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| Two Happy Homeowners! |
I’ll go more into the
details of my specific experience in a later post. For today, I want to focus
in on three imperative things you need to do when going through the homebuying
process. There are certainly PLENTY of additional tips & tricks we can add
to the list, but for now, I’m going to focus on what I believe to be towards
the top of the list. Without further ado, let’s take a look at what you need to do when looking at buying a home.
1)
Find Out
What You Like…No Home Is Perfect!
One of the most common misconceptions when buying a home is
that “the perfect home” exists. You could build the image of your ideal living
space: 4 bedrooms/3 baths/finished basement/vaulted ceilings/bar space…the list
goes on and on. However, reality kicks in at one point. Unless you are
incredibly wealthy (and let’s be honest, most Smart Money Seed readers aren’t),
you most likely are not finding a house with EVERYTHING you want on the market
for the price that you budgeted for.
This is why it’s very important to shop around & make a
list of what you are looking for in a home. For Kayleigh & I, we knew we
needed three bedrooms and at least two full bathrooms for our first home. We
were looking for updated appliances, a nice kitchen space, high ceilings &
much more. When looking, a house fell into our lap that had MOST of what we
were looking for, plus it was well within our budget.
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| 5994 Trumhall Ave, AKA the new crib |
If you can find something that checks most of your list off,
I’m fully in the camp of jumping on that opportunity. We are thrilled to have
many of the amenities that we were looking for in a starter home, plus we can
always work on renovations to incorporate some of the aspects the home may
lack. Just remember that renovations cost money-so don’t buy a home that will
need updates taking you out of your price range! I’m still here to promote
financial wellness and overspending on a home is one of the worst mistakes a
person can make.
The lesson to take from this: make a list of what you would
want in an ideal home, get out and see some homes & make the decision
knowing you’ll never have your “perfect home”. Once you take that mindset, the
buying process become much easier.
2)
Shop For
Your Mortgage
Another trap initial homebuyers fall into is simply taking
the first mortgage proposal that they see to “speed the process” up. We had a great realtor that recommended
multiple lenders to us, so we had initial options when looking at prospective
financiers. You don’t need to just use the list that your realtor provides,
though; there are a bevy of options available to you when looking at buying a
home.
If you are a first-time homebuyer, I’d also look into
eligibility for special programs that provide discounts/incentives for your
first home purchase. For Ohio readers, My Ohio Home is the sponsoring site that
matches your income/credit to the appropriate program. These programs range
from down payment assistance/forgiveness to lower mortgage rates and are
available at a wide range of mortgage lenders across the state.
Unfortunately, Kayleigh & I were disqualified from these
programs due to income limits & thus, we took to the mortgage lender
circuit. Aside from the usual suspects (big-name banks like Chase, Huntington,
etc.), you can find competitive mortgage rates at:
- Credit Unions
- Online Lenders (think Rocket Mortgage)
- Private Lending Companies/Brokers
In our case, we shopped at all three before arriving at our
current lender, one of the lenders our realtor recommended. He was great at
talking us through all the available products & what we qualified for,
while maintaining a competitive rate within the industry (shoutout David Arocho
& Prime Lending)! Plus, he had old-school Pacman, Asteroids and some
cornhole in his office suite. Needless to say, he had me sold.
It’s important to shop your mortgages & ask the lender
if they can match rates across the market. Ultimately, this is one of the
biggest purchases you will make in your life. It’s important to make sure you
are getting the BEST deal you can! If I’m truly being honest, we should have
shopped our mortgage even more. That’s a lesson I’ll take into my next home
purchase and one I hope you take to heart when looking at financing your home.
3)
Monitor
Your Credit
Our last tip is one that I stress to people regardless if
you’re thinking of buying a home: MONITOR YOUR CREDIT! When you are looking at
mortgages, the lender is going to take a magnifying glass to your credit
report. They’ll be looking for anything they can to ensure that you are a
trustworthy client while deciding what rates you qualify for. And while our
credit system in the U.S. may not be the best indicator of whether a person can
pay their mortgage on time, it’s what the mortgage system uses today.
If you were showing up to a job interview, would you show up
looking messy, not knowing your talking points, etc.? NO-that’s not the Smart
Money Seed way, and we can apply that same principle to your credit. When
buying a house, you really should not open any new credit accounts for at least
6 months. That will ensure less “new” credit on your report, keeping your
average age of credit higher & ultimately make you a more appealing
customer for the lender.
In addition, make sure you have all credit card debt cleared
off your account before applying for mortgages! This was a BONEHEAD move by me
when we applied-I had simply let my credit card statement post & hadn’t
paid the statement before the credit report had been pulled. Because of this, I
showed outstanding debt and my debt-to income ratio was altered, thus altering
our mortgage rate we were offered across the board.
ROOKIE MISTAKE by me & one that I’ll rue as I look at my
amortization calendar. Everybody makes mistakes, even people that try to give
financial advice on a blog! It was an expensive lesson for me to learn and one
I can fix through a future refinance…but not an issue you want to deal with
when making the biggest purchase of your life! Be smart, clear all of your
“debt” before applying for a mortgage-your future self will be applauding your financial
tidiness.
The lesson here: stay on top of your credit. There are many
free credit reporting tools out there (Credit Karma, Credit Sesame & Mint,
to name a few) that can help you get an idea of where you sit. Polish that
credit report like you would your resume-you’ll qualify for better rates and
save THOUSANDS of dollars in the process.
Summary
In closing (if you’ll pardon the pun), make sure you are
well-versed in the language of the homebuying process before embarking on that
journey. You’ll save yourself thousands of dollars and get the most bang for
your buck, which is ultimately the goal of buying a house! Just remember:
- Find Out What You Want In A Home
- Shop Around For The Best Mortgage
- Clean Up Your Credit (Like A Resume!)
There’s plenty more advice to give (I’m still learning
myself) but for now, these tips should have you well on your way to making the
right home purchase. Good luck!
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