Congrats! If you’re even thinking about taking this step, welcome to an exciting journey.
Likely, you don’t happen to have hundreds of thousands of dollars just laying around to throw at buying your first home. As I found out, nearly the hard way, it is imperative that you establish good credit before you even consider shopping for a house.
I never needed a credit card, I always just used my debit for everything. Despite a couple (albeit weak) urgings from my mom to get a credit card, I never really saw the point. Basically with a credit card, you are borrowing money from the bank that they expect you to pay back at certain intervals. Why borrow money when I have enough and live within my means?
This is why. If you’re looking to get a mortgage or even a pre-approval for a mortgage, you typically need at least two years of credit activity. When our lender looked up my information, no report was found! *gasp*
Luckily, my husband had nearly two years of history and very good credit scores, so we were able to move forward, but what a nightmare it would have been if neither of us had any credit!
Prior to getting to the point of looking for a mortgage, we did a little house hunting on a few websites such as Zillow, Remax, and Realtor. I really enjoyed Zillow, because they had affordability and mortgage calculators. Also, my husband and I were very flexible with exactly where we wanted to live (within an hour’s commute of work in any direction), and Zillow was a bit easier to navigate with that particular circumstance.
We had our list of must-haves that we couldn’t live without on our new property, and the list changed quite dramatically when we realized certain combinations simply were not going to be within our budget or desired locations. We also realized that despite that we would love to find our “forever” house right away, we would probably end up getting a house that was a bit smaller and living there at least until we decide to have children, then either do an addition or move again.
Ultimately, we came up with the following for our desired property:
Within an hour of our work locations
About 5 acres (the more the better)
Has a liveable, non-mobile/manufactured, house
Has some kind of shop/garage
We knew we wouldn’t be too concerned if the house needed some superficial work (replacing carpet, outdated counters, painting, etc.).
We found a realtor that we liked and began the process of finding the house. My husband and I would check our various websites daily, comparing different houses, their locations, and values. When we found one we liked, we would ask our realtor to show it to us.
The first one we physically went to look at was a 3,000 sq ft, charming, 1950’s farmhouse. Unfortunately, it was right in the middle of a flood zone. The basement had a waterline about halfway up the walls (great if you want to keep crocodiles in your basement!), and there was also serious water damage from a leaky roof. There was mold on the ceilings and it was about an hour and a half from our work. Some of the rooms were a lot smaller than what we saw online too. (A trick I picked up here: to evaluate if the photos online are stretched, look at the oven. If it looks too wide, the rooms will be smaller than pictured!) We knew this was not the one. However, it was a good experience to talk to our realtor about what we liked/didn’t like and hone in on what we were looking for.
We found two foreclosures that we adored, also further than we would’ve liked from work. However, the market for houses is so crazy right now that they both had accepted offers on them within a few days of being listed. We know many people who are looking for houses right now and they seem to sold within a week, for more than the asking price in most cases. We didn’t have a pre-approval for our mortgage yet, so our hands were tied. We spent some more focused time on getting our paperwork in order and got our pre-approval.
Then, all of a sudden, we found a house we loved.
It was almost exactly one hour from work. It had 4.2 acres with a river through it. It had a huge shop. And it was only listed for $230,000.
I went to look at it with our realtor one day after work to see if it was worth getting excited about (the heartbreak of finding houses you love and seeing them sell in a couple of days is terrible and exhausting). Despite the house being a little outdated (the 70s was the age of burnt orange apparently) and only 1,100 sq ft, I could picture us living there. It had a nice, open floor plan and a master bedroom upstairs. I knew the husband would love the shop, and I could see us spending hours by the river. After work the next day, all three of us went to see the house again.
After we found out it was not in a flood zone, we decided we wanted to make an offer.
Our realtor gathered all of the information he could on the house. We read prior inspections of the home, the septic, and the well. We looked at plot maps, researched what kind of zoning the parcel had, and did more calculations to figure out what we could offer. Because the house was on the lower end of our budget, we were able to scrape together 20% instead of 10% for the down payment.
In mortgages, if you put down less than 20%, they will make you pay an additional monthly payment as ‘private mortgage insurance’ which can be over $100 extra each month. This is to help cover the bank if you default on the loan.
So, with our numbers in order, our realtor drafted an offer. My husband signed everything (because I had no credit, I am invisible on paper) and the offer was sent.
We found out that night that there had been a previous inspection, done about a month prior, that had found a couple concerning issues. The most serious of which were: dry rot on flooring joists and e coli in the well water (yuck!). We immediately started looking for inspectors that could answer questions for us about these issues. Largely, how much will it cost to fix?
Other issues that the old inspection brought up were not a problem for us: smoke detector didn’t work, the gutters were clogged, downspouts needed to be further from the house, the chimney needed a rain cap, some doors were hard to open, etc. We are somewhat handy and can fix a lot with a little help from YouTube.
Our offer, almost $20k less than asking price, was accepted the next day! We were thrilled, although cautious. This house did have a few problems that would need to be dealt with, and it had been on the market for a while. We knew we had to get more inspections done so we knew exactly what we were getting into.
To be continued…