Tales from the Wallet – Buying a Home

Tips on Buying a Home | Corporette

How does buying a home affect your finances?  How can you best prepare for it?  This is a huge topic, but we’re going to attempt to take it on as part of our Money Milestones series, which explores how a few big milestones in your life can really affect your finances.  So far we’ve looked at wedding budgets, how to financially prepare for a baby, and how to pay for grad school.

This can be a tricky issue, and we’ve covered a lot of the hows in my last post on owning property (where we also discussed whether to buy a home when you’re still single), as well as in our discussion on where you live is one of the biggest money decisions you make. Some thoughts on how to prepare for and survive a home purchase:

Preparation

  • Decide whether buying a home is the best choice for you at this point in your life. This buy or rent calculator can help you crunch the numbers.
  • Have a general idea of what a downpayment will be like. Some lenders will allow you to put just 5% down, while many others require 10% or 20%. (You can always do more if you want to, though.)
  • Research some general tricks of the trade — particularly if you’re looking at a more expensive purchase.
    • If you can, seek to borrow less than $417,000 — anything more than that is classified as a “jumbo loan,” which has a higher interest rate. Jumbo loans are offered by local and national banks and aren’t usually backed by Fannie Mae or Freddie Mac. They may or may not have higher interest rates, but they often have tougher requirements for applicants. For example, you may need to provide a larger downpayment and need a higher income and credit score than you would for conforming loans.
    • In some places (like New York and New Jersey), you’ll be subject to a “mansion tax,” which means home purchases over a million dollars will cost you additional state taxes.
    • On the flip side, for those non-Rockefellers among us, note that there may be tax breaks or credits available that can be helpful to you, for example, FHA loans. The Federal Housing Administration (part of HUD) insures FHA loans so that borrowers can get a better deal from their lender — more easily qualify for loans, pay lower closing costs, and contribute less for a downpayment.
  • Have a rough idea about what a mortgage will entail. For example, lenders will look for things like a stable employment history, a solid credit score, and relatively low debt-to-income ratio. (Most lenders prefer a ratio below 41-43%.) You can use online calculators to help you figure out how much mortgage you can afford.
  • Know your general timeline, because that will affect where you store the downpayment. I kept way too much money in cash in my 20s because I thought I might generally need it for a downpayment or other life events — and because I didn’t know where to invest it. I’m curious to hear what the readers say about this, but I would advise you to a) review our older post on 401(k) plans and IRAs — some of those vehicles allow you to withdraw the principal to use for a first time home purchase, and b) review some of the comments here on laddered CDs if you want a really safe investment. The general stock market can be scary — and as I write this in March 2015 everyone thinks it’s poised for another fall — but if you’re on a longer timeline (say, 5 years), then you may want to take the chance.
  • Improve and protect your credit score.  This is going to be huge in getting a good offer from a mortgage lender, so you should know what it is, as well as know what you can do to improve and protect it.  For example, consider arranging automatic payment for the monthly minimum for your credit cards and store cards, even if you plan to pay them in full each month.
  • When you’re finally ready to Start Looking, call a mortgage lender — any one will do — and get a prequalification or preapproval letter. Expect to fill out a few online questions about your income, debts, etc., and to answer some followup questions. It’s important to know that a seller probably won’t consider your offer unless you’re preapproved — being prequalified isn’t enough. A lender will give you a preapproval letter for a certain dollar amount after actually examining your credit history, income, etc. (Here’s a good comparison of the two.) Each pre-approval letter is good for about 120 days.

