6 Ways To Prepare BEFORE The Housing Bubble Pops

Certified Mortgage Advisor
NMLS 1701021
Published 
December 15, 2020

6 Ways to prepare before the housing bubble burst

Hello, you marvelous people you've most likely heard a lot about a potential housing crasher housing market decline from this bubble in 2021. So I asked some of you and 66% of you said that in some form, you're actually waiting for this market to cool off. So what I wanted to do with you is talk about six ways that you can prepare for this housing bubble burst.

Why we need to re prepare?

If we don't prepare, what's going to happen is the opportunity is going to present itself to actually purchase and we're not going to be ready.

Validate why you're waiting

First, we want to validate why are we waiting in the first. Because if we don't validate, what's gonna end up happening is you're going to go, you know, we have holidays coming up and Uncle Bob or Aunt Susan, or whoever was going to come up and try to convince you of something else, or you're going to have a realtor who might pressure you into a decision you're not ready to make.

If you don't validate why you're making that decision right now. You might shift in that decision a little bit later in the future. So we need to understand exactly why we're waiting.

Reason why we are waiting

So here are some reasons that you might be waiting. Maybe you're waiting on prices to go down. Maybe you're waiting for more or better homes to come on the market, right.

Inventory is super low right now, and we're waiting for a better home to come up. Maybe you're waiting on easier loan requirements. So COVID has made getting a loan a little bit more difficult, especially if you're self-employed. Maybe you're waiting to build up savings or building up credit. That's a perfect option too, if you're you're waiting because of that.

Then maybe there's another reason. That's what I don't have listed that is going to be a perfect option for you for why you are weeding.

1. Research Homes Virtually

First, what I want you to do is research homes virtually. This is to help you get a better understanding of what's on the market, because maybe right now in your head, you're thinking, yeah, we want a $300,000 house.

Needs and wants list

Well, if you look at a $300,000 house in the area you want to buy, maybe you realize, oh, we actually are maybe looking at something closer to 275 or on the opposite end. Actually, we're looking at something closer to 350. We need to set our expectations upfront and that's going to help you build a needs and a wants list.

Basically what you're separating is what's the requirement that we need in this home versus what's a wish list for us. So maybe accessible parks are actually something that's more of a want for you. Maybe a minimum of a two-car garage is something that's more of a need, and this is going to help you set those expectations upfront right now.

That way, when the time comes, you actually know everything that you want. You're not having to guess what you want to happen next, which is the entire opposite of what I've experienced dating because I'll tell you none of these girls know what they want.

2. Keep tabs on your credit score

I want you to keep tabs on your credit score. Maybe you have great credit. Excellent. If so, make sure you're keeping tabs on it and that everything's looking good. Maybe you're still working on your credit. And if you're in that spot, then you definitely need to be tracking what's going on there.

Three great options

You can look at Mint, AnnualCreditReport.com, and Credit Sesame. There are thousands of others, but that's gonna help you get a free credit score and track what's going on with your credit score as well. Now, if you have issues with yours. Then you absolutely need to get those taken care of now before you go and purchase. That way it's a non-issue, it's completely in the past, by the time you're ready to buy.

How to dispute credit ratings

So here's the link to the CFPB step-by-step guide on how to dispute credit report errors: CFPB. So you can check that out if you need it. They even have sample letters that you can use.

#CalmMoment

Now, before we go into step three, let's go ahead and have a calm moment.

So normally what happens when there's so much going on around us, we tend to distract ourselves and we kind of procrastinate because we know there's work we need to do in the future, but we're kind of pushing off because we don't actually want to have to deal with what's going on underneath.

Maybe we've even procrastinated by saying, you know what? I don't, I'm not even going to finish the rest of this video because it's going to challenge me to do things that maybe I don't want to do. So that's okay. But what's lying underneath that typically is some level of anxiety. And beneath that is there's this frustration that it feels like there's so much working against me. No matter how much I tried to push forward, something is pushing back, right?

Whether that be tightening loan requirements or homes that are increasingly unaffordable, we have COVID. So we have employment and income issues, not to mention all of the health complications and the social strangeness that has now happened because of isolation.

