10 Things I Didn’t Know About Buying Our First Home

My wife and I are in the process of purchasing our first home.

While interest rates are likely going to stay low for a few more months, prices are going up and inventory is down. In short, it’s a great time to take the dive if you can swing it.

I’m excited that we may be in our own home soon, and I can’t wait to do some of the projects I’m reading about at Young House Love.

I’ve talked to a lot of folks and researched homebuying for a little longer than a year, but as I’m sure you can imagine, the actual process brings new challenges that I didn’t know about. If you’re a potential first-time homebuyer, I invite you to learn with me. Here are the ten things I didn’t know about buying a home and ten tips for you as you begin the process:

1. Shop for lenders, get pre-qualified and be realistic about what you can afford.

Before you make an offer, you’ll need a letter of pre-qualification from the lender. This shows the seller that you’re likely capable of making a purchase. Pre-qualification normally lasts for a few months, so don’t do it until you’re geting close to making an offer, since running your credit will take a few points off of your score. Talk to a few different lenders, since most of them have access to the same mortgages. I’d recommend obtaining your credit scores from the first lender you talk with so that you can shop other lenders without having them run your credit score every time. If you’re hearing two very different things, dig deeper to see who is telling you the truth or what you may be missing. We dealt with three lenders over the past year, and most of them gave us similar numbers.

As you know, your credit score, job history and assets will be the factors that determine how much house you can afford. While you may have a high credit score and a solid income, I would not recommend shopping for a home based on how large of a loan you can obtain. Determine how much you’d like your monthly payment to be, and use that as a basis to determine your price range.

2. Find a buyer’s agent and use them.

The whole process moves quickly and you’ll be putting your signature on countless documents before you ever receive the keys. Use a real estate agent that can help you navigate through the system. We are fortunate to have two family members assisting us, and without their help, we may have missed some important things.

Remember that the listing agent works for the seller, and they want to sell the home quickly and for as much money as possible. A buyer’s agent will work for you, and they’ll receive a small commission payment when you purchase the home (this is included in the purchase price).

3. Don’t waste your time shopping.

Once you determine how much home you can afford, set as many filters as you possibly can on the home search engine you’re using. We knew we wanted three or more bedrooms and two or more bathrooms, but we wasted valuable time looking at a few homes that only had one bathroom. We also wasted time looking at homes that were out of our price range. It can be discouraging to look at homes you can’t afford, so don’t do it. If you realize you need to wait until you can afford a better home, then do that. But don’t look at homes out of your price range.

We also looked at a few homes that were zoned for schools we knew weren’t performing well. Even though this was one of the most important factors we considered during the homebuying process, we wasted time looking at homes in bad school districts that were newer and cheaper than the one we decided on. This was pointless.

You get what you pay for, folks, and sellers aren’t stupid. Most have a fairly accurate idea of what their home is worth. If it looks too good to be true, you’d better find out what the catch is and decide if you can stomach it.

4. You need to be prepared to throw down some cash the day you make your offer.

I thought we wouldn’t need to put any cash down until closing day. Actually, earnest money is required to prove to the seller that you’re serious about buying the home. This cash is credited to your down payment or closing costs on closing day, but be prepared to put down about 1% of the purchase price when you make your offer. If you walk away from the home during the contingency period, you can get this money back. Check out number 7 for more information about the contingency period. If you get the home fully under contract and opt to walk away, don’t expect to get this cash back.

5. Your down payment won’t cut it.

I heard the term “closing costs” before, but I didn’t know how much they would be. In fact, our closing costs are higher than our down payment. We asked the seller to cover closing costs, and they agreed, but this is a cost you should factor in if you’re serious about purchasing a home. The closing costs cover attorney’s fees, lender fees, the first few months of homeowners insurance and property taxes and a few other fees you may not have realized you would have to cover. You may also hear the term “pre-paids”, which refers to the insurance and taxes you pay in advance.

6. Ask for a one-year warranty that includes appliances.

During the first year of home ownership, I assume that something will break. Don’t let it break your recently-depleted bank account too. Warranties only cost about $500 and they can cover things that may break in the home. It’s quite normal to request the seller to include a warranty, so put that in the original offer and make it a point to keep it there.

Many inspectors sell warranties that cover the things they detail in their report as well. Either way, this should give you some peace of mind for the first year when you can’t call the apartment company every time you have an issue in your home.

