Last Tuesday, I saw a home that I fell in love with. It’s bright, warm, cozy, and cheerful. It’s the perfect first place for me and I was “sold”. When my sister (who is also my real estate agent) dropped me back off at my apartment, we agreed I should make an offer on the place. Within just a few hours of submittal, the offer was accepted.
When you get that call to say your offer has been accepted, it starts out with total relief and excitement… followed by “oh shit…” (depiction of reaction below)
Real estate agents, mortgage brokers, and title companies exist for a reason – it’s because unless you’re hybrid real estate agent/lawyer, there’s no way you can navigate your way through the various tactics in which your final monthly mortgage payment, closing fees, and repairs/credits from the home inspection, come about. After my offer was accepted, I spent Wednesday morning hunting down and sending the following:
- Two years’ worth of W-2s
- Two months of pay stubs
- Two months of bank and savings statements (which put the fear of god in me that someone was going to see my addiction to iTunes)
- My picture ID (which I had to casually explain why I looked like a serial killer)
- My blood type
- My dog (aka first born child)
(I’m kidding on the last two… I also went out for a large glass of wine and double Jack and diet that night.)
And that wasn’t it… then you have to start signing the checks/wiring the money.
- $475 inspection fee (by the way, if you live in the DMV, Romano Pietrobono of The Building Inspector of America is the best!
- $4500 in earnest money wired
When all that’s done, you’re still not. Then comes the:
- Paperwork from the title company (five forms)
- The actual loan application (100 pages – thank GOD for Docusign)
- Securing home owner’s insurance up front (USAA made that super easy on me)
- Reading the HOA manual, to know which utilities you have to set up
- Getting a home inspection (must be done within two days of offer being accepted)
- Re-negotiating any repairs with the seller and signing the final docs
While all of this seems easy enough (since you’re not doing the heavy lifting), the emotions that come with it are not. Why? The first two bullet points do not include ACTUAL numbers but instead, numbers that are estimated. The title company included things like Title Insurance (which are not needed if a seller is in good financial-standing with the home), which elevated the closing costs, past my budget; and although my Mortgage Broker did put an emphasis on the closing costs being estimated extremely high, they were jaw-dropping enough that after a long day, my head was spinning and I broke down.
This last part is what EVERYONE goes through when they buy their first home (or so I’m told). And, it’s common to set a budget and get it blown out of the water. SO… I’m going to give you some tips on how to avoid (as best you can) the emotional pitfalls of parting with your money/being financially prepared for something like this.
- A mortgage broker is worth their weight in GOLD. Mine has been amazing, treating me as though I’m family (you can check out his contact info here). It’s his job to run all of the numbers for you but…
- Be incredibly honest about your financial situation. Mortgage Brokers are not here to judge you but instead, get you the best possible deal on closing costs and a mortgage. What this means… give them the bottom number of what you have saved for the entirety of this purchase. This includes money down (3.5% for FHA loans and 3% for conventional – assuming you have great credit), closing costs (averages around $6K) , any current home fees you will have to pay at the same time (I have one month of paying for two places), and inspection fees ($300-$500 for a modest home).
- Know your bottom number for money down and closing costs, and then… add 30% for safety’s sake – this is probably the biggest tip I can give you. Granted, there are all sorts of credits mortgage brokers and real estate agents can give you, to support your closing cost number. However, it’s important to still understand what the reality could be.
- Communicate/understand timing of first payment – This is also something a lot of people forget about. Since I’m in an apartment, I still have rent to pay every month until my lease is up. I have one month where I’m paying for both places. This is in addition to two utility bills. It’s not ideal but I had to account for that.
- Read all of the paperwork – especially the numbers sheets, and ASK A TON OF QUESTIONS!! It’s okay to question everything, especially if there is something you don’t understand. This is one of the biggest purchases you will make in your life and it should never be taken lightly!
By the end of this week, I was emotionally (and financially) spent. However, I’m still so excited. For me to be able to afford a place on my own is a huge life achievement, and one that I would never trade in for anything else. Now off to start planning my decorating, while I wait for settlement mid-March…