By Jasna in musings — Apr 5, 2018

First-time home-buying

Learnings and advice for others to avoid some mistakes and heed good moves.

Husband and I have thought about getting our own place for the past year or two. I was excited about the idea of starting earlier by borrowing money from our retirement funds to get us to 20% for a down payment, or use PMI to put down less than that. My husband wasn't a big fan about that, but I knew he would ultimately go with whatever I wanted since I typically have stronger opinions than him. However, after talking to many people, reading many articles, and taking much of this Udemy course, my feelings changed as well, and so we waited until now to get serious.

Aside from saving up more money for the down payment, closing costs, and more cushion room after that, last year was pretty rough for me at work, so I was in no state to add even more stress and responsibilities to my life that came with home hunting. Waiting longer allowed me to get through that rough hump, find a better job, travel with husband, enjoy the holidays with family, and feel settled into that new and better job.

Looking at the housing market felt directionless for husband and me since, as we quickly learned, the DC area has fast property selling turnover (if that is the right way to put it).

But once we found a realtor (a few weeks, through a coworker), she was able to give us details on next steps, i.e., more direction. So, after an initial call with her, it sounded like the first step was to

Curate a list of personally-appealing properties on sale

Our realtor recommended Redfin since it

tends to be updated faster with property status changes and additions and
factors in HOA, property, etc. fees into calculating an estimated mortgage

I had already made accounts with **Trulia **and Zillow. I still keep email notifications on from them since all three sites seem to give me slightly different new-property news.

I created a Google Sheet with the following columns:

I update this every night with new properties, price changes, status changes, etc. I've noticed that as the days go by, I tend to get a little pickier with properties to save. This is good since I felt like husband I were not picky enough in the beginning. This process has also gotten fun over time.

I shared this sheet with my realtor, and she said this was a great start. The next step was to

Get pre-approved for a mortgage

What I find annoying about this process is the beginning pre-qualification phase for each lender. I guess it's just to quickly weed out potential borrowers who are complete mismatches for the company. But oh well.

(On a much darker note, this Reveal podcast episode about racial disparities in mortgage lending was incredibly depressing. Takeaways: mortgage lenders are incredibly racist. They all are. TD Bank is one of the worst. Husband and I are fortunate to not be black, and I am fortunate that husband is white and further legitimizes me.)

Starting this step was NOT fun. Continuing it is NOT fun. But it gets much easier after the first one since each lender basically asks for the same documents and information (and temporarily lifting any credit freezes should be a one-time thing if you give a decent window--we did one month).

I'm proud to say that I've gotten done applying with First Savings Mortgage, CapWest, J.G. Wentworth, and NBKC within the past 4 days. I'll probably add Rocket Mortgage as well since we started that and didn't finish. It is just a matter of hours or days (hopefully) until we get officially pre-approved.

From the Udemy course above, I learned about Costco's Mortgage Services. Truly, what does Costco not do? If you are an executive member, you can use this service to get special quotes from a selection of mortgage lenders that Costco vets. That is how I learned of CapWest, J.G. Wentworth, and NBKC. (First Savings Mortgage was via our realtor, and Rocket Mortgage was via the Security Now podcast commercials.) I also got an email from Chase.com about their mortgage services, which give you extra points if you are a cardmember already (I am). This was tempting, but then I read a lot of terrible reviews.

Some tips:

Keep all commonly-needed documents easily electronically available somewhere offline or in an encrypted place.
Make sure each electronic form you use is properly secure.
If a lender asks for sensitive documents or other information via email, make sure you use **encrypted email **services. I use tutanota.
For U.S. residents: don't forget to lift freezes temporarily on all 3 credit bureaus if you have put freezes on them (which, you should have because of that damn Equifax).
Read reviews of lenders before wasting your time applying with them.
If you can help it, don't use online lenders.

Assuming all goes smoothly with pre-approval, the next thing we should do is...

Edit: the following was written well past our move-in (end of June) and settling in.

Attend open houses and visit property areas

This process will really test your preconceived notions of what you wanted. You'll get a better feel for your tastes, not just for the property itself but also the location.

Open houses should generally let you in with or without a realtor. However, if you want to enter a property outside of open house hours, you'll definitely need a realtor who has access to the property's lockbox.

Keep liquid cash readily available

Try to do this before you start bidding. Bidding can turn around in a flash, and all of a sudden, depending on your down payment, you will need to be ready with an earnest money deposit. This can be several thousand dollars depending.

We almost got in trouble with this. We had liquid cash available, but sort of. Most of it was in an online bank's savings account, which takes 3-5 days to transfer to my brick-and-mortar bank's checking account; and I didn't have checks to withdraw money faster from the savings account; and since it was online, I couldn't visit a branch for in-person help... It was stressful! When we won our bid (detailed bid), we had a week to provide an earnest money deposit. Somehow those funds transferred just in the nick of time, but I surely wished I prepared earlier so I could save myself that stress.

Bid

But depending on the market in your area, you may need to move fast once you do begin finding homes you really like. By fast, I mean you may actually need to place a bid for offer that week or night, especially if that property is clearly popular.

The first time you bid is supposed to be the most work. You're just getting familiar with the dozens of pages of paperwork, though your realtor should be going over them with you. After the first time, supposedly it is easier and faster – though we didn't experience another time because we were able to win the bid on our first go!

Among other things, we had to consider the following:

how much we were offering to pay. Obvious! The higher, the better for the seller. There is typically also an option to escalate, as in, you put down an initial offer but are willing to escalate your offer in certain increments up to a point if there are other competing bids in your range. But you must weigh that against the next bullet point:
percentage of money we'd put down in cash. (Especially relevant for us plebeians without boatloads of cash.) This was important to get a good interest rate and to be competitive against other bidders. The higher the percentage, the more trustworthy you were to both the seller and the mortgage broker.
waiving specific contingencies. The more we waive, the more attractive we are to the buyer because they are less on the hook for any needed repairs identified by a home inspector. And also the greater risk we take on as buyers.

For us, we visited a house after work at 5:30 p.m., with our realtor picking us up from the metro station. We decided to bid that night because we learned the bids were due the next day. We were with our realtor until around 10 p.m. filling out paperwork. I kept an eye on my email like a hawk with any updates or extra info we needed to provide. It was quite a 24 hours.... We found out sometime the next evening that we won!

It actually turned out that we were the lowest bidder but had the highest percentage of down payment. The seller's realtor encouraged the seller to pick us because of our trustworthiness, while the seller apparently initially just wanted to pick the highest bidder. It was 15% down payment for the lowest bid from us vs. 5% down payment of a bid $15,000 higher than ours. Go figure.

Closing

This is the period between your bid win and when you finally get the to your new home, more or less. For us that was a month, though we agreed to allowing the homeowners to stay an extra few weeks to adjust to their schedules.

More paperwork to fill out! You need to hand in your earnest money deposit and finalize your mortgage agreement with your mortgage broker. You need to schedule home inspections for general stuff, maybe radon, and any other specifics relevant to your property and location. Hopefully your realtor can provide you with great recommendations for inspectors.

Of course, all of this is not counting any packing, moving, or other logistics on your end with your current property.

At the end of it all, you meet with your realtor and a lawyer to finally sign your property deeds and get your keys. Maybe the seller's also supposed to be there... but ours weren't (they were already gone to Portugal).