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Money, The Home Buying Process

House Hunting: Dave Ramsey Style: Part 3 – Buy Your House

May 26, 2014

This is Part 3 of a 3-part series. Be sure to learn How to Prepare, and How to Find Your House.

Welcome to the third and final post in the House Hunting: Dave Ramsey Style series!

In this last post, we will discuss the ins and outs of the home buying process from the offer all the way to taking possession of a property.

boredNo, this is not the most glamorous part of home-buying. It’s not as simple as just giving someone money and getting keys to a house in return. If only. I will not attempt to bore you. Actually I will attempt to do quite the opposite and keep this topic fun and informative!

Let’s dive back in where we left on in the last post…we chose the town house strategy.

What happened from that point forward?

lazyDid we laze about, dragging our feet, and cross our fingers together that we would get the town house?

In a dream world maybe. And definitely NOT in the Denver market.

Thankfully our real estate agent (who’ve I’ve been raving about all along) is up to Dave Ramsey standards of being “high-octane and high-protein… meaning she rocks! This is what our last week has looked like in a nutshell:

race car

An intense collaboration of several people under tight timelines.

This past Sunday afternoon (one week ago…wowzers!) we saw the town house and really really liked it. We felt like we were at home. The next step was to tell our realtor we wanted to put an offer in and everything got accelerating from there. Now, I really wish I could tell you everything Barbee, our agent, pulled together in the following 36 hours…but I can’t give away all her tactics! She’s that good and I can’t compromise her edge by revealing all on this blog.

Before she would allow us to offer a bid on the house, we were advised to go back to the neighborhood we wanted to buy in and spend time walking and talking with people. Jonathan and I hopped in the car, went back to the town house development, and walked around for nearly 3+ hours. We met lovely people and asked them LOTS of questions – we wanted to research the good, bad, and ugly before we committed to wanting to live there.

Fortunately the people were great. Lots of families in the area. The HOA is very healthy and we actually met the VP of the Board. I asked if I could apply to get on the board and she said there was a spot that just opened. PERFECT! When buying into a townhome, you need to get on the board!!!!! Who else but YOU will make sure they are spending the money correctly, honestly, and in a healthy way? We won’t let our largest asset be at the mercy of others ideas and opinions. We are planning to get. in. there. and be part of the choices.

We also want to get involved, meet people, and serve the community in a meaningful way. Bonus!

After walking around, we wanted to move forward with the bid…although we were getting nervous. We watched at least ten others tour the town house while we walked around! I know it’s over reacting, but this is how big the crowds were in my mind.

crowdWhen we called our agent that evening, she already knew there were already three offers on the table (all over asking price) with anticipation of four more by the end of day…and they were going to take offers for two more days. GULP!!!

Translation of that information in the Denver market = Any bid we offer had to be competetive ie. over asking price. But, we don’t just have money to give away like Aladdin…

throw money

Our agent gave us some suggestions and advised somewhere in between $5,000-$9,000 over asking price. I got online and research all other town homes in the area for sale and the past month’s worth of sales and from that information we came up with our number within her recommedations. We felt good offering it but knew it may not be enough…

This is where Barbee’s expertise came in. She’s never lost a house unless it was a over money. That gave us tremendous confidence since we’ve heard friends tell stories about losing houses. We weren’t worried about that with her…but we also knew our offer might be less than others. This is the part where I can’t reveal exactly what Barbee pulled together but I can tell you the outcome:

They chose us and we beat out TWO cash offers for more money!!!!!! 

oprah

That is incredibly hard to do but Barbee did it. I am confident that without her we would not have gotten this town house. We were actually sitting at Ikea when we got the news. Amazingly, we walked out only having bought a french press. Who goes under contact on a home at Ikea and doesn’t leave with new furniture? I think we were too in shock.

Here’s where the post gets technical. I provided links to general summaries of a few things I mention, in case you have not heard of them before.

This past Tuesday night, minutes after hearing we were chosen, we got to see our contract online with not only our signatures but the seller’s!!! 🙂 We watched Redfin update our property to “pending.” EEEP!

This past Wednesday morning we dropped off the earnest money at the Title Company. Down the line we can purchase title insurance. Dave Ramsey says DO IT!!! We plan to.

This past Thursday morning we did the home inspection. A few minor things came back. For example, a bathroom door didn’t shut all the way (not because of structure issues -watch out for those!!). No biggy. We also checked radon levels and they came back in the “safe” zone. Whew!!! We measured all the rooms and began to dream about decorations. Pintrest will be my new best friend!

Yesterday we reviewed the inspection report with our agent and submitted requests for the seller to fix various small things throughout the house. We hear back on if and what the seller will repair this upcoming Wednesday.

Tomorrow we meet with our mortgage broker to lock our rate and sign a few other documents. She then orders the appraisal for the property.

