So at the rate that I’ve been talking about this, everyone and their mom and their bubby probably knows that I recently bought a house with my boyfriend (I keep a separate blog for it – sowerebuyingahouse.wordpress.com – if you want to actually read about all my neurotic thoughts and freak outs). That’s actually the house we bought in the picture.
Throughout all the crying and doubting and screaming though, I do have some nuggets and takeaways for the brave (and crazy) souls out there to want to embark on their own home purchases.
First things first:
1. Determine what you can afford – so before you start looking at million-dollar listings, you have to talk to a bank about whether or not they think that will break your bank. Most sellers and agents will ask you first if you have a pre-qualification or pre-approval letter before they will even consider making an appointment with you (a pre-qual letter is easier to get because they just take your word for it where as a pre-approval is issued after they’ve reviewed bank statements, checked your credit, etc.).
The bank will take your income, outstanding loans, and current assets and their computer will spit out a number based on their criteria for how much debt they are comfortable lending you and how readily you can afford a down payment and closing costs.
2. Speaking of credit – You don’t have to have pristine credit to qualify for a loan, but the better your credit, the better your interest rates are going to be. Make sure you’ve spent at least 6 months to 1 year paying your bills on time, being careful of your credit card spending, and not taking out any additional credit. These are all things that are flagged on your credit. Watch out.
Now that you’ve got your magic number and your credit is in order:
2. Make a list of all the things you want for your dream house – there is so much out there, it’s actually really overwhelming. The only way to narrow it down is to determine what you like first and then search from there. It’s how I found my boyfriend and how I found the house we purchased. Get really, really specific. List the neighborhood you want to live in, how many bedrooms, if you want a backyard or basement, if you want it close to transportation or shopping, if you want a fixer-upper or move-in ready. (My list is here in case you were interested.)
As you continue to search, you will most likely get frustrated and try to make compromises when you look at houses and keep hitting walls, but let the list be your main guide when you’re strongly considering something. I made a list and every time I wavered from it and tried to convince myself of a house that didn’t really meet my criteria, the house actually fell through.
3. Hunting online is a good place to start – trulia.com, zillow.com, and realestate.nytimes.com were my obsession for the last two years but now there are many more websites thanks to IDX. I set up email alerts for new listings, I checked for new listings on the site anyway, I learned to narrow search results, expand search results, and navigate through their list and map features.
I also learned that houses listed for over a certain number of days were a major long shot, short sales meant agents who didn’t call you back, and co-ops required at least 20% down to even look at you. Then, of course, I ended up getting a short sale that had been on the market for 6 years. Which leads me to –
4. Be insanely persistent – if you find something that you think you really, really want to see, call the agent every week until you get an answer. If you have their email address, call and email once a week. At least. I practiced this multiple times with multiple properties and most of them ended up as a bust when I finally got to look at the place, but it gave me insight every time on which listings to pursue and which ones to drop.
5. Build a solid team of people you trust – this is something I absolutely stumbled through. I started looking for a house two years ago and went through my share of shady real estate agents, attorneys who didn’t have time for me, and loan officers who will try to get you to say anything to pre-approve you for a mortgage (so if you were to hypothetically work this many hours of overtime, how much money would you say you make?).
Real Estate Agents – Don’t be afraid to interview real estate agents, fire real estate agents, and have multiple agents working for you. Remember, it costs you nothing to have an agent working to help you buy a house, and they get a fatty commission at the end of the day, so make them work for it!
One caveat – I had a great real estate agent, up to a point. When my price point dropped, his level of service dropped. I ended up closing my deal with no real estate agent on my side, which was infinitely harder on all fronts (suddenly, searching, calling on properties, and setting up appointments was all my boyfriend and me).
Another caveat – at my price point, (under $300k in NYC), the selling agents for houses I could afford and were interested in were unwilling to speak to an agent because it would cut in on their already smaller commission. So at a certain level, you may have to pound the pavement (virtual and otherwise) on your own.
Real Estate Attorneys – so this has to be the biggest racket in NY, because most other states don’t require this, but there are actually three attorneys involved in the whole process – your attorney, the seller’s attorney, and the bank attorney. You have to pay for your attorney and the bank attorney. Make sure you also speak with multiple attorneys and get a feel for their working and communication style. You don’t have to be friends, but you do have to trust that they will take care of you at the closing table. Mine definitely did and we couldn’t have closed without her.
Lenders – You can get almost anyone to pre-approve you for a loan, especially as you move out of larger banks (Well Fargo, Chase, Citibank, etc.), and into smaller places that focus on lending money. I have encountered almost everything, from places that will allow someone to vouch for your character as part of their criteria to lenders who try to coerce you into actively lying to their system. Expect to not only pay more for these types of places, but also deal with some backhanded tactics that could end up biting you later down the road. For your first mortgage, I’d stick with the big banks or Firstxtra. Not that they are totally faultless (hello, Great Recession 2008), but because they tanked the economy so hard, their lending standards, while very tough, are in place to make sure you can afford this loan.
6. Be ready to be surprised at every point in the process – From getting the loan, to negotiating the price, to drawing up contracts, no one will be able to fully disclose every step right up front. This was hard for me because I have a hard time going with the flow in general (control issues and all), so each new surprise threw me off my game. Now that I have some perspective on it, I realize that even if someone was able to explain everything to me up front, chances are I wouldn’t remember a lot of it or it would be different 2 or 3 months down the line anyway.
And this should be a good primer for diving into something that really, no one can prime you for. This shit is going to be crazy. That is the only guarantee I can really give.
But man, when you get the keys to that house after all the dust has settled, nothing will seem like it wasn’t worth it.