Recognize, take control, and resolve

There's so much complexity and frustration around things that we can't control and what ends up happening is normally we don't want to have to process this and that's where we get into our procrastination and distraction. But the only way for us to find some resolution for this is to actually recognize, okay, these are, these are, this is a lot that's out of my control and we can actually move into more resolution.

When we recognize I can only control the things in front of me, everything. I can not control it at all. And I completely understand what that's like because I'm somebody who likes to control myself. And I feel entirely stressed out and anxious and frustrated when I don't have control over them. But recognizing, oh, this is completely out of my hands.

And the only thing I control can control is what's in front of me. Then that's going to lead you to a spot of more resolution, more peace in the plan that you have moving forward.

3. Figure out savings

I want you to work on your savings and the first thing that you want. Is looking at an emergency fund.

Now, what number should you have in your emergency fund? Everyone has a different idea. Some people say a thousand dollars, some people say three months' worth of expenses. Some people say six months, some people say a year, it's all going to be up to you.

How much should be your buffer

I think a good target is three months of your expenses.

Target and strategy

Once you have that saved, then on top of that, you need to make sure that you have a target in mind for how much you're going to spend on your closing costs and your down payment. And you have a strategy to get extra money if you need it. So for instance, if you need an additional $5,000 in your savings, how long, how many months is it going to take you to get that extra $5,000? That's going to help set up what your timeline is to purchase.

Planning will help you get a home

What happens to a lot of people is they just don't prepare and they don't think about it. Then, they say, oh, we're ready to purchase a home. Then they see how much it costs and realizes, oh, we don't have this money. And they're trying to scramble and add extra frustration and stress to their life because they didn't plan for it in advance.

4. Paying off high interest debt

So I'm not one of those people who thinks you have to pay off all of your debt to purchase a home. But I do think you should absolutely pay off high-interest debt. Specifically credit card debt. If your interest is in the 8%- 10% plus range, then absolutely get that taken care of before you purchase a home. Your money's going to be better spent paying off that debt. Then use that money towards a down payment or closing costs.

5. Start or clean up your budget

So if you don't have a budget already, you absolutely need to start that you're going to find the money. That's going all over the place, and this is going to help you be able to save for the targets that you have to purchase a home. And if you already have a budget, then you might be finding out that you have money going in places that you didn't anticipate. Right?

Don't let your hobby get in the way

Because when I look at my budget, I see how much money I spend on plants, and it's disgusting. I'm sure the plant store down the street loves me, but my wallet doesn't as much. I don't need as many tropical plants as I have. So make sure you do that.

Budgeting tools

Two really solid options are a tool called EveryDollar or You Need a Budget (YNAB). There are going to be great options for you. If you're looking to start up or clean up your budget.

Credible

Now, before we move into number six, let's have a quick word from our sponsor. So our sponsor is credible. They are a mortgage comparison website. What you can do is go to the link in the description, fill out a quick form, which takes only a few minutes. We'll do a soft credit poll. So it won't affect your credit score. And then they'll show you rates that you are pre-qualified for from different lenders. So you can shop and figure out what is going to be a good option for you.

Here's the link: Credible. Super easy to do and fill out and compare those loans. Something to know is credible display pay. When the house you love an advertising fee if you do fill out a prequalification request.

6. Practicing payments

This only applies if you're estimated housing payment, what you will be spending on a mortgage is going to be higher than what your current rent is. So let's say right now, your rent is $1,200. But you're anticipating, you're actually going to spend closer to 1500 a month when you buy a home. So what you can do is actually practice making that payment before you legally commit to making that payment.

That way you can see if this payment is too stressful or too tight. And our. So, what you would do is make your regular 1200 per month rent payment, then take the extra 300, put it into savings. Okay. So not only do you force yourself to create savings, but you also see how much strain does 1500 a month actually puts on us because it's one thing to S to theoretically say, yeah, I can afford 1500 a month.

I can afford 2000 a month. But when it actually leaves your bank, That has a different emotional feel to it. So sometimes it's helpful to practice that in practice that payment for a couple months. And then by the end, when you're ready to purchase a home, you'll actually have a nice little savings set aside there.

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