Monday, July 15, 2013
How to Buy a House in your 20s: Part Two
Welcome back ya'll!
It's round two of our How to Buy a House in your 20s blog series!
Just joining us? No problem! You can catch up with our first post here.
Just to reiterate, these are tips and suggestions that helped us get into our first home at 22. This is what we did and for us, it worked. Hopefully, it'll provide some inspiration and creative thinking for some.
Note: I am not a financial professional in anyway. The advice presented in this article was gleaned from real-life experience and advice from our parents, financial professional and realtors.
Ditch the bank. Join a credit union.
When we merged our finances together, we decided to bank with Delta Community Credit Union. It offered lower interested rates on home and car loans as well as earning higher interest rates for our savings accounts.
Simply put, banks are for-profit organizations. Credit unions are non-profit. We picked the banking institution which we felt would most benefit us in the long run.
In all honesty, we did not get our home loan for our new house from Delta Community Credit Union. However, we feel as though it was a right step toward our financial future that impacted our ability to get our home. After all, we got an excellent interest rate on the car loan for our little Scion. We actually found the car through a car company the credit union works with and got a better deal than what we saw at the local dealerships.
Got student loans? Pay um!
I know, I know. You go to college, slave away, graduate and get to pay student loans until you are 100. Woohoo. However, they can really help you build some positive credit. If at all possible, do not default on a student loan. Don't be late on a payment either! By making late payments or defaulting, you'll build negative credit. Negative is bad. Positive is good.
Unfortunately, great credit is important in the real world. It'll help you not pay a deposit when you rent an apartment. More importantly, it'll help you get that loan for that house or car you want.
If push comes to shove and you can't pay those back just yet, see if your lender will allow you to defer or forebear your student loan. Deferring or forebearing your loan will not hurt your credit. [Read more here] Just remember: You do have to pay them back at some point so don't get in over your head.
When we first got married, our combined monthly payment for our student loans was what we were paying in rent. It was killing us. After doing some research, we are now paying our student loans back with the graduated payment plan. It reduced our monthly payment by half and is so much more feasible.
Side note: Our lender told us loans such as student, car or personal loans impact your ability to get a house more so than how much you owe on a credit card. Why? Because unless you have a gold card without a credit limit, chances are those loans are a higher denomination than what you owe on those credit cards. It's all about that debt to income ratio people!
Ask a bazillion questions.
Reap advice from anyone who is willing to give it. That's what we did. While we didn't follow every bit we received, we heard the same under lying advice.
This also applies to any realtor or mortgage broker you work with. I'm sure I drove our poor realtor nuts asking what probably seemed like the same question over and over again.
No lie. I spent an hour or more on the phone with our mortgage broker so they could explain the Good Faith Estimate to me line by line. (By doing this, I also caught a mistake they'd made that saved us a couple hundred dollars...)
Buying a house is a big deal. You are also spending a lot of money. Be wise and do everything you can to understand where you money is going and why.
Hunt for the perfect realtor.
Realtors do get a pay day when they sell you a home. Therefore, make them earn it. Don't settle for one that's letting you do all the house hunting. Don't settle for one who only answers their phone once in a blue moon.
It took us a couple months to find a realtor we liked. By the end of the process, we loved her! [If you are in the south metro Atlanta area, you can find her here. She comes very highly recommended. ;)] Our realtor fought tooth and nail for us. We firmly believe we wouldn't have this house without her. She even had to whip our mortgage broker into shape a few times!
So, there you have it. That is how we bought our house. It wasn't always a fun process by any means, but it was so worth. Planning my wedding was the most stressful thing I have ever done. Buying a home was the most frustrating - mostly because I have no patience. With buying a home, you've got to have patience. You will get there. I promise!
Do you have any tips to add?