Simple 2-Year Plan To Buy a House

Young family putting up a picture in their new home after moving in.

It’s no secret that buying a home takes a lot of preparation, but knowing exactly how to prepare is less obvious. Luckily, we’re here to show you where you should be at each step of your homebuying journey.

Two years can be a good amount of time to prepare your finances, shop for the right home and mortgage, and successfully close on a house. Below, we’ve outlined how to prepare to buy a house in two years:

How To Buy a House in 2 Years

TimelineHomebuying StepHow To Prepare
The first six monthsLook up your credit scoreYour credit score is a major factor that will help determine whether a lender is willing to let you borrow money — and, if so, at what interest rate. For this reason, finding out your credit score is a good way to check where you are financially.

A credit score in the mid-700s or above will earn you the best interest rates. If you have a lower credit score and want to save money on interest, start working on building your credit before you take out a home loan.
Understand the costs of homeownershipOn top of your monthly mortgage payment, you’ll likely need to pay for homeowners insurance, mortgage insurance, property taxes, maintenance, utilities, and any unexpected home repairs. It’s important to budget for these costs from the get-go.
Start or continue saving upBefore you can get a mortgage and buy a home, you’ll need to make a down payment and pay closing costs first. Regularly contributing to a high-yield savings account can help you stay on track to meet your goals.

There are big benefits to saving for a larger down payment. Paying more cash upfront means you’ll have a smaller monthly payment and be charged less interest overall. If you get a conventional loan and put at least 20% down, you’ll also save money by not paying for private mortgage insurance.
Figure out what you want (and need) in a homeSitting down and making a list can help you prioritize what you want and need in a home. Consider factors such as:
– Location.
– Square footage.
– Number of bedrooms and bathrooms.
– Amenities.
– School districts.
– Neighborhood safety.
– Walkability.
Research the marketOnce you have an idea of where you want to live, research the housing market in that area so you’ll know what to expect when it’s time to buy.

It’s also important to keep up with how mortgage interest rates are changing, as they will affect your monthly payment amount. This could influence your purchasing window if you’re looking to take advantage of relatively low interest rates.
12 months inPartner with a real estate agentA real estate agent or Realtor is an expert with homebuying resources and networks that can be invaluable for aspiring first-time homeowners. Working with a real estate agent can save you time, money, and stress, so finding a good one is key.
Get pre-qualified for a mortgagePre-qualification is an estimate of how much you could borrow from a lender. Getting pre-qualified is a way to help set your budget early on without committing to a mortgage loan. Pre-qualification is different from preapproval, which comes later.
18 months inResearch loan optionsThere are many different mortgage loans and terms to consider. These include:
Conforming mortgages.
– Nonconforming mortgages.
– Loans backed by the Federal Housing Administration, aka FHA mortgages.
Fixed-rate mortgages.
Adjustable-rate mortgages.
30-year mortgages.
15-year mortgages.

Everyone’s financial situation is different, so take some time to decide which type of home loan is right for you.
Start gathering the paperworkThe last thing you want is to scramble around looking for required documents. You can help avoid this scenario by taking the initiative to locate the paperwork commonly required for mortgage applications, including:
– Identification.
– Social Security number.
– Proof of income, like pay stubs, W-2 forms, and tax returns.
– Bank statements.

Mortgage lenders may ask for more documentation, so look over their requirements carefully. The more organized and prepared you are, the more likely your loan application will get approved.
21 months inGet preapproved for a mortgagePreapproval involves a lender verifying your financial information and the maximum amount you should be able to borrow. Having a preapproval letter in hand means you’re ready to start making offers, and lets sellers know that you’re serious about buying.
Tour open housesChecking out a property in person gives you the chance to feel out whether the home and neighborhood are a good fit. If you are buying a home remotely or can’t visit in person for another reason, virtual open houses could be an option.
The finish lineMake an offer on the home you wantThere are different ways to stand out when you make an offer. For example, putting down more earnest money — aka a good faith deposit that will be applied to your down payment later — can help entice the seller into accepting your offer.
Apply for a mortgageYou’ve been preapproved — now it’s time for the real deal. After you apply for a mortgage, you’ll receive a loan estimate, which is a form that breaks down key information about the mortgage you could expect to get. Comparing loan estimates from multiple lenders can help you choose the right mortgage when you make your final decision.
Get the home appraised and inspectedAn appraisal determines the value of the property, while an inspection looks for any major problems with the home. If any issues come up when the home is appraised and inspected, you may be able to back out of the deal or negotiate further with the seller instead of having to deal with the problem yourself. That’s why getting an appraisal and inspection is important.
Purchase title insurance and homeowners insuranceLenders title insurance covers your mortgage lender against previous claims that challenge your legal ownership of the home. Homeowners insurance protects you financially from liability and property damage. Both types of insurance are required by lenders when you’re taking out a mortgage.
Close on your new homeThe final step of your plan to buy a house in two years is to close on the home. On closing day, be sure to inspect the fine print — because once you sign, the deal is final.

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