Adventures in Home Buying – Part I
By Erica Root
Are you in your twenties or thirties and looking to buy a house? Maybe it’s a concrete near-term goal or just a flight of fancy you have after binge-watching Fixer Upper on HGTV. Whatever the case may be, I hope sharing my experiences as a first time homebuyer will help you if and when you take the plunge.
I’m frugal. Financially risk averse. And a chronic under-buyer (see Gretchen Rubin).
But more importantly, I don’t really understand how money works, at least not beyond how much I bring home and home much I auto-transfer from my checking account to my savings each month. So for me, buying a house always seemed like this enormously convoluted process that was only undertaken by true ‘adults’ who fully understand the process.
Clearly that’s not the reality we live in, but it’s what I assumed.
Home buying wasn’t something that was taught in school, or given to me in a ‘how to be a grown-up’ manual.
So last year, as part of my quest to get financially savvy, I helped organize a Fem Dems “Get Financially Fit” panel discussion. We brought in experts to discuss how to save for retirement, how to buy and finance a home, and ways to manage those pesky student loans.
I paid close attention to the home buying part. I was able to ask all the questions that had been floating around in my head, get clarity on the process, and gain a deeper understanding of what it would take to finally buy a home.
By vetting all my fears and answering my questions, I finally felt like I was in a place where I could take that next step and resolved to do so in the new year. So when January rolled around my partner and I began the process, emailing the real estate agent and mortgage broker I had met at that panel discussion just a few months before, and we got to work.
There are a lot of steps when buying a house. To make things more digestible, I thought I’d break it down into concrete steps that you can follow:
Step #1 Find a real estate agent and mortgage broker
This step might be easy if you have a lot of friends who have already purchased homes. If this is the case, get your recommendations from them. Did they like their agents? Were they helpful and proactive? Did they fight to get them the best deal possible? How would they describe their home buying experience? If you’re interested in who they suggest, then set up a meeting to see if the agent is the right fit for you.
If are the first of your friends to buy a house, it might be a little more challenging. This is when your inner circle of friends won’t work in your favor. You need to extend your feelers out more, to those second tier colleagues and acquaintances. Ask around. This works for most things in life, whether it is looking for a new job or looking for a real estate agent. A safe bet is to target those colleagues who are a few years older than you. The more I talked about my home buying experience, the more potential real estate agent options came out of the woodworks. It seems like everyone has a cousin or aunt who is in Sacramento real estate.
The lesson here: ask around, work your network.
Step #2: Get pre-approved (for a home loan)
Getting pre-approved is important for two reasons: it gives you a chance to figure out how much money you want to spend on a house and it makes you a more desirable homebuyer, because you are able to show sellers that you have money to back up your offer.
Schedule time to sit down with your mortgage broker. He or she will provide you a laundry list of items you’ll need to gather and bring to your meeting. Spend an evening rounding up all your relevant financial documents: W2 Forms, tax filings, paystubs, etc. These are the documents your mortgage broker will need to help determine what type of loan and the loan amount you qualify for.
The gathering of all the prerequisite materials is really the hardest part of this step. The pre-approval process itself is not that awful. You sit down with your broker, they input all your information into the computer, run a credit report, and you tell them what your magic mortgage number is. Your broker then tells you if you qualify for your suggested mortgage and what it would like for you a monthly basis if you increased or decreased your mortgage amount. For the most part, your pre-approval amount is that dollar number you are comfortable with. However, there is always room to bump this up (if you qualify) or down once you are getting ready to make offers on homes, (for instance, if you find a home you like that is well under the amount listed on your pre-approval letter, you might not want to show the sellers how much you can afford, as it may drive their counter-bid higher).
Once you have that pre-approval letter, make sure to get a copy over to your real estate agent. They will use this to set parameters in your client property portal where they send you house recommendations. But more on that later.
NOTE: Before you go into the meeting, sit down with your partner, or if you are buying a home yourself, sit down with yourself and determine how much you’re willing to spend on a mortgage. Keep in mind, when moving from an apartment to a house, you will likely have new utilities you’ve never had to account for like water and sewage. Possibly even an HOA. To help us get a sense of how much more we’d be paying utility-wise moving from an apartment to a home, we decided to assume an additional $150-$200 in costs on top of whatever mortgage payment we’d be making.
Those are the first two steps. In Part II of Adventures in Home Buying I’ll go over:
Establishing your house must haves and deal breakers
What’s the difference? Redfin, Trulia, and Zillow, a side-by-side comparison
I’m actually viewing homes… now what?
If you are in the market for a mortgage broker and real estate agent, I’d highly recommend mine. Their information can be found below:
- Nate Sibbet, Mortgage Consultant, Wells Fargo: firstname.lastname@example.org
- Christina Ellermeyer, Real Estate Agent, Keller Williams: Cellermeyer@gmail.com