Then we wait.

wait

The seller has to purchase another home in the meantime and we wait to hear about when closing will be scheduled based off that. This is where we are slightly vulnerable…what if they don’t find a house? Then we lose this town house and are out some money. Very unlikely but a possibility.

And more waiting….

The Lord knows I need it.

When the seller finds a house, we will then set up our closing date where we’ll become the owners!! Now the seller may need a day or two in the property (while we own it) to move out before she can get into her new home. We’ve drawn up a contract for how that time will look – utilities, who’s insuring the property, etc. Should be a smooth transition with little risk transferred to us.

From that point, it’s just signing papers at closing, packing, and moving into our first home! 🙂

For those wanting the bullet point version, here you go:

  1. Research the area. Meet people. Weigh Pros and Cons. Study recent sales and know what the dollar buys in the area.
  2. Buying a town house or condo? GET ON THE BOARD!!!
  3. Draw up an offer and have your agent submit to the seller’s agent. (You want a high-octane, high-protein agent on YOUR side) Get an Endorsed Local Provider.
  4. Go with a mortgage broker over a bank (in most cases) as they can close quicker, communicate more personally, and advocate for you.
  5. Put down your earnest money if you go under contract. (Varies but ours was $1,500)
  6. Schedule an inspection. ($300-$500) Make sure they look for mechanical, electrical, and structural issues thoroughly.
  7. Check radon levels and don’t forget to do a sewer evaluation (unless sewer is owned by the HOA…which it is in our case).
  8. Submit requests for repairs by the seller. Accept or end contract based on response from seller.
  9. Get title insurance. ($300-$500)
  10. If buying more than basic sub-division, get a land survey.
  11. Lock-in your interest rate (if taking a mortgage). Find out exact closing costs. Calculate if it’s worth to “buy down” your interest rate. To buy down, you pay more at closing but your interest rate is lower over the life of the loan. For us, the cost difference between our rate and buying it down would take us 6 years to recoup. Not worth it since we don’t plan to stay in the town house that long. We’re better off paying more at principal monthly. If we were staying longer? I would buy it down.
  12. Come prepared to sign documents and provide money due for down payment (hopefully you have at least 10%) and closing costs (can range from $1,000-$5,000).

WHEW!

I hope that was fun and educating, as that was the goal!

When we finally move, yall will get some photos! 🙂

 

 

Money, The Home Buying Process

House Hunting: Dave Ramsey Style: Part 2 – Find Your House

May 23, 2014

This is Part 2 of a 3-part series. Be sure to read Part 1 – Prepare.

Welcome back!

Jonathan and I are documenting our home-buying journey here on the blog for all the Dave Ramsey followers out there wanting to see someone follow his guidelines. Yes, it can be done! 🙂  In case you didn’t read part one of this series, you can catch up here.

Last time we discussed all our preparatory steps as we geared up to purchase a home. In this post, we will explore the actual house hunt, which in some ways can be the most exciting part! This is how many people look when they get to start actually looking at houses.

excited

 

But it can quickly turn to this.

displeased

Our realtor told us that we shouldn’t go looking for any home until we have our pre-qualification done and ready to go. Who knows when you will find “the” house, right? She wanted us ready to offer if we loved it, especially since we were looking in the foothills – an area where properties are gone within hours.

You read about the snafu of getting Jonathan’s credit cleaned up in post one. Once that was done, we wanted two quotes on mortgage interest rates. We first asked a local broker recommended by our realtor. We were blown away by her customer service, dedication, swiftness, and that heart of a teacher quality that is so rare. She wanted to help us meet our goals by getting a 15-year fixed rate mortgage with as much down as we could save up.

The second quote was from our credit union.  First they told us that we could “afford” a house $200K over what we were considering. Then he said, “Since you have no debt, most of your income is available for a mortgage payment.” To which I replied, “Yea, if we wanna be house poor, never adopt, send our kids to college, or retire!”

no way

Sigh. Yes, we are weird. No we are not putting 40% take home pay towards a house payment. Geesh!

He couldn’t understand my concerns and thought we were rather odd for wanting a 15-year fixed rate loan and for the payment to be less than 25% of our take home pay, as this puts conservative limits on our “buying power”. Now I understand WHY the housing market crash of 2008 happened! People (and banks) were taking way too much risk and way too high of mortgage payments compared to their income. I would MUCH rather live in a modest home well below our means than live in a house that sucked my income dry every single month.

Not. Gonna. Do. It.

We dropped the bank lender like a bad habit and decided to move forward with the local mortgage broker recommended by our realtor. Between those two, we are in as good of hands as we can get.

Last Friday was our first time looking at homes. We hopped in our agent’s car and she had waters and treats waiting for us – so sweet and thoughtful! Another way I could tell she goes above and beyond in her work. That afternoon we looked at seven houses and in each one, our agent was continuing to provide an education:

“Look, this is how water damage can occur.”

