This gal is now a homeowner. I have to admit, it’s still sinking in a bit. When that first mortgage payment comes out though, I’m sure it will hit me like a ton of bricks. Being a first time homebuyer and now owner was a stressful, exciting and at times a frustrating experience, so I thought I’d share my experiences. I’m going to try and be as detailed possible, because it’s was the little details that really surprised or frustrated me. Hopefully, this will help another first time home buyers out there, or at least provide the opportunity for anyone curious out there to see what buying a home entails. It was a big process, so I’m going to break this up over a couple posts. This first post will cover everything I did up to and including finding an realtor.
1. Crunching the numbers.
Absolutely, without a question, the most important thing anybody buying or thinking about buying a house has to do. When I got the notion that I might like to buy a house, the first thing I did was really look at my budget – how much money is coming in, where the money is going, and how much I had saved up. I wanted to be absolutely sure that I could afford all those things that come with being a homeowner, so I mocked up some if-I-owned-a-house budgets. I did my best to include all those extra costs of owning, like maintenance, taxes, anything I could think of. I also high-balled my estimates as best I could. I did this for a range of house prices, which really helped me narrow down on an absolute maximum price I was willing to pay. I used mortgage calculators (found on most major bank websites) to figure out monthly payments over a 25 year amortization period.
2. Get pre-approved.
Once I knew how much house I could afford, I set out to get pre-approved for a mortgage. I decide to investigate getting a mortgage through a broker and the bank. The first thing I did was get all the information I needed together, which included a letter from my employer proving that I worked for them, a recent pay stub, and a print out of the balances of my accounts (basically proof I had the money for a downpayment). My next step was to investigate the mortgage broker, I got some references and called them to get their opinion of the broker. Everyone I called had nothing but good things to say about him, so I made an appointment with him. Going in, I was leaning towards a 5 year fixed mortgage, so we discussed that and then he, with my permission, ran a credit check and judged my ability to hold a mortgage. Turns out, I was eligible for a mortgage of up to $300,000. Uh, no thanks. Thanks to my number crunching before I knew that was way way way way beyond what I could actually afford. I told him my the maximum amount I would be willing to pay was far below that, and he looked surprised. Apparently most people go and see him and expect him to tell them how much house they can afford. Any who, the broker offered me an interest rate around 3.9% based on my credit history and current interest rates. I flat out told the broker that I was shopping for the best interest rate, and he agreed to keep me updated on interest rate changes and specials.
My next trip was to the bank, where I went through basically the same process as what happened at the broker’s. The bank offered me an interest are of 3.85%, but I had a feeling they could go lower so I held out. About a week later, I got an email from the broker with an offer for a better rate, which I forwarded to the bank. I went back and forth between the broker and the bank but eventually got an interest rate of 3.69% from the bank. I felt a little guilty for playing the broker against the bank and vice versa, but in the end, they get to collect a fair sum of interest from me, so as far as I see it, it’s absolutely worth haggling over your interest rate. At this point, the broker rates started going up again, thanks to the market, so I signed an agreement with the bank, guaranteeing that interest rate for 120 days.
Now I just had to find the right realtor and the right house.
3. Find a realtor
There are a surprising number of realtors around, so finding the right one is a little daunting. Again, I asked around for recommendations. One thing that’s good about living in a rural setting, is the farmer grapevine – everyone knows everyone else’s business. I heard some bad things about one real estate office, so I immediately eliminated a number of realtors right there. I called the realtor that got the best reviews and we discussed the house buying process. I had the realtor make some appointments to see some houses the following weekend. I didn’t sign anything at this point, so I could have visited any number of other places with different realtors if I so desired. I was happy with my realtor, he asked lots of questions so he had a good idea of what I was looking for in a house and my price range. He also mad ensure that I had all the information possible for each listing we looked at. I felt confident my realtor was representing my best interests, so I knew when I did find the right house, he would be the person to guide me through the buying process.
Next post: Finding the right place and putting in an offer.