Making the Purchase

  • You’ve been to a zillion open houses, know your D to I ratio, have Opinions on hardwood floors — now’s the time to strike! Expect for things to move fairly quickly once you get your offer accepted, and be ready to write your “earnest money” check, generally 1-10% of the purchase price (to be held in escrow). This may be the biggest check you’ve ever written, and it’s generally non-refundable — my husband and I celebrated with tequila shots back in ’09 after we wrote the check for our current apartment.
  • Keep protecting your credit score, as well as your job — your employer will often be called right before closing and asked if there is expected to be any change to your income or employment in the near future.
  • Know your closing costs, as well as your moving costs.  Some closing costs are paid by the borrower; some by the seller — in general the numbers aren’t pretty, so don’t let them take you by surprise.  Some closing costs (or rather who pays them) are negotiable with your lender or seller, so do your research. Don’t forget that you’ll need cash for the move itself, which is another big purchase. (Here’s the post with my best moving tips.)
  • For the home: assess what work, if any, you should do before you move in.  Here’s my $.02: LOOK VERY CLOSELY AT ANY HARDWOOD FLOORS. Before you move in while the place is empty, it is very easy (and relatively inexpensive) to get a true hardwood floor refinished, where they buff off the top layer of wood and possibly restain it.  It is also easy (while more expensive) to completely rip up the old floor and put down new ones.  After you move in?  All of your furniture has to be moved, often for days at a time.  Other things to consider before you move in: getting the walls repainted, regrouting the tile, and possibly having an electrician in to add wall sockets or ceiling fixtures like fans or lights.

 Settling In

  • Rebuild your emergency fund.  This should be your primary goal for the first few months. I have never felt poorer in my life than after we bought our apartment, because suddenly the big cushion of cash we had been sitting on was gone.  Prioritize the emergency fund above any renovation projects or new furniture purchases.
  • Bide your time for other big home-related purchases.  Stalk the furniture pieces you like (online apps like PoachIt work for furniture pieces as well), and get to learn the sale cycles at your favorite stores. Note that you can sometimes get discount codes for home services like landscaping, fences, and more if you attend a local home renovation show. (Here’s our last post on grown up furniture, as well as our post on setting up house, if that’s helpful.)
  • Keep an eye on your goals and expectations as you go forward.  For example: do you plan to be in your home for 5 years, or 30? Do you hope to make a profit when you sell (as is common in NYC) or do you just hope to break even?  This may guide your choices for renovation details, what you renovate, how you treat the property generally, and more.

Readers, this is obviously broad strokes — what else would you add for financial advice for buying a home?  How should you prepare and otherwise navigate the waters? 

 (Pictured: Rebecca Minkoff ‘Sophie’ Snap Wallet, available at Nordstrom for $95.)

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Comments

  1. You’re reading my mind, right? (Or at least my internet search history) :)

    I’m going through this right now, and kicking myself for not saving up a larger downpayment. But at the same time, rent in Boston is high enough where I don’t want to rent for another year. I’m glad to hear that it isn’t crazy to deplete emergency reserves to do this. Both husband and I have stable, high-paying jobs, so hopefully we’ll recover pretty quick.

    One thing I was surprised about: If you’re doing a jumbo loan (definitely easy to do in HCOL areas) and have anything lower than 15% downpayment, you’re pretty much stuck with an adjustable rate mortgage, even if you have absolutely stellar credit scores.

    • SoCalAtty :

      True unless it isn’t your first mortgage. We’re going to end up trying to save up 20%, but would really rather only put 10% down and keep the other 10% in reserve. Apparently, at least with the lenders we use, on your second jumbo loan, some lenders will do an 80% mortgage with a 10% HELOC, and 10% down and the interest rates really aren’t bad. So that’s always another route. For us, we need to buy again sooner rather than later because losing that deduction is killing us.

      • We got around a jumbo loan by doing a conventional loan +HELOC + downpayment of less than 20%. Both interest rates are very low. We aren’t in a HCOL so it may work differently in more expensive locations.

    • I’m not sure that’s always true – but maybe it’s related to being second time home owners? We’re in the suburbs of a large city and got a jumbo loan with a fixed rate mortgage (around 4.75%, I think) & 10% down last year. Our lender said that a lot of the negative aspects of jumbo mortgages have changed more recently, so while we looked at adjustable rate jumbos, they weren’t significantly better (and obviously a lot riskier) than our fixed.

