This should really be titled “things I wish someone had told me before we tried to buy a home.” So, because no one told me, I wish to tell you, in hopes that it will help.
1. Realtors and mortgage people do not deal with first time home buyers very often. They are not used to having to walk buyers through every step of the way. Make sure to ally yourself with an outside party (a parent or friend) that has purchased a home before, the more recently the better. You will find this very helpful.
2. But first, we needed earnest money. Earnest money is a “small” amount of money (normally about 20-30% of your down payment) that is given to the seller to show that the buyer is serious. If they do not accept the offer, or the sale falls through, the money is returned to the buyer. If the buyer decides they do not want the house for what they consider a “stupid” reason (it’s too small, we found something better) the seller has the option of keeping the money. The earnest money is part of the down payment and is credited as such at closing.
That evening, they accepted our bid, and the games began. An inspection of the house must be done within 10 days of the bid being accepted. The buyer is responsible for setting up and paying for the inspection. This is not credited back to the down payment.
3. A regular home inspection only covers certain aspects of the house. Be sure to ask the inspectors exactly what the inspection covers. In our case, the initial inspection showed issues with the plumbing. Because the inspectors were not plumbers, we had to call a certified plumber to find out how much repairs would cost. This, of course, was an extra cost.
In our case, we found the plumbing to be a problem we could not live with, so we had to fill out a form that basically said we couldn’t move forward with the purchase until it was fixed. Because the sellers now live six states away, we opted to have them escrow the payments. Why we had to fill out four different forms to make this happen? Your guess is as good as mine.
4. In this case, escrow is an account set up by the seller’s bank to pay for work done by a contractor. The seller gives the money to the bank, the bank gives the money to the plumber, and the plumber does the work. If the work exceeds the amount of money in the account, you can renegotiate with the seller, or pay for it yourself.
5. Some banks won’t let you escrow. Like mine. So, we worked with the seller to pay the plumber without involving our bank. This could end up biting us later if the work exceeds the price we agreed upon. We will have no legal way to negotiate the sellers paying a higher amount. Yes, this scares me.
While this was all going on, I was not only dealing with my realtor– I was also dealing with my mortgage lady. They need a lot of personal information about your history and finances. Make sure you are not giving out this info willy-nilly (i.e. make sure they are legit). And that leads me to point 6…
6. My realtor and my mortgage lady did not communicate with each other unless I asked them to. They each expected me to inform the other of major things happening on each side. We didn’t know that the bank didn’t approve the escrow until almost a week after we had agreed to do it because I didn’t tell my mortgage lady about it and neither did my realtor.
7. They need your race, nationality, last two paychecks from all places of work, info on all other loans you currently have including credit cards, social security number, one month’s bank statements for all accounts, tax records, W2’s and work history for the last two years. In my case, I had just graduated from college, so that was used as my work history. I had to prove it by getting my transcripts reprinted (in the summertime).
We were a little short with the down payment, so my mom lent us some money, except…
8. You can’t acquire any new loans while applying for a mortgage, even from family. A family member or employer can gift you money, but they must sign a form saying it is a gift, not a loan, plus provide bank statements proving that it is their money, not a loan or gift from a third party. My mom transferred the money from her saving to her checking to cut me a check and then had to prove it.
9. You also need an appraisal. An appraisal is different from the inspection; it is done much later in the process and ensures that you aren’t overpaying for the home. This is something that the buyer is responsible for paying, but is credited back to the down payment.
10. Banks get overwhelmed with closing at the end of each month and will push back your closing date. Then you have to sign another form allowing them to do this.
The most important thing I’ve learned from this: have easy access to a scanner or fax machine. The biggest hang up I encountered was having no easy way to have my fiancé sign paperwork (while at work) and send it to my realtor. I ended up driving all over town, wasting gas, time, and money. We probably could have closed early if I had my own scanner.
New homeowners, any “wish I’d known” tips you’d like to share?