Alright, this has been a painfully long wait, but I've got all of my taxes current, debt paid off and a home we're interested in. Never bought a house before and zero idea how this process goes.
What do I need to do to get the ball rolling....just connect with a realtor and let them hold my hand through the process? We're not pre-approved for a loan or anything, so should that come first?
PREPARE YOUR ANUS, WALL-O-TEXT INCOMING.
---
1 - Get Approved
Call your checking / savings bank, get pre-approved so you know what you are "in the market for" GENERALLY, you just want a ballpark really.
2 - Get your Rates
Go to
https://costcofinance.com/ if you are a member and pop in relative details and your pre-approval amount. You wanna find out things like the general rates for 30 and 15 year loans because while you may get pre-approved for that nice 1.3 million dollar house, the payments will fuck you. You WANT a 15 year loan, the difference between a 15 year and a 30 year loan in interest saved is significant, not 10 or 20% in savings, more like 5-10 TIMES the interest paid to a 15 year loan. Put it this way, I'm dropping from a 30 year to a 15 year and my savings are around 100,000 Dollars.
3 - Understand your Mortgage
If your down-payment is under 20% of your home value you will pay PMI which is basically an additional charge to your mortgage
Your local taxes will be paid by your lender, charged monthly via your mortgage
Your home insurance will be paid for by your lender, charged monthly via your mortgage
Ultimately your home payment will look somewhat like this:
Principal + Interest (the payment given to you when you looked up rates on costco (or any rate site)
Taxes
Insurance
PMI (if under 20% down-payment)
4 - Find your tax and insurance rates
Personally i like redfin (
https://www.redfin.com/ ) because you can pop in information or click a house and generally see stats like:
That tell you where your money is going. You can even toss in information that is more relevant to you, like if you KNOW your interest rate is going to be 3% and not 3.5% OR if you know that your insurance rate is going to be roughly 5000 a year and not 8400. It'll give you a better understanding of what you can reasonably afford. Understand that these are general ESTIMATES usually based on percentages, if you know your area tax rate then it's better to use concrete numbers than the estimates given to you by a site.
Typically you can find the rates of an area by going to the Tax Assessor website for your county.
5 - Determine your Limits
A realtor will attempt to sell you a home that is within your pre-approval limits, your pre-approval is not your "Affordability". He will sell you that 1.3 million dollar home, but you will possibly murder yourself making those payments. Find out, using all the information you gathered before this step, what home is affordable to you. It could be that 1.3 million is in your budget for comfortably living and making payments on while living a life you want to live. It is more likely that a home lower than your pre-approval rate will meet those conditions. Use that value as your limit, only cross it for a holy grail. you will see one or two holy grails in your life, a holy grail isn't a "I love the paint" home, it's a "This home will accommodate us as we grow, is a perfect location and won't murder us with payment worry."
6 - Find a home
Use a realator for this if you would like. Our market was SO fast moving that I was asking our realator about houses before he suggested them. They have tools you don't have though that allow them a better understanding about whats coming to market before it officially hits places like redfin. For my home purchase, since the market was insanely fast moving, I basically sent him an address, told him to bid and then he and I toured it after the bid.
7 - Bidding
You can low-ball, you can high ball, you can cancel and you can do whatever the fuck you want. Just understand most of that shit falls to your realtor so when they say "I don't know if they will accept it" it may be a case of expertise or embarrassment. If you are offering 10% under asking for a brand new home in a beautiful area, you aren't likely gunna be accepted. It could be that even if you offered 10% OVER asking you would still remain un-accepted. It all depends on your market, offer what you think is reasonable for a win on the property. Understand too that "people" you are bidding against for a property might not even be "people" but rather investment firms. Fuckin open-door...
8 - Getting accepted
Time to have your "dream home" shattered BEFORE you spend major money on it. Your realtor may suggest some inspectors, you can hire whoever you want or even do it yourself. Understand that you want someone that can basically shatter whatever dreams you had for this home and do it with precision and skill. You wanna know that the lovely garden outside that the wife / girlfiend loves is actually filled with red ants and termites that migrate into the master bedroom. You wanna know that when you turn the oven on to max the microwave beeps uncontrollably for an hour. All these things will save you from spending thousands on a home you should have left on the market OR will allow you to barter with the owner for concessions in price / repairs.
9 - Financing
Go to
https://costcofinance.com/ or research where you want to finance through that has the best rates for you. Don't be afraid to walk away from a loan provider even after they have done credit checks on you, this is a "one time" purchase, so to speak so any credit fuckery won't fuck you long. You will need paycheck stubs for the past 2-4 paychecks, ID photos, address of past living situations going back about 5-7 years and bank statements for the last 2-4 months.
I didn't understand points when I began, points are basically payments made to the bank to secure lower rates. A lowering of interest from 3.25 to 2.5% may not sound like a lot but using the example above of around 750k, the difference over the life of the loan is 48,000 USD. That drop is TYPICALLY associated with a 3 point payment. Points are percent, a 3 point payment means a 3% of home-value, on a 750,000 home is 22,500 USD. That 22,500 is ON TOP OF your down-payment. So basically you are spending 22k to save 48k over 15 years. The effects of 3 points does not always COST 3%, in my case I am buying 3 points for 2.166%.
You can finance your points, it will increase the loan you take and lead to higher payments BUT it will lower your overall interest paid. This is really up to you, a lower loan rate saves thousands depending on the loan value, you'll be saving money by financing it but you need to determine if your new financed value is going to raise your payments beyond a comfortable level. Financed by you = Saving more money || Financed by them = Saving Money.
You can finance closing costs, it will increase the loan you take and lead to higher payments and interest paid. I argue AGAINST doing this unless you simply cannot pay the closing costs. Ultimately though, the value of the home over time will recover any interest paid on those closing costs but that is simply money lost to a black-hole. Financing your closing costs will increase your monthly payment at an ultimate loss, unlike points, but if the difference is you buy or don't buy a house, that is a decision that is up to you.
10 - "Due at Closing"
A down payment is only PART of the payments at closing. Depending on your area, taxes, the seller, your closing costs can be EXPENSIVE. The home is expected to have all of the funds available for insurance and taxes, since this value is a percentage of the property value it can be thousands to tens of thousands of dollars depending on your price range. If your down is 10% and your home is the one above from the picture, you are looking at closing costs cash on hand of around 105k-115k USD.
---
There you go, hope you find it helpful. That was our experience buying basically. Even though it's a wall of text I bet I skipped things.
