What to Know About Buying a Home: FAQ's, Money, Real Talk
I can’t even begin to try and count the number of times during the home-buying process that I thought to myself, “WHY DOES NO ONE TALK ABOUT THIS?!”
Even with a great realtor and mortgage lender by our sides, this whole process very much felt like being thrown in the deep end of a Triwizard tournament maze with no wand to navigate it, simply because of the lack of exposure to knowledge about this process and how rarely people discuss their experiences with this openly. Which, I understand that a lot of people are private about their finances and these things, but I personally felt throughout this process that I couldn’t wait to share more about our experience with others so it wouldn’t feel like such an overwhelming, foreign process, because it really shouldn’t be this complicated or confusing!! Especially considering that on Instagram, it so often can feel like a 1-2 step process that people are doing left and right seamlessly, so it can give a false illusion that it’s an easy process, but it isn’t that way for most people IRL.
I formatted this blog post using the most frequently asked questions submitted on my Instagram Stories, and I’ll be continuing to add to this post as pertinent questions come up— feel free to leave more questions in the comments below!
I’ll kick it off with this fitting first question:
“What advice would you give to someone after going through this?”
Be prepared/research, don’t be afraid to ask EVERY single question you have (no matter how "stupid” you might think it is), expect it to cost more than you anticipate, don’t expect you can control everything / timing of the process, and prepare to have it kind of take up all mindspace / time. If you’re not someone who loves emails / having to respond quickly, buckle up and just brace for a period of intensity at the beginning/middle of process. Things will WILDLY vary, depending on location (aka how intense the market is), your preparedness/flexibility of funds, credit history, flexibility of timing, and the professionals you are working with.
RENTING VS OWNING
“I have a fear of going from renting to owning. Never owned, so am nervous to buy!”
I feel like once you hit a certain age / income bracket, you start to wonder why you are “throwing away money on rent,” instead of owning a property that you are investing your money in.
I hear that! BUT it’s really not black and white— there are definitely pros and cons to both sides, and it’s more about what is right for YOU at your current stage of life and your priorities over the next several years of your life. There is no universal one right answer— but just don’t buy a house because you feel pressure to, or like you “should.” Make sure it’s something you truly want!
Also, I want to acknowledge how challenging it is for the majority of people in this economy to feasibly save up for a down payment for a house while renting— especially in larger cities.
As someone who just bought a house, it might be surprising to hear me say that owning is NOT the right decision for everyone! But I truly believe this, based off this process and also just discussing with people who I consider to be more financially-educated than I am.
Pros of owning: You OWN your house— you can make the decisions about your home, there’s a pride in ownership, you are pouring your dollars into this place and have equity in it, unlike if you were renting. I’d say it also makes more sense if you are financially prepared to do so and have a clearer idea of what the next 5-10 years look like for you.
Cons of owning: You OWN your house— aka no one else is responsible for anything that happens to or in your house. Pipes burst, appliances stop working, electrical work needs to be done, etc. The majority of homeowners I know have encountered unexpectedly high costs even during first year of home ownership due to these things that all inevitably happen (we’ll go more into home warranties later and also unexpected costs at time of purchase). Also, while some people think they can sidestep some of these financial curveballs by purchasing a new build vs an old home, that’s only really true to an extent— stuff still happens, and it depends on the quality of your build, whether you’re hooked up to public utilities, and just the inevitable parts of owning a home.
Pros of renting: Your rent money is not just paying for the cost of living in that rented space— it’s also paying for the convenience and freedom of responsibility over things going wrong. Pipes burst, appliances unexpectedly break, etc., it’s your landlord’s responsibility (not just financially, but also getting the repair done), not yours. There’s also flexibility in renting— you’re not tied down to one location in a permanent sense, and the longest commitment you’re likely having to make is 12 months.
Cons of renting: The money you’re spending is not building any equity— it’s going directly in your landlord’s pocket. Especially in larger cities like NYC, that can be a hard pill to swallow.
The Process: Looking for a home, what to look out for, etc.
“Where to begin in the process? So much anxiety, decision paralysis, overwhelm. What were your main sources of info/answers about the process?”
I totally understand, it can be an extremely overwhelming process! Especially when you’re not familiar at all with how the process works, what you need to prepare for it, and all you keep hearing is how crazy the market currently is (which, fair, it really is).
Google can help you kind of understand the GENERAL process, but the process will also largely be influenced by where you are looking to buy. I would definitely start with internet searches (and internet searches are the safe space where you can google questions you might feel are dumb but they’re not!) to get a general sense of the process and the things you need, then when you start talking with a real estate agent and prospective mortgage lenders, you get much more clarity on everything.
“Did you have a real estate agent?”
Hahahahahahaha I cannot imagine for the LIFE OF ME how someone could go through this process without one, unless you were once a real estate agent yourself and even then, NO. Our agent was amazing and we would not have survived without her. PS, seller generally pays buyer’s agent fees in closing costs.
How to find an agent: you can totally look agents up in your area with good reviews on Zillow or Yelp, but honestly if you know anyone (yes, even your random friend from high school who you don’t speak to anymore) who has gone through buying/selling in the area you’re looking to buy, ask for a referral! That is how we got connected to our agent.
I would also wait to actually engage with an agent until you’re serious and pretty ready to start the process. You can also definitely have intro calls with a few agents to get a sense of how they work, their personality, and working style— this is IMPORTANT, as they will become your BFF you talk to more than anyone during this process, and it’s invaluable that your communication styles mesh and that you genuinely trust them.
“How long did it take to find the right home?”
This question is honestly best compared to asking someone “how long did you date for to find your significant other?” The more you look/put yourself out there, the higher likelihood that you will find your match— but it’s one of those things where you cannot predict the timing of it, because you could spend weeks with ZERO listings you’re interested in coming on the market, but then suddenly the right one pops up and you’re ready to give away your first-born for it.
I had Zillow searches set up for all the areas we were open to living in (criteria set for our budget, no. of beds/baths, etc) I’d say for the past year. I started to seriously stalk listings about 4 months before we connected with our realtor— and by stalk, I mean I literally could recite every listing’s details by one glance at the photo of the house, because that’s just me. The thing is, you really can’t get mentally married to any of those houses you’re looking at if you’re in a market like LA and aren’t ready to put in offers right then and there (and be pre-approved already)— because any decent house would fly off the market within a week.
But what my extreme Zillow obsession DID help me with, is understanding house lingo better and what we could realistically get for our budget, what houses were selling for, and helped us narrow down what were “must-haves” vs “nice to haves.” This helped us understand what was most realistic for us, all factors considered.
“How long did the process take? From looking to signing?”
For me, I felt like it was a 7-step process: Mortgage pre-approval + looking at houses, the offer/bidding stage, offer acceptance/negotiation, the actual loan process, inspections + due diligence (title, disclosures, etc), closing on the house, then the flurry of things that need to happen right after closing.
This flow chart my real estate agent showed us as a general “timeline” of the escrow process (below)— I’d say it’s pretty accurate, though in different markets, some of those steps are happening all at once. For instance, the SoCal market around LA where we were looking was insane, so to be competitive (more details on how to be “competitive” in the next section), we had a 21 day escrow… which is FAST. So 21 days from the day our offer was accepted, we closed on the house. Our inspection, appraisal, reports/disclosures, and requests for repair were all happening at once. That was the stage that I probably gained the most white hairs and I cried almost every day out of sheer overwhelm. But in a lot of markets, 30 day escrows are more standard I’d say.
“What is the pre-approval process like? Do you need one before you start looking at houses or do you start looking at houses first?”
The process of a pre-approval with a mortgage lender is fairly straightforward.
In competitive markets in bigger cities, it’s highly likely you need a pre-approval before you seriously start looking at houses (aka ready to put an offer down if you find “the one”), because many listing agents won’t even let you schedule a walk-through appointment without one, as to not waste their time and to weed out non-serious buyers.
What we did, was we got recommendations from our realtor on several lenders. I reached out to all of them to schedule initial consult calls— on these intro calls, you generally give an overview of your financials, credit score, budget, and ask them about their loan products, rates, and process. Pay attention during these calls to their communication style— the mortgage process is HIGHLY stressful, confusing, and there is a lot of very timely communication, so you want to make sure you’re working with a lender that has a compatible working/communication style to you. I talk about that a bit more below in the “Money” section of this post, but do chose your lender wisely! We did not go with the right lender at first, and that wasn’t fun.
