When we bought our first (and current) house, our whole process went by very quickly and smoothly. Our mortgage company and real estate agent both told us that our mortgage was the quickest process they’ve ever done. We got pre-approved and bought a house less than one month from start to finish.
It took around 2 weeks for us to find the perfect house, and we probably looked at over 20 houses in person. We also looked at hundreds online so the 20 that we looked at we thought were for sure buys. Our agent probably HATED us. Luckily she was a family friend so I hope she got over her hatred quickly 🙂
We are sort of in the home buying process again as you all know. We keep going back and forth with what type of house we want, where we want it located, and how much we want to spend.
Our current house is fine for now. There is definitely nothing wrong with it, I guess we just want something a little nicer that also has a little more room. So we could: a) stay in our current house and save a lot of money; or b) buy a house within the next year and finance the majority of it (probably with a 25% down payment).
If we did stay in our house for longer, we would spend some money on making it perfect. I definitely would want to change some things in our bathroom (such as adding a nice glass shower door), make our front and backyards perfect (possibly add a garden) and finish decorating everything to the way we want it. This is a whole ‘nother post in itself!
Anyways, when we bought our current house, we followed all of the steps below, except for the fact that we didn’t realize that the total monthly cost would be that much higher than what the mortgage company quoted us. That is something that we were naive about. Learn from our mistake!
1. Get pre-approved for a mortgage!
This is definitely one of the first steps you should take. Looking at houses without getting pre-approved can be disastrous because you might just be wasting your time. You might not get approved, get approved for less than you think, etc.
Wouldn’t it really stink if you spent a ton of time looking at houses that turned out to be way more than what you can be pre-approved for? That can be a major letdown.
2. Buy less than what you are approved for.
I think we were approved for around $200,000. We were 20 years old and this seemed like a ton since we made hardly any money then. We were shocked and we looked at one house that was around this price range, but then we realized that this was a bad idea as we wanted to be more comfortable with our bills.
Also, something that our real estate agent told us, is to not show the seller how much you are pre-approved for. We showed our real estate agent our real pre-approval amount of course, and our agent said that when this happens, it can not be good. She said that if some sellers can see what we can actually “afford,” that they know how flexible that you can be with your pricing and negotiating. You can get your mortgage lender to lower the amount on the piece of paper and this is what we did. We asked our lender to say that our pre-approved amount was $150,000 (everyone, please keep in mind that I live in the Midwest and housing is cheaper here).
3. Buy a house that’s a good size for you.
Also think about the future you are planning when you think about the size of the house you might buy. Remember my post on how we Bought Too Much House? Keep that in mind! While before our house seemed way too big for us, we now want something bigger. Eventually of course we would want kids, but it’s mainly that we want a bigger yard.
Do you plan on living in this house for awhile, or just a short amount of time such as 5 years? Do you want a house and neighborhood/city that is good for kids to grow up in? There are many questions to ask yourself.
4. Get a realtor!
This is something that I definitely recommend. Our realtor saved us a lot of money and was a great negotiator. We got the seller to pay all closing costs (which were around $5,000). And she also got them to fix a lot of little things around the house. Realtors do a lot of work and are skilled in buying/selling houses. They know where to begin, what to look for and have tons of tips.
5. Make sure you look around and don’t settle.
The market is great right now for people who are looking. There are a lot of houses out there and most have a great price (all of course depending on your city! Some cities are in a housing bubble). You will be living in this house most likely for a long amount of time, so you don’t want to regret your decision.
6. Hire an inspector.
This is something that is definitely needed as well. An inspector will be able to find things that might sway you from NOT buying the house. If you’re buying a house, then you can most likely shell out another $300 for an inspection. It is a good investment.
7. Figure out the WHOLE cost.
Not just want the mortgage would be. Figure out if there will be any PMI, what the homeowners insurance will be, and property taxes. This all can add up quickly, and it added around $300 to our mortgage.
8. Save!
Now that you know you want a house, try and save as much as you can before you move into your new home. Your new costs will most likely be higher than what you think, and any extra savings will be extremely helpful.
