Buying A Home
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
When should we start?
My fiance' and I are ready to start looking for a house to buy. We haven't applied for a mortgage yet or even gone to look at houses. My question is how long did it take all of you to close on your house from the very very beginning until the day you closed on it? We aren't sure when to start the process. Our lease is up in about 10 months. Any advice is welcome.
Re: When should we start?
I would start by looking at your monthly budget and determining how much you can handle for a monthly mortgage payment. Your mortgage payment is often referred to as PITI - principal (the actual amount of your loan), interest, taxes (property taxes), and insurance (homeowners' insurance and PMI if applicable). Once you have a comfortable figure in mind, I would give that to a bank or mortgage broker so they can pre-qualify you for a mortgage and tell you what price range of house your comfortable monthly payment correlates to based on the down payment you'll be making, the average property taxes in your target area, etc. Pre-qualification doesn't involve running your credit, but pre-approval does. You'll want to actually get pre-approved before you start going to look at houses in person because a pre-approval letter will make any offers you make on houses substantially stronger than offers without pre-approval, but at this early stage, pre-qualification is probably sufficient. However, you'll want to pull your free credit reports on your own before you go get pre-approved just to make sure there is nothing incorrect on there that could hurt your credit.
Once you have a price range figured out, start browsing houses online in your target area to get an idea of what is in your price range. You will want to meet with a couple of buyers' agents (ask family/friends for referrals) who can start showing you homes. I would not start looking at houses in person more than 3-4 months out, though, unless you are willing to pay rent and mortgage at the same time (or if your landlord will let you break your lease for a reasonable fee). Most sellers want a 30 day closing date, some will accept 60, and a 90 day is the longest I've ever heard of. Until then, I would just look at places online to get an idea of what's available.
I'm sure I left some stuff out, but this should at least give you an idea. Good luck!
I think it's good to start looking well ahead of time so you have an idea of what to expect, but if you fall in love with something you might have a problem. I think 60 days is the longest time til closing most sellers want. There are exceptions to this, but I think it's rare.
If you're trying to time it so that you don't pay more rent than you have to, I would shoot to close two weeks before your lease is up. That will give you time to move and give you a cushion if closing gets pushed back. It should be easier because mortgages are paid in arrears: you pay AFTER the month instead of before. For example, if your lease is up October 31, you'll pay your last month's rent on October 1. If you close on your house October 15, you would have some of the first mortgage payment in your closing costs, but then your next mortgage payment for November would be due December 1.
Time needed to close really depends on you. I think FHA/USDA/VA loans take a bit longer than conventional loans because they're more strict with their approvals. We're doing conventional and are considered "highly qualified" by our mortgage broker and we could have closed in 24 days if we wanted to. Part of that is because I was freakishly on top of the documentation.
I think I would wait until four or five months out to start looking, but start going to open houses now to meet realtors and see what's out there. Chat with them while you're there and tell them you're just getting started and that you're looking to close on a house around (date). This is a great way to find an agent if you don't already have one in mind.
You'll want to wait to get your pre-approval until you're four or five months out because they're good for three months.
In the meantime, get your financials in order and figure out your budget. Pay down any credit card debt and don't open any new lines of credit. Don't do anything that puts a "hard inquiry" on your credit report. If you're going to be getting gift money, get it as early as possible so that you don't have to explain it to the underwriters.
Great advice so far. What I will say as far as looking goes- you can go look at houses at any point you're ready (once you know your price range). This might actually help you figure out what features you like/ don't like, and more importantly, what neighborhoods you like/ don't like. So when you're SERIOUS about looking, you can be a little more focused.
Clearly the downfall, though, is what if you fall in love w/ a house early on? You'd have to chance it not still being on the market OR you'd have to try and get out of your lease. All depends on what you can afford....
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The PPs have made some really good points. I think a lot of it depends on how high your personal standards are, whether this is a starter home or a forever home for you, and what your market is like. For example, if your market is flooded by short sales, you may want to give yourself more time because short sales take for freaking ever to go through. Or if you have a very definite set of "must haves" that are harder to find in your price point, you may want to give yourselves more time for looking. But if you want a 3 bed/2 bath/2 car garage and they are a dime a dozen in your price point, you may not need as much time. If you have a very specific neighborhood that you want to be in, you may need more time because you are limited to looking only at houses in that neighborhood. Etc. Etc. Etc.
FWIW, we have been in the market for 15+ months, have spent 7 months very actively looking, and are currently on our 3rd contract. This one is a short sale. It's been a month already without word from the seller's bank, and we have no idea when they will respond. We are hoping to close in June, but we'll see. If we do, it will have taken us 18 months from the time we first started looking until the time we close. But this is our forever home in a very expensive market and we had a very defined list of "must haves" in an area of the county where there are very few homes for sale in our price point.
You've already gotten some great advice but I'll give you my story too. First, like a PP said, look at your budget and figure out how much you can spend. Make sure to account for future plans and your lifestyle. Then go and get pre-approved by your bank. Remember banks and mortgage companies all have different fees when it comes time to close. We went with a local bank because their fees where about $500 less than a large name mortgage company in town.
I would strongly suggest you make your budget before being pre-approved. Our bank approved us for close to 100K more than we ended up spending because based on our income they said we could afford it, however, they didn't account for the fact that we wanted to have kids soon and day care isn't cheap and we like buying season football tickets and we wanted to be able to eat! Know what your limits are and where you will feel comfortable.
Remember that your mortgage does not only include the price of the home but it will include taxes and insurance as well. When making your budget try to estimate the additional cost of electric and gas you will use in a larger home. When we did our budget we took our current bills and doubled them since we got a place about twice the size. In my mind, its always better to over estimate than not.
As for our home buying experience, we started looking and thinking about buying about a year ago. We didn't talk to an agent or see our first home till January. We went under contract last week and won't close till July because its a new construction home that isn't completed yet. Take your time and know what you want and need. Before being under contract for our current house, we made an offer on a house that I loved. I later came to turn that my DH wasn't as in love as I was. Thankfully, the sellers were a pain and wouldn't work with us on the price. We walked away, the house is still on the market and we found a place we both love!
Best of luck!
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