      For our first home, which we purchased at the beginning of the financial crisis, I think we did 5-10% down, a $417 jumbo, and HELOC for the rest. The HELOC had an adjustable rate and no cap, which kept me up at night — but amazingly enough worked really well for us considering the super low interest rates over the last few years.

  2. Sometime after you start thinking about buying, and before you talk to the mortgage people, gather your documents. When I bought in 2009 I couldn’t believe what a pain it was to gather everything — a few months of pay stubs, bank statements, mutual fund statements, basically anything that documents how much money you have and where it comes from. And once you’re pre-approved, you need to maintain that information for when you actually bid and actually get the mortgage.

    • Meg Murry :

      And then send them to the mortgage broker/bank in PDF! Our person handling our mortgage was incompetent beyond the usual, but I had gathered up every single paper document he asked for (printed out the ones that were online) and then made photocopies, including a cover summary spreadsheet and handed it all to him. Apparently the underwriters were in a different branch, so he faxed the documents to the underwriters, except they didn’t all go through and then I’d get vague voicemails like “I need page 4 of your bank statement.” and then 2 days later “Oops, I need page 3 of your taxes” WTF – I gave you 2 months worth of bank statements from 4 different checking/savings accounts and 3 years worth of taxes, how am I supposed to know which page you mean from which account? And part of the problem is that it was phone tag of underwriter-> mortgage rep-> my husband -> me. So I finally got the guy to give me his email address (after 3 requests) and I sent him PDFs of all the required paperwork, which he then forwarded to the underwriter – so much easier.

      TL;DR: If your mortgage broker wants everything hand delivered on paper instead of electronic, consider a new lender. I would have switched after the cluster above, except we were too close to the end to start over.

      • I co-sign this statement! In 2012 we were buying a home and using a major bank as the lender…they were disorganized beyond belief and borderline incompetent. I had exactly the experience you mentioned above. They delayed and delayed beyond belief (claiming they were “missing” random pages of various accounts, but waiting weeks to tell me, waiting 4 months after we paid for the appraisal to actually have the house appraised, etc) and the process ended up stretching out for going on 6 months, without exaggeration. This was leading up to Superstorm Sandy, and our proposed house was in a floodzone, so the loan ended up being declined after the storm (and we are STILL in litigation for our ernest money…awesome). I guess the bank did me a favor by dragging, but on the other hand, the seller is trying to use the fact that the purchased dragged for much much longer than it should have against us.

        BUT fast forward 2 years. DH and I bought a condo and used ANOTHER large bank as a lender and the process was night and day. We emailed everything that they wanted ONCE, they communicated clearly, and they closed our loan within 60 days of when we signed the contract. Now we are refinancing with the same bank (at 3%!) and the process was just as seamless. I’m sure everyone’s experience varies, but I would strongly urge anyone and everyone to run like hell from that red and yellow bank.

  3. Don’t underestimate the toll house hunting will take on your wallet too. It took me 9 months to find the right home. That basically meant commuting each weekend to the city for half a day to look at hours of appointments, lunches/dinners out, weeknights that I had to be across town to make sure I could get into a house, and I felt the pain at the pump too. Then, when I found a place I wanted I had to deal with inspections, movers, immediate repairs upon move-in when things failed so I had to keep a lot of cash liquid to pay for those things.

    If your timing is off at all on the sale of a previous home you might have another set of expenses too. That doesn’t even count how much I am still spending. I allotted for bills and new furniture to fill the home (but not all at once) but kind of forgot things like having a 3 1/2-bathroom home over a 1-bathroom means I need more toilet paper and towels and shower curtains than before. Every time I go to Target I’m amazed at how much I need. I also attempted to eat my entire pantry/fridge/freezer before moving so I didn’t have to move food. Now every grocery bill is insane. Finally 3 months later I feel like I’m leveling off but it is another expense I forgot to account for.

    Thank goodness I saved up enough for a bigger down payment and then didn’t need it all since I spent less than I assumed. Having all of that extra money on hand helped me not freak out every time I paid a bill. (Okay, not freak out as much.)

