You’ve made your determination and set yourself a goal: You are going to buy a house in the Tenafly real estate area. Great! Now what do you need to do to prepare and make it happen? This post will explore some of the answers to this question.

Just a few years ago many homes were listed and sold within a few days. Loans were easy to obtain even if your paperwork and credit scores were imperfect. Obviously, things are different today. Here’s the good news: Mortgage rates are historically low, certain tax incentives are available, and in many places, prices are still relatively low in economically turbulent times.

With proper planning and a little smarts you can find your piece of the American dream. Here are some practical tips to get into a good position to buy a home.

Avoid borrowing! Lending policies have tightened and because a home is usually one’s largest lifetime purchase, it represents significant risk to the bank. You want to look as safe as you can in the eyes of the bank. What’s the best way to do this? Have as little debt as possible and keep your credit profile stable. In a word, don’t go borrowing before buying a home.

Even if you receive an “incredible” credit card offer offering 0% balance transfer, don’t do it – at least not right now. For one thing, when you read the fine print, these offers usually turn out to be less attractive than they look. Along the same lines, don’t buy expensive items like an automobile or a major piece of technology before you buy a house, even if you are offered a 0% loan for a year. Beyond the fact that many consumers end up losing money in these situations, the key point is that you don’t want the appearance of risk.

Keep things stable. Keep your money in your current bank or credit union and most importantly, don’t change your job if you don’t have to. Your job can paint a portrait of stability, but if lenders see a lot of changes it can send the opposite message. Obviously, if you have an opportunity to earn a much higher wage or to follow your true calling, do it, but avoid unnecessary changes.

Budgeting

Now let’s look at some practical financial steps to take. First, make a realistic estimate of what your monthly outgo will be when you buy a house at the price point you anticipate. This includes the mortgage itself, but also taxes and insurance. Beyond this, you should count on the unexpected to happen, so add funds for repairs, maintenance and upgrades. Think roof repairs, plumbing, windows, flooring, etc. Something always comes up – Murphy’s law is in effect here – so plan for it.

Now, let’s look at your actual budget. If you are currently rent, calculate the difference between your monthly rent and your future home payments. Knowing the numbers isn’t really enough. We recommend that you take the “overage” – the difference between current and future expenses – and invest it in a high-interest savings account. Consider these funds to be your future down payment, bearing in mind that many buyers have to put down up to 20% today, far higher than a few years ago.

The discipline of careful budgeting will pay off in all sorts of ways. For example it’s not uncommon for real estate agents to want to show you homes both in and slightly above your stated budget. You may end up spending more than you anticipate now. This is not necessarily bad – in the end you’ll want to know where the best “value” spot is within your budget range. You may need a few more dollars than you anticipate today, so careful, disciplined budgeting is a must.

Check with several lenders to find out where you stand and what you can afford. You can begin by obtaining no-obligation quotes on the Internet. Then apply and get pre-approved. This will greatly strengthen your position as a buyer.

Work hard to make sure that both buyers’ credit profiles (if it’s a couple) are in good shape, and do the work to improve your credit.  

Sell or give away unneeded items (i.e., junk). Since unexpected expenses will crop up, you’ll be glad to have extra cash on hand. Plus, if you offload your junk, you’ll have less stuff to move when the time comes. Be honest with yourself, will you really use all the junk you currently have stored? Go ahead and unload outdated gadgets, furniture you never use, old college textbooks, clothes you no longer wear, etc. Remember that organizations like the Salvation Army, St. Vincent de Paul or Goodwill may offer haul-away services for some items. More important, considering the current economy, others may need these items more than you do (and you can get a tax deduction for donations to boot).

Consider buying a condo. These are often a good choice for first-time buyers and can help keep expenses low since you won’t need to worry about things like exterior paint or landscaping.

After dealing with all of these items, if you still feel it’s not a good time to buy, there’s nothing wrong with renting. Buying a home is a huge step, both emotionally and financially, so pursue it only when the time is really right for you.