So kind of surprisingly… kind of not surprisingly, my husband and I just bought our first house. (insert cheers, yay, so exciting, right? – thanks 🙂 ) Honestly though, we weren’t really looking… or preparing, which is how I think a lot of people our age end up going about their house buying process. During the marriage counseling we did a year or so ago before our wedding, we had started talking about and looking into Dave Ramsey. In the vein of what he teaches, I kept an envelope of $1000 in my drawer for safe keeping. Eventually though, that became way easier than going to the bank or something, so an envelope in a drawer became my savings… which probably wasn’t the smartest, but I’m still young and learning.
As far as the house buying goes… a lot of people plan to buy a house, figure out the timeline to work out with the end of their lease or something and then search and go look at homes for months until they find the perfect one. That wasn’t us either.
On top of all of that, I have always wanted to move to another city. I’ve been applying to jobs in Charlotte, Greenville, Nashville, etc. since before I graduated college (4 stinkin years ago!) and just nothing has been the perfect fit yet. So, we were content in our townhouse and I liked renting because that meant at any minute if I was offered a job in another city, we could drop everything and leave. But recently, my job has expanded and I’m growing and I love where I’m at and I love the opportunities it gives me, both to travel and to reach my career goals, so I’m not necessarily looking to leave a good thing behind, just because it’s not in my favorite city.
So, then comes us buying a house out of the blue. I guess this is back in March or so, but we had chosen to extend our current lease at our townhouse and we were planning our anniversary trip to Mexico. I have a thing for looking at houses online though just to see how people remodel them and to figure out what I like, when one night around 11 pm, I stumbled upon this house that I just loved. I showed my husband, like I always do when I love a good house, and he loved it too – which NEVER happens. So being crazy people, we jumped in the car, drove 20 minutes or so to this house in the middle of the night and drove past it like 3 – 4 times to see all we could from the outside, haha! I hope they didn’t see us lurking outside.
And now we’re here! In the little tan, colonial house on the corner, STILL unpacking boxes, taking care of our own yard (well him, not me) and drinking Spiked Selzters on the back deck (well me, not him haha).
So… all of this rambling about me, actually brings me to you, future, potential home buyer. I know whenever I thought about purchasing my first home, not only did it scare me, but also I had no idea where to start or what to do or how to prepare, etc. Hopefully, this post will help you out.
Here’s what to expect when buying your first home:
1. Money is everything
Yeah, I know, it sucks. I have never been in the perfect monetary situation. It’s not that I rack up credit cards and do crazy things with my money, but I do have a good bit of student loans to pay off and I haven’t always been the best at saving. I had just recently started saving in attempt to be more adult-ish and smarter, but I should have started saving a long time ago. Luckily, I found a local lender who helped me to figure all of that out. I would seriously suggest finding someone local who will take the time to help explain things to you and meet with you, rather than something like Rocket Mortgage like you see on TV (don’t do it!!)
So I would say to you, your first step needs to be to save some money. Then, when saving that money, make sure you’re putting it into some sort of account. Why? Well, remember all of that money I told you I was saving in an envelope? Well… I couldn’t even use that towards my house down payment, because there was no money trail. Who knows? It could have been drug money or I could have borrowed it from someone or something weird like that (at least that’s what they told me haha). So first things first, they want to see that you have savings in your account that have been there for at least 6 months or so, to be legit.
As far as savings go, I think the best thing to do is to save 20% of the amount of the house you want to buy and if not that, at least 10%. I’m pretty sure that’s what all of the responsible adults in our lives did back in the day and if you can do it – cheers to you!! But, if you’re like the rest of us 20-somethings that kind of, sort of have our lives together, but not really, you’ll be lucky to save 3% – 5%, which means you can only get an FHA loan. Read about these online and they’ll tell you these are a last resort for poor people (thanks internet), but every 20-something I know has done the same thing. We have other things we want to spend our money on right? Like traveling and clothes and lattes and stuff haha.
2. You’ll need a lender
If you are taking your time to buy a house, go ahead and meet with a lender. Let them take a look at your finances. Ask them how much you’ll be approved for (don’t ever buy a house that number because they usually approve you for way more than you need and you can get yourself into a bad situation). Talk through with them what payments will look like and what your price range should be. If they’ll let you, go ahead and submit all the financial documents they need to review for your loan so they can actually get you approved. Our house buying experience was so last minute and chaotic that we were still getting this stuff taken care of up until basically we closed and it was stressful.