    • I think it’s a good thing you didn’t move the food, even if your first grocery bill was enormous. We tried eating down the pantry before our last move, but it was somewhat quicker than we were planning on. I can’t believe some of the stuff I dragged across the county with us! It cost time and money, then more time to unpack and arrange.

  4. Anonattorney :

    If you’re not buying a brand-new house, make sure you have a good chunk in reserve to deal with unexpected (or expected) fixes. There are just endless things you will want to spend money on once you buy a house.

    Also do some good research on the property tax situation in your area. In my county, property tax increases are capped at a certain rate each year. I think it’s 3% – so even if your house appreciates more than 3% in a year, your property tax will not increase more than 3%. There are some exceptions to this rule. If you do major renovations of your house, the assessor can reassess your market value and bump up your tax obligation significantly. If you are looking at buying a “flipped” house, the tax amount on record may not be an accurate representation of what YOUR taxes will be if you buy that house.

    Anyway, taxes vary significantly and can have a big impact on your monthly payment.

  5. Hubs and I are closing on our first home this week! Some comments/tips –

    1) I don’t think it’s fair to say that you *should* borrow less than $417,000. If you meet the tougher standards for doing so and have the income to make the mortgage payments, I think it’s a better investment to borrow more and get a house that you will be in for longer vs. getting a shorter-term home and losing extra money to selling and moving costs.

    2) Get recommendations from people you know about buyer’s agents. If you’re a first-time homebuyer, they will be critical in helping you figure out the quality of a house and telling you how to prepare to buy a house.

    3) A fixer-upper is not always a better investment than a new home. There is almost always an unknown dimension to the cost of a fixer-upper – until you rip out that wall or floor, you won’t know if there’s water damage, structural issues, or other problems that you’ll have to fix. You also will need to invest your time into juggling various contractors, and if it’s not inhabitable when you buy it, you will have to pay rent on top of your mortgage. New construction that has been thoroughly inspected by a reputable home inspector is a safer bet.

    • This is excelent advise. I did NOT know about the $417,000, but when my HUSBAND and I get married, I will make sure he has enough money so that we can pay most of the morgage in CASH. My other OPTION is that dad said he would give me a gift of a house if I got stayed MARRIED for a year, which mean’s that I will have to have my husband in my coop for a year, or else I have to live with HIM at his apartement for 1 year, and if we are still MARRIED and with child, then we can moove to a house that my dad will buy.

      I think I am a littel luckyier then most others in the HIVE, except I am NOT lucky at love b/c I have NOT been abel to find a HUSBAND, even tho I have a JD degree and a good job and am told I am very atractive. With all of this, no body want’s to marry me. They all want to turn me into their sexueal pin cushon, but having a bunch of winkie’s pokeing at me is NOT where I want to be in life. I want a decent MAN, not a bunch of jouvenile guy’s who want me to give them sex, then roll off me and go to sleep. FOOEY!

      I think the key is to find a guy who has enough money to buy me a house, or go in with my DAD so that we do NOT have to deal with banks and morgage’s and all of that stuff. DOUBEL FOOEY on bank’s.

    • Yes. My number one piece of advice: Do not buy a fixer upper if you have any other remotely reasonable option. We did, and while I love our house, it has ended up costing us so much more money than we thought. For this money, we could have gotten something in perfect condition and saved ourselves a lot of hassle. Plus, you can get a loan for the purchase price much more easily than you can get a loan for renovations.

      There are probably some markets out there where doing the renovation yourself would, in fact, save you money. But I think 90% of the time, you only think you are going to save money because you don’t know yet how much the renovation will actually end up costing.

    • Hildegarde :

      I have also heard that fixer-upper homes often wind up being more trouble and expense than the buyer expects, but there is a lot of space between “fixer-upper” and “new construction.” There are plenty of homes that are not brand new, but also do not require a ton of work.

