Finance Tips Archives » Larry & Kathy Reichle

While you may have been ready to buy a home during the 2020 spring market, the uncertainties caused by the pandemic may have put a damper on your plans. At this point, you may be uncertain about your post-COVID-19 real estate goals and unsure whether the opportunity to work from home will inspire you to move to another market or another type of home.

If you’re looking to get ready for a home purchase a few months down the road, this plan will help ensure you’ve covered all your bases. From finance to logistics, it’s important to think through the changes on the horizon to streamline your 2021 home purchase.

couple discussing purchase with man at table

Preparing to finance your purchase

One of the first things you’ll want to think about is the financing for your home purchase. Talk to a real estate professional and ask for an introduction to a mortgage lender, if you don’t already have one in mind.

Talk to your lender about the pre-approval process. When it’s time to begin seriously looking for your new home, you will want to have a pre-approval in place so that you can show sellers that you are serious about any offer you may make and that you are approved for a home mortgage.

In the meantime, you’ll want to check your credit score and your credit report to ensure that there are no mistakes. If your score is less than optimal, explore strategies for raising it in the months ahead. These can include:

Paying bills on time
Having rent and utility payments added to your credit report
Paying down debt and avoiding accruing new debt

In addition, talk to your lender about the types of home mortgage products you qualify for—VA, FHA, and conventional, among others—and the credit score range you’ll need so that you can be approved for each.

Determining your price range

By working with your lender you’ll be able to come up with a ballpark price range for your home search. This will be important as it will help you to narrow down the neighborhoods, home types, and home sizes you should be considering.

Remember, just because you qualify for a certain amount, you don’t have to shop at the top of your budget. Consider your lifestyle, other debt, future plans, and disposable income needs when determining your home purchasing power.

Comparing potential markets for your search

This is a good time to begin looking at markets where you might be inclined to move. Talk to your real estate agent to find out what features you’ll find in the areas you’re considering. Determine what you are looking for so that you can narrow down your search. Do you care more about:

Recreational opportunities?
Children’s programming?
Dining and nightlife?
Convenient shopping and services?
Commute times?
Larger lot sizes?
Larger homes?
Resale potential?

If possible, spend some time in your potential neighborhoods. Shop at the stores, eat in a local restaurant, and visit a nearby attraction. Check out the people to see if they seem like good future neighbors for you and your family.

Comparing potential home styles and features

Spend some time looking over listings to determine what home styles and features are most important to you. Put together a wish list and prioritize with must-have, nice-to-have, and optional items. Determine how different updates, upgrades, and other features impact price. Consider what you might be willing to add or change after the purchase and what you’ll want to have completed before you move in.

Preparing for associated expenses

Buying a home brings with it a large number of expenses before, during, and after the purchase process. It’s important for you to have an idea of these ahead of time so you can ensure that your savings are adequate. Remember, you won’t be able to run up additional debt while your mortgage is in underwriting, so it’s important to have a budget in mind before you begin.

Expenses for your home purchase may include any or all of the following:

Earnest Money Deposit (EMD): 1–5% of the purchase price
Down Payment: Generally 3–20% of the purchase price
Closing Costs: Variable (discuss with a real estate professional or lender)
Moving Costs: Variable
New furniture and design elements
Needed repairs and improvements

Planning for your upcoming move

Once you’ve determined where you’re moving and the type of home you’ll move into, you’ll need to begin planning for the move itself. If you’re in a rental home, check with your landlord to determine how much notice you’ll need to give before ending your lease as well as what information needs to be included in that notice. You’ll also want to check on month-to-month rental options, in case you are not ready to close at the end of your current lease.

You’ll want to save up money for your upcoming move but the budget can vary widely depending on the services you require. While you may be able to manage a do-it-yourself move for only the cost of a rental truck, a professional move can cost thousands of dollars. This price can be further increased depending on the distance of the move as well as services like packing and unpacking.

If you’re moving with children, you’ll want to spend some time preparing them for the emotional impact. If possible, take them to visit their new neighborhood, play in the park, or spend a day with classmates at their new school. The more you can do to communicate and demystify the process, the more comfortable (and excited) the youngest members of your family will be on moving day.

