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Home Ownership, Lifestyle

The 411 On Buying Your First House

Everything You Need To Know About Buying Your First House

Before I get started, let me preface this by saying that I’m not a realtor, a mortgage lender, an inspector, a lawyer, or anyone else of importance. I’m just a regular 28 year old who bought a house, and these are just my experiences with the entire process, so take everything here with a grain of salt 😃

Two years ago, I wouldn’t have had a clue about anything when it came to buying a home. But now, a few years later, I know…actually quite a bit. Throughout the year long process (and putting in 5 offers), I picked up on a few things. And I wish I would have found a blog from a “normal person” (not a mortgage or real estate company blog site) stating their tips, their experiences, and lessons they learned going through this kind of thing. (Update: It’s been a year since I bought a house! Here are the 10 lessons I’ve learned after my first year of home ownership) So I hope my experiences help you out if you’re looking to buy your first house! Without further adieu, here are my tips. Warning: prepare yourself for a beast of a post!

Find a realtor you trust
When my boyfriend and I started toying around the idea of buying a house, we let a few people know – well, everyone adores their realtor and wanted to play match-maker! But we wanted to find our own realtor, and decided to book a tour with Redfin. We happened to get matched by chance with Kyle Moss and we were so lucky to be placed with him (if anyone in the Seattle area is looking for a realtor – use him. I could rave about him for hours…and totally have if you know me in real life). The cool thing about Redfin, is that their agents and brokers aren’t paid on commission, but rather by salary. This was a HUGE selling point for us, as we never ever ever felt pushed to buy a house we didn’t like so they could get paid. In fact, the second or third house we toured with Kyle, which was an updated flip, he said had poor construction. I knew right then and there I loved the honesty and that we were matched with someone who genuinely cared for our interests.

Tour a TON of houses to figure out what you want – we toured over 100!
I wish I was joking with that number, but I think we ended up seeing a total of 103 during our home buying process. Pretty nuts, huh? But I highly recommend touring houses even just for fun when you’re not ready to buy 6 months out, so you can get an idea of how houses are bring priced in a particular area, how much you can get for your money, what people are saying about the houses…it’s just a super smart idea to start looking early! Another amazing thing about Redfin (I swear this isn’t sponsored, I just adore the company) is that they have people that just take you around to houses. So if Kyle was busy with another client, we didn’t have to wait and potentially miss out on a house. Most of the time, we would meet the agent at the house (you can visit up to 6 at a time in one tour), take a walkthrough, and go on our way. If we had any follow up questions for Kyle or wanted to put in an offer on one of the homes we saw, they would pass the notes along to Kyle and he would reach out to us to start the offer process. It was incredible because we started working with a few different agents, and it got to the point where we could text them and say “Hey, I know it’s 9pm on a Sunday, but any chance you could meet us at 8am tomorrow to tour this house before work?” Since we toured with them so much we started to become friends, and they started to know what we wanted. Sometimes they would get to the house early, tour it, and be like “You can go inside if you want, but I know you’ll hate it. It’s not your style at all” – and they were totally right haha!

Make a list of what is most important to you
Do you want a condo with no maintenance? A house with a big yard for your kids and dog? A garage and a workshop? A certain number of bedrooms and bathrooms? A master suite? This may change for you over time once you see certain things that you like and don’t like. For example, I really wanted a house with a main floor bathroom (random, I know), and a yard. The BF was adamant about a garage.

…but also know where you’re willing to compromise
When buying a house in Seattle (the most competitive housing market in the country at time of publication!), you can’t always get what you want – unless you have unlimited budget. And as a first time home buyer, we didn’t. They say there are three things a home owner has to take into consideration, but can only have two – location, price, and condition of the home. For example, you can have a new construction home in the location you want, but you’re going to have to pay a premium price for it. Or you can get a larger home in your price range, but you’ll probably have to move a bit outside of the city center to do so. At first, location was everything to us. But as we started going through the process, we realized that everything in Seattle proper in our budget, was either 800 square feet or a total teardown selling for $650k+ (and sometimes both)! So we had to eventually compromise on location, because square footage and amenities were more important to us. But other people love the idea of being in the city, so they’re willing to live in a smaller condo in order to be closer to downtown. Neither one is wrong! It all just depends on your preference.

