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When to begin budgeting for a home purchase

When to prepare to buy

As real estate agents, we aim to help you through home-buying.

Common questions we receive from buyers are typically related to budgeting. One particular question is when to begin budgeting. You may be eager to buy a home but have yet to start the preparation. Then, when you begin to look into the financial positioning requirements, it can feel overwhelming. However, don’t fret. There are various steps to consider when preparing your budget, commonly associated with multiple costs during the transaction. Some buyers will refer to them as “hidden costs,” but they are not really hidden if you are preparing to buy a home.

When to start preparing to buy a home?

We recommend preparing to buy a home a few years in advance. However, you may have already started this preparation without knowing it. Here is what you will need. The more of them you have, the more prepared you may be:

  • Debt-to-income ratios are important to consider when buying your first home.
  • It would help if you had two years worth of tax returns – this is a baseline to know what price range to shop within.
  • Pay stubs, W-2s, or other proof of income
  • Bank statements and other assets
  • Credit history is needed, and your lender will ask to pull your credit if borrowing.
  • Gift letters if applicable. Your friends and family might help you buy a house by giving you money. If that’s the case, you’ll need to provide a written confirmation that the money is indeed a gift, not a loan.
  • Photo ID to verify who you are
  • Some may ask for renting history to help to determine their decision to lend you funds.

Next steps when buying

Consult with a lender before shopping for your home. This will help you know the best price range for you. Then you can also plan for your necessary down payment. Budget for inspections, renovations, and closing costs well. Before buying your home, look into utility costs and consult your real estate professional for further assistance. These costs also help ensure you can afford the new living costs associated with homeownership.

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