Real Estate Hurdles Pt 2 + Logistics of Purchasing Property

Hi House Nerds! I responded to the rest of the real estate hurdles and listed the logistical steps it takes to buy a house. As always, I'd love to hear from you! 

Your Real Estate Hurdles

  1. I don't want the responsibility of owning a home - I can't even fix my toilet

  2. I don't know if I'll be in this city forever - you can't tie me down!

  3. My credit sucks and/or i have too much debt

  4. My city property value is too high! and/or my ideal neighborhood is too expensive!

My Response to Your Real Estate Hurdles

I don't want the responsibility of owning a home - I can't even fix my toilet
In my opinion, this is the biggest challenge of owning a home. While I've been through some stressful situations with broken garbage disposals and frozen pipes et al, the power I feel in being able to take care of my own home maintenance is incredible. Not everyone wants to feel that power, which is fine! That's why you have referrals. If you're in Austin, ASK ME. If not, i highly recommend the website, Nextdoor for referrals from real people.

It takes practice dealing with service providers. The secret is to GET QUOTES. People want your business and they'll compete for it. Talk to multiple people and make sure they know you're getting quotes from others. Make sure you keep a small reserve of money in the bank just in case. Remember that stuff breaks! It's not the end of the world. Spending money to fix it, or even improve it, is a value add to your own propert. If you compare the amount of money you spend on repairs and maintenance with the amount you spend on rent - you'll see that the responsibility of homeownership is WELL worth it. 

I don't know if I'll be in this city forever - you can't tie me down! 
Helloooo Landlord. As long as you can live in your house for at least 2 years before you move, it's financially worth it to buy and then rent it out when you're ready to move. As long as you can rent it for the amount of the mortgage (or more! Cashflow!), your tenants will be paying down your mortgage while the value increases. Maybe you rent in your new city while you prepare to buy house #2. You've still saved those 2 whole years of rent by paying toward your mortgage instead of paying someone else's. My path in short:

2013-2015         Bought a house and lived in it
2015-2016         Moved into a rental house, rented out my house to tenants
2016-present    Bought house #2 and still live in it, tenants are paying mortgage #1 + cashflow

My credit sucks and/or i have too much debt
Before you decide that this is a fact, talk to a mortgage lender! A low credit score can mean a higher interest rate, but it doesn't mean homeownership is off the table. If the mortgage lender tells you to improve your credit and pay down your debt, MAKE A PLAN TO DO SO. Figure out how to track your credit and improve it in the quickest way possible. I use Credit Karma. Figure out a concrete way to pay down your debt. Track your spending and figure out where your weak spots are. I use Personal Capital. Stick to it and then revisit your home purchase plan. This is definitely a hurdle, but it is not a road block. If you need help of encouragement along your financial rehab path, you can visit my friend, Kara's website! Bravely is an amazing resource for getting your financial ducks in a row to prepare for home purchase. 

My city property value is too high! and/or my ideal neighborhood is too expensive!
Since the mortgage crisis ended, home values have skyrocketed. My zip, for example has appreciated 12% each year on average over the past ten years (national average is 4%). That's INCREDIBLE, but also discouraging for prospective buyers. Don't feel left in the dust! While you may not be able to afford a perfect home in the perfect neighborhood, there are other options! If you HAVE to live within a 1 mile radius in a pristine home, you're better off renting (aka making someone else richer). BUT, if you're creative and determined, you can find a smart purchase in your 2nd or 3rd choice location, which may be your 1st choice within a couple years. 

If you have a real estate hurdle that I didn't address, please reach out. I would be thrilled to hear from you. If you decided to clear your hurdles, keep reading. 

Steps to Buying Property

  1. Talk to a mortgage lender. Be prepared to answer some intimate questions about your finances. Have questions ready, figure out what paperwork is needed, & never feel like you're asking too many questions. It's always okay to shop around lenders too! Having a good relationship with your lender is important. Responsiveness is also VERY important. (I have some great recs if you need someone!)

  2. Once you fill out a mortgage application, your lender will give you a pre-approval letter. This is your ticket to SHOP. It will tell you your overall budget. The lender can also give you an estimate of your monthly payment, which is important! Your overall budget is most likely much higher than you'll want to pay monthly.

  3. Find a badass Realtor. If you live in Austin, I would be MORE than thrilled to help you through this wild ride, however follow your intuition! Make sure it's someone you trust and who comes highly recommended. I also recommend finding a realtor who has gone through it themselves. It would be very hard to guide someone through this emotional, stressful, exciting process if they hadn't personally gone through it themselves. The best part is, as a buyer, you don't pay your realtor! The seller pays the realtor at closing, so it's worth it to find the best of the best.

  4. Your realtor will get your criteria and customize a search on the MLS (Multiple Listing Service). The MLS will send you automatic emails when a house is listed that fits your criteria. You'll browse the listings and let your realtor know which ones you want to get in to. This is the fun part! Make a list of 'must haves' and 'would be nice' - but also some deal breakers. Your realtor should be able to tell you roughly how much it costs to fix or replace things.

  5. When you find a house you like, you'll decide on an offer price and percent down and your realtor will draw up the contract. In a hot market, or on an especially good deal, there may be multiple offers. In this case, the seller's agent will ask for 'best and final'. This is the scary part! You don't want to pay too much, but it's also very possible to lose the battle to a higher offer. Think about the max you feel comfortable paying for the house & if you love it, go in aggressively! Your realtor will have more guidance in the moment depending on the situation.

  6. Your offer is accepted! You write checks for the option money ($100-$300) and earnest money (about 1.5% of sales price) and you're officially in your option period. This is a period of time when you're legally able to pull out of the contract if you encounter a deal breaker during the inspection or you just change your mind. In this case, you would lose your option money, but you would get your earnest money back. Your realtor should make you very aware of these deadlines and their implications.

  7. After option is over, your lender goes into action. They will usually ask for many different documents during this time. They have about 30 days to get your loan through underwriting, which is a second level of approval to ensure we don't incite another mortgage crisis. I always imagine them being very meticulous and mysterious. Buyers do not deal directly with underwriters. The lender will need to verify income and ensure your DTI (debt to income ratio will still be below 50% when all is said and done.

  8. Closing! You'll meet your realtor at the title office and sign what feels like a novel worth of documents. Your realtor and lender will have gone over a lot of these documents together, so nothing should be a surprise. Keys are yours as soon as funding is official. You're a homeowner!

Thanks for reading, y'all! As always, contact with questions. 

Stephanie DouglassComment