After these intro calls, you can decide to get a pre-approval with one (or more, technically you can get as many pre-approvals as you want, but it’s not necessary / can be slightly frowned upon) lender— this pre-approval packet basically gives you the information you need to put in an offer on a house. It shows what loan amount you qualified for through that lender, and basically assures a seller that you, as the buyer, have been fully vetted as a qualified buyer for their house, and you’re not an Anna Delvey. Also, a pre-approval generally is valid for 30 days, so you’ll want to get that going only when you’re really ready to buy.
To sum up our timeline: We started the pre-approval process and selected a lender in late December. Then we actually switched lenders because it was not the right fit (that’s a story for another day), and right in the middle of that, the listings for some houses we were seriously interested in came on the market— including what would end up being our home. So we were waiting for our new lender to give us that pre-approval like we were runners in a relay race, and as soon as we had our pre-approval (and knew exactly what capabilities we had with our offer), we basically took it and flung it at the sellers along with our offer in early January when offers were due. The other 2 houses we were eying quickly flew out of our budget and we really loved the house (that is now ours) we wanted originally, so all focus turned to that. Then came the counter-offer process (which with our seller, was NOT FUN… story for another day), and a lot of holding our breath over and over until our offer was accepted.
Location: How to choose where to buy, deciding on neighborhoods, etc.
“What things most important to consider when deciding what state to live in?”
This answer will be so different for different people and lifestyles!
I think for a lot of people especially since the panini, we’ve all done a deeper dive into what is really necessary and important for us to feel good in our day-to-day. So identify what brings you happiness, what is good for your mental health, and the general things you feel you need to thrive— then see what cities might be supportive of those things! Things like weather, access to outdoors, public transportation, proximity to airports if you need to travel a lot, lively culture with lots of dining / entertainment options, remote areas, being by family, good school systems if you have kids, etc.
Then after that, I think it’s important to look at some other factors too— for me personally, especially after the last few years, it’s a non-negotiable for me to live somewhere racially diverse in population and generally progressive. For some, lack of income tax in certain states can be a big incentive. Then, if you’re buying a home in that state/area, it’s important to look at real estate taxes in that area, public school ratings (even if you don’t have kids, this impacts the value of your house), the growth potential of value of that market, and so forth.
“Why California? How did you choose which neighborhood, especially without being there?”
California was a decision for us made up of a lot of factors! Many of the factors listed above were taken into major consideration— we knew we desperately needed more space with both of us WFH, more accessibility to outdoor areas/activities, obviously a backyard for Benny 🤣, it holds potential for both of our careers, we’re closer to Justin’s family, and we are both pretty familiar with LA. I won’t say no to the weather either, after enduring my 13th New York winter.
As for deciding on neighborhood without being there— we both have been to LA a lot for work in years past, so there were several neighborhoods we knew well. A lot of them were unaffordable for us though in terms of what we wanted and our budget. We took a trip out to LA in December shortly after we connected with our real estate agent, to look at and drive through different neighborhoods and walk through some houses just to get a feel for what we really needed and wanted.
Ironically, our house is in a neighborhood that we didn’t explore on that trip, but when the house popped up and we did some research on the area (lots of Google street view stalking, searching crime rates, and Google Maps-ing how far all of the stuff we like/want near is was from the house), we were good with it. Honestly, I don’t know how people did this before the internet! We haven’t moved yet, so obviously that may change 🤣 but hope not! In all seriousness though, for us, we also really identified that the house itself was extremely important to us, moreso than what was in the immediate surroundings— we both WFH and are generally homebodies, so that was our priority,
All the money things: Loan, mortgages, finances behind process.
“How did you determine price range and stay on budget?”
Just like when shopping for anything else, I don’t think it’s so much you deciding on your budget versus it being decided FOR you because of your finances and what you qualify for with a mortgage lender 🤣
You have to consider your income, liquid savings, assets, credit score standing, and also risk tolerance (aka how much of your savings do you feel comfortable putting into a house, the steadiness of your income [you’re committing to a mortgage, so this is important])— and obviously if you’re purchasing with another person, all their financials come into play too. Depending on the market and your mortgage lender, you can discuss various down payment percentages too, based off your liquid cash you’re willing to put down.
