This is Part 2 in a series. You can read Part 1 here.
We first began looking at homes online through Zillow (geez, I can lose hours on Zillow) to see what was available, checked out a couple of open houses, and contacted Quicken Loans to get a quote on a mortgage. We pulled our credit reports and checked for errors as well as comparing the debts listed against the debts I track on my spreadsheet. We compared a few loan types including VA, FHA, and Conventional. We began to work with our Realtor and he recommended a local mortgage broker rather than an online mortage broker since the local bank had knowledge of homeowner incentive grant programs in our local parish (that’s county for all you non-Louisianians).
We settled on a mortgage broker from a local bank based on a recommendation from our Realtor. We started going through the pre-qualification process with them to find out what we qualified for. We knew that we didn’t want to take out a mortgage loan for as much as we could qualify for, since we wanted to be able to comfortably make the payments and not over buy, so we told the mortgage company what range we were looking in and asked them to give us quotes for what a mortgatge for that price range would look like in terms of monthly payments.
We thought we would go for a VA loan because of my husband’s prior military service, but we decided against it when we realized that it had higher fees and rates and we didn’t really need 100% financing since we had a downpayment. So next we looked at FHA loans since we were looking to put down around 3.5%. Our mortgage broker told us about a parish incentive program for people looking to buy their first home in the parish who made under a certian salary cap. We qualified for the program and I asked about all the strings attached since usually those grants require you to stay in the home a certain number of years, etc. But there were no strings! (I checked and double checked).The FHA with the bond money (grant money) came tied to a 30 year fixed APR at 4.7% which we thought was pretty good and we planned to pay it off in way less than 30 years. When my husband graduates from school and starts working full time again we plan to continue to live off of just my income and chunk his income at his student loans and then at our house payment.
We were excited that we could use the grant money from the parish to pay almost all of our downpayment and keep most of our money for savings and for paying for things we may need to fix or buy for the new home. That was so exciting since I was so nervous about buying a house and totally wiping out our savings since that just seemed like it invited disaster to strike. Plus, I hear callers in to the Dave Ramsey Show calling about just that situation and Dave would talk about how buying a house when you’re broke only invites Murphy in. So I really wanted to make sure we were being responsible. Yes, we hadn’t followed the baby steps by buying a home while we were still in debt, but I still think he made a good point about making sure to have an emergency fund, especially as a new homeowner because now you are responsible for all repairs and there’s no landlord to call.
So with the ball rolling on the mortgage, we asked our Realtor to take us looking at some houses in our neighborhood. We liked our neighborhood for its proximity to my husband’s school and my work, as well as its central location to all our friends, shops, and restaurants. We particularly were interested in forclosures since I have had friends in the DC area who have snagged great deals going that route, and because we still had about 6 months on our lease so we had time to wait if we needed to. Our Realtor cautioned against forclosures and short sales since they were a headache, but of course we thought we knew better.
He was a good sport and agreed to take us to look at a few houses we had picked out in our neighborhood, including one that was a foreclosure. We learned a few things on that first house hunting trip:
1. Listen to your realtor when he cautions against foreclosures
Our Realtor agreed that there were some good deals to be had with foreclosures, but that they were often way too much of a hassle for first time homebuyers. He also said that many need a lot of work. In my naiveté, I didn’t know what “a lot of work” meant until we saw this first house. This foreclosure was a total wreck. The windows were broken and looked like rocks had been thrown through the glass or they were covered with plywood. The floors had had standing water on then as evidenced by the ring on the baseboards and the completely warped laminate wood flooring. The house smelled terrible, the backyard was just dirt and rocks, and when we turned the corner to walk down the hall there was what looked like blood smeared on the wall. We ran out of there. Perhaps if those were the only issues with the house and we loved it otherwise we could have gotten it at a price low enough to cover the cost of the repairs it needed. But, as our Realtor pointed out, if some bad seed is being foreclosed on and is angry, they may have inflicted damage on the house intentionally or they may have just totally neglected it, so lord knows what other problems may lurk beneath the surface. It reminded me of an episode of Flip or Flop where the former homeowners poured concrete down the toilets when they were foreclosed on. So terrible. No thank you.
2. Small is really small
We were used to living in an apartment and I felt that a 1200 square foot house would give us the room we needed. After all, we didn’t need a lot of space and I didn’t want to have too big of a house to clean and heat or cool. But after looking at small houses, we realized that small really is small. Sure, a good layout does wonders but if we are looking for a home we can grow into, small isn’t it. My husband decided we needed to look for homes over 1600 square feet and while that dramatically cut our options for what was available in our price range, I agreed with him after seeing a few homes that were way too small.
3. You can’t change location, but you can change everything else
Location, location, location. Of course we have heard that old adage about real estate but its so true. You can’t change the location of the property or the size of the property, but you can change just about everything else. On that first house hunting trip we realized that a lot of the homes in our neighborhood were small and had small yards. Since a yard is really important to us, we realized that that wasn’t the right location and looked for other neighborhoods with bigger lot sizes.
4. Weird layouts suck…and you always need a door to a bathroom
Weird layouts that don’t make sense are a dealbreaker for me. I do not want to add or remove walls, though if its a simple fix I may be open to it. But completely reconfiguring the plumbing of a bathroom and adding a new wall and door to enclose it? No thank you. Why do people even build bathrooms without doors on them? And by changing the layout I do not mean “oh, I prefer the tub to the left of the shower”. No, I mean the tub was in the bedroom (yes, you read that right). That’s why you need doors to section off a bathroom. This one house my husband and I looked at ticked all our boxes and was a bit dated (read: popcorn ceiling) and had a small-ish but useable kitchen and was way under our budget (like $15,000 under). Plus it had a garage (albeit a broken door) and a nice sized fenced yard. But we would have had to completely reconfigure the master bath so that the tub was not actually in the bedroom (yup, next to the fireplace…what is this, a romantic ski lodge?). Plus it had a scary shower (see below) that needed to be completely re-done. Despite the low cost we would have had to sink a chunk of change into it. And unlike people on Property Brothers, we don’t just have those “savings” lying around (seriously, who has a budget of $250,000 and “saves” $30,000 on a fixer upper so that means they have that money in cash just lying around to pay for renovations?). We were open to a house that needed work which we could do over time, not something that needed to be done just to make it hospitable.
5. Scary Showers
Another thing that we learned was a dealbreaker for us was scary showers. Those are the small tiled in showers that are about 3 square feet large and the ceiling is about three inches above your head. They have no light in them and are these tiny, wretched coffins that spout water onto you. Shudder. I value my shower time and want the shower to be a place where I can relax and be comfortable, not fumbling around in a dark box too small to even bend over to shave my legs. And fixing them means that you have to rip them out and totally replace them with a normal shower. (cash register sound effect) No thank you.
Stay tuned for Part 3…..