This is the first in my new blog series, My Friends are Buying Houses.
As with all the future guest posts, the writers are expressing their own views, opinions, and experiences. I hope you’ll give them the respect you give me!
My friend Katelyn bought her house a few months ago. She made a plan for saving money and stuck with it, asked around for input on location, and then dove right in. Here’s her story:
Buying a house seems like a ridiculously scary and complicated process, right? Sort of. There are many things to think about, but if you have someone working with you, it’s not that bad and the end result is one of the most amazing things a person can do. I would like to preface this by saying that I am a single woman who purchased a home on my own.
I bought my house in April of this year, although the process started long before that. I had been considering buying a house for a couple of years. I had a few factors to contend with though: money, location, and timing. Money is pretty much everyone’s biggest concern. I am very mindful of my spending practices. I knew I wanted to buy a house, so I started making decisions to reduce my financial output. There were certain things I couldn’t get out of: rent, Grad school payments, car payments, and bills.
However, I was completely in control of reducing my bills. I lowered my heat to 60°F during the day and put it up to 62-63°F when I was home. DO NOT let your home’s temperature fluctuate more than that. You use up more energy spiking your heat up 5-10 degrees than if you just stuck to within 2-3 degrees of a particular temperature. I had originally been keeping my heat between 68-70°F. In making this change, I saved nearly $100 in the coldest month of the year. That’s $100 in just one month! I also took to unplugging electronics I was not using. Don’t leave your computer charged plugged in all the time. I unplugged my coffee maker, toaster, etc. If I wasn’t in a room, I turned off the light. I started using energy-efficient light bulbs. All of these things help to save a few dollars on my electric bill. I also got rid of my land line, solely relying on my cell phone. I reduced my internet and cable to the lowest they could do. In trimming my telecommunication expenses, I saved another $100 per month- crazy!
I also started shopping around for inexpensive food and really relying on sales. It doesn’t take too much time to make a list of the grocery items you eat/use often and take a look for when they go on sale. When they do, if you can, stock up. At one point, I had enough toilet paper and paper towels to last 4 months. I had my monthly grocery expenses down to $100. I used to spend nearly that in a week. Shopping around and stocking up during sales: savings of about $300 a month.
I started eating out less and inviting people over more. If you do it potluck style, the onus of providing all the food gets shared. You can still hang out with people, but it’s not as pricey. Oh and it tastes better, too! 🙂
So in all of this saving, I knew I wanted to buy a house. I just didn’t know where or how big or most importantly, what my price range would be. I work in on the North Shore of Massachusetts and had been living in an apartment approximately 10 minutes from work. It was certainly a convenient commute. However, I was not close to my family. I wanted to be sure that I was in close range to work and closer to my family. I started asking friends and family about the towns in the area in order to get a better, more honest feel for them. Buying a house is a forever-type decision. I wanted to be in a town that I could potentially raise children in. I narrowed my search to 2 towns and started crunching numbers. I this ended up being a lot more difficult than I originally thought.
Enter my mother, Karen Giovannucci. My mother is a real estate agent with Coldwell Banker. I highly, highly, highly suggest working with Coldwell Banker. If you’re in MA, you can even work with my mother! (here’s her office) What I didn’t realize was just how easy it was to get pre-approved for a loan and to figure out just how much I could spend on a home. Any good real estate agent would put you in contact with the loan officer for their company. That’s what my mother did. I provided information about my bank accounts, credit card accounts, loans I had, pay stubs, etc. Fairly basic and I was good to go in a week. After providing this information, the loan officer will tell you how much you are pre-approved for and at what rate. I was pre-approved at a 5% fixed rate (do NOT do adjustable rates). I figured out my price range and began my search.
Now, I had a price figure in my head that included how much I had for a down payment and how much I was approved for in loans, but I needed to be smart about how I went about searching. I did not want to be at the very top of that range because then I would have a higher loan. I wanted to be a little below that. I also needed to consider the condition of the house. You don’t want to buy a house at the top of your price range that needs a lot of work – you won’t be able to afford fixing it up! Make a list of your essentials (your must-haves): garage, yard, number of bedrooms, bathrooms, hardwood floors, levels, basement, etc.
One thing I did a lot of in this process was drive around. I did ‘drive bys’ of the homes I was interested in. This gave me a good feel for the neighborhood, commute, and overall look of the home before I even stepped inside. If I liked what I saw, I either waited for an open house or scheduled a visit with my real estate agent (my mom). I can’t even tell you how many houses I went into. One house was too close to the highway (I could hear it inside the house). One house had a lot of poor workmanship that I would have to undo. One house had water in the basement. One house had an unusable second floor. One house smelled of oil in the basement. One house had an unusable garage.
Finally, after weeks and too many homes to count, I found my house. It has a garage, beautiful yard, 3 bedrooms, hardwood floors, a full basement, wonderful neighborhood, close but not too close to the highway, and in a fantastic town. I put in an offer in mid-February.
This part of the process is also a little crazy. You have to play a little game with the buyer. Think about how high you are willing to go with your price. I suggest going anywhere from $5K-10K below that with your initial offer, then bargain, bargain, bargain. I got quite a bit covered after I fought for it. :-). After you get an accepted offer, get a home inspection. If any structural damage is discovered, demand that the home owner pay for it or take it off the price of the house.
Personal side note: if the home owner gets a quote for home repairs, I wouldn’t necessarily trust it. Get your own person in and hire them. I had a NIGHTMARE situation because I hired someone recommended by the homeowner.
After the inspection is done and the final number is decided upon, you can set a date for the purchase and sales and closing. Before these dates, you need to get a little more paperwork in order, but your real estate agent should give you a flow sheet. My entire process was wrapped up and I was a homeowner at age 25 on April 12, 2011. :-).
I love my home and have been doing some necessary repairs to it. I am making a list of things I want to do in the future, but mainly I am just enjoying it. I even got a puppy! I still exercise smart money-spending and because of this, I can dream about my future in this home. Right now is a wonderful time to purchase a home. Rent doesn’t build equity. Essentially, you are throwing away money every month. Buying a home is a wonderful investment that can pay tenfold down the line. Good luck!
If you’d like to talk more with Katelyn, you can find her at her blog, Katie Takes on The World, and on twitter, at @WorldViaKatie. And you can email Mrs. Giovannucci (Katelyn’s mother AND realtor) if you have any questions. Even if you’re not in Massachusetts, she can help you find someone in your area. And Mrs. G said you only really need 3.5% down! But I hope to have more saved when I’m ready to buy a house!