7. When you put a home under contract, it’s not really under contract.

After we made an offer and the seller countered, we countered again. Once the seller agreed to our counteroffer, the home was placed under contract, but we had a 14 day contingency period. While it’s great to have the gratification of being fully under contract, the contingency period allows you to do your due diligence.

During this time, we had the home inspected, and found a few things that we wanted the seller to fix before closing day. They didn’t agree to fix everything, but they did fix a majority of the issues the inspector raised. After fourteen days, we had an amendment to our contract that included these fixes, and the house became fully under contract. That’s actually where we are now in the process.

You will be expected to pay for the inspection, and it can run you anywhere between $250 and $400, depending on a number of factors. Most lenders do not require an inspection, but it is well worth the investment, especially if the seller agrees to make some fixes. The cost of the inspection will be covered by all of the fixes that we don’t have to worry about when we move in.

8. Mortgage insurance is brutal.

Most first time homebuyers don’t have a 20% down payment for their new home, and so they’ll be required to pay at least some sort of mortgage insurance in order to own a home. Mortgage insurance – sometimes referred to as PMI, for private mortgage insurance – is not the same as homeowners insurance, which covers your home and your belongings in cases of damage or total loss. Mortgage insurance insures the lender if you end up defaulting on the loan. It doesn’t help you at all, but it’s required if you don’t have a 20% down payment.

It is important to understand how much you’ll need to pay each month in mortgage insurance and factor this in to your monthly payment. While your actual mortgage payment may be in your range, when you include mortgage insurance, homeowners insurance and property taxes, you’ll likely see your payment go up a few hundred dollars per month. Most of the time, once you have paid back 20% of your loan, you are no longer required to pay this insurance, but if you’re going the FHA route, you’ll have to pay for PMI for the life of the loan as of June 3, 2013 unless you refinance down the road.

9. Be prepared for the loan officer’s requests.

Getting pre-approved for a loan is fairly painless, but once you have a home under contract, you’ll need to prove all of the things you’ve been saying about yourself and your abilities to buy a home. We had to send in:

  • W-2s for the past two years
  • Tax Returns for the past two years
  • All bank statements for the past two months
  • Pay stubs for the past two months
  • Copies of our drivers licenses

The internet makes obtaining these documents relatively painless, but be sure you know how to access your pay stubs and also that you know where your tax returns are located. If you own your own business or get paid on commission, the requirements are a bit mor stringent, but I’m not familiar with that process. I merely know that the income you said you had during the pre-approval process must be verifiable.

10. Read, understand and believe your lease.

If you’re living in an apartment or condo, you’re probably contractually obligated to some sort of lease agreement. Most apartments require either thirty or sixty days notice when you opt to terminate your lease agreement early, and most will include some sort of early termination charge. If they didn’t, a lease agreement wouldn’t mean much, would it? Often times, this charge will be the equivalent of paying an extra month’s rent in addition to continuing to pay regular rent after you give notice. Dig up your lease when you start shopping and understand the timeline. If your apartment requires sixty days notice before moving out, you’ll probably want to try to push the closing date as late as possible so that you’re not paying rent and a mortgage at the same time.  Your mortgage payment won’t be due until 45 days after closing day, so that will help as well. While some sellers will offer to pay your early termination fee, most lenders do not like seeing this arrangement on paper.

We haven’t closed on our home yet and the process is far from over, but I hope this may help someone searching for answers when they purchase their first home. Let me know if you have any questions or don’t like what I’ve said.

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My Experience with the Evernote Smart Notebook by Moleskine

Evernote MoleskineI tweeted a few weeks ago asking my followers what they thought about the Evernote Smart Notebook by Moleskine. I didn’t hear from anyone on their thoughts about that notebook specifically, so I decided to make the purchase and decide for myself. If you buy one of these notebooks on the Moleskine website, they’re $29.95 for the bigger size. I bought one on Amazon for $19.77. By the way, I don’t do affiliate links, so if you click any of these links and buy something, I don’t get paid.

A lot of you who are reading this blog are probably thinking to yourselves, “that is a lot money for a notebook”. And you would probably be right – if a notebook was all you received . If you’ve ever bought a Moleskine before, you know that they are not cheap by any stretch. But you also know that they’re worth the extra cost. They hold up extremely well, retain a classic and professional look, and they’re trendy too. And trendy counts for something, right? The Evernote Smart Notebook by Moleskine is exactly like a normal Moleskine, except for the following:

  • The cover is decorated with Evernote-branded artwork and the Moleskine-standard band is green (It’s detailed up close but looks black from far away)
  • The notebook comes with a unique validation code for 3 free months of Evernote Premium, which costs $4.95/month (more on why that matters below)
  • Stickers are included that are specially coded to match up with Tags on your Evernote account

Those extra features only cost you about $8 on Amazon, since a normal Moleskine notebook costs around $12.

