A few weeks ago, I closed on my first home. (Two months ago, I didn’t even know what closing on a home really meant…that’s how fast this all happened!)
Still, we’ve been on the road to this day for a few years. My husband and I paid off our student loans and my car loan about three years ago and have been saving for our down payment and extra money for expenses ever since. A lot. As much as possible. Often, more than 50% of our net income.
It wasn’t easy, but we knew it was smart to wait and save as much as we could as we transitioned from depending on a landlord to depending on ourselves. Here are some lessons we learned along the way:
I cannot stress just how important it is to be patient during the home buying process.
For starters, there have been very few times in history where both home prices and mortgage rates are so shockingly low. Usually, it’s one or the other. Because we waited, we were able to snag a 4.0% fixed-interest rate and negotiate a price on a home that was well below it’s market value. We also felt like we were able to skip the so-called “starter home” and jump right into a home that will be large enough to accommodate a future family. This way we don’t feel like we’ll have to move any time soon—or ever—if we don’t want to. This was a purposeful decision because we are definitely not interested in selling a home in a couple of years in a bad housing market.
As with any home purchase, we faced a few bumps in the road. Negotiating was especially tough (more on that later). Tears were shed. Husbands were forced by their wives to call real estate agents and “get tough”. Numbers were crunched. Breakdowns happened. We almost lost our dream home.
But every time we wanted to cave in or move on, we stayed patient. In the end, the sellers caved and we got a better deal.
Consider Credit Unions
For our mortgage pre-approval, I immediately went to the local bank where we have accounts. They were nice enough and gave me a good deal of helpful information. But their closing costs about gave me a heart attack. And their interest rates fluctuated daily—common for most institutions, but still something that made me nervous.
Luckily, someone recommended that I check out some nearby credit unions. Boy, am I happy I did! Their interest rates did not fluctuate daily and were even slightly lower than our bank. Even better, though, were their closing costs. In total, we paid about $3,200 in closing, which was about half of what our bank was going to charge. (We also were able to negotiate that the seller paid $2,000 of our closing costs, helping us out even more.)
Expect Unexpected Expenses
Since the sellers accepted our offer, we’ve been shelling out money for a lot of things we didn’t anticipate.
In addition to the closing costs (e.g., title insurance, appraisal fees, and more), you’ll have to foot the bill for any inspections you want conducted on the property. For us, this meant a building inspection, termite inspection, and radon testing.
Our inspector found two dozen minor issues that needed to be fixed within the house. So we’ll be loading up on caulk, hedge trimmers, and new dryer vents in the weeks to come; all expenses we hadn’t anticipated when we were saving for the house. Sure, this stuff comes along with home ownership, but it was all new to us.
After we moved in, we also shelled out $125 to replace the locks. We needed a refrigerator and washer and dryer set, so I stalked deals and coupons sites for a couple of days before handing over $3,000 for all three appliances. We also bought a new lawn mower just yesterday for a cool $300.
Prepare for An Emotional Roller Coaster
Negotiations can last a day or a week or a month—however long it takes in your particular situation. And this time should really be called Hell Week.
We submitted our offer on a Sunday and didn’t have a signed contract until the following Saturday. Here’s how our week went:
- Sunday: Submitted a low offer and asked seller to pay closing costs.
- Monday noon: Received a counter of $5,000 less than their listing price. No closing costs. We countered at $10,000 above our first offer.
- Monday afternoon: Sellers countered at $2,000 less than their previous counter. Confused yet? We countered back with our final offer of $20,000 above our original offer and asked for closing costs.
- Monday evening: Sellers countered with their final offer of $2,000 above our final offer and would not offer closing costs.
- Later Monday evening: We agreed to their price, but said we still wanted money for closing.
- Tuesday: We waited.
- Wednesday: They lowered their listing price. They were playing hardball and looking for other offers. At this point, we started looking for other houses.
- Thursday: Nothing. Even worse, we weren’t interested in ANY other house. We considered giving in to their final offer.
- Friday: Their realtor calls our realtor three times to feel us out. Finally, at 3pm, they accepted our final offer. Hooray!
That entire week, I couldn’t concentrate. I couldn’t focus on work or anything else. It was especially devastating because there were no other houses we were interested in. We were even considering backing out of the home search for a couple of months and continuing to save.
It seemed silly because both of our final offers were so close to each other. It was almost comical that we couldn’t agree on something. Truthfully, we would have caved to their final offer the next week if they hadn’t finally agreed to ours.
When hundreds of thousands of your dollars are in limbo for a whole week, it’s slightly traumatizing. Be prepared!
Don’t Fall in Love With One House
I kept beating myself up over this during Hell Week. I was so irritated with myself that I had fallen in love with one house. This is not the trap you want to fall into when you’re shopping for a home. Remember: have a few different houses that you’re interested in when you go to the offer table. Otherwise, you’ll drive yourself crazy during negotiations AND you’ll probably ending up paying more than you wanted.
Keep Things Professional With Your Realtor
I live in Kansas, where college basketball is in almost everyone’s blood. Our real estate agent was no different—he was one of the biggest sports fans I’d ever met. There were many times where him and my husband were on long tangents about sports or tournaments when I wanted to be talking business or looking at a home we were viewing. Of course, this set the two of them on a friendship vibe instead of a business vibe.
During negotiations, we weren’t thrilled with a few things our realtor did and said. So when my husband had to get tough with him, it was harder because they’d been treating each other like pals instead of business associates. It’s fine to be friendly, but everyone needs to remember that there’s a lot of money and a big life decision on the line.
Enjoy The Process
If you remember to take a step back and enjoy the process, it can remove a great deal of stress. Spending Saturdays looking at homes is fun! Knowing that you’re about to be a homeowner is exciting. You get to choose your perfect house—-no one can choose for you. It’s definitely a process like no other, so take the time to relish it!
What about you? If you’re a homeowner, what did you learn from buying your first home?