Do your research
Redfin offers free home buying classes, as well as tons of blog posts (for home buyers, home owners, and home sellers) and their own directory of mortgage brokers and home inspectors. It’s like Yelp that Redfin people have used and given their opinion on. It’s incredible. We went to a few home buying classes on How To Stand Out In A Competitive Market, and a Mortgage class (they give you free booze and food, and the event doesn’t cost anything…they’re literally the best things ever) and got a ton of information out of them. We also found our mortgage lender, and our home inspector through Redfin’s Open Book. Also, we now live in the day and age of our smartphones being glued to our hands. Redfin’s app allows you to favorite homes, share them with your significant other, make notes and take photos right in the app (also available via desktop if you sign in). It’s brilliant and allows you to stay up to the minute when homes are on the market, and are pending offers.

Be Patient, and Don’t Settle
This was a hard one, as everyone’s timeline is different. For some of my friends, they got their house in one month. Others it took over a year. You never know when the right house will come to you! However in our experience, it always takes longer than you think it will to find your house, so don’t give up hope and don’t settle for something just to be done house hunting. I can’t begin to tell you how many times my boyfriend and I talked about this. “Well maybe we could live with just one bathroom” or “maybe we don’t need a garage” we’d say to each other, even though those were two HUGE things on our list! People used to tell me all the time that even if you lose a bidding war, know that it wasn’t your home, and I rolled my eyes at everyone who said it to me. But honestly, now that we’re in our home, I am SO GLAD we didn’t get any of the other homes we bid on and lost. I cannot imagine living in a better house for us currently, and I’m happy we didn’t settle for a house we didn’t want or give up on the process entirely (we almost did! We called our lender and said we were over it and she convinced us to stay strong).

MONEY
This is a category with multiple sub topics, but let’s just have the overarching message be this – IT’S EXPENSIVE. PERIOD. But there are some huge pros, and depending on your situation it can be better than renting over time. So here are some tips I’ve come up with:

Start saving as early as you can
If you’re reading this article about “What you need to know about buying your first house”, clearly you’re thinking about it, and probably have already started to save. But in the off chance you came across this article and are thinking of buying a house in a few years, start saving NOW! Even if it’s just $100 per paycheck, it will add up over time and make a difference. But seriously, you always need more money than you think you do, and that brings me to…

Know the difference between what you can “afford” and what feels comfortable to you
When we first got approved for a loan, we were approved for an amount that was too high for us. Not technically above what we could afford, but in hindsight with all the other fees and monthly dues, would not have felt comfortable to us. And I’m so glad we purchased our home for so much less than we were approved for – and that our other bids didn’t go through (because 2 out of the 4 rejected offers were at our max approval amount). So when deciding your max budget, look at the total monthly expenses you will be paying – property taxes, home owners insurance, any HOA fees, etc. Not just your mortgage amount (including principal & interest – but that is usually included in any mortgage calculator online).

Take upgrades into consideration
Ah, the million dollar question – do I buy a fixer upper, or a move-in-ready home? YAY Thanks, HGTV, for crushing all of my dreams and thinking it would be so much fun and easy to buy a fixer upper 😃  Now, this doesn’t even need to be comparing a fixer upper to a completely remodeled house. Perhaps you tour Home A; it’s an older home but it’s in great condition. However over time you think that you may want to update the countertops and backsplash in the kitchen, all of the windows in the house are single pane, and the furnace is 45 years old and needs to be replaced soon. You then look at House B, and it’s been completely remodeled – the fireplace is tile and modern looking, the kitchen countertops are quartz, they just upgraded the washer, dryer, and put a new roof on. Home B might be pricier, but if you compare it to Home A that needs a new furnace, countertops and windows, it could be worth it in the long run to pay a bit more of a premium upfront (and be able to pay that amount over a 15 or 30 year loan) than to have to come up with the cash for those expenses out of pocket later. Or not! That’s the thing about home buying – it’s totally up to you.

Plan to spend more than you think you will in the end
I’m not talking about planning on buying a more expensive house, but planning on spending more when it comes to closing the deal. Depending on where you live, you could pay 5% down, or you may have to pay 20% or more down. In addition to your mortgage, principal and interest, you’ll also need to pay your home owners insurance and property taxes for the year during closing. Also depending on how much you put down will determine if you need to pay for mortgage insurance. If you put down less than 20% on your down payment, you will be paying mortgage insurance monthly until you get down to 80% of what you owe on the house. Also during closing, you can expect to pay closing costs, an appraisal fee, credit report fee, closing/escrow fee, title report fee, mortgage recording change, and probably more than I’m missing. This can add up to several thousand more than you were expecting. Another Redfin plug – they give you a percentage back when you buy a house with them, and you can use that money towards closing costs. WIN! (I swear they have no idea I’m writing this blog post, and I’m not being sponsored. Although I’m totally open to it 😃 )

