It’s official, Jeff and I are homeowners! We couldn’t be more thrilled to be building our lives and spreading our roots for our future family. Our little 1,250 sq. ft. 3-bedroom townhouse has a whole bunch of love from us living here the last 2 years as renters and I can’t wait to see what else it may bring.
That being said, if I have learned anything the last few months, it’s that buying a home is REALLY HARD, especially when it’s your first time. Trying to learn the terminology and different roles in the process is exhausting, but doing it now is making it even easier for when we decide to upgrade. From that, we learned quite a few lessons, and as a 20-something in today’s ever-changing market, I hope to share at least a tiny tid-bit of knowledge to make your life and future a little easier when you decide to buy a home.
We have been living in this townhouse since relocating back to the Chicago area in 2015. We have been renting the home for two years with an option to purchase, and when the homeowners decided they didn’t want to be landlords anymore, they offered us the home to purchase. After one failed attempt to purchase in the Fall of 2017 because the homeowners were short on the money needed to close, we began the process again three months later in 2018 and eventually made it to the end! I’m very glad we waited for the second time because it gave us not only the experience of what the process is like, but time to better prepare and do our own research on the market and the professionals we have to help us out.
The first time around, our leasing agent “assigned” us a lawyer, which happened to be the same lawyer our seller was using. This didn’t raise any red flags at first, because I thought it was a great way to streamline the process. After some advice from others, I opted to find our own lawyer to feel most solidified in our deal. I shopped around at about five local law firms for quotes and service comparisons and found one through a friend who works at a firm. They gave us a great deal, making it cheaper than our original lawyer because of a friends and family discount, and were very insightful at first interview as to what we needed to do next. Through the contract review process, they pointed out parts of the contracted that needed to change to protect us that the previous lawyer didn’t, making us feel like we almost got screwed in the first deal. We felt secure and comfortable with all of the confusing jargon given to us because they explained anything we had questions about. The extra money and time dedicated to finding another lawyer was completely worth it.
During the first purchase agreement, we found a good broker through a friend recommendation, and he gave great advice as to what I needed to do, being that I didn’t have a real estate agent or a lawyer to lean on. Between our two purchase attempts, we opted to hire a real estate agent based on another recommendation just to see what options we had on the market, and she recommended we check into another mortgage broker who she vouched for heavily. The new broker ran the numbers and actually was able to get us a better mortgage deal and immediately gave us better advice before we even filled out the mortgage application or committed to using her. She was consultative through the whole process and made sure we were on the right track to being successful.
The first time around, we had some issues coming up with the huge lump sum needed to close, and we were encouraged to add closing credit paid by sellers and raising the price of the home to compensate the sellers. Ultimately, it’s just adding to your loan for them to help you now. Although this ultimately fell through for us with the homeowners having monetary issues to begin with and the home appraising less than the sales price, we did have other credits that came with our rental agreement. Since we lived in the home 27 months before we closed, we were offered $100 a month in closing cost credit, giving us an extra $2700 we didn’t have to come up with, plus we converted our original security deposit of one month’s rent to our earnest money to cover those costs. We ultimately saved over $4000 upfront through this agreement and could have saved more if we asked for more closing credit and the homeowners agreed.
Your mortgage broker and lawyer are your paid friends – you need to be honest with them about everything in order for your situation to work. Having bad credit or some red marks on your record from the past are important to disclose because they will give you information on either how to avoid those or how they can better assist you to minimize their impact. Once they run the full credit reports, they’re going to know everything anyways about your life. Transparency is key and sometimes you have to put your ego aside to get the deal done. Our issue was money – we are obviously not the richest people on earth having just come out of a wedding and we’re working on making ourselves more financially savvy, but we’re in our 20’s and have student loans, car payments and so much more on our shoulders. By disclosing everything to them, they fought to get us the best deals that we can afford and were honest to us about the deal and conditions we needed to meet. It may be extra work on our part, but we did it and we succeeded in getting a great deal.
Kind of like what I was saying with the lawyer situation, it’s important that you have your own representation at all costs, in all aspects. Real estate agent, mortgage broker, lawyer, everything. Our first pass at purchase was all duel agency except our mortgage broker, and it was hard because what I wanted wasn’t happening. The second time we only used the same leasing agent (because if I brought in my own agent, I would have to pay them commission which was an extra $4200 we didn’t have) and although it wasn’t ideal, my lawyer stepped up to the plate to ensure the deal went smoothly.
Going into the first deal, I thought we could definitely close in a few weeks. People on those Million Dollar Listings shows close in 15 days all the time. The money was there and we were ready to wrap this thing up – but it’s not that simple. Yes, 30 days can be possible, but you have to think about loan processing, underwriting, legal review, paperwork processing, appraisals, inspections and so many other factors that can extend the process. Usually, I would say 45-60 days is a more reasonable timeline to expect, even if you have your team already in your corner. Sellers are a common factor for delaying the process as well, because they usually need to buy a new home or may do heavy negotiating to get the best deal.
This process requires a lot of time, money and energy. It’s hard to handle it all on your own, and things often come up, like bills, that may require you to take money away from the house purchase. You have to be humble enough to ask for help sometimes – ask your representatives about solutions, seek financial assistance from someone close as a gift if you need more money to cover the closing, or even just ask for emotional support during this stressful time. Anyone that has ever bought a house understands how stressful it is, and you would be surprised how common it is for people to ask for help when buying their first home.
This process drains you dry, emotionally, physically, mentally and financially. At one point, I was cooking breakfast with whatever we had left in the fridge about two weeks before closing and just couldn’t let go of hugging my husband when he was trying to go to work. I was stressed and poor, I hadn’t been to the grocery store in almost four weeks and just spent $30 I shouldn’t have on some apples, toothpaste, a few vegetables, a box of pasta and ground beef, choosing the cheapest options and getting just enough to feed us for the week. Hugging my husband while he comforted me that everything will be ok, made me feel normal for a minute. Everyone has moments where they’re at their lowest financially but having a support system that loves you unconditionally made me feel like it’s ok and normal for this to happen. No one wants to talk about it because no one wants to admit they’re struggling due to the stigma of middle class society that everyone is doing good. Well, here I am telling you that it’s ok to feel absolutely broke. You don’t have to share it with everyone, but having at least someone there emotionally can give you strength at your weakest moments when you feel terrible.
This was the most stressful situation I have ever encountered. Whether or not you’re a numbers person, I’ve learned that only people in the industry really understand what it all means and why the numbers are always changing. Lean on the specialists you hired and over ask questions to clarification, and set up a support system around you to talk with when you just need to vent. This may be the most essential part of the process for your own personal sanity.