Prepare to Purchase
/So, you want to buy a house, but you don’t know where to start. I know, I’ve been there. It can be difficult to get yourself prepared to make such a big purchase. Please read on (and watch the accompanying video) as I walk you through the steps you need to take to get yourself ready to find your perfect home.
Stage One...Perception is Reality
Listen, I know it’s a daunting undertaking -- It’s hard to reconcile this numbers in your head. You’re just getting to the point where you feel financially independent and FREE -- you may have even just paid off your student loans -- and now it’s time to take out a few hundred thousand dollar mortgage for some wood, shingles, and sheet rock someone put together 50 years ago. Oh boy. You’d rather just keep dishing out smaller monthly payments and not attach a massive pile of debt to your name and I get it. I get how difficult it is to sign on the “dotted” lines (there are so many lines -- I would practice your best, quickest signature ASAP) and be indebted to a mortgage company. But if I can give you one piece of advice, it would be to dive in and make it happen.
It is so easy to look at the Seattle housing market and get discouraged, thinking that it is impossible to buy a house. $200,000 feels like a HUGE amount of money...until you realize that $200,000 can’t get you more than a studio condo in one of the hotter markets or a complete gut job in a less-than-stellar area. My advice -- don’t let the number scare you because it is all relative. Your $350,000 investment won’t magically turn into a pumpkin immediately after you buy the house. Our market is higher than most of the country, but the market has steadily increased, along with everything around it. That means you can get approved for a higher loan and wages in this region are higher relative to the rest of the country. While $400,000 may get you a castle in the Midwest, you’ll have a pretty lengthy commute to make it to work every day. Don’t forget -- the home values in the area are the same for everyone. Home prices have no subjectivity and everything stays relative. You can afford a home in this market and you can still find a good deal.
After I finished college, I had aspirations of becoming an attorney, NFL star, reality TV star (not really), or something fun and exciting. The NFL dream quickly fizzled out and I couldn’t bring myself to take out MORE student loans to go through Law School and join the hundreds of other newly-minted attorneys in a saturated field. So I began working a regular-old corporate desk job. I showed up to work, played the game, and began to get myself out of the hole most college grads find themselves in. I figured out how to live on the cheap ($8 Amazon T-Shirts and my Maxxinista finds made up 80% of my wardrobe) and, as a result, found myself being VERY fiscally conservative in my day-to-day life. I am thankful for the opportunity my family gave me to live, essentially, rent free for 5 years (wow, that time flew by), and I am thankful for all the spare time I had in my cubicle when I was done with my work. If not for those things, I wouldn’t be in the position I am in now -- a homeowner before 30 years old. Tell 23 year old Tyler he would have a perfect home (for us, at least) and he would say “Did you win the lottery? Go to the League? You didn’t buy a home -- keep paying your student loans and hush” (23 year old Tyler wasn’t all that nice, apparently). 23 year old Tyler is the one who can hush because, my girlfriend and I searched and found the perfect home -- and, oh man, it is LIBERATING (I never thought I would be so excited about putting up shelves or lighting a fire in OUR fireplace). Now that you’ve got the right mindset and we have discussed why you can, in fact, purchase a house in this market -- let’s talk about how to prepare yourself to make this purchase.
Stage Two...Set Yourself up for Success
Mortgage Lenders are extremely helpful people. I am happy to run you through basic, theoretical knowledge, but if you are serious about buying, your mortgage lender will become your best friend. That being said, I still want to let you know a little bit about the lending side because there are a lot of misconceptions that people see as roadblocks and I want to help navigate you past them.
The two major loan types -- Conventional and FHA. FHA loans require 3.5% down while Conventional has a lot more flexibility. FHA are government-backed loans which have looser requirements (read: certain borrowers with lower credit and/or higher DTI ratios may qualify for more money with an FHA loan). The downside, of course, is that it will cost more because you also have to pay for additional insurance per FHA guidelines. A conventional loan will have more strict qualification guidelines, but will be a bit cheaper per month. Now, there are several state/city/county-run programs which can help eliminate the down payment, especially for first time home buyers. Additionally, certain “agricultural” areas can qualify for 0% down USDA loans which is a different type of loan option. That is a very broad overview, but hopefully it shows that you do have options and there is no “one size fits all” approach to funding your home purchase. Again, your lender is your friend, so if you want to buy, please reach out to a lender of your choice and discuss your mortgage options (I know several great lenders if you need some suggestions) to figure out what is right for you.
Once you figure out what loan is the right fit and what price range you’re approved for, it’s time to figure out what type of home you like and what region(s) in which you would like to look. This can be as firm as you’d like -- I hated split-entry houses before my search, but what do you know, that is what I ended up purchasing. Your tastes will change the more houses you see, so unless you know you cannot have a certain type of architecture or region (due to issues with stairs, for example), there is no reason to fully eliminate it because you may surprise yourself when you find a house you love.
Stage 3...Locate, Find, BUY!
This is the fun part. This is where you scour the corners of the internet, likely using up most of your monthly-allotted data limit, and “Favorite” and “X Out” all the homes. At this point, the world is your oyster and you are looking for that perfect pearl. Honestly, go all out here. Spend your evenings looking at homes online -- figure out what you like and don’t like and get some kind of image in your head as to what you like in your price range. It is pretty common to loosen your strict regulations at this point as you start to better understand the market first hand. That is where your agent comes in -- your agent explains what kind of compromises you can make -- Do you NEED that fourth bedroom? Maybe moving 15 minutes south will let you afford a house with everything you want, at the expense of some commuting time. Let your agent be your friend here. A good agent is never trying to talk you into or out of something, he or she will simply make a concerted effort to EDUCATE you into making the best decision for you. During this Online Perusing Period (OPP - Patent Pending), don’t be afraid to drive neighborhoods and get a good idea of the areas you love and the ones you want to avoid. This may give you some good knowledge as to why that $600,000-looking house is only listed at $350,000 -- you probably aren’t getting a great deal if it’s located in a less than desirable area. Always remember, if something looks way too good to be true, it most likely is. Real Estate is a hot market and the amazing deals rarely stay on the market for long.
Once you have spent some time doing your own research and working with your agent (hopefully me!!) to get a good idea of what you want to do, you are ready for the emotional roller coaster of actually touring homes. That home you saw last week that you absolutely loved? Let’s go take a look at it! As an agent, I make sure to constantly scour the available listings and send them to you -- it is my policy to actually look through the houses myself before I send them so you are not wasting your time previewing homes that will not work for you. During this stage, you need to prepare yourself for a lot of disappointment. As a first time buyer, you are likely at the bottom of the totem pole because you may not have the cash flow to outbid other buyers on a home and you may see several houses slip through your fingers before you’ve even had a chance to submit an offer. Don’t get discouraged -- I promise you there will be more houses and more opportunities for you to find a home you absolutely love. Keep your emotions in check when you tour a home, understand it is a business transaction, and keep an open dialogue with your agent -- if I keep suggesting homes you hate, let me know so I can adjust my approach and tailor it to what you want. I promise, I won’t get offended if you say you hate a home I send to you.
Conclusion…
Hopefully this at least answers some of your questions about the home buying process. There are a lot of steps to take to get ready to purchase a home, but there are also a lot of very knowledgeable people who will help you along the way. Buying a home is a team effort -- it is very difficult to do it on your own, especially as a first time buyer. Please feel free to contact me if you want to discuss anything further or see what steps you may need to take. Thank you for reading and I look forward to hearing from you with any questions you may have!