      Furthermore, newly constructed homes come with their own uncertainties. I practice real estate law, and have repeatedly encountered situations in which the builder built the new house on the cheap, so things fail quicker than they should. Or the developer included developer-friendly provisions in the HOA documents that residents are unhappy about once they move in and a situation crops up. Or people buy a new house in a bright shiny new subdivision, the market tanks, and so few new people move in that the subdivision remains half-built for years. A home inspector who can miss things in an older home can miss things in a new home. It’s true that a new home has had less time to have pieces fail, but it has also not stood the test of time like an older home.

      All this is not even to mention the environmental impact of constructing a new home! I know this is not something everyone cares about, but a significant portion of the landfill waste the US generates every year is construction waste, some of which comes from new homes. Even a LEED-certified home will takes decades of low environmental impact to make up for the impact of constructing the house in the first place. Finally, continually building new homes rather than inhabiting old ones can contribute to suburban sprawl (though not always, I realize), and depending on where you are it can contribute to the racial and economic segregation of neighborhoods. So there are plenty of drawbacks to a new home, too.

      • You’re right – I didn’t mean to say “new construction,” more like “live-in ready.” (I bought a newly-renovated but old home, FWIW).

        • Hildegarde :

          In that case, there was no need for my rant. I just often hear people assert that what’s new is always or usually better than what’s old, and I think this is often not the case (not just for real estate, but for many things). So, I thought you might really be saying everyone should move into a newly-constructed house. In any case, I hope your new-to-you house is working out well.

  6. Despite getting one myself in 2009, I’d caution people against getting an FHA loan. The guidelines for the monthly PMI have changed several times in recent years. Mine is about half a percent of my home value annually, and it goes away when I hit 78% loan-to-value. The current amount is closer to a full percent annually as well as an upfront payment that is added to your loan, and you pay it for the life of the loan. Sure, you can probably refinance, but I’d think long and hard about trying to get a conventional loan first, even if it means saving a little while longer for the down payment.

    I agree with Kat’s advice about painting. I was so excited to move in that I thought “I’ll paint that closet and spare bedroom later!” 6 years later, definitely not painted.

  7. We purchased a home within the past year. The first baby step we took, recommended by our realtor when we first interviewed her, was to open a joint checking account from a local bank where we could get bank checks immediately. We pooled our down payment savings there. Prior to that we both had separate online checking accounts, and while the banks could issue bank checks, we would’ve had to wait for them to come through the mail and in a fast moving market we needed to be ready to give our deposit right away.

    There are also service providers to select- realtor, attorney, lender, home inspector, and any experts you need to bring in. And now that I think of it, an accountant- for the first time this year I am not doing my own taxes because they will be too complicated.

    My overall impression after going through it is that it really isn’t that hard! They will loan you a lot of money without asking that many questions!

    • That’s an awesome tip and the sign of a thoughtful agent. I will second the advice – I don’t know why we never thought of it, but after buying 3 houses in 3 states over 8 years, and each time having our savings in internet only banks, I can vouch for what a pain it was to potentially lose a house because your money can’t get there fast enough.

      Also, I want to point out that selecting a buyer’s agent can be a really important milestone. A good one will be honest with you about each house, will do their best to negotiate the right price for you, connect you with a broker, and generally take care of all of the logistics that you don’t need to know about. A bad one will not do much and then show up to collect her 3%. I’ve had both, and I recommend interviewing at least 3 before you commit. (same for selling, where that’s even more important) There are interview guides posted on the internet if you don’t know what to ask.

  8. What a timely post! I am just starting to get my house ready for market so I can move into a more centrally located condo.

    For me, my mortgage guy is the most important person. He sees the deals that are coming through, and he knows the market better than any real estate agent. In fact, he referred me to the agent I am using.

    Also, about a month after closing, you will think you have made the biggest mistake and that you bought the wrong house. Be ready to review your reasons and try to get to a place where you don’t have any regrets or can forgive your past self.

    • Katniss Everdeen :

      K-Padi, you’re in the Bay Area, right? I am thinking of refinancing our house and would love a recommendation for a good mortgage guy who can give us some straight data on whether we should do it or not. We weren’t thrilled with our rate when we bought, though our mortgage person was really lovely to work with and moved fast. But I think we can do better now.

