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How to buy a house
So, as you may have heard, wrdnrd and I are buying a house. Ok, technically we're buying into a co-op, but most of this is the same. And it's a HUGE amount of bullshit. So I am going to give some of my hard earned knowledge to you, in case you are also thinking of doing this terribly stupid thing soon.
Disclaimer: this information is US specific and may in certain cases even be Washington state specific. I am not an expert, this is my first time buying a house, please work with professionals if you are going to do something like this.
Ok, so you want to buy a house/co-op/condo. Step 1 should be set up an appointment with your bank to talk to someone. At least in our case we had a really good experience going over things with the local credit union and were given some scenarios with how much we could expect to pay for different mortgages, so we got a feel for what range we were comfortable with. Then we tossed that out the window cause we went for the co-op, which pretty much means you got to go with NCB (National Co-operative Bank), but let's ignore that for now.
Pre-approval and your credit report. Any time you get an approval letter from a bank they will query your credit report. Any time your credit report is queried it hurts your credit score. Yes, this is fucked, I can rant about credit scores for days, let's move on for now. You might want to get one initial pre-approval, so you know what the bank will actually agree to, but if that expires don't bother going back until you have a sale lined up. Seriously, it took one extra look at our credit to hurt our scores, so try to do as little as possible that involves them before you are ready to seal the deal. Also, anything you can do to clean up your credit score ahead of time? DO IT.
Down payments: generally the advice is to have 20% of the sale price as a down payment or you'll have to pay more for mortgage insurance. Definitely worth talking to agents and banks here since 1) mortgage insurance may not be that much, 2) some banks will give you a long for the down payment (at a higher rate, but still not terrible), and 3) 20% is not always the norm or can be negotiated, depending on what you're buying. Of course, if you have more moneys you can get a lower mortgage, or a lower interest rate buy purchasing "points" or some shit that I used to know but forgot.
Gifts, loans, and other ways of getting that sweet down payment cash: Ok, to make your life easier/game the system, if you know you want to purchase a house soon and friends/family are going to assist you, get that money in your account ASAP. The bank you're getting a mortgage from will be asking to see the last 2 months of statements. Any transactions showing up there you'll need to provide documentation on, such as a letter from the gift giver that this is not a loan and a copy of THEIR bank statements proving they have the cash they gave you. If you get that shit in your account early you won't have to jump through these hoops. Very useful if these are actually loans from your family; the bank won't need to know. Shhhhhhh!
If you're selling a bunch of crap (cars, collectibles, etc) you need to document the sale, unless,again, it is outside that two month window. Even if you aren't bending the rules, the less paperwork you need to do, the better. Get that shit in your bank NOW.
Get an agent. Look, our guy hasn't always been the most responsive dude on the planet, but given that I know fuck all about buying a house it's helpful to have someone on our side to review the contract, change things in it, offer advice, and just be there if you have questions like "what the hell does this mean?" and "what are we doing next?"
Have a healthy chunk cash on hand. Let's say $2-4k. Even if the bank is giving you an 80/20 loan to cover the down payment, there are a ton of little things you need to pay for on the way to your signing. Credit reports, inspections, property estimates, processing fees all add up. Oh, and a big portion of that will be the earnest money, which is a chunk you put in escrow to prove you aren't a flake. You only lose it if, well, you flake. Any legit reason for calling off the purchase and you get it back, and there are a lot of places in the process you can find a "legit" reason to back out if you get cold feel.
Paperwork. You will need to send SO much stuff to the bank. As stated above, the more money you have sitting around that is out of their two month inspection window the better, since you won't have to explain it. But you'll be sending W-2s, paystubs, bank statements, drivers licenses, and copies of any other assets you'll be drawing on. BTW, if you have a ton of assets tucked away, fuck off. Why are you even reading this? Seriously, go enjoy your criminally low capital gains tax rates and get out of my face.
The good news is that the majority of this stuff is available online now and most things can just be e-mailed to your lender. I can't imagine how long this process could take back in ye olden dayes /strong bad voice.
