Alright, alright, alright. A few weeks ago, I asked the fine people of Instagram what questions they had about buying a house, and I promised my handsome husband would be answering them. We finally had the chance to go on a morning coffee date and sit down to go through your questions and tell ya what our experience was with buying a home and what we have to share with you! I can tell ya that I was terrified to buy a house for the first time, but Shane's wisdom and the amount of time he spent researching and learning all about real estate gave me all the confidence I needed.
Take it away, honey.
What are the first steps in buying a house?
The first step is deciding what you want out of a home. Are you looking for an investment property, a starter home, or maybe a forever home? Figure out what's a good purchase for you in the long run. How many bedrooms/bathrooms do you need? How many square feet do you want? Do you want a big yard? Make a list of the top 5 things you need out of a house.
You'll need to determine your budget for your cost of the home, your downpayment, closing costs, and repairs/upgrades needed once the home is yours.
How much should you put towards your down payment?
It depends on what's more important to you AND your financial situation. If you value a lower monthly payment and can get by with less cash in the bank, then you could make a higher downpayment. However, if you don't have a lot of cash, or you would like to keep a larger nest egg, then a lower downpayment is better for you knowing that you are going to have a higher monthly payment.
20% equity is required by most lenders to avoid paying PMI, which is mortgage insurance. Depending on the size of the loan, mortgage insurance can run you anywhere from $75-$200 a month -- and this is not going towards paying off your loan or interest.
We calculated putting down 20% on our house was going to save us $5,000 over the next four years. For us, it was worth the larger downpayment up front in order to avoid unnecessary fees over the next few years.
How does having a realtor work? Who pays them, the buyer or the seller?
In Colorado, typically the seller pays the realtor and the buyer pays the closing costs. This can be different in other states. So before buying a house, make sure you talk to a couple of people who have bought a home in the area/state where you're looking.
When it comes to choosing a realtor, do your research. Find someone with a good reputation and comes with excellent referrals. Have friends who've bought a home? Ask them about their experience with their own realtors and if they would recommend using them.
Total plug for our amazing realtor who showed us countless houses and gave us tons of wisdom -- if you're buying a house in the greater Colorado Springs area, definitely give Jessica Daniels a call. You won't be sorry.
How do I get a loan?
Apply with multiple lenders to see who will give you the best interest rate and closing costs. Again, go based on referrals from trusted friends and their experiences. We ended up applying for a loan with three different banks based on other people's recommendations. We chose the one that gave us the best deal.
When you go into this, make sure you understand the different types of loans you qualify for and the rules that go along with them.
The bank will pre-approve you up to a certain amount based on your income and your assets and your debt to income ratio (DTI). It may not be wise for you to purchase a home up to the price the bank offers because they will most likely approve you at a number you might not be able to comfortably afford each month.
Can I just put it on a credit card?
Not sure. But if you figure it out, make sure you put it on your Southwest card and earn some miles -- you'll fly for free for the next twenty years!😉Shout out to my boy, Todd.
How do you estimate the cost of updates to the home?
Before you ever purchase a house, you need to create a list of the known updates you are going to want to make to the specific home you're looking at buying.
There are a few ways to do this and not all of them are perfect:
1. Try and price it out yourself by doing the research.
2. Get a bid from a contractor or handyman.
3. Use other resources like people you know.
4. Read "The Book on Estimated Rehab Costs" by Jay Scott. It's a great book to help you understand the philosophy of budgeting and estimating repairs, but it's not a book that is going to tell you how much everything costs because that is based on your location. So keep in mind that material and labor costs are highly dependent on location.
What's it like buying a house with Megan?
Stressful. Just Kidding.
It's fun because Megan has a good design vision. She could visualize all the tiny details to make the house come together. And it's fun to picture yourself in a house together!
You have to take the other person's wants and needs into consideration. There's no such thing as a perfect house, so you're not going to find exactly what you have pictured in your head -- unless you're willing to put in some extra work.
Meg got emotionally attached to almost every house we visited (this is true--I had to picture myself in every house), which is why it's so important to know what you want and what your budget is before looking for a home. And know that you have to be able to move on very quickly. (We looked at around 25 houses, put in 5 offers, and got in 3 bidding wars before getting our home.)
Can't wait until we do it again.😂
Any final remarks?
*Shakes head* (Those of you who know Shane will understand.)
So there ya go! Any homeowners out there? What advice would you give to folks looking for their first home?
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