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For us it would be a problem to sell right now because we are so upside down in our mortgage. So we will stay put for a while (and that's why we are always working on some projects here – to make this place suitable for our needs 🙂 But I think, the house market really depends on where you live. For example, in our state the inventory is pretty low at the moment because everyone is upside down like us, and that's why nobody wants to sell. The majority of what's on sale are short sales, HUD homes and foreclosures that are often projects too because of their condition. So a good inspector is a must (you know, the one who actually has a ladder long enough to climb on your roof 🙂
Yes a good inspector is DEFINITELY a must 🙂
Great tips! I think something everyone should keep in mind is that no matter how much you love a certain house, you will always be able to find another comparable one. Staying detached as much as possible will allow you to make wiser decisions and walk away from a bad deal if you need to.
Thanks Nick! I agree with you.
Great tips Michelle! These are all so important! We paid waaaaaay too much for our first house and I wish we would have spent lower than what we were actually pre-approved for. Oh well, you live and you learn, right?
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Yes you live and learn 🙂
It`ll probably be a couple of years until we`ve saved up enough for a downpayment (it`s a 15% minimum in Norway), but I still like reading about buying houses and such, need to have a goal for my savings! I like that tip about not telling the pre-approved amount! I`ll remember that one!
Thanks 🙂
Al of these tips are great, I would have to say that if you are buying a house you need to allocate a buffer of about 25% above what the realtor and lender will quote you for a monthly payment. Also people save up enough for a 20% downpayment, I say save up 30% so the extra 10 can go towards a house fund for repairs. I also have to suggest that you need to be well prepared for a shock as far as utilitiy costs in the new house. For an apartment you will pay less than a 100 dollars, for a house you will pay over 250 a month.
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Thanks! 25% sounds like a good number for the buffer.
We want to save at least 30 to 35% for our down payment and repairs/furniture for our next house.
I feel like #2 should be BOLDED AND CAPITALIZED. Its so important not to spend what you're approved for. Borrowing that amount will leave you strapped for cash for the next 25 years.
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I agree! Thanks for stopping by.
Yes I agree Dave. No need to rush it. And ugh that is crazy about your friends!
Yeah our inspector found a ton of small things that we got fixed, thank god!
Definitely that last one– even if you have a key ready house and you have that insurance that's supposed to cover repairs right after you buy a house, something is going to happen. For us it was a pipe that was too far away from the house to be covered by the insurance but too close to the house to be covered by the city. Everyone I know who has bought a house has had unexpected expenses.
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Yes there are ALWAYS unexpected expenses. Thanks for your comment!
My advice would be to NOT find out how much you COULD be approved for. When I got a pre-approval for my house, I first figured out how much house my husband and I could comfortably afford. I then asked for a pre-approval for that amount, because I didn't want to be tempted by more expensive homes that would take us outside our comfort range. Our payments, including taxes and insurance, are currently about $60 below the original maximum, and our income has increased by about 50% since we first bought the house in 2009, so now it's even more affordable for us!
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True. If you know how much you can be approved for, then many are tempted to spend more.
Two added points — first on the inspector. I'd recommend an independent inspector, eg, one NOT recommended by your realtor. Remember that your realtor has an inherent conflict of interest, even though he represents YOU. To be paid he needs the sale to go through. If he recommends an inspector that identifies serious flaw with the house, (a) the deal might not fall through and (b) that realtor isn't going to use that inspector again. So save the hassle and get recommendations for an inspector not tied to your realtor. SECOND — I would add a first step to the entire process. Namely, prospective homeowners should first determine whether buying is the right decision. For some, it clearly is. Bust as we saw in the housing crisis, far too many people bought houses who probably shouldn't have.
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Yes you are very right. Hiring your own inspector is important.
Definitely shop around for your mortgage to get the best rate possible. Also, really evaluate your current debt load and see if you can bring it down some before you take on a mortgage. Concerning savings, people really need to keep money aside for ongoing home repairs & maintainance as this is what a lot of people don't prepare for…Murphy will strike at some point lol.
Great tips!
I like the idea of meeting the neighbors, and driving around the neighborhood at different times of day to see what goes on. I found out I wanted to live in other areas just by doing those simple things. Of course I found the house before I settled on the place to live, so it was a little different for me. Living in an inexpensive mobile home makes things easier I think, but if I ever upgrade I will definitely follow your tips.
Yes meeting neighbors can be important. We didn't do that, but we did drive around the neighborhood.
Of course, you know that we are right in the middle of the process, and your tips are solid.
I would recommend adding "don't fall head over heels in love with a house, before you sell yours!"
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Great tip!
Yes I agree. And thanks Shannon!