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Wednesday, April 9, 2014

28. Checklist for Buying a House

Here's some basic steps for Buying a House from our experience buying our first house in 2013.

Step 1: Check Your Credit Report & Score
Having good credit will help the amount you are approved for as well as the interest rate you qualify for… You can check your credit report with all 3 credit bureaus for free once a year. Your credit score you'll have to pay to find out. Having no credit you can still get an approval but it just takes some extra work. If you have bad credit or need to rebuild your credit consider waiting to apply for a home mortgage.

Step 2: Figure out How Much You Can Afford
Again, questions like how much is your monthly income and monthly expenses come into play here… Perhaps a good rule of thumb is buy a house double or triple your household yearly income. Also do you want to have a 15 year or 30 year mortgage? The recommended is to buy a house that you can pay off in 15 years, put 10% (or preferably 20% to avoid PMI) of the value of the house down as a down payment, and for the payments to be less than 25% of your take home monthly income. You should also have 6 to 12 months or more of your monthly expenses saved up in your savings account.

Step 3: Find the Right Lender and Real Estate Agent
We went with Wells Fargo. A credit union might also be a good option. Check around to see what would be best for you. The loan officer at Wells Fargo recommended a real estate agent who was fantastic. 

Step 4: Look for the Right Home
Figure out what is important to you… What kind of square footage are you looking for? Do you want a 1 story or 2 story house? How many bedrooms/bathrooms/living areas do you want? Are you looking for a newer (say under 15 years old) house or can you settle for an older house (16 years or older)? Find one you fall in love - both you and your wife. Just make sure you are looking for what you can afford.

Step 5: Make an Offer on the Home & Be Willing to Walk Away
It is helpful to get a pre-approval letter so that when you find the house you like you can just make an offer. Don't over pay and be willing to walk away if the sellers aren't willing to go with your terms. I still think it is a buyer's market right so there are plenty of options. 

Step 6: Get the Right Mortgage for Your Situation
We opted for the fixed-rate mortgage. Do the research to see what is best for your situation.

Step 7: Close on Your Home
It is a process. Our loan was approved in 20 days… The whole process took about a month and a half. Our loan officer said that kind of turn around very rare. Expect the process to take longer more in the range of at least 2-3 month time frame. The delay for us was largely because we were negotiating additional items (they would pay for closing costs, we wanted some of the furniture in the house, they had already bought a second house and needed to sell this one, there were no other buyers or offers, and we wanted them to get some things fixed before finalizing our offer, etc). DO NOT under any circumstances open up new credit accounts (furniture, appliances, etc.) during this time as this could delay the process or even result in a denial.

Step 8: Move In!
Count on moving expenses, buying added items for the home, and costs you may not have thought about… It will also be very stressful on our family but it has been so worth it!

What are your thoughts? Was this checklist helpful? What is your advice about buying a house? Leave a comment! 


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