Apr 22 2009

Our first steps of buying a house

I consider myself to be pretty cautious when it comes to spending money. I want to make sure I know all aspects of what I’m getting into. 

That’s why I want to make sure we aren’t rushing into this “let’s buy a house” thing. We have about seven months before we’d need to close on a house. That should be plenty of time to research the process and make level-headed decisions.
We need to be prepared to walk away at any time. 
If it’s November 20 and the house we want hasn’t passed inspection and there’s no way we’ll be able to close on November 30 — we’re done. Getting the $8,000 first-time homebuyer tax credit is a huge reason for why we want to buy now instead of waiting. If we don’t make a purchase that qualifies for that, then we’re going to keep on renting, even if that means we’re saying buh-bye to a great house. 
The question I have to keep in mind is, “Will someone else want to buy this house too someday?”
When looking at all houses, I want to remember that someday, I’ll probably want to sell the house. If the house is too quirky or has traits that would make it generally un-sellable, then I should look elsewhere. If the neighborhood isn’t so good or the schools are lousy, I can’t waste my time there.
Finally, we need to be really real with ourselves. Can we seriously afford such a huge undertaking at this time?
We’re crunching numbers, and then crunching them some more. I’ll share my findings and ask for your input soon. If it seems like a decent house would be too much of a stretch for our budgets, we’re not going to do it.
We don’t want to contribute to a “housing crisis: the sequel.”
As I share this possible house-buying journey with you, please keep me in check. If I’m saying crazy things, call me on it. 
Our next step is getting pre-approved for a mortgage. I spoke with a loan officer over the phone and he took basic financial info from me and ran our credit reports while we were on the phone. He said that everything looked good and he expected that we would be approved.
Pre-approval means they take a look at your credit reports and other tangible financials to see your debt situation . We were also asked to supply the last two year’s worth of W2s, a pay stub from the last 30 days and Shane’s transcript from college. Durn it, I’m going to have to order the transcript because I can’t find it anywhere.
We’ll see what kind of loan we might be approved for and then take it from there.
I pulled my credit report from the three reporting bureaus to make sure there were no errors. Shane will do that on his own report when he gets home.
A real estate agent is coming over later this evening to speak with us. So yay, things are moving along!

Posted under Uncategorized | 12 Comments »

12 Responses to “Our first steps of buying a house”

  1. Shane’s transcript? That’s crazy! I know we’re no longer in a free-wheeling lending period, but I’ve never heard of such a thing, provided you have decent credit otherwise.

    If they give you too many other hoops (or fees) to jump through, I would consider looking at a different mortgage broker or your credit union.

  2. Meredith- transcripts are pretty normal for just-out-of-college folks. Because we can’t show 3 years of consistent employment, they need proof we were in school. That’s all.

    Here’s a tip: When we got a pre-approval letter, the mortgage broker guy asked what price range we were looking in, and put the top of the range on the letter. This was good for a couple reasons:

    – We didn’t know the “upper limit” that we could be approved for. We were shopping well within our budget, and if a preapproval letter had the “28% of our income” (that we could still, technically, afford and get approved for, but would prefer not to spend) it may have made our “upper limit” creep up with the thought “well, if they’ll approve us for it, maybe we can afford more…” We were looking out for our own budget, so not even knowing the upper limit helped us stick to our much lower, self-imposed one.

    – Sellers didn’t know our true “upper limit”. If they’re selling a house for, say, $150,000, and we offer $140k, but our preapproval letter says we can afford much more, they have no reason to negotiate (because they know we can afford the asking price). If they want to sell the house, and know we can get approved for JUST our offer, though, they’re more likely to come down out of motivation to sell.

  3. That’s what the first lender I spoke with said, that he’d approve us for the amount we were wanting and then write an individual letter for the amount we want to pay. Sounds pretty clever to me!

    The two lenders I spoke with today said we could qualify for a lot more than what I was asking. I didn’t ask how much, and I don’t want to know. I know how much we can comfortably afford, and that’s how much I’m pursuing. Anything higher, and we won’t be able to meet our other goals. I wanna go on vacation someday, ya know?

