We did it. We probably did it all wrong, but we did it.
That's right ladies and gentlemen. Kim and I bought a house. We're still waiting for everything to close and finalize, but the house is under contract and it looks like a go.
It's been a long process. We're grateful to all of you who have prayed for us, sent us words of encouragement and who have just been uplifting voices to us on our journey.
It hasn't been easy. We've learned a lot and we learned it the hard way. Experience earned is experience wasted if it does not become experience shared.
So that's the plan. I am now an expert on buying a first home. Why? Because I've successfully done it. Ok, so maybe I'm not an expert, but if you've never bought a house, I'm more of an expert than you are.
I wanted to share some of the "do's and don't's" that I've picked up along the way. If you have bought a house already and you fancy yourself more of an expert than I am, feel free to still read the post and enjoy the fact that you knew more than I did before you even bought your house. It's fine. I won't begrudge you the opportunity. When I fall down, it's terrible. When somebody else falls, it's hilarious. Those are the rules. I don't write 'em. Don't be mad at me.
#1 - Pay off ALL your negligent debts!
If you're new to the process of buying a home, you are going to get advice from a plethora of people. Every giver-of-wisdom known to man will come out of the woodworks to tell you what you need to do. Some will say that you need to pay off certain debts. Some will say that there are debts that will be overlooked.
What it comes down to is this: Anything that is past due, charged off or in collections will hurt you. It is true that this is currently a "buyer's market." That being said, it is also true that there have been a record amount of foreclosures within the past few years. Why? Because during the big "everyone deserves to own a house" boom, people were being qualified for home ownership who didn't deserve it. Other people were being qualified for mortgages that included monthly payments that the buyer could not realistically afford. Then, there were also those who were completely qualified at the time of the purchase, but were so devastated by the crumbling economy that they were rendered unable to make their home loan payment anymore.
Regardless of the reasons, banks have taken a huge hit by lending money to people who did not end up paying it back. As a result, banks are now MUCH more stingy with their money and require MUCH closer inspections of their potential borrowers.
You want your credit report to be clean as a whistle. If you haven't looked at your report, you need to. If you missed my past article on how to check your reports, click HERE.
At the end of the day, you might get approved for a mortgage with some blemishes on your report, but it's going to be hard and you probably won't get a good interest rate. You don't need to be in a hurry. You don't need to buy a house more than you need to fix your credit. You need to fix your credit more than you need to do anything. Those are the facts, whether you like them or not.
#2 - Get yourself pre-approved AND pre-qualified!
There's nothing worse than falling in love with a house and thinking that you're good to go, only to find out that your paperwork is not quite in order and lose the house because of it.
Before you even step foot inside a house, make sure you've done the following:
- Choose a lender and settle on him, her or them.
- Go through the pre-approval process
- Get your pre-qualification letter
The worst thing you can do is withhold information or be dishonest with your potential lender. Give them everything they ask for and then some.
Once you have your pre-qualification letter, you've got no worries. Don't forego this step. I really cannot stress this enough.
#3 - Know how much home you REALLY can afford!
You may be confused by this suggestion. Your lender already told you what you could afford...right? Yes and no. They told you the maximum amount of money they feel comfortable lending you. That doesn't mean that that mortgage will give you a payment you can afford.
First off, if you don't have a budget already, you have no business even thinking about buying a house. You're not even close to being ready. Do not pass go. Do not collect $200. Go back to the beginning. If you need help, check out this article on getting started with a budget.
If you do have a budget, make sure it's one that is very specific. Figure out what is the most you could pay for a mortgage and still have enough left over to live your life. You need to be able to buy clothes. You need to be able to put gas in your car. You will need to go to the doctor. You'll need new tires. You should be able to go out to eat and buy birthday presents. Find the number that allows you to still do those things.
Once you've found this magic number, make sure your lender is aware of it. Sit down with them and figure out what total purchase price would give you the monthly payment you can afford. Don't look or even think about houses out of this range. You're only going to get your heart broken. Be realistic!
#4 - Be prepared for the extra costs of buying a home!
You know you need a down payment (Although there are programs that don't require down payments, most people prefer to a buy a home in this manner.), but there are other costs that you may have been unaware of.
When you make an offer on a house, you have to make what is called a "good faith deposit." On top of the down payment, you make this other deposit, which kind of is like saying to the seller: "I'm giving you this money to prove I have more where this came from." It's somewhat trivial, but it has to happen. Generally speaking, this amount will range between $500 and $1000. Make sure you talk to your Realtor about this.
You will also need to do a home inspection very soon after the offer is accepted (assuming that it is accepted). These inspections generally range between $200 and $400. Be prepared for that.
You will need to fork out another $300 to $400 for the appraisal, which will occur about a week after the inspection.
Lastly, have some money set aside for the move process, as well as some work that will need to be done after you move in. You should have a good $1000 set aside just for this express purpose.
That's pretty much all my newly gained expertise. I'll have more after we move in. You'll hear all about it. Don't worry.
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