Things they’ll ask you for are items like your tax returns, pay stubs, any savings you have, any debts you have, your monthly payments, what you’re doing now, where you live now, bank statements (these are embarrassing btw – I’m sure they were like dang, this girl goes to Chick-fil-a ALL THE TIME), etc. They’ll start by getting you pre-approved which is when they take a superficial look at these documents and decide that they’re pretty sure you’ll get a loan. This allows you, when you find a house you like, to go ahead and make an offer that they’ll consider. Then, once all of that is taken care of, the items you gave them will go into underwriting. Basically, that’s a big word for some financial person violating your privacy for the next month or so as they scour through all of your finances and financial decisions and ask for more and more documentation until you feel like there isn’t one thing in the world they don’t know about you. Sounds fun, right? Then, they’ll give you the actual approval on your loan. But because things can never be easy, they’ll underwrite you one more time before they let you close. Truthfully, they just want to be 100% sure, without a doubt that you’re never going to not pay them back, which I guess makes sense if you think about it.
3. Choosing a home
So, once you get past all of the ugly money parts of this process, some of the process is really fun. There was nothing more satisfying to me than constantly refreshing my realtor.com app to see what was new out there. I basically pretended I was on HGTV being like, oh! they have subway tile backsplash and quartz countertops, but oh no! they haven’t updated that heinous wall paper, until I found a house that checked off enough of my boxes that I considered it move-in ready. Now with this, as weird as it sounds, you need to call a realtor. I didn’t really think so, because me on my realtor.com app were way better at finding what I wanted and seeing it online way before my realtor could tell me it was out there. We live in a different day and age, you know? BUT there are a ton of things I couldn’t have done without my realtor. If your family knows someone, I suggest reaching out to them because then you’ll feel like they have your best interest at heart and you can trust them not to talk you into a home you don’t want just for a sale. They’ll allow you to physically see the homes you’re interested in, in person, and they’ll take care of helping you make an offer, talking with your lender, setting up your inspections, closing, etc. They really do take such good care of you during this process. So, sounds simple, right? Find a house you like, see it in person (still like it?), make an offer. Yes, it is that simple, but no, it’s really not.
4. Making an offer
So you’re ready to make an offer… where to begin? Do you offer what they’re asking? Do you try to offer a little less to save some money? Do you include closing costs or do you ask them to pay for them? It’s all very confusing, which is why it’s so good to have a realtor help you. I don’t know if it’s this way in every market, but in a lot of areas right now, it’s a seller’s market, not a buyer’s. Which means there are a limited amount of houses for sale and there are a ton of buyers looking and ready to pounce. The day we came to tour our house, there were 16 other couples coming to look at it, that same day. We made an offer that day because we knew it wouldn’t be on the market long and there were 5 other offers. We got into a bidding war, which wasn’t fun. And in the end… another home buyer outbid us. What?! You weren’t expecting that, were you? They went about $10,000 above asking price and we just weren’t prepared to do that. So, we were really sad, but we were headed to Mexico, so no big deal, we’d get over it. BUT basically as soon as we landed, we found out that their deal fell through and it was on, we were trying to find a way to make a new offer with limited internet access, one too many pina coladas and all the way in Mexico. This time, there were again several offers, so we asked them to paying closing costs (because we simply didn’t have those funds upfront), asked them to leave the fridge (thank God they did) and offered the $10,000 above listing price they wanted and we got it!! Note though, this process is pretty stressful, because you and your realtor decide on an offer, she/he writes it up in a long, formal contract that you have to sign and you submit it and wait… and those hours of waiting to hear back the next day are brutal. Then, they often counter-offer and wait to hear back from you in the same process until y’all agree on something. Not to mention, you never speak to the actual people until closing, so it feels super weird when you finally do and you realize you’ve been negotiating with the sweet people who are just like you but five years older.
5. Leading up to closing
So, you’ve saved some money, gotten with a lender, gotten approval, found a realtor, found a house, made an offer, etc. The work is not done. You have to have home inspections, termite inspections and an appraisal. With these, they’ll either tell you everything is perfect (not likely) or they’ll tell you some things need to be fixed. You then, have to turn around and ask the seller to fix these things. As if they have not already put so much money into fixing up their home to sell it, not a week or two before they’re done with it, they have to put more money into fixing more things. It sucks, but it is nice to move into a home that you know is safe and sound. The appraisal is also kind of tricky. This is to make sure that your loan matches the value of the house. In our case… it didn’t. The house only appraised for the original listing price, not our $10,000 above asking price offer. So… we either had to come up with that extra $10,000 to give them (which we didn’t have) or they had to accept our lower offer. Here comes another day of stressing, waiting to hear back. They must have just been so over all of this and ready to go, because they accepted it and we were so so so thankful. So once all inspections are done, things are fixed, appraisal is taken care of, you come and do one final walk through before you finally get to close!