    @Meredith, I agree, I was a bit surprised with the transcript request. Oh well, it’ll be good to have a copy on hand for whenever we may need it again. The second lender I spoke with only wanted to see the last pay stub. Much easier.

  4. One quick thing to add – make sure you know how long your pre-approval letter is good for. If they have to keep writing up letters for you between now & November (and pull your credit report every time), I’m not quite sure what that would do to your credit score. Have fun. :)

  5. Ok, a few things:

    1) I believe it is your agent that needs a copy of the pre-approval letter. there’s no need for the seller’s agent, much less the sellers, to know your approval limit. If something is on the table your agent’s assurance that you have been pre-approved for that amount should be enough to the other agent.
    2) I was a first home buyer once too and I know the excitement of finally owning your own home and making it your own. Unless you are ready to buy fairly soon talking to an agent could almost be jumping the gun. I say this because two things may happen: a) when you mention you are looking to buy in a few months or so, agent will be discouraged. h ewants to make his commission NOW not in a few months. As a result he may not take you so seriourly yet. b) he may decide to move up YOUR time table to fit HIS. he may be aggressive and push towards lots of showings to get you to buy a house NOW so he can get his commission.
    3) You are very smart to have the next buyer in mind. Always do this and try not to fall in love with home that are “almost” perfect but have that one off the wall characteristic. Chances are you won’t be in that home forever and what was “cute” to you may not be to others.

    Good luck!


  6. Sounds exciting!! I can’t wait until we’re out of this area to buy! The “starter” homes start at around 200k!! Yuck! Not gonna work for us!

  7. This is very exciting Kacie! Good luck on the house hunting.

  8. Just curious, are there any hooks in this $8,000, like do you have to pay it back if you not keep the house for so long? How about renting a house instead of buying. The feeling I am getting from you is that you have a little baby, you would like a lawn to for him to pay in and this $8,000 is something that gives you an excuse to look. Buying a house is a big risk, especially on a one income household. Anything happens to that job, or you have to transfer now you got to unload that house or have two households. Its just a lot of risk for 8 grand. IMHO.

  9. Hi Linda,

    Yes, there are hooks to the $8k. If you sell before 3 years, you do have to repay the money. We haven’t decided if we want to rent or buy just yet, but we are looking at both options to see which might be the best one for us. I am pretty risk averse myself, and even though that $8k is a lot of money, I’m not completely sure if it’s worth it.

  10. http://www.rurdev.usda.gov/rhs/

    If you qualify for a government loan, this is the way to go. Follow the link above!!


  11. It seems like you have a good handle on what you are comfortable affording, not what the bank is comfortable lending. 28% of after tax income sounds well and good, but does that mean you can’s afford a night out for three years? What is someone is laid off or hurt? Caution is what people practiced when buying a home 20 years ago, and caution was pushed to the side the the last decade and many banks are playing “what is old is new again”.

    Is the Pittsburgh Market currently a Buyer’s Market or a Neutral Market? If it is a Buyer’s market, with the $8K incentive now may be a great time to buy if you decide you can afford it.

    I also would suggest you look into Open Houses. You don’t have to drag an agent along, and you can see what is out there in a price range you can afford in an area you like. You can join other lookie-loos on a Sunday, but your purpose is research. Our last outing we looked at well over 100 houses before we found what we wanted.

    Use a Real Estate Attorney even if not required by state law, and even if you have a “buyer’s agent”. It looks like according to PA law, unless the you are paying the agent’s commission, the agent is working for the seller. So, rather then having a “buyer’s agent”, you have a “agent that brings the buyer”. This is a very important distinction as the less you tell the agent the better. Why? The agent would be required to inform the seller of anything that could benefit the seller in the transaction. The agent’s fiduciary duty is to the seller.
    PA Code §35.336

    Reconfirm this to make sure the code is current. And, if you have a buyer’s agent that you are paying, read the contract thoroughly and have your real estate attorney read it well too.

    iVillage’s GardenWeb RE Forum has some very knowledgeable folks posting, as well as thousands of threads on buying and selling houses. Take some time to read about resale value as well as buying a house to fit your family’s needs. Sometimes the two do not mesh.

    Best wishes on your journey.

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Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

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