In what feels like a blink of an eye, Chad and I have gone from novice realtor.com scrolling renters to under-contract first time homebuyers. It’s been crazy, surreal, and quite a transformation.
At the beginning of March, we met with a lender. Then, a realtor. And in the span of two weeks, we saw four homes, put an offer on two separate places, and officially went under contract with what will be our first home. We close on May 20, which gives us the luxury of time to get ready.
Amid the COVID-19 madness, things have had an extra layer of crazy. We already didn’t expect to buy a house right away, and we really didn’t expect to need masks to see our future home, or to drop off our earnest money through a slot in a door. Wild, guys. It’s been absolutely wild.
Anyway, I wanted to create a straight-forward resource for other people who are starting homebuying journeys of their own. It can be a tough process to navigate, so I’m going to break down our experiences. Feel free to pin or save for later, if you think home ownership is in your near future.
Here’s what I’ll be covering in this post, detailing the beginning steps:
1. Save (and budget!)
2. Choose and meet with a lender
3. Choose and meet with a realtor
If you have any questions after reading, please ask away in the comments!
Prelude: Do Research
Before you officially start any kind of homebuying steps, you need to first do some research. It can seem overwhelming to know where to start, but it’s crucial that you know what you’re getting into.
For us, we started by searching what we did know: we’re going to be first time home buyers. We plainly started out by searching that phrase, along with “how to,” “where to start,” and “steps.”
If you are like most first-time homebuyers, you probably don’t have $390k sitting in the bank. If you do, that’s amazing! (Congratulations, you rock, and I hope you find the home of your dreams.)
However, if you don’t have that kind of money on-hand, buying a house involves getting financed through a loan (that you pay back in monthly sums, also known as a mortgage). In addition to a loan, there are often assistance programs available as well.
We were able to find several resources and assistance programs for people like us, who are going to purchase a home for the first time. (Note: we didn’t end up going with any of them, but we found several! We went with a conventional loan in the end.) Some promising options were state and county loans that offered lower down payment options or sweat equity.
In general, the government—including federal, state, and county—have various assistant programs, whether you’re a first-time home-buyer or you have a qualifying income.
They have options for veterans, teachers, and beyond. Some reduce the down payment of a house down to 0-3%, while others cover PMI. The key is to look into the federal, state, and local government resources and assess from there.
Once you are aware of the loan options and assistant programs out there, you have a better idea of how much money you’ll need to find a house in your budget. Keep in mind, a 20% down payment used to be standard, but that’s not always the case.
Check out these resources for more information:
Step 1: Save Up!
Once you have an idea about available loan or assistant programs, you can set a money-saving goal. Personally, Chad and I wanted to have around $20k in the bank before we started our official home searching process.
To get to this point, we budgeted (fiercely), implemented date days, both got second jobs, and opened a savings account specifically for our house savings—no money gets taken out of it until it’s time. The key for us was automatically transferring $750 into our savings account every single month, and making sure that any extra income was deposited directly into savings.
While we were fortunate to have enough money to put so much money into savings, this is unrealistic for many. My best advice is to work through your budget to figure out a sum that is doable. If you can afford to transfer $100 or $200 every month, it will add up over time. The key is to do what you can, and stick with it.
Note: One resource you should seek out is a Homeownership Advisor (sometimes called housing counselors)! Lenders work for their company, and though you will likely find one who's looking out for you, an advisor is someone who is completely on your side. We did not do this and found out after the fact, but I highly recommend finding one before starting the process.
Step 2: Meet with a Lender
The next step is to meet with a lender—someone who can get you a loan to buy a house. There are a ton of options out there; we simplified this process by finding a lender who works with the Federal Housing Authority loan program, even though we later went with a conventional loan instead. It was nice to know we had an option.
We worked with a local branch of Bay Equity. Our initial move was to pick out a specific lender on their site (Ryan had great reviews), then we decided to apply for pre-qualification online, then schedule an in-person meeting later.
Note: shop around for a lender. Fannie Mae recommends looking into at least three different lending entities, which could include a private company (like Bay Equity), a bank, state housing finance agencies (FHAs), or a credit union.
Upon choosing Bay Equity, our first goal was to get pre-approved for a loan. This is a quick and informal assessment of how much money you’ll be able to borrow. This will hugely inform your home-buying budget, and what kind of homes you can afford to look at.
Here are some cool resources from Bay Equity that really paint the step-by-step process and information needed to buy a house for the first time:
- First time home buyer, www.
- Home buying steps, www.
- Types of loans, www.
Keep in mind that a lender is going to ask you lots of questions, especially about income and assets, so it’s key to have that information available (we looked at our tax returns). They are going to run a credit check, which will be huge in figuring out what kind of loan you can receive.
Additionally, the lender will require several documents to verify the information you provide. If you’re co-applying for a loan, with a spouse or partner, you’ll need two sets of everything. It helps to have these items handy and ready to go.
- Most recent federal tax return
- Pay stubs
- Driver’s licenses
- Bank statements
- W-2 forms from the past two years
- Profit and loss statements or 1099 forms (if you own a business)
- Proof of other regular income, such as social security, disability, or child support
Step 3: Choose a Real Estate Agent
After you receive your pre-approval (usually a letter that states how much money you’ll tentatively be able to borrow), you should meet with a real estate agent or broker in your area.
A real estate agent is not required, but I highly recommend using one. They are a free service to the buyer—their fees are typically paid for by the seller. Throughout the process, they can be an excellent advocate and resource to get you through the homebuying process.
Fun fact: not every real estate agent is a "realtor." Though this term is tossed around a LOT, it's actually not true for everyone. According to the Realtor site, "REALTOR® is a federally registered collective membership mark which identifies a real estate professional who is member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics."
There are many ways to find a real estate agent. I highly recommend internet searches, local awards, sifting through reviews, and most of all—getting word-of-mouth input. We found our agent, Haddie at the Glenwood Springs Property Shop, through several friend referrals. And, no surprise, she is as amazing as we were told!
Once you pick an agent, you’ll likely go meet up with them in person. You’ll go over your budget, desired area, home type, and everything you want and need in a property. They’ll use their MLS listing access to generate the applicable homes, and as soon as you find one you like, they’ll take you on a tour.
From there, your real estate agent acts on your behalf throughout the entire process. They’ll write up contracts, mediate with the seller’s buyer, walk you through deadlines, and help to navigate the unknown. This is why it’s critical to find a great one.
Be on the lookout for the following part of this series, that will cover next steps. I’ll talk about:
- Looking at homes
- Choosing the right home
- Putting in an offer