6. A couple of last minute things
Oh yeah, I forgot, it’s not quite that easy, there’s still a couple more things to do. Once you take care of all of the things you have to do to move out (that’s a whole other blog post), you’ll have to do a few things to get your home ready for move-in. Get ready to sit on the phone on hold for a while, because you’re going to need to call the cable company, internet company (if yours is separate), a homeowner’s insurance agency, the county wastewater group, the gas company, power company, trash service, pest control group, security company, etc. I also highly suggest having a maid service come in before you move everything in. Our house was clean, but you have to think that the sellers just got done moving everything out and probably didn’t do a spring cleaning before they left, so it’s good to hire someone to wipe out cabinets, clean baseboards, wash carpets, wipe off blinds, etc. so you have a fresh start.
7. Closing time (I’m totally singing the Semisonic song in my head while typing this, lol)
YAY! So it’s time to close on your house, finally! The month (or possibly way more) of waiting in limbo is over. You, the sellers, their realtor, your realtor and your lender all meet together at the lawyer’s office. He goes through a spiel and then hands you 100,000 papers to sign (not really 100k, but it definitely feels like it). You have to sign papers about deeds and taxes and the property and a bunch of other stuff that you should probably read, but you don’t, because you’re just so excited to be done and get out of there. When the papers are signed and everyone is happy, they hand you the keys and you can’t wait to go yell from the hillsides! It’s done and the home is yours.
This is probably one of my longest blog posts ever and if you’re not in the thinking-about-buying-a-home stage in life, it’s probably too boring for you to read, but if you were like me, looking for anything and everything online to help me figure out what buying a home was like, you’ll be so glad for all of these nitty gritty details. I just wanted to ask anyone like me who was in a similar financial situation and who had finished buying their home a million little questions because I was constantly stressed the whole time, haha.
If you are looking to buy a home, please don’t be afraid to reach out to me! I’d love to answer any questions and help calm you down during all of that!!
And because I love my readers soooo much, I created a self-made short dictionary for you below for all of the phrases you don’t know, but need to. 🙂
C’est la vie,
Anna’s Home Buying Dictionary:
Conventional loan – The most responsible, most highly looked upon home loans. You’ll likely need 20% of your house price for your down payment and you’ll get better rates and avoid a PMI.
PMI – Private mortgage insurance or basically the bank’s insurance policy on you in case you stop paying your loan off. Because you have less money to pay upfront, they charge you more money each month. It sucks, but that’s basically how things go in life.
FHA loan – This is a type of loan a lot of 20-somethings and first-time home buyers are getting and it only requires 3.5% down. Most sites online say this is good if you have not-so-good credit, but you get worse interest rates. Luckily, for me, my credit score was really good, so I still got a good interest rate.
VA loan – This is for veterans and doesn’t require any down payment.
USDA loan – This type of loan also requires zero down payment for homes in rural areas.
Underwriting – When the people at the bank look through all of your financial documents to assess if you should be approved for a loan.
Closing – When you transfer everything about the house from the seller to you and essentially close the deal.
Offer – The amount you propose to give the seller for their home
Closing costs – Around 2% – 5% of the price of your home. This has to be paid at closing and is different than your down payment. It includes fees for underwriting, realtors, lawyers and other stuff I guess? It can be harder to get sellers to cover this when it’s a seller’s market, but it’s worth trying!
Down payment – The amount of money you have to put down out-of-pocket, outside of your loan amount towards the home.
Earnest money – This is money you have to pay as soon as your offer is accepted to basically show good faith that you are going to make good on your offer and close on the house. I think it’s usually $500, but our sellers asked for $1000 since one offer had already fallen through. This is deducted from your down payment at closing though, which is nice.
Appraisal – This is when the people lending you the money come determine how much your future house is worth. You have to pay these people too. This is money we weren’t anticipating, so just know upfront to have this cash ready. Ours was a little over $500.
Home inspection – When you find a 3rd party inspector to come take a look at your house and determine if anything is wrong. They find all of the small details like water valves missing under the sink or support needing to be added under a step. This is another cost you won’t be expecting, so be prepared for that too. I can’t remember exactly how much it was, but it was a couple of hundred dollars. And if you’re smart, you’ll want them to come and re-inspect right before closing to make sure everything was legitimately fixed.
Interim interest – This was another unforeseen cost for us. At closing, we found out we had to pay $1000 more than we were expecting. This covers interest for the month that you won’t be paying a mortgage payment. For example, we closed on June 1 and won’t pay our first payment until August, so it covers that time in between.
Mortgage – The legal agreement for you borrowing the money from the bank to buy your house. This is what you’ll be paying back each month.
Escrow – This is an account the lender sets up during your home buying process to cover different fees. For example, our lender used that to pay our annual fee for homeowner’s insurance and then those monthly fees are just included in our house payment.