Ok, I've talked myself out and I don't think I've covered half of what has gone on, but this is some of the stuff I wish I knew about when going into this. (also don't have huge vet bills and a major medical incident before purchasing a house). Anyway, I'll be happy to answer any questions or accept sympathy in the comments.
Disclaimer: this information is US specific and may in certain cases even be Washington state specific. I am not an expert, this is my first time buying a house, please work with professionals if you are going to do something like this.
Ok, so you want to buy a house/co-op/condo. Step 1 should be set up an appointment with your bank to talk to someone. At least in our case we had a really good experience going over things with the local credit union and were given some scenarios with how much we could expect to pay for different mortgages, so we got a feel for what range we were comfortable with. Then we tossed that out the window cause we went for the co-op, which pretty much means you got to go with NCB (National Co-operative Bank), but let's ignore that for now.
Pre-approval and your credit report. Any time you get an approval letter from a bank they will query your credit report. Any time your credit report is queried it hurts your credit score. Yes, this is fucked, I can rant about credit scores for days, let's move on for now. You might want to get one initial pre-approval, so you know what the bank will actually agree to, but if that expires don't bother going back until you have a sale lined up. Seriously, it took one extra look at our credit to hurt our scores, so try to do as little as possible that involves them before you are ready to seal the deal. Also, anything you can do to clean up your credit score ahead of time? DO IT.
Down payments: generally the advice is to have 20% of the sale price as a down payment or you'll have to pay more for mortgage insurance. Definitely worth talking to agents and banks here since 1) mortgage insurance may not be that much, 2) some banks will give you a long for the down payment (at a higher rate, but still not terrible), and 3) 20% is not always the norm or can be negotiated, depending on what you're buying. Of course, if you have more moneys you can get a lower mortgage, or a lower interest rate buy purchasing "points" or some shit that I used to know but forgot.
Gifts, loans, and other ways of getting that sweet down payment cash: Ok, to make your life easier/game the system, if you know you want to purchase a house soon and friends/family are going to assist you, get that money in your account ASAP. The bank you're getting a mortgage from will be asking to see the last 2 months of statements. Any transactions showing up there you'll need to provide documentation on, such as a letter from the gift giver that this is not a loan and a copy of THEIR bank statements proving they have the cash they gave you. If you get that shit in your account early you won't have to jump through these hoops. Very useful if these are actually loans from your family; the bank won't need to know. Shhhhhhh!
If you're selling a bunch of crap (cars, collectibles, etc) you need to document the sale, unless,again, it is outside that two month window. Even if you aren't bending the rules, the less paperwork you need to do, the better. Get that shit in your bank NOW.
Get an agent. Look, our guy hasn't always been the most responsive dude on the planet, but given that I know fuck all about buying a house it's helpful to have someone on our side to review the contract, change things in it, offer advice, and just be there if you have questions like "what the hell does this mean?" and "what are we doing next?"
Have a healthy chunk cash on hand. Let's say $2-4k. Even if the bank is giving you an 80/20 loan to cover the down payment, there are a ton of little things you need to pay for on the way to your signing. Credit reports, inspections, property estimates, processing fees all add up. Oh, and a big portion of that will be the earnest money, which is a chunk you put in escrow to prove you aren't a flake. You only lose it if, well, you flake. Any legit reason for calling off the purchase and you get it back, and there are a lot of places in the process you can find a "legit" reason to back out if you get cold feel.
Paperwork. You will need to send SO much stuff to the bank. As stated above, the more money you have sitting around that is out of their two month inspection window the better, since you won't have to explain it. But you'll be sending W-2s, paystubs, bank statements, drivers licenses, and copies of any other assets you'll be drawing on. BTW, if you have a ton of assets tucked away, fuck off. Why are you even reading this? Seriously, go enjoy your criminally low capital gains tax rates and get out of my face.
The good news is that the majority of this stuff is available online now and most things can just be e-mailed to your lender. I can't imagine how long this process could take back in ye olden dayes /strong bad voice.
Ok, I've talked myself out and I don't think I've covered half of what has gone on, but this is some of the stuff I wish I knew about when going into this. (also don't have huge vet bills and a major medical incident before purchasing a house). Anyway, I'll be happy to answer any questions or accept sympathy in the comments.