Home Buying for Millennials – How to Buy Your First Home: Part 2

Welcome back. Let’s get to it by picking up right where we left off.

Making an offer – “This is the one,” you say. We said it more than twice. Now that you have equipped yourself with vast amounts of research and you have a trusted agent at your side, you should be in a position to make offers. Once you’ve made an offer on a home, hang tight as it is considered along with any other offers that might have been made. While money is usually the prevailing decision maker, it’s not the only thing on a seller’s mind when it comes to the sale of their home. Other considerations, like how soon or late you can close, are also taken into account. For one home, our final offer was slightly lower than another prospective buyer’s, but since we had time on our side, we won the bidding war by agreeing to a much longer period of time to close. So, before you go over the top on your offer, think critically about it and lean heavy on your agent for his or her professional guidance. Here’s an interesting question. If the house you’re bidding on is your so-called dream home, and buying it fits into your cash flow / overall financial plan, does it matter if you “overpaid” for it? I’ll leave that up to you to decide. Meanwhile, congratulations! Your offer was accepted and now the “fun” part begins.


home inspectionHome inspection and financing
– Home inspection and securing your financing more or less happen simultaneously, but let’s discuss inspection first. Inspection is an extremely important part of buying a home. This is going to be your first chance to see “what’s under the roof,” so to speak. Therefore, I recommend working with an inspector who’s amassed a ton of experience and is thorough. His or her job is to be to objective and point out anything that’s wrong with the house. Don’t start freaking out if you’ve amassed a decent list of things that need attention. Some of them might be minor and not worth bringing up.

From here, you going to have the opportunity to negotiate any of the items that you feel need to be remedied. A remedy can be anything from the sellers fixing the problem at their expense, to them offering a credit towards the purchase price of the home. The home we ended up buying had a number of things that needed attention. Fortunately for us, none of them were too serious, and the sellers were happy to accommodate our requests for them to be fixed. However, there was one home that had a laundry list of issues including 3-4 major problems. We basically ran away from that house after the sellers refused to address any of the items found during inspection. So shady!

Just remember the following during your inspection. You are the ones that are about to fork over a ton of money for a home that you’re going to spend a lot of time in. So, if you don’t feel good about the house after your inspection, or if you simply don’t have the time or money to remedy any of the issues yourself, walk away and let the hunt continue. Paying for another inspection is a small price to pay compared to buying a home that could have something seriously wrong with it. My father said, “Homes are like trains, you can always catch the next one.”

While inspection is taking place, the mortgage process continues from the pre-approval stage. Once you are in contract for your future home, your lender will request that you complete a mortgage application and submit a myriad of supporting financial documents. I advise that you gather your documents well in advance of making an offer. As a financial advisor, I had everything anyone could ask for at the touch of my fingertips and I still found this part of the process annoying. So promise me you won’t be that person scrambling for their information each time something is requested, okay? Your financial documents can include, but are not limited to, copies of past tax returns, latest bank and brokerage statements, pay stubs, details of existing loans and even a letter from your accountant. For my fellow business owners out there, things can get even more detailed since your lender might also request your business’s financial statements, tax returns and some letters of explanation.

Once everything is submitted, your loan will head to underwriting. Then, a decision will be made as to whether or not your loan is approved or what needs to happen before the bank will lend you money. I recommend you stay in close communication with your lender during the underwriting process. Be proactive! If a new bank statement comes out while your loan is in underwriting, have it ready in advance should they ask for it. After your loan is approved, you will given a statement of your estimated closing costs and revised mortgage payment figures. However, these figures should be very close to the estimates you would have received along the way.

Completing inspection and securing financing were super stressful for us. I am sure they are for most people. I think some of this was because of what we know as professionals in our respective fields. Additionally,  we had a quickly approaching closing date (unlike the home we walked away from). However, I also believe most of the stress was psychological as we started to envision ourselves in our new home. It was easy for our minds to run wild with ideas for decorating, our kids playing in the backyard, what our neighbors would be like and just about everything in between. When you’re this close to the finish line in a high stakes game of home ownership, remaining calm and focused can go along way. Easier said than done!


Closing on your home
– With the inspection phase now over and financing secured, it’s closing time. (No Semisonic joke here, thank you very much.) Your lender and agent will inform you of what to bring to your closing, but just think bank check and a couple of forms of identification. I’d also carry some cash and a few blank checks for good measure. The day, time and place for the closing will all be set in advance. Ours was in the title company’s conference room a few towns over from our new home. However, before you actually sit down to conduct what can only be described as signing your life away, you will stop by the property for your final walk through. This is your last chance to make sure everything is the way it’s supposed to be before that house is all yours.

Side story #2: Heather and I found some water in the basement during our final walk through. No joke! Apparently, the condensation pump to the HVAC decided to split that morning. Yay! It sure was interesting watching the seller’s agent scramble to resolve the situation. “What do you want?”, he asks. “Fix it please!”, we replied. Apparently, he was the town’s #1 realtor and the way that he took care of the problem was actually quite impressive. Before we knew it, a plumber repaired to the hose to the pump and the water on the floor was sucked up via wet vac. Fans were put in place to dry the carpet of any moisture. We also had money placed in escrow for a couple of weeks to make sure it didn’t happen again. It was a heart-stopping moment, but it goes to show you what can happen at any point in the process. Especially at the very end!

At your closing, you will sit down with your attorney and agent, the seller’s attorney and agent, the sellers (or their representative in our case) as well as someone from the title company. What comes next is a lot of signing and dating of paperwork. Your attorney will tell you what everything is as he hands it to you to sign, so be sure to listen up. Many things will be signed twice or even three times while some things you have already seen and signed when completing your mortgage application. By the end of it your wrist will hurt, but a set of keys will be placed in your hand. You are now the proud owners of your new #familyhome. Mazel Tov!


Conclusion

Well, isn’t that something? And this guide was keeping it relatively simple! As I sit here in my new living room putting the finishing touches on this post, I can definitively tell you that this entire process was worth doing. Looking back on it now, buying a home and escaping NYC with our family is hands down the biggest transition of our lives thus far. It is also one of our proudest moments. Battling our way through the recession while launching our careers in the most competitive job market on the planet and managing a mountain of student loan debt to afford ourselves a beautiful home was one of the hardest things we’ve ever done.

As you may already know, I spend a lot of my time working with Millennials. I always believe that no matter how difficult our financial challenges are, we can overcome them through financial planning and hard work. I not only hope that this post helps anyone interested in buying a #familyhome of their own someday, but I also hope it energizes my fellow Gen Y’ers to empower themselves so that they too can achieve the great things in life.

Lastly, don’t forget to check out some great Millennial press and video content I’ve been featured in on the topic of home buying: