Adventures of a First Time Home Buyer! Part 1 - I don't have that kind of money! Better get a loan!

 Welcome to 
The Adventures of a First Time Home Buyer

Part 1 ~ I don't have that kind of money!  Better get a loan!

I don't know about you but I don't have cash oozing out of my bank account...
so when we decided we were ready to buy a home we did the
first thing any potential home buyer should do!

Now, this was fairly easy for us.
That's right...we just happen to know someone.
BUT that doesn't mean it wasn't an adventure...
mainly because I had to dig into my very unorganized filing system for paystubs and tax records.
{note to self - organize filing system once we move into the new house}
after that it was a numbers game...

How much do you REALLY make?
How much do you REALLY qualify for?
How much can you REALLY afford?

An experienced mortgage lender should definitely be able to review your finances and determine whether or not buying a house is realistic or even close to being realistic.  You may find that you need to lower your debt a little {or a lot} or repair something on your BE PREPARED.  Once we were in there we discovered that we had to pay down a few things - not by much - but we weren't 100% prepared for it.  Our lender was able to estimate exactly what we could do with the expendable money we had.

Surprise #1...we had to pay some debt down to get scores exactly where they needed to be!
WTF? Moment #1...the credit score you are given by the credit bureaus isn't always the same as the one a mortgage broker pulls up! 
Sigh of Relief Moment # 1...the little we had to pay down brought the credit scores up significantly.

Once you get all of that drama out of the way, your lender will help you select the best loan product available that fits your finances and abilities.  Ours was easy...FHA was the way to go.  We thought that since we were first time home buyers we would qualify for all sorts of fabulous loans {zero down specifically} but lo and behold...those kinds of loans have many restrictions and we didn't meet the criteria.

Surprise don't necessarily get the cool first time home buyer perks available JUST BECAUSE you are a first time home buyer.  There are income restrictions and credit score restrictions on many of these offers.

Once you figure out the loan type you qualify for you get to play with more numbers...LOTS OF THEM!
Like Sales Price, Down Payment, PMI, Mortgage Insurance, Homeowners Insurance...OH MY!  These numbers drastically change what you thought you could afford!

Surprise # 3...WHAT?  We can't afford our million dollar dream home?  POO!
{kidding...we already knew that!}

Your lender will then provide you with a loan pre-approval letter which will help portray you as a qualified buyer as you search for homes.  Note ~ our lender didn't give this letter to us directly.  He worked with our realtor once we decided to make an offer on a home.

Helpful tips when looking for a lender:
  • Interview and evaluate a few different lending sources. I've read that you should look into at least three different lenders. Obtain recommendations from your real estate agent {if you have one}, family, or friends.
  • Ask loads and loads of questions. 
  • Use a local lender. It makes sense to work with someone who knows the area in which you are buying, can respond quickly, and will make it easier for area agents and title/escrow offices to complete transactions.