Want to be a homeowner in two years? You can if you start planning today. The 30-year fixed-rate mortgage is at a historic low.  Right now, you can finance your new home for 30 years at 3.62 percent. However, current low mortgage rates do not make homes more affordable for many buyers.

American builders aren’t building enough smaller and starter homes to keep up with demands.  According to the Harvard Joint Center for Housing Studies (JCHS), only 22% of new homes built in 2017 were small homes.

Most builders prefer to build bigger homes because they are more profitable for them. The average size of new homes built in 2018 was 2,386 square feet. 

According to Zillow, the median price of homes currently listed in the United States is $289,000 compared to $148,000 in January 2012.  The median listing price in San Francisco and Miami are $1.3 million and $475,000, respectively.

If you want to be a homeowner, you have to plan.  Here are the ten things you need to start doing today if you want to buy a home in two years:

Start Saving

Many private lenders require a down payment between 5% and 20% on a new loan. However, you can get a Federal Housing Administration (FHA) loan by putting 3.5% down. FHA guarantees any loans issued by banks, credit unions, and online lenders.

Using the median listing price of $289,000 mentioned above, a potential FHA buyer will need at least $18,785 for down payment ($289,000×0.035) and closing costs ($289,000×0.03=$8,8670).

If you are buying a new home, the builder might have closing costs assistance. Even with help from the builder, you need a lot of money to buy a new home, so start saving.

Review Your Budget

If you don’t know every item line on your financial budget, you need to get acquainted with them.  Going over your cash inflows (wages, bonus, & side hustle) and cash flows (rent, student loans, and credit card payments) will give you a clear idea of how much home you can afford.

You pay a fixed amount every month when you are renting.  If there is any problem with the unit, your landlord will fix it.  However, when you are a homeowner, besides the mortgage payment, you are responsible for property taxes, homeowners insurance, and maintenance.  If the air conditioner breaks in august and you live in Florida, you have no choice but to fix it.

Order Your Credit Report

You can get an FHA loan with a credit score as low as 580.  However, if your credit score isn’t 670 and above, you should postpone buying a home until you get your credit score to that level.  Low credit scores will make the mortgage is a lot more expensive than it needs to be.

Review and Fix Derogatory Items

The Fair Credit Reporting Act (FCRA) requires Equifax, Experian, and TransUnion to provide you with a free copy of your credit report once every twelve months.  You have to request them; you can file your request here.

All of the nationwide credit agencies allow you to review your reports and dispute erroneous accounts online. 

Pay Down Debt

You need to pay down as much debt as possible, especially collections accounts.  Conventional, FHA, USDA, and VA loans will not get approved if your debt-to-income ratio is above 43%.  We already talked about the additional expenses that come with owning a home. So, it would be best if you tried to keep monthly payments on all debts, around 36% of your household’s monthly gross amount.

Location, Location, Location

Crime rates, school quality, and commute are three main reasons you should start thinking about where you want to live today.  Maybe you already have a location in mind, but that could change after you went over its crime statistics. Also, you might realize that you could not afford to live in that area after you went over your budget. 

Start House Hunting

Even Though you won’t be ready to buy a home two years from now, you need to start house hunting now. You will get acquainted with the neighborhoods that you are interested in–their price point, demand, and all.    With so many online real estate platforms available, you no longer need a realtor to start house housing.  

Don’t Change Job

You must have a steady job to secure a mortgage loan. As a general rule, lenders prefer to see that you have been working at the same place for two-plus years.  If you quit your job, you need to get a similar elsewhere.

Educate Yourself

After the 2008 Housing Crisis, Congress passed, and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

The law has strong mortgage regulations, which can save buyers time and money.  However, you still have to educate yourself on the home buying process, including private mortgage insurance (PMI), different types of mortgage loans, and many more. 

For in-depth knowledge of the home buying process, the Consumer Financial Protection Bureau (CFPB), which Dodd-Frank created, has tons of documents that will guide you through every step of the home-buying process.