EvernoteNow, when I’m working, I can write down notes in a meeting, snap a picture of the page with my iPhone (which has a feature that fits these notebook pages in the frame perfectly), and rename the note something that will be easier to search for later. In a matter of minutes, the written words that I wrote are searchable on my Evernote account, so next time I’m rifling through pages trying to remember where I wrote that one specific thing that I can’t seem to find, all I have to do is perform a simple keyword search and the note will turn up – on every single device that I sync my account with. That’s called OCR technology, which I’ve discussed before, and it really is the best feature of Evernote that most people don’t know exists. My written notes are now filed in subfolders on my Evernote account, so I can easily find things that I need most of the time without even having to perform a keyword search.

But why do I need an Evernote Premium account?

  • You may not. But I’m finding many reasons to use my account now that I have more space to upload information than I did when I was worried about reaching my monthly maximum. The other day, I cataloged some recipes that my Grandmother left behind in various church cookbooks. Now, they’re searchable and archived for years to come.
  • You can search within PDFs and iWork documents, which is a feature I have not used. I don’t have much to say about that, except that it sounds like something that could be very useful, especially if you’re studying for a test or project using large-volume PDFs.
  • You can also take notebooks offline. Again, not much to say about this beyond the fact that it’s a great feature.
  • You can read about more features here.

In short, I recommend the Evernote Smart Notebook by Moleskine. A normal Moleskine would work just the same for some of the features I pointed out, but the stickers coded for tagging and the free months of Evernote premium make the cost difference completely worth it. I will point out that this Notebook is only for someone who is genuinely interested in getting their notes organized across devices. If that sounds like something that’ll put you to sleep, don’t waste your money. If you’ve been wishing you could be more organized but can’t quite give up written notes, this is a wonderful solution to your problem that I think will help you in your noble quest to be more productive and save time by being organized.

Related Insight from People Who Are Smarter Than Me:

Craig Jarrow, the Time Management Ninja offers:

Brett Kelly has a great book about Evernote too, which I intend to read soon. I read his free chapter though, and it definitely intensified my interest in the app.

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Writing: Your Ticket to Twenty-Somethingness

I started this blog as a way to practice my writing. Essentially, I write for a living, so I figured this outlet would help me develop and practice my craft.

Much has been written lately about the importance of writing in any job. As a young professional, you are likely familiar with the term “generalist”. If you aren’t familiar with the term, you are probably familiar with the concept –  as young professionals entering the workplace, we must be prepared to perform an increasingly diverse list of job responsibilities, and we’d better get pretty good at all of them. Gone are the days of being a “numbers guy” or the girl who is really good at editing everyone else’s writing. Excelling in numbers (haha, get it?) and possessing exceptional editing skills are marketable, but waning budgets, smaller staffs and more work also require us to know how to mail merge, answer phone calls, make phone calls, sell stuff, market products and report on them in a clear, concise manner. In short, you can be great at one thing, but you’d better be pretty darn good at everything else, too.

Strong writing skills are imperative, but many of us lack the basic grammar, spelling and composition knowledge we need to succeed. Dave Kerpen, author of Likeable Business, writes:

The number of poorly written emails, resumes and blog posts I come across each month is both staggering and saddening. Grammar is off. There are tons of misspellings. Language is much wordier or more complex than necessary. Some things I read literally make no sense at all to me.

Writing is a lost art, and many professionals don’t realize how essential a job skill it is. Even if you’re not a writer by trade, every time you click “Publish” on a blog, “Post” on a LinkedIn update, or “Send” on an email, you are putting your writing out into the world.

The title of that post is: Want to Be Taken Seriously? Become a Better Writer. ‘Nuff said.

Indeed, we must put a stronger focus on our writing skills and the way our business writing is coming across to our peers, supervisors and external audiences. If you don’t take your writing seriously, you won’t be taken seriously. I think this is true in personal communications among friends and family as well.

There are a number of resources available when you google the words “grammar” and “stupid”, but here is my favorite. Take note of the tips in that article for some simple mistakes to avoid. But beyond that, give all of your e-mails a second or even third look this week. The recipients will appreciate it and you’ll notice a difference in the way that your messages are communicated.

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