      • Yes. Ross Huffman at iMortgage. (Google will find him). Call his mobile. Tell him Karen sent you.

        I very highly recommend him.

  9. Katniss Everdeen :

    I have a general question about home ownership. We moved into a lovely older home that doesn’t need major work. But now that we’ve been in it for a while, we’re developing a list of projects we’d love to do – some big (adding space), some medium (windows), some small (bookcases, etc.). I am feeling a little stymied about how to stage the work we want. Are there any good books, guides, experts out there who can help me think through this? What would you recommend? I also don’t want to do anything that we can’t recover in the real estate market, since we don’t anticipate that we will live in this house forever.

    • I moved into a flipped house that looked good but had some big issues. I started with the most essential and the things that would likely cause cosmetic damage. I did new pipes, then new fireplace, then roof repairs, then insulation, then yard, then new paint and carpet. It was also a matter of “what is bugging me the most about my house this year?”

    • We are experiencing this in our new (old) home within our first year. It helped us to think of yearly, 5 year, and 10 year plans, like with your career. Right now we’re pouring a driveway and building a fence to improve the view. If we’re still here in 5 years it’ll be a kitchen remodel and probably bathroom as well. Our home was built in 1930 and some of the tile reflects that. After 10 years we’ll be finishing the basement to add a den/bar. Do the low cost stuff first to make your home more “you” as well as anything that is likely to cause damage to the structure. Also, think about what will add value if you know you won’t live there forever. Kitchens and bathrooms add lots of value, whereas changes to your bedrooms and living areas won’t have as big of an impact. Watch HGTV IMO, you’ll learn a lot just from the remodeling shows.

  10. I was certainly not prepared for how quickly everything moved once we submitted an offer. Barely a month later, we were moving in, and let me tell you, it was one of the most stressful times of my life. Plus, giving notice to my apartment building that I was leaving… Breaking a lease is more trouble than you’d think.

    I would definitely recommend keeping as much cash on hand as possible. Home inspection, appraisal (if you’re doing FHA), moving, immediate fixes, changing locks, etc. all deplete your bank account fast.

    A last note on budgeting: part of the decision to buy vs rent has to do with how much more or less you’d be paying monthly for a mortgage vs staying in an apartment owned by someone else. The thing is, though, that your mortgage doesn’t include things like utility bills, home insurance, an alarm system, etc. that might have been covered to some degree in your rent. It’s really important to factor those things in so you’re not caught off guard when suddenly spending far more on your new home per month than you ever did in rent.

    • Maddie Ross :

      I cannot emphasize enough how important it is to include things beyond your new mortgage payment in the consideration. Those online mortgage calculators are great and you can usually estimate things like HOA dues and increased utilities, but yard maintenance, repair costs, and insurance deductibles can get overwhelming. We’ve owned homes for 7 years now and have had 3 insurable events with related repairs. And have replaced out of pocket an HVAC system, two water heaters, a roof, three toilets, a fridge, a stove, two sinks, flooring and portions of two walls. Not upgrades – mostly emergency maintenance. We’ve never fully priced it out because I think it would make me ill, but I would easily estimate that’s come to over $50K in maintenance and repairs.

      • Meg Murry :

        And check carefully what those calculators are including – some have taxes and insurance factored into them but may be very low estimates, others are only calculating the amount of principal+interest you would be paying and leaving taxes and insurance out entirely – and that’s a huge chunk of change not to calculate in.

      • Ask your lender to prepare a cost estimate for you based on the actual listing you are interested in. This cost estimate should not only include what your monthly mortgage payment would be under the loan program you are going with, but also the closing costs. They can run as many as you want under difference scenarios and the lender should be working with your agent to help strengthen your offer based on these numbers. The cost estimate based on an actual listing will include prior year taxes, HOA fees, etc., and be very close to the good faith estimate that they have to provide you later on. If your lender won’t do this, find another lender.