“Ranches will be the most expensive homes we see because they take up more land.”

“I can feel this house is slightly tilting because of the bentonite in the soil…common near the mountains.”

I loved how she wasn’t going to hold her opinion back. She wanted us in the right house and that’s all there was too it. Anything that needed to be said, she said. She truly is a “real-estate mom!”

That day we learned a few things. First – photos always look better online. Second – you can’t smell the house in photos! Smoke, cats, mildew. Gross. Third – location, location, location. I saw a “deal” online only to pull up in front of the house to find it across the street from a ginormous construction thing/highway. Four – if the price is too good to be true (in this market at least) it’s too good to be true.

smelly

We didn’t find anything we loved that day and quickly found ourselves going from excited and pumped up down to discouraged and exhausted. Does “our” home even exist?!?!

On Sunday afternoon we got picked up again…this time with Starbucks and she even went way above and beyond by getting delicious gluten-free chocolate dipped almond horns at a specialty bakery in town. YUMMY!!! We saw a couple different properties on Sunday and fell in love with BOTH! The first property was a town house that was beautifully remodeled inside and the second was a mostly updated brick ranch with an immaculate yard and cozy sunroom.

Now we were just confused.

confused

You couldn’t have found more opposite properties for us to fall in love with. Sure both were beautiful and had charm. The town house would be a 3-5-year strategy since it’s 3 bed/2 bath, 1,300 square feet, and no garage. The ranch would be where we’d raise a family at 5 bed/2bath with a 2 car garage and nearly 2,700 square feet.

We could see ourselves in both homes…BUT we had to sit down and look at the facts…and filter them through the Dave Ramsey lens.

The town house was a no brainer. We can afford it (since it’s basically the same cost as we pay in rent monthly…so no budget impact) and keep saving for things like adoption, retirement, and future home purchases. We could do a 15-year fixed rate mortgage with more than 10% down and the payments would not be greater than 25% takehome pay. Easy-peasy-lemon-squeezy.

The house (with it’s plantation shutters…sigh) was actually out of our price range on a 15-year fixed rate mortgage. Ruh Roh!

scared

I wanted to see…JUST ONE potential dream home. Even upon pulling up, our realtor looked at me and said, “Are you sure you want to go in there?” She knew it was a temptation in the making even by seeing the exterior alone. I allowed my heart to be tempted though…bigtime. The dream house would require us to do a 30-year mortgage and even at that, the payments would be 35% of our takehome pay.

Jonathan and I got dropped off and needed to talk strategy. Were we going to follow Dave’s advice and take off a modest bite as we incrementally work towards the dream home someday? Or would we jump into the dream home and sacrifice other lifestyle/savings in order to have that now…while violating Dave’s principles and knowing it.

UGH!!!!!!!!!

The decision about our strategy wasn’t actually that hard. In five minutes I realized that talking about the town house, we were just excited and happy. A team. In talking about the dream house, we fought. Argued. Lost our peace. I turned to Jonathan and said, “If this is what life looks like in the dream home, I don’t want it!” I refuse to have money fights. We don’t have money fights ever and I don’t want to start. The entire Dave Ramsey program is designed for FINANCIAL PEACE. I will not trade that in for anything.

Drum roll please……

We chose the town home!

thumbs up

This past Sunday afternoon we began the buying process by putting in an offer…knowing there were at least seven others on the table. We will get into all of that in part three.

Stay tuned.

For those wanting some nice bullet points to wrap this post up:

  1. Compare mortgage interest rates with at least two lenders 
  2. Do your homework on how quickly each lender could close (Our bank would take 30 days where the local broker could pull it off in 7 days.)
  3. Don’t look at homes outside your price range. (Of course the more expensive one will be better, that is why it’s more expensive!)
  4. Stay objective while touring a property.
  5. Don’t overlook things like deep smells, location, sunlight, or any other quality that you can’t really change. It’s not all about the resale value but keep it in mind.
  6. Have an open mind and be willing to look past changeable qualities that aren’t to your taste – you can change them!

 

Money, The Home Buying Process

House Hunting: Dave Ramsey Style: Part 1 – Prepare

May 21, 2014

Here on this blog I want to document our home-buying process for those of you out there trying to buy a home the “Dave Ramsey” way. By no means are we experts…just trying to do our best to follow Dave’s guidelines. If you are not familiar with his home buying guidelines, check them out here. There is always time to change your housing strategy if you desire!