Alright, enough money talk for now. Let’s talk offers. You’ve decided that you want to buy a house, and are starting to tour some houses. What should you know, what should you look out for? Here are my experiences:

Get fully underwritten before you put in an offer
I recommend getting fully underwritten as soon as possible. I believe this expires every quarter, so perhaps don’t do this until you are ready to put in an offer (because they have to do a credit check every 90 days, which pings your credit score a bit). But it’s so great to be fully underwritten instead of just “pre-approved” for multiple reasons. One, you can use it as a bargaining chip when you’re putting in an offer, and two, you will move through the closing process quicker. As a bargaining chip, it’s a great thing for your realtor to pitch you as someone who has already been fully underwritten by the bank. Especially applicable in a competitive market, anything you can do to make it easier for the seller to cross the finish line, makes you a more attractive buyer. By not being fully underwritten, it’s giving them one more hurdle to have to cross, or another thing that could fail and thus make the transaction not go through. Which leads me to my next point…

Be as competitive as possible – as long as you feel comfortable
Again as a disclaimer, I’m not recommending that anyone do anything that doesn’t feel comfortable to them. I’m just telling you my experience in this crazy Seattle market, and what ultimately ended up getting us our house. I wouldn’t have felt comfortable doing any of this without our amazing team (Kyle obviously, Laurelle from Redfin, Roger our inspector, and Dawn our incredible mortgage lender).

In a typical market, you can put in an offer and that’s it. The seller reviews it, and either accepts or rejects it. But in a competitive sellers market, it’s a bit different. Usually there is an offer review date, so the seller can get as many offers as possible, and compare them against one another. We’ve been in situations with 6 or 7 other offers on the table, but have heard of there being as many as 41 offers in place! Insane, right?! So, how do you make your offer stand out? One way is to go above asking price. There are a few ways you can do this. You can just give them a straight up dollar amount instead of their asking price (for example, you can offer them $550k instead of their $525k asking price), or you can do a bid up to a certain dollar amount. How that works is you can say that you’ll bid $X over the highest asking price up to a certain point. That is what we did and it worked!

The Three Major Contingencies

Another way to make your offer is to stand out, is to waive one (or all if you’re feeling like you really need help competing against all cash offers) of your contingencies. The three contingencies you have are inspection, appraisal, and financing. For every offer we placed (which again, was 5), we waived inspection. Two of them had inspections already done by the seller, so we could look through and see everything that needed to be fixed with the house. Two of our offers, we paid for inspections to be had before we placed an offer. Yes you read that right – we willingly spent money and time to have an inspection done before placing our offer, even though us winning the house wasn’t guaranteed. And most scary, our fifth offer (which is the house we live in!) we waived inspection completely without having one. Eeep! We did have an inspection done after we officially closed on the house, but it was ours so it was more for our peace of mind. Since we went through several inspections and walked through so many houses, we knew what we were looking for and felt comfortable waiving it. I’ll talk about an inspection list in a little bit below.

The final two offers we made, we waived all three contingencies. Waiving appraisal basically means that if I bought a house for $500k and an appraisal company says it’s only worth $450k, the bank will only lend me $450k, so I have to contractually come up with my down payment for the $450k plus an ADDITIONAL $50k because that’s what I said I’d buy the house for. Scary, huh? What we’ve heard is that in most situations appraisals come in right on the nose, and this was true for us too. For some context, I believe our house appraised for $500 more than what we bought it for. And lastly, waiving financing means I don’t care if the bank lends me the money or not, I will find a way to pay for this house. Again, a bit scary huh? However since we had been fully underwritten and trusted Dawn our mortgage lender, we felt comfortable knowing that she would ultimately be able to loan us the money. We never felt any pressure from anyone to waive these contingencies, but ultimately trusted the team we were working with and by taking a risk, we were able to get our home.

What to look for during an inspection
Whether you’re doing a walkthrough on a home, be it the first time you’re seeing it or if you’ve decided you want to put an offer on it, there are a few things that you should keep your eye out for. Again, a disclaimer that I’m not an inspector and you shouldn’t take this checklist as a replacement for a professional (they do so many more things than on this list haha), but here are some things we learned since we had to do so many of them 😃

Outside:

  • Take a look at the foundation. Is it cracked anywhere? Are the cracks hairline cracks or major disruptions that could be costly to repair?
  • How is the outside material of the house? For example, are the bricks cracked or are they laid properly? Are the wood shingles coming apart? Has it been painted recently or does it need a new update?
  • Is there caulking around the outside of the house so it makes it more difficult for bugs to get in?
  • Is the roof in good condition, or do some of the shingles appear to be coming off?
  • If the home has a chimney, is there a chimney cap? Does the chimney appear to be in good condition or will it need some repairs?
  • How is the yard – maintained, or needs some TLC? If the property is fenced, does it appear to be built well or is it time for a new one to go up? Are there trees on the property that need to be taken down? (We just took down 8…not cheap!)
  • Are there any branches or trees touching your house? Critters use that as an easy way to get in!

