Category Archives: Goals

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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Managing Millennials: 4 Things We Want

Inc. Magazine produces some interesting content, whether in their print version or on their website. In the past few years, they’ve made a splash in the discussion on millennials, specifically helping baby boomers and Gen Y figure out how millennials need and want to be managed.

Michael A. Olguin offers five tips for managing millennial employees (published back in 2012). He had this to say about twenty-something employees:

Before we get too far down the road, it’s important to clearly define the term millennial. By most definitions, millennials were born between 1982 and 1996. These individuals’ personalities were shaped by the personal technology era combined with parental guidance that was nurturing to a fault (i.e., an “everyone gets a trophy” mentality). These two influences created a sometimes confounding workforce that is at best difficult to understand and at worst entitled.

His five tips are:

  1. Reinforce the positives.
  2. Recognize that each person is different and must be managed differently.
  3. Be flexible.
  4. Allow as much ownership as possible.
  5. Don’t be vague.

I would probably put “Don’t be vague” on the top of the list. I think millennials are generally skeptical, so they often worry about the inner-workings of an organization. Being vague only reinforces those negative feelings.

Those tips reminded me of another article I read, 5 Ways Your Boss is Killing Your Morale.

The five ways highlighted are: Scheduling mandatory fun, requiring employees to punch the clock, not showing gratitude, making a big deal out of a small mistake and not listening.

That gives us ten suggestions for managing millennials, and here are four more from my perspective:

Tip #1: Meet regularly (but not too much) and update the entire team on how things are going.

We want to hear from you. We want to know what you’re working on, how we can help you, and what you think of the work we’re currently doing. We also want to hear about overarching strategy and we like to make our work line up with that strategy. It makes us feel useful. We understand that you can’t tell us everything, and we don’t expect you to, but we like to feel valued.

Tip #2: Make your expectations as clear as possible.

If you want us to be at work at 9:00 am every day on the dot, but tell us we can be flexible in the mornings, then we think you don’t care about what time we get to work. If the time needs to be 9:00 am, make that abundantly clear. If you want us to be the first person to answer the phone when it rings, but tell us whoever can answer it answers it, tell us that on day one and you’ll never have to pick up that phone again. We don’t speak your language, although we’re trying to. We like clear expectations, and we like to exceed them. Vague expectations leave too much room for you to get frustrated at us for something that we can easily fix.

Tip #3: Help us define our career path.

We are thankful that you decided to give us a job. You took a chance on us, and we are blessed to work for you. Still, we are constantly thinking about what’s next (and that doesn’t mean we want to move to your competitor). We’ve got families to raise, houses to buy and differences to make – and we want to move up in your company as soon as you think we’re ready to do so. Help us get there. Nothing is set in stone, but we are looking for a clear path forward. If there isn’t room for growth, help us learn as much as we can so that when our skills and experience outweigh our current position, we can move on and benefit you in other ways. It’s not all about the money and promotions, it’s about feeling grounded.

Tip #4: Seriously, nix the mandatory fun.

We love you. We really do. But we see you for forty+ hours a week, far more than we see our wives/husbands in the daylight. If there isn’t work to do, we want to be with our friends and family. Please. We don’t want to bowl with you, eat with you, or see a movie with you. Because even when you tell us something is optional, we assume that you expect us to be there and we change our personal plans to make it happen. Don’t make us do that. Please note that we are perfectly willing to meet after work for professional outings, just don’t act like it’s all fun and games. If we’re with our bosses and co-workers, it feels like work and it is work.

A lot of companies have figured this stuff out and are actively managing millennials in a way that will likely retain them for many years. Others aren’t quite getting it yet, but they’ll be forced to get there soon.

Am I being too harsh? What am I wrong about? Agree with me? Let me know!

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Your Today List

Boom. That’s the word I use when someone puts me in my place. Chris Brogan really knows how to put me in my place.

Instead of a todo list, make a today list. Make the word “today” synonymous with how you live your vision. Make your view of the future your lifestyle, not a project.

We spend so much time talking about what we’re going to do. We love to tell ourselves that – at our age – we can wait. Here are a few examples:

  1. I’ll start going to church when I get a wife/husband.
  2. I’ll save for retirement when I make a little more money.
  3. I’ll work out more when I can afford a gym membership.
  4. The housing market isn’t going anywhere, I’ll save for a house later.
  5. My job is o.k. now, I’ll wait until “blank” before I look for a new job.

Or on a smaller scale:

  1. I can clean my bathroom later…I’m the only one that uses it anyways.
  2. I’ll make that budget next week…this week is an exception to my normal schedule.
  3. I’ll wake up early tomorrow…I had to work late last night.

I think you get it.

We have to get out of the mindset that the future is in our hands. As we all have probably experienced at least once in our lives, the future isn’t promised to anyone. Turn that To-Do list you’ve made in your head for the “you” that you want to be into a Today list.

Me? I need to work out. I need to find a church with my wife. I put these things off every week, assuming I can work on them when I have more time. The truth is, there just isn’t any time quite like the present. In fact, I probably have more time right now than I will ever have until I retire. What are you holding yourself back from this week?

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