One of the unexpected side effects of the COVID-19 pandemic has been a growing population shift from the city centers to suburban and rural areas. Driven in part by the availability of work-from-home job opportunities, many individuals and families are also motivated by the promise of more open space, outdoor living, and increased privacy. If your homebuying plans include a move away from your small, in-town apartment or condominium, here are some of the things to take into consideration as you prepare to make that transition.

Homebuying in the Suburbs

Even if you grew up in the suburbs, if you’ve spent most of your adult life living in the city, you’ll experience a bit of a learning curve. Buying and maintaining a suburban home can bring with it a number of new challenges and you’ll want to be prepared both logistically and financially.

Choosing the right neighborhood

It’s important to determine what your most important deciding factors will be as you choose the neighborhood that will be home for you and your family. Perhaps you are looking for award-winning school systems or magnet schools with specific programs. Maybe you want larger lot sizes and an emphasis on outdoor living. Maybe you’re moving to the suburbs in order to be closer to family members. Whatever your purpose, you’ll want to communicate it to your real estate agent or broker at the outset of your search.

In addition, think about the amenities that you currently enjoy most and look for suburban enclaves that offer them. If you’re a major foodie, look for an area with an exciting local restaurant scene. If your day is dependent on a great cup of coffee, look for an area with one or two exceptional local roasteries. Exurban and suburban areas aren’t just the big-box, generic locations they used to be. Many of them have their own unique culture and their own local charms, so choose the one that’s right for you and your family.

Planning for your new commute

If you’re used to walking to work or taking reliable public transportation, you’ll need to figure out how your new life in the suburbs will affect your commute time. Even if you’ve been able to work from home during the pandemic, if you’re planning to return to the office next year, you’ll need to get a sense of the timing involved.

At some point when you have narrowed down the neighborhood for your home search, you’ll want to drive to and from work during rush hour in order to get a sense of traffic patterns and the length of your commute. Keep in mind that in many areas, traffic density has still not returned to pre-COVID levels, so you’ll only get a rough approximation of your new commuting time.

Cost Considerations

Many people are attracted to the suburbs because they get more for their money in terms of both square footage and the reduced cost of living. Items like groceries and gas are indeed cheaper in the suburbs, but there are other costs associated with suburban living that you’ll need to take into account.

Homeowner’s Association fees

Remember when you are working with your mortgage calculator to keep an eye on HOA fees and include them in your budget. Remember, too, that some HOAs cover a variety of resort-style amenities, while others only pay for common space maintenance and upkeep. Determine what services you’re looking for and find out what will be covered in the neighborhood that you choose.

Recreation and amenities

What kind of lifestyle do you plan to adopt once you’ve moved out of the city? Will the kids be playing travel sports? Will you want to maintain your workout routine? Are you hoping for additional recreational activities, like more time to golf or improve your tennis skills? Putting more time and effort into recreational activities can involve a major financial outlay for new equipment, coaching or instruction, membership fees, and other expenses. Factor these in as you put together your monthly budget.

Lawn care and upkeep

If part of the charm of suburban living is mowing the lawn and raking leaves on the weekend, your only lawn care cost may be a good mower and some work gloves. If you want to outsource your yard maintenance, however, you’ll add a fair amount to your bottom line. Take into consideration both the potential maintenance costs of your new home and your willingness to actively participate in the upkeep process.

Furnishings and decor

If you’re moving from a small flat in the city to a larger suburban home, you’ll have a fair amount of shopping to do. From additional furnishings to fill all of those larger rooms to rugs, window treatments, and other items, you’ll need to spend some money before you feel truly settled in. Remember to wait until you have closed on your new home before making any major purchases, especially if you’re planning to finance them, as that can affect your mortgage underwriting process.

Commuting and travel

If you have been living in the city car-free, you’ll need to factor in the cost of a new vehicle for you and your spouse as well as all of the associated expenses. In addition, if your commute involves tolls and parking in the city or light rail travel, you’ll need to calculate those costs as well. If you enjoy travel and have been used to taking the subway to the airport, you may need to begin to add on the costs of long-term parking or other ground transportation to your travel budget.

Outdoor living costs

Many people are fleeing the cities to take up residence in the suburbs in large part because of the access it gives them to outdoor spaces and activities. Maintaining a pool, outdoor kitchen, and other outdoor spaces can add significantly to your costs, both during the purchase process and in terms of monthly upkeep and utilities. Be sure to add these in as you plan your monthly expenses.