Simple 3-Year Plan To Buy a House

A woman works on her plan to buy a home in three years.

Written By Michael Rosenthal

Reviewed By Tom McLean

Buying a home is an expensive and often difficult undertaking — especially for first-time homebuyers — but it can be done if you come up with a plan and stick to it.

Here’s a timeline you can use to learn how to buy a home in three years.

How To Buy a House in 3 Years

Timeline	Homebuying Step	How To Prepare
The first six months	Maximize your credit score	A strong credit score is key to securing the best possible interest rate on a mortgage. Start your homebuying journey by checking your credit score online. Most loans require a credit score of at least 620, though some government-backed loans allow lower scores, or have no minimum credit score requirement. If your credit score is in the mid-700s or higher, you’re on track to get the best deal on interest rates, which means you can afford to borrow more without increasing your monthly payment. If your credit score needs improvement, work on increasing your score by paying off debts, reducing credit card balances, and making payments on time.
	Figure out your priorities	When you imagine your future home, what do you see? Is it a quiet single-family house on a couple of acres of land? A hip downtown condominium or townhouse? Location, size, and features all affect cost when it’s time to buy. For your three-year plan to buy a house, make a checklist of your wants, needs, and must-haves. See what you can live without. An indoor heated pool sounds great, but maybe living near a good school district is more important if you have children.
	Determine your price range	Home prices can cause serious sticker shock. You’ll need to factor in a down payment, closing costs, moving costs, property taxes, homeowners insurance, and maintenance. If you plan to buy a house in three years, estimate what you could afford by then. Also, don’t forget to figure out your monthly mortgage payment. A popular standard to follow is to allocate a maximum of 28% of your gross monthly income to your mortgage payment.
	Set up a plan to save	In a three-year plan to buy a house, you’ll have that much time to save up enough to afford one. To be sure you reach your goal, create a realistic savings plan with clear targets. You can set targets to meet every month, or even every week.
One year in	Learn the market	Research neighborhoods you would like to live in that can meet your needs. Note the average sales prices. Don’t forget to keep an eye out for up-and-coming neighborhoods that could offer cheaper homes that may appreciate in value over time.
	Pre-qualify for a loan	Pre-qualifying for a loan is an informal process that gives you a rough estimate of how much you can borrow. It’s a smart way to find out what kind of loan you can expect to get, even if it’s not official. You can use that estimate to narrow down a realistic home price range for you.
	Find the best real estate agent for you	No one understands the housing market like an experienced real estate agent. Team up with a reputable agent early on for help in scouting neighborhoods. Get referrals from friends and family, or via online research, and always interview agents to make sure they understand what buying a home means to you.
Two years in	Follow up with your savings and credit score	Check your savings progress — and don’t panic if the numbers aren’t what you expect. Readjusting your budget is a normal part of the process. Once per year, you can request a free credit report from each of the three major credit bureaus, so take advantage of that.
	Start shopping for a mortgage	Research what kind of mortgage may be right for you. There are many options to consider: — Conventional loans. — FHA loans, backed by the Federal Housing Administration. — USDA loans, backed by the Department of Agriculture. — VA loans, backed by Veterans Affairs. — Jumbo loans. Also consider your options for a loan’s interest rate type and term: — Fixed-rate or adjustable-rate mortgages. — 15-year mortgages. — 30-year mortgages.
	Prepare your mortgage application checklist	You’ll need a hefty stack of documents to secure a loan, so prepare for that now with a mortgage application checklist. Some of the basics you’ll need include: — Identification. — Social Security number. — Recent pay stubs. — Recent income tax returns. — Bank and investment statements.
Two years and six months in	Get mortgage preapproval	Earlier, you got pre-qualified for a mortgage. Now it’s time to get mortgage preapproval. Preapproval requires a more thorough review of your finances, after which the mortgage lender will estimate how much it expects you can borrow, as well as your interest rate. Mortgage preapproval usually is good for 60 to 90 days, and having a preapproval letter on hand will show agents and home sellers that you’re ready to buy.
	Tour homes	There’s no better way to get a feel for the right home than by checking it out in person. But unless it’s an open house, you’ll need an invitation. Your real estate agent or Realtor can help set up home tours.
The finish line	Submit an offer	So, you’ve found the right home for the right price, and you’re ready to buy. Your agent or Realtor will help you decide on and submit an offer to catch the seller’s attention. For extra security, add contingencies that’ll protect you in case of unexpected problems with the home.
	Sign the purchase and sale agreement	Once the seller accepts your offer, both parties will sign a purchase and sale agreement that sets out all the terms of the transaction, from the sale price and contingencies to when you plan to close on the house.
	Apply for the loan	With your mortgage preapproval, there should be few — if any — surprises when you officially apply for a loan. Three business days after you apply, the lender will give you a loan estimate that details all the terms and expected costs.
	Set up a home appraisal and inspection	Your mortgage lender will order a home appraisal to verify its value. This also is a good time to get a home inspection, which will verify the condition of the home and alert you to any necessary repairs or safety concerns.
	Deal with inspection concerns	There’s a chance the inspector may find problems with the home’s condition, such as cracks in the foundation, or mold. If you have an inspection contingency, you can ask the seller to make repairs or adjust the price to compensate, or you can walk away from the deal. Having the right contingency in your deal can help get you out of a bad situation.
	Shop around for insurance	Mortgage lenders require borrowers to have homeowners insurance, but you can choose the insurance company as long as the policy meets the lender’s minimum requirements. Do some research to find policies that fit your budget.
	Sign on the dotted line	Get your pen ready — it’s closing day! Check all of your paperwork — you may want to have a lawyer look it over — and sign away to fund the loan, and transfer ownership to you. Your journey in how to buy a house in three years ends here, and your life as a homeowner begins.