This post would be loooong if I didn’t break it up, so for your sanity it’s being divided into three parts:

Part One: Prepare

Part Two: Find your house

Part Three: Buy your house

As a foundation and starting point, here is a review of what Dave Ramsey recommends to anyone buying a home:

  • Be 100% debt free
  • Have 3-6 months of expenses saved in a Fully Funded Emergency Fund
  • 10% down payment minimum
  • 15-year fixed-rate mortgage (or less)
  • Payment (including taxes, insurance, and any PMI) should be less than 25% of your take home pay

With that said, let’s dive into part one – the preparation aka getting the ducks in a row.

ducks

Our home buying process began this past August. Yup. Nine months before we were ready to pull the trigger. We wanted ample time to save funds and interview realtors. No way were we going to purchase our largest asset with just anybody steering the ship. We hopped onto the Dave Ramsey Endorsed Local Provider website and requested to be contacted by a few Dave recommended ELP’s in the local area.

Within a day or so we had a few ELP’s reach out to us. We set up interviews with each of them but something stood out with one in particular. It was obvious she was experienced, enthusiastic, driven, and hardworking. She didn’t ask us anything about the actual home buying straight away. She took us out for coffee and asked us about who we are, what we value, our Dave Ramsey story…she took interest in our lives. At the end of that initial meeting, she asked very basic things about the home buying process. We told her out timeline of starting to look in May and she gave us the advice to hold firm to that and to not go out looking beforehand. I knew we would be in good hands with her.

The other ELP’s? They were nice but within ONE MINUTE of being on the phone, let alone a face to face interview, they were trying to set up an auto-MLS service so we could get emails about houses in our price range and desired specs. They didn’t ask about our timeline. They didn’t ask about who we are. They didn’t ask about our Dave Ramsey story. We ended up cancelling both those other meetings because we were so unimpressed on the phone, we could only imagine the in person interaction. One even talked about getting in the car and checking properties that very week….

disappointed

We called a few other Dave Ramsey like-minded couples in the area whom the agent we liked had previously helped buy homes. We wanted to choose her but needed to make sure we did due diligence to check references for the good, bad, and ugly. She was happy to provide us with references and they all checked out. There were only good things to say. They were definitely raving fans of her and the team’s service. This gave us tremendous confidence in moving forward with her.

yay

We chose to work with her in January but remember….our timeline wasn’t until May. So what happened in the meantime? Education!!! Dave Ramsey always says the best ELP’s are those with the heart of a teacher and boy, did we strike gold. Our agent invited us to her office on evening for a 3-hour personalized class on the entire home buying process.

She truly educated us on the ins and outs of every step in the journey ahead. We were able to ask questions and she and her team were super patient and wouldn’t move on until we completely understood their answers. She wanted to educate us, not speed us into a house so she could have a payday. It was obvious by her actions, patience, and desire to help us understand home buying that she had our best interest in mind.

The next preparatory step was the mortgage pre-qualifictaion…and we ran into a hiccup.

Long story short – Jonathan got a speeding ticket 3.5 years ago driving through Indiana. He paid it but then threw out the receipt, whoops. A year later a collections letter showed up in the mail, stating he never paid the ticket (which he did and even had a bank statement proving it). They wouldn’t accept the bank statement as a receipt, so he paid the ticket, AGAIN! He paid it right away, so the collector should not have reported it to the credit bureau but….

frustrated

Of course, they did. Fast-forward to the mortgage pre-qualification and to our surprise a big BLACK mark is found from this collections company. This would mean the mortgage interest rate we would qualify for would be much HIGHER. There was no way we were going to pay upwards of $75/month for 15 years in interest because some dumb $100 speeding ticket was sent to collections many moons ago (even though it got paid twice!!!) Grrr!

Just a note here that the Almighty FICO credit score isn’t a big deal in the Dave Ramsey world. However, in home buying, you either want to have NO credit score (because you’re doing the DR plan and have no debt) or a GREAT credit score (which you can still obtain perhaps if you have a credit card open that you always pay the balance off). In between is where you get into trouble. This collections account was throwing us into the middle, so I had to proactively fix it or be willing to pay up.

I dove in and made phone calls, faxed letters, begged, emailed, etc. It took two and a half months to finally clear – JUST IN TIME for our May buying timeline.

high fiveI want to end each post with a brief summary of bullet points, for those who would rather get the drive-by version rather than the whole story! In closing, while you prepare for home buying, make sure to do the following:

  1. Be debt-free and have your 3-6 month Fully Funded Emergency Fund set aside (this is NOT down payment funds)
  2. Save at least a 10%-20% down payment plus cash for closing costs
  3. Find a Real Estate Endorsed Local Provider (ELP) in your area and interview them and check references!
  4. Stay off websites like Trulia, Zillow, or Redfin on a regular basis until you are ready to buy. Don’t tempt yourself prematurely.
  5. Don’t go looking at houses in person until you are ready to buy. Again, why tempt yourself?
  6. Obtain a current copy of your credit report and make sure it’s accurate.
  7. Clean up any errors from the credit report – this will take a while so be insistent but patient.
  8. Pre-qualify for a 15-year fixed rate mortgage.

Stay tuned for part two…