Inside:

  • Are there any cracks on the walls? If so, are they simply in the sheetrock or is it the sign of a bad foundation?
  • If you notice any sloping, put a ball on the ground to see how quickly it rolls.
  • Check the water pressure – turn on sinks, turn on the shower and bathtub to make sure all drains work properly. Ensure the water isn’t rusty, flush the toilets, etc. We did this in a house we were interested in and found in the basement some galvanized pipes were the cause of a slow bathtub drain.
  • The crawlspace – are there any holes accessible to the outside? Signs of feces or animal nests anywhere? Is it insulated, and if so does the insulation appear to be in good condition?
  • Does any part of the house smell? Does it feel like there is moisture in the air? Check for signs on the floors and ceilings for water damage.
  • Check to see how old the water heater, furnace, washer/dryer, and appliances are. Have the furnace and water heater been serviced regularly and do you have records showing it? Not necessarily deal breakers, but good to know.
  • Find the electrical box and make sure it’s not a chaotic mess and/or needs to be replaced. Also check for wiring – is it knob and tube, aluminum, or copper? Copper is what you’re looking for.
  • Are your floors hardwood, engineered hardwood, laminate, vinyl, carpet or something else? If they’re hardwood, are they in decent shape or do they need to be replaced? Can they be salvaged and sanded/refinished? Or do you need to redo flooring for the entire house because you have 5 different types running all over? Flooring can add up big time! Pro tip: if your carpet looks to be in decent shape but has a few bumps in it, simply have them stretched by a pro. They’ll look like new!
Everything you need to know about buying your first house
I love this photo because I look so excited and my boyfriend looks absolutely petrified 😂

In contract – YAY! – now what?

Now is when all the fun (and in our experience, stress) comes into play. For us, it was the longest three weeks EVER! All we wanted was to get they keys to our house and for everything to be official, but you have to play the waiting game while your inspection, appraisal, mortgage approval, and tons of paperwork is completed!

A tip – have your documents ready to go ahead of time so your contract process goes smoooooth. The documents our lender asked for from us were our bank statements for the last 3 months, retirement statements, 3 recent paystubs, and our tax returns. Before our offer was approved and we even went into contract, the seller wanted to see proof of funds. So for about 24 hours, my boyfriend and I were on the phone with our mortgage lender freaking out sending over screenshots of our bank accounts to prove we had enough money for the down payment. It made for a stressful few days (did I mention I was also traveling all the way across the country and was doing this LITERALLY sitting on the sidewalk in New York? I was going to say I looked crazy, but honestly New Yorkers see much weirder things so I probably fit right in). Now, it also made the contract process easier because we had all of this ready to go once we had officially signed the conrtract, so it was a good thing in the end. But you’ll need to get all of your paperwork over to your mortgage lender and real estate agent I believe within 48 hours of a signed contract, as well as your earnest money check, which is basically like a pre-down payment to prove you’re serious about the agreement. This amount is up to you and agreed upon by you and the seller in your contract. It goes into a 3rd party bank account, escrow as it’s known, and they give it to the seller once the sale is complete.

In addition, when you decide to buy a home, don’t open any new credit cards, especially when you’re in contract! This is a mistake that two of our friends made (I believe they both opened Macy’s credit cards in order to buy house stuff!), and while they did end up getting their homes, it put their contracts in a huge amount of risk. We were told not to mess with our credit at all during the process, so for the year or so that we looked, we didn’t open or close any of our credit cards.

Finally, be so proud of yourself! Buying a home is a stressful, tense, chaotic, time consuming process, and you survived it! As someone who has been in their house for less than a year, I can still say that I definitely have some unpacking still left to do, and the rooms don’t look like something you’d seen in a magazine, but it’s totally worth it. You’re able to paint whatever you want, knock down walls, change light fixtures, add outlets, and make the place 100% your own.

I know this was A LOT of information, so feel free to take some time to digest and if you have any questions don’t hesitate to leave a comment below. I’m happy to answer any questions you have!

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