Tuesday, December 26, 2017

Home buying process, the real deal

One day you wake up and think "I'm gonna buy a house" And keep reasoning "it is time to use all the time and effort and savings in something more durable, a real investment".
That one day for me meant almost two years of digging, reading, researching, saving and most importantly building my credit.
Here's a summary of what I learned when I made a first try...

Workshop - you'll need this in the future, make sure is HUD approved. It is a workshop that explains what you're about to start. I recommend this. It took me a few months, because I dedicated 8 minutes some days....I think it's intended to take you 8 hours. eHome America was the provider a chose, and I got a voucher for the free workshop from a non-profit that provides resources for new buyers.

Counseling - After you complete the workshop, bring your certificate of completion and meeti wht a counselor. I chose to go to the same agency that gave me the voucher, because they already knew me and I knew them. The counselor will guide mainly to the general costs of buying a house and prepare you for your monthly budget based on your current annual income. Please note that not everything is true and there is no lie. Get the wallet ready. Here's when the expenses start. First with the credit report. They will tell you that you will need it, and that you will need to show that to lenders. So you pay for it. The counselor will give you a certificate of attending the session, and printed copies of everything you two talk about including but not limited to budget, resources for credits, credit report, lenders, etc.

Lender search - this will get you the money $$! first off, do-the-search. Each lender will tell you "don't search because that affects you credit". Well, it does but less than getting into a mortgage with a lender who is not doing a great job. Since this is an advice after the fact, I regret I did not search more than one lender. Check with banks, credit unions and maybe a private lender. Your credit may be affected a little, but not too much if you do the search within 30 days. Lenders will tell you how much they can lend you and most importantly under which conditions. Here's where you'll know whether you have chances to negotiate (a better rate, or some type of discount). I only got a voucher for a movie and box of pop-corn! First thing they will give you is the pre-approval letter, which includes the amount the lender is willing to lend you. Of course it does not mean they will lend you that amount, because things may change (market, income, lender's conditions to lend, etc).

Broker - this will be your next best friend. And as all best friends, we must choose well. There are so many options, so many people. My advice: do not stick with the first one you speak with. They will try to make you feel guilty if you talk to some other agent. Well, it turns out that it's your savings and the next 30 years of your life that are on sake. So do talk to as many agents as you can. Tell them what you want and choose the one who offers you time and answers. The broker will be your friend, so choose a good one. The broker should find your dream house, and be available for your questions. Our of respect, just make sure you're not cheating i.e. your dearm house is found by one agent but you give it to another agent. I had to sign an agreement to ensure "cheating" did not happen.

House searching - this will be your part time unpaid job until you find your dream house. Your agent plays such an important role! It's their business too, so make sure you get what YOU want. You can start with defining the amount you want to invest, and you can go for a lower amount than your pre-approval letter. And then make changes based on what your broker finds you. The problem with my lender was that she had a full time job, that had nothing to do with selling homes. I must say she was very efficient and demonstrated a lot of confidence. But she had another job! So if we add that to my already crazy schedule, you may guess where we were going! we will meet some evenings to see a few houses, and explore different areas.

Inspection - this is when you see what your house is worth. I found a beautiful two story house in the city. Perfect for my new life! It was called one of those "flipped" houses. It looked in very condition inside and outside. In order to do the inspection, you must make an offer to the seller, including in the offer is to request an inspection. When the seller accepts the offer, you must find an inspector and sign the contract with the lender. I contacted an independent inspector a friend recommended me.
I know, this was a crazy step for me! I didn't even know if the house was in perfect condition inside (i.e. the things we don't see), but I had to sign the contract. Everything happens fast, becasue of course you don't want to lose the house, and they want to have a deal completed. Well, I was "under contract"!! But had to wait for the inspection and any potential "minor" things to fix.
The inspection was costly ($600+ though there are offers for less than $200) but knowing I have no clue of how to change a light bulb (well, maybe I do know, but had to be cautious) I wanted to make sure they did a good job. And yeah they did! The "flipped" house turned out to be in such a bad condition! The main door was out of place (yeah the were selling the house like that), water leaking, weird roof renovation, and the ceiling was a mess inside underneath the roof, and there was mold in the basement... It was major stuff, so I tried to negotiate some things to be fixed by the seller. However, the broker advised me not to ask for everything to be fixed. She said that the seller has the right to not fix everything, but just the "major" things since we were already under contract. So I took responsability of the ceiling, thinking "why do I have to take anything to fix when the house is being sold as 'ready to live'". Fortunately, the seller did not accept to fix the water leaking problem because of course that had something to do with the pipes, and who knows what else. So I was able to step back and not pursue the buying process.
I was thankful after all this stressful inspection and under-contract process because I didn't realize how painful it can be. They all were selling me a house that was not ready to live in, but they were all ok to lending me thousands of dollars for the mortgage, and they were ok with me taking the responsability of fixing major damage in a "ready to live" house that was not so ready.

I did not buy a house, but I feel more prepared now to buy one. So I hope these thoughts help you too...

Is something big happening in your life? are you changing positions? going back to school? Think twice if this is a good time to buy a house. I did it. My lease was about to end, I broke up with my partner, I got a scholarship to go back to school. So I decided it was time to buy the house and start all brand new. All that in the same month!! Buying a house should not be in a rush, take your time, and as many questions. As I mentioned, this will become your part-time job....but imagine yourself all the beautiful things coming to your new life as a home owner.

I wanted to have movie nights with my little friends :) what would you want to do ?