This post has been a long coming. If you have been following me for a while you know it is going to be almost a year since my boyfriend and I got our place. We learned quite a bit from our experience as this process was literally in the midst of the pandemic. So let’s get into it. Although seeing apartments or houses sounds like fun, that’s not the first thing you should be doing. Before you get yourself too excited and end up being disappointed when you find out the place you like is way out of your reach, you need to get pre-approval. This is if you’re applying for a mortgage. If you are not and have the cash I still would advise you consider financing as you can make a better return on your money if you invest in somewhere else.
There are many options you can find online to determine how much you can pay for a house, but I use this calculator to determine as it is more accurate where some others are solely based on your credit and can actually suggest you a price that’s well above your need. It is better to determine your initial budget with your income later on you can check with the lenders to see how much you can get for pre-approval.
This is not the fun part, but trust me it will get worse when you are actually closing so don’t throw your towel yet. Now you know what your estimated budget is, it is time to look for lenders. This is where your credit score comes in. If you have a higher credit score you will most likely get a lower rate on your mortgage and vise versa if you have a lower credit score. When you finally found the lender with the rate you like you can apply and fingers crossed will get a pre-approval.
This is where the fun part begins you look for the houses within your budget. I love this part a lot as you will get to explore and discover neighborhoods. It’s quite exciting. Just remember not to be wowed right off the bat as from the surface any home even the worst one might look good with good staging. That’s why real estate companies pay a lot of money for staging. If you like the place, make sure to check everything. There will be a house inspection if you decide to buy the place, but on top of that, you should also get a sewer scope to make sure the pipes are good and will be no leak or so. These are so important as you might discover some of these problems later on like we did.
Now let’s talk about closing costs. Ugh, this part gives me a headache. So most of the time this happens in person at the lawyer’s office where the seller and the buyer signs the paperwork then the lawyer distributes the money to the rest of the parties. You as a buyer will need to bring a check for the deposit which is about 1% of the purchase price. This is what they refer to as earnest money deposit. You will also be paying for other things like appraisals and other related closing costs during this phase.
Down payment is something that we all worry about when it comes to buying a home. Traditionally most banks require at least 20% of the purchase price, but nowadays that’s not the case. You can make a down payment as low as 5%, to begin with, but there is a catch. Just like financing a car, the less you put down more you pay on monthly fees. This is pretty much the same with mortgage payments and you might also have to pay for mortgage insurance on top of it to ensure that the bank gets money in case you default. That’s about 1% of your purchase price. I know not so great 🙁
Overall you should be prepared for these costs as it is something a lot of home buyers experience. It can be overwhelming for first-time buyers. If you ever feel like throwing your towel watch this TikTok and laugh it off then get back to your home buying process. Lastly, I didn’t know about this before but you can always refinance your home if you feel like there are better rates in the market. So you don’t have to stick to the same rate for the next 15-30 years. In fact due to the pandemic, a lot of homeowners are refinancing their mortgage to take advantage of the lowest rates. These rates won’t be around too long so use it while you can.