Buying a home is also an emotional process— it can get dangerous if you fall in love with a home so hard that you’re willing to go over budget for it, because that is likely going to be stressful for you down the road. Once we got our pre-approval information and knew the amounts we qualified for, the rates, etc., we determined our smart maximum ceiling on spending on the house itself (accounting for all closing costs, costs of some repairs, moving, etc.), before we even went in with our first offer. This helped us avoid any emotional overspending, because we knew we had a hard limit to stick to.
One thing that also helps to consider this that our real estate agent told us, is what price would you be absolutely kicking yourself that you didn’t come up to if another person got the house with that number. We had to make sure that we emotionally knew that if it went beyond our smart ceiling amount, we couldn’t ruminate and regret it because we knew that would have been the irresponsible decision.
“Any first time home buyer loans or other benefits/programs you qualified for?”
We did not do any of these programs, but ALWAYS ask lenders what incentives they have for their loan products when you’re having initial calls with them.
We also worked with a local lender, rather than a big national lender because of how competitive the market was in the area we bought in— despite slightly lower interest rates, a national lender would almost certainly not have been able to get this loan pushed through in the 21 day escrow period that is somewhat needed to stay competitive with offers in that area. Also, our lender had worked with our real estate agent on numerous transactions so they had a great working relationship— I cannot emphasize enough how much that helped us during this stressful process too, and I’m so glad we made the uncomfortable decision to switch lenders because we knew something didn’t feel right, because we ended up with a lender that was wonderful.
“Down payment— worth to save up and put 20% down? What % did you put down?”
I grew up with the mentality that you had to put 20% down on a house— I think a lot of us in my generation did, because the market and times that our parents bought homes in, it was that way! But now, I don’t always think that’s the optimal choice DEPENDING on your financial situation.
Typically if you put less than 20% down, mortgage lenders will charge you a monthly MPI (mortgage insurance) fee that will largely also be dependent on your credit score. Different lenders have different loan products though, so this isn’t always the case!
We put less than 20% down and because of the loan products our lender was able to provide, we don’t have a MPI fee. But even if they did have the MPI fee, we would have still put down less than 20%. Why? I didn’t feel comfortable putting down all my liquid assets and being “house poor,” because I don’t have a super high risk-tolerance, and honestly what I can make in 5-10 years by smartly investing that money I didn’t put toward the down payment will more than likely exceed the interest paid on a higher principal amount. Also, as a homeowner you want to make sure you have enough funds to be able to take care of any repairs or issues that will inevitably come up after purchasing the home. Speaking of which…
“What were some unexpected costs of the process?”
Everything. And I think that was the part that aggravated me the most— because while I KNEW to anticipate lots of unexpected costs (closing costs, inspection/appraisal fees, and then just lots of logistical things that come up), and padded our budget taking ALL of that into account, there were still a small handful of things my frugal ass was like 👀👄👀 about— this is also location dependent too! I had the unfortunate learning experience of discovering California’s “supplemental taxes” that almost made my head pop off. . I am that person that anticipates everything (ahem, control freak) and makes sure I ask 93982043 questions to know exactly what I’m walking into, too.
I’d say it’s also mostly in the post-close stuff that you rack up the “extra” $$$ bills. Repairs to the house that the seller doesn’t pay for (BTW after seeing how much plumbing + electrical work cost, I’m ready to quit my job and go train to be an electrician) depending on the condition of your house and what the inspection report comes back with as necessary repairs, furniture if you need to furnish the place, moving costs, and any appliances that maybe didn’t come with the house (we had to buy a washer/dryer).
If you’re also moving long-distance, you have to also budget for all those costs: flights (not just of the move, but likely needing to visit during inspections and so for, moving, potentially hotels if timing doesn’t align,
Also, depending on your closing date and your mortgage lender, you definitely want to know when your first mortgage payment is due. We were lucky to get a little breathing room to not have our first mortgage payment due until about 1.5 months after close (but then certain interest-related fess were higher in our closing costs— nothing is free 🙃).
