The Bride and I have been looking for a house for the better part of a year. We first started a few months before our wedding, bad idea. The stresses of these two events should not be combined. We took a break form house hunting, got an apartment with a short term lease and started looking again last month. We are close to closing a deal, for the second time. Here are some words of wisdom from someone who has been in the trenches.
- Get pre-approved before you begin house hunting. Paperwork is a hassle and looking at a new house is pretty fun. The trouble comes when you find your dream house and want to put in an offer. The seller will want a pre-approval letter to show that you are serious. If you don’t already have one you will have to scramble and that might take a few days. During that time, another buyer can step in and scoop up your house. Even worse you could go to get the approval and realize that the house is out of your price range. Not only is that embarrassing, but it may also turn your realtor off to you. No one wants to waste time with a buyer that can’t get a mortgage.
- Don’t buy or lease a car! Loans are counted against your income. That 400 a month car loans will mean a smaller mortgage payment and a cheaper house. My realtor told me about one buyer who got a lease before closing and it cost him the house. That lease payment was the difference between him getting the mortgage and failing to qualify. Wait until after you buy the house to get a new ride.
- Your overtime might not count. Mortgage financing requirements changed at the beginning of this year. In an effort to prevent another housing collapse the government is trying to make sure that you can really afford that home. As a result overtime and income from second jobs is more heavily scrutinized.
- That new job doesn’t count. My wife got a new job about 5 moths ago. It pays much much more than her old job. Thanks again to the new mortgage requirements we were told we can’t get full credit for the income from that job. I was told that they take an average from the last two years of unemployment and that is used as your income. This is frustrating, but it could be a big obstacle for anyone who has been out of work in the last two years. This would also include a stay at home parent who leaves their job to care for their family.
- Your monthly payment will always be more than you expect. Mortgage calculators are great, I’ve used them dozens of times to gauge what I could afford. It’s the responsible thing to go, but the home buying equation has a lot of variables. Taxes, fees, insurance, on and on it goes. When all is said and done my monthly fee will be about 15% higher then I estimated using the calculator.
So there you are a few pearls of wisdom to help you along your journey. As we get closer to closing I will probably have more to say about this. Stay tuned.