping.  But you’ll never know what you can afford or what you need to work on until you complete this step.  Knowledge is power!  Think of the lender as your financial guru, counselor and confidant.  

5. Meet with a real estate agent.  A real estate agent will help address your home and lifestyle needs.  They will use the guidelines you obtained from the lender and input from your personal preferences to narrow down the location and type of home that will be the best fit.  They will be able to tell you how competitive the market is, what homes are selling for, and provide examples of homes currently for sale in your target market.  A good agent will have a strong knowledge of the area and a set of questions prepared to determine your needs and search parameters.  Think of the real estate agent as your home buying guru, counselor and confidant.  

6. Start your search!  Once you know what you can afford and where you would like to live, you and your agent are ready to begin looking!  Having the pre-approval from your lender will make any offers you now submit much stronger.  You should allow another 2-3 months for this part of the process (1-2 months to search and 1-2 months to settle).  This overall timeline is especially important to keep in mind if you have a lease that will expire or need to sell your current home before purchasing another.