      • Anonymous :

        And with property taxes – two key things:
        1. Get the detail of the tax bill – prior owner may have had senior exclusion/ part-time residence… and you won’t get that
        2. Learn your community’s property tax cycle, assessment process, and process for appeals. Depending on where they are in the cycle, your home could be a) currently over-assessed and you can file an appeal to lower taxes or b) under-assessed and you may get an unhappy surprise in the future.
        And I suppose a third thing – factor in property tax increasing higher than inflation and wage growth.
        If you live in a low tax area, no big deal however for high tax area this is a big deal (e.g. our taxes equate to about 5 months of mortgage payments)

      • anon a mouse :

        But you should keep track of how much you spend on repairs and upgrades – if you think you might profit when you eventually sell, you can use these to adjust your cost basis and help mitigate capital gains.

  11. If you’re moving into a single family home from a condo or apartment, take into consideration and budget for these purchases you will likely need to make: trash cans, lawn mower (or landscaping service), snow blower, rake, shovel, ladder, etc. I never in my life thought I would own a chain saw, but after repeatedly having to hire a tree service to dispatch of fallen branches and limbs I now do the cutting and disposal myself.

  12. Either negotiate into your sale contract a home warranty or purchase one on your own. I always included a seller purchased home warranty in all of my client’s (buyers) sale contracts. The cost is pretty low relative to the full cost of the transaction and it could save you quite a bit of money if something goes wrong. That said, read the fine print and understand exactly what your home warranty will cover before you plunk down the cash for one. They are most certainly not all created equal. Also, get a recommendation if you can – preferably from someone who has had to file a claim. You can certainly get one from your real estate agent too, but ask questions about how many of their prior clients have purchased through that company and what their experience has been if they have had to file a claim.

  13. Bigger and more expensive isn’t always better– my husband and I bought a smaller and much less expensive house than the bank said we could afford. On top of that we got a 30 year mortgage instead of a 15. We always wanted to be able to easily afford our mortgage on one of our salaries. We’re fairly aggressively paying extra for now, hoping to pay it off in about 10 years.

    School district is important to consider too for resale value, even if you’re not planning to have kids. Houses in good school districts in my town get snapped up immediately unless they’re grossly overpriced. We weren’t sure if we were going to have kids when we bought our house (in a crappy school district). I kind of regret it now, but the house is cheap enough that we should have it paid off by the time our daughter starts private middle/high school. It’s something to consider if you do have kids too– is the extra price of the house in the good school district “worth it”, or is it better to buy a cheap house and pay for private school?

    • Yes, I have to think that the bank calculators on what you *could* buy are a joke. Now that we have two kids in daycare, those monthly payments far outweigh our mortgage and I’m not sure what we would do if we didn’t buy a house that was way, way, way under qualifying. Also, check out taxes in your area — ours are bananas and I had no idea before we bought. Another reason I’m thankful we got a house that was less than half of what we were told we could afford.

      • I nearly spit coffee on my computer the first time I did a bank calculator. I mean, I guess I could afford it if I spent money on literally nothing but house, utilities, and food. No thanks, bank, I like to go out to eat or buy clothes occasionally.

  14. Momindant :

    If you are looking to buy in an area serviced by Redfin, you will receive a credit at closing equal to the excess of the buying agent’s commission (paid by the seller) over 1.5%. Except in Oregon, I think. Anyway, the Redfin is free to use and offers lots of good info on schools, etc. Redfin is a full-service brokerage company, and they have the resources to recommend lots of good things you’ll need, like contractors, financing, etc.

  15. This might be a silly question, but can someone shed some light onto the mortgage lender selection process? I’ve read in several places, including above, that it’s not too important where you end up getting your pre-approval letter from. However, what about when you’re ready to actually make a bid and take out the loan? Do most people end up calling around to different lenders at that point and filing multiple applications again or do you stay with the lender who issued the pre-approval letter (and if so, why isn’t it important to carefully screen the lender where you get the pre-approval)? Really appreciate all the good advice in this post and in the comments! Thanks!

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