Our Home Buying Experience ⋆ Golden Circle Homestead

As first time home buyers, Jonathan and I have been completely new to the experience. We started to outgrow our current home when we had Landon, but it wasn’t until a year ago that we started seriously looking into what it would take to buy a house. The major things included saving for out-of-pocket expenses like a down payment and closing costs as well as building up our credit.

Looking back, I’d call it a roller coaster of an experience. There are ups and downs, fast and slow moments, going back and forth. At one point you are exhilarated from the thrill and the next you want to scream at the top of your lungs. The entire time there was a pit in the bottom of my stomach due to the excitement of a new journey. For a smoother transition, here’s what I learned and what I wish I knew going into this process.

Credit Plays a Big Role

Aside from maybe some credit cards or a car loan, a house is probably the main purchase your credit score will impact. You credit score will impact your pre-approval amount and interest rates. Having a credit score (a good one) is the easiest way to go through the mortgage process, but that doesn’t mean it’s the only way or the best way. It IS possible to get a mortgage without a credit score, but you will need to go through manual underwriting and you’ll have a bigger obligation to prove your payment history. At the time, we were not aware and thought a good credit score was the only option. In our case, we had to do some quick work to get our scores up to get a better rate for our pre-approval. Thankfully, we could do this right alongside saving.

Shop Around for your Team

You’re not going to mesh well with everyone. Even if you did, someone is going to offer you something better. Shop around for your realtor, loan officer, inspectors, and appraiser. You should find a realtor who understands what you want and can work well with the rest of the members on your team. You want a loan officer who is trustworthy, communicative, and can offer you a decent pre-approval at a good rate. When you’re shopping around for loan officers, have a list of ones you want to contact and price out so that your credit score isn’t hurt every time you have a hard pull inquiry. Additionally, you want a reputable appraiser. (Although, if you’re doing an FHA you generally won’t have any say.) You will have to some deeper digging to find a loan officer who will go through the manual underwriting process if you don’t have a credit score.

Budget

Everything is always more than you think it’s going to be … even with a quoted projection that factors everything in. Over-budget and put as much on the down payment as you can to cut down on your mortgage. You’ll want to budget for closing costs, home insurance, inspections, appraisal, and the down payment.

FHA vs Conventional

There are very large pros and cons to both an FHA and conventional loan. A conventional loan gives you the freedom to make whatever choices you want about your purchase. There are nearly no restrictions. You can choose who you want your appraiser to be (or even if you want the house appraised) and you aren’t limited to the appraisal’s value. You can buy the home as is at whatever cost. Conventional loans can be more difficult to get as you have to have a killer credit score to get pre-approved (unless you go the manual underwriting route) and are generally required to put a much larger down payment on the house. An FHA loan also requires a credit score that will impact your pre-approval and loan amount, but can be much lower. It provides buyer protection with requirements of an inspection that could mean the seller has to make certain updates and changes to the property for the buyers safety and fairness of the transaction. It also requires an appraisal that protects the buyer from not over-paying for a house. This can be challenging if the seller doesn’t want to match the appraisal. If that’s the case, the buyer will be required to pay the difference of the appraisal out of pocket if they still want to purchase the home.

Don't Underestimate Time

While you may have a very quick transaction, especially if you are going conventional, an FHA will likely take longer to make sure all the i’s are dotted and t’s are crossed. Have an expectation of at least two months from the time you make the offer to the time you close and have the keys in your hand. From inspections and potential home improvements that need to be done to final negotiations, a lot can be up in the air.

Keep an Eye on that Mortgage

You closed and are an official homeowner … keep an eye on that mortgage. You’ll notice two things: you may have the ability to refinance and get a lower interest rate and the percentage of your mortgage payment that goes toward the actual principle is extremely low compared to what goes toward escrow etc. The more you can put down on your monthly payment – the better, as it will go directly to your principle to help you pay down your mortgage sooner.