At first it was all so scary and new to us, but we decided to at least try to get pre-approved for a home loan and see where we stood. We gathered all the info requested and sent it in only to realize what they could offer us wouldn't even get us a shack around these parts. So we waited. In the mean time I researched everything I could to get tips and tricks and be prepared, I asked friends who owned & tried to be as frugal as possible so our down payment wouldn't be an issue. Although at the time it seemed like forever, its only been 4 months since we started this all and two weeks ago we were pre-approved for an amount we felt comfortable with. Last Wednesday we put an offer in on a home we loved and on Friday morning the offer was accepted! In case any of your are in the beginning stages of home buying or just thinking about it and wondering if you are ready I thought I'd share a few things we figured out along the way. We knew what number we could be approved for if we upped the credit scores just a bit more and that helped us when looking for homes, but here are some other pointers that I hope help you too!
Budget
Moving from Southern Oregon to Portland made for a huge adjustment in our home owning dreams. For our budget we could purchase a pretty large home and land in our old town, but up here good luck. That was a hard pill to swallow at first, but we knew we couldn't go back to that area and had to re-adjust our expectations. The first task in our budget plan was figuring out what we could afford, we knew we were fine paying what we currently were for rent so that price with a leeway of a few hundred dollars was ideal and comfortable (our payment is going to end up being less than our current rent, which is great!) Our mortgage also includes insurance and property taxes, but we still wanted to have extra each month for home projects, decorating and our savings that would be a little lower with that down payment being taken out. Our main goal was to not live beyond our means in order to be homeowners.
Neighborhoods
Since we had an estimated loan amount we were working towards before actually getting pre-approved, we were able to look for homes in that price range. Although we obviously couldn't fall in love with anything or make offers, we decided to download redfin and zillow on our phones so whenever we had the chance to browse we could. It helped to have the apps handy when we were out running errands or having a meal in certain areas around our city so we could see what the prices for homes were like if we really liked a neighborhood. We also just drove around a lot to figure out what spots we totally dug and which ones to avoid. There were a few things that were important to us- avoiding homes on main heavy traffic roads, finding a neighborhood with sidewalks or a mellow street for our walks with the pups (& eventually kids!), not sharing a driveway (private street was okay) with neighbors, having a yard, not being close to a railroad, a large garage or shop for Brandon to work on his projects in, a studio space for me, etc. I know these are small almost picky details, but they really mattered to us and we were able to narrow down our search to just a few areas we totally could see ourselves living.
Down Payment
Some couples have down payment help from family or receive monetary wedding gifts, however, we are doing this ourselves and didn't feel comfortable asking for any help since we have been married for 5yrs and are in our 30s and we have great careers and wanted the satisfaction of doing it ourselves. With that said, down payments can be insanely high depending on what type of loan you go for. We actually opted for a non-traditional loan with a lower down payment and locked interest rate. I know that the more you put down the better, so do what is comfortable for your lifestyle and your wallets. I did mention earlier that I tried to be as frugal as possible, which when I think about helped in small ways. I didn't go as far as to cut coupons or never open my wallet, but I did change my spending habits. Not shopping for decor for this condo was an easy choice because I knew we wouldn't be here long. Cutting out frivolous mall purchases, making coffee and meals at home more often and even switching my grocery store away from Whole Foods made a huge difference and was all worth it! Spending less adds up and I'm so thankful that a down payment was never a deciding factor in this entire process.
Credit Score
To be eligible for some loan programs the minimum score is 580, but a preferred score is 640. We wanted to be as close to 700+ as possible and with my husband having NO credit versus bad credit* it was just as tough to get that score to go up as it is for some people to pay things off. Our lender was up front and honest about the ways credit affect things and we knew we had a few options, but that waiting for the points to rise would be the toughest part of the entire process and so we played the waiting game. First up our lender advised us to actually build more relationships with creditors so my husband opened 2 new credit cards and chose secured ones so it was our own money we were borrowing against. One of the cards was from our bank so it was easy to spend and transfer funds between the accounts. Our lender also advised us to use these cards often, but a day or two before the last day of the month to pay the balance down to $10- that piece of advice was great and was a huge factor in a 70 pt score increase. We wanted this part to go faster though so we traded in our car, put down a small amount of money and opted for the balance to be made into a loan. Now I wouldn't advice everyone to do this if you can't afford a new bill (we had been car payment free for a while), but for us it worked. We wanted a newer car, the payment was low enough and it looked great for the credit- which resulted in another 59 pt increase. Within 4 months we raised the scores high enough and during that time saved even more for the down payment so it was a win-win! Also you should know that creditors report to the credit bureaus usually from the 28th-10th. So paying things down a few days before the end of the month (like credit card balances) or even making payments (like car loan) early can be a huge plus for you, if you can afford to do it! We made sure to grab free credit reports and for the 4 months of waiting we used credit score monitors. When the lender pulls your score they will take whatever one is in the middle and use that for your pre-approval.
*As a tip- if you do have debts you want to get rid of to up your score, pay off the newest one first. If you touch the oldest that could possibly be off your report soon, you risk the chance of the account refreshing and reflecting a negative. I know that sounds weird, because it makes sense to go after the smallest or largest first, but we heard this from so many people (including our lender) with knowledge in this area that it made sense.
I hope these few tips help you out if you are starting this journey, if you have any questions at all about things we did, or tips of your own- please chime in. I will try to share more about things as we go through them and I can't wait to show you our new digs!
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