WE ARE HOMEOWNERS! What does this really mean? For some, it may mean someone spending years cleaning up their credit to own a home. It could mean someone settling in a city they plan to create memories in. Buying a home to some can mean solidifying their social status to make it seem as if they “made it,” to gain affirmation from the world. To us, it meant starting our real estate investment journey and buying a property that will give us a rate of return when we are ready to sell it.
After I graduated, my family and I relocated to Massachusetts, so my husband could pursue his doctorate degree. It will take him about 4 and a half years to complete it and he has already completed 2.5 years. When we first made the move, we were renting for about $2,000. Yes, $2000!! Depending on where you are from, this may not seem like a lot, but being from the South, rent averages around 600-900 in decent areas. Jabari’s mom gave us the idea to buy a home since we were already giving so much to rent. We agreed with her advice and thought it made great financial sense considering the season we were in!
The process
We understood buying a house wouldn’t be an emotional decision, but a smart financial decision to cut the cost down. What I mean by this statement is, I had to let go wanting a huge yard, a garage, and lots of other preferences because this was a temporary investment. We wanted to buy a multi-family home so that the income would be a mortgage helper. We started the process and received pre-approval letters from a couple of reputable lenders. However, the area we lived in at the time was out of the price range for what we were looking for. We stopped the process for a couple of months and decided we would look for houses closer to my husband’s school in a town called Worcester.
We came across some houses we liked and randomly met a realtor that assisted with the house buying process. We did not have any referrals for our realtor, but he was God sent because he did an amazing job and treated us so well. Although we were a young couple looking to purchase our first home, he treated us with the utmost respect. If you are looking to buy or sell a home in Massachusetts please get in touch with Mark Gordon with Lammachia realty.
After we found a promising purchase prospect, we put in an offer a couple of times for the home, but the seller just wouldn’t accept any offers. Our realtor informed us the seller ended up accepting another offer later. We found another home in an excellent location and we put in an offer. It was accepted the first go around and the seller agreed to all our terms. One would assume the hard part is over, but this is where the REAL work begins! After your offer is accepted, you sign a purchase and sale agreement that both parties have their lawyers look over that basically outlines all the rules and terms of the agreement to sell the real estate. We experienced tough times with the underwriters and encountered a lot of ageism, but we got through it. After many emails and submissions sending proof of everything in our life we finally received our “clear to close” letter. It’s basically the document that says the lender has done their due diligence and agrees to finance the purchase. At last, we finally owned our home! We went from paying $2000 in rent to around 1650 for a mortgage and we have loyal tenants that pay $850/month, so we really went from $2000/month to $800/month! Although we don’t plan to settle in Massachusetts, it made financial sense to buy a home instead of renting for years. Now we pay on something we own rather than paying over 100,000 in rent to something we don’t own. We are setting a foundation to create wealth for our family and it starts with having the right mindset about money. You are never too old or too young to own a house. Homeownership isn’t a status to us, it’s a process for a life we are trying to create for ourselves. Just as a home is given to you, it can be easily taken away.
MISTAKES WE MADE:
Hiring Unqualified Family To Do Work On Our House: Being the good people that we are, we knew of a family member that worked on houses and wanted to put money in his pocket. Let’s just say it was a big mistake and there was no paperwork involved. If you are going to hire family, treat it as you would hire any other professional. They need to have insurance and a license. It was a hurtful and very costly mistake, but a mistake that will be prevented in the future.
ADVICE FROM OUR EXPERIENCE:
NEGOTIATE!
You can negotiate with the seller. We negotiated to have the seller clear out a lot of junk that was in the basement, in the garage, and repair a window seal. You can also negotiate something called “seller credits.” Seller Credits are simply the seller crediting you part of the sale at closing. It is a great tool to cut down out of pocket cost at closing. Many lenders have certain stipulations on seller credits in the process so make sure you know what your lenders allow before you negotiate with a seller. Many people think that you must take life savings to buy a house, but that’s far from the truth. Programs like FHA loans only require 3.5% down. On a 200k house that’s $7000 down, but if you negotiate $5000 dollars in seller credits you can cut that part of the closing cost to $2000. There are also favorable loans for members of the military like the VA loan that requires 0% down payment. That’s one heck of a thank you for your service. If you live in GA, RRC has programs that help you with your down payment.
GET A GOOD LAWYER
Make sure you have a good lawyer so that if anything falls through, you can walk away from a deal and not lose any money. If your realtor is good, just ask him or her for recommendations of lawyers they’ve worked with in the past. Our lawyer negotiated us not losing any of the money we put down in the Purchase and Sale so if the seller didn’t do everything necessary to close, they would have wasted their time for about 45 days and have to start over again with someone else. The inspector for our FHA loan told us they could close on our loan until a window got fixed on the property. We informed the seller of the situation he initially told us “we could do it.” After Jabari had our lawyer remind the seller’s lawyer that he gets nothing if we walked away, the buyer’s urgency for our situation took a turn for the better and he had someone fix it and our loan was able to finish being approved.
HIRE PROFESSIONAL CONTRACTORS
Get everything in writing and do not pay a contractor until what you both have agreed to get done is done! If no work is done, the contractor does not get paid. Communicate as much as possible. We suggest you create some type of payment schedule with your contractor that clearly outlines what needs to be done and when payment is disbursed based on agreed upon milestones.
BE PATIENT WITH THE PROCESS
When buying your first home, it’s important to be patient with the process. What’s for you is for you. Don’t try to rush ahead of the process
Are you a homeowner? What other advice can you share? If you aren’t a homeowner and aspire to be one, what’s stopping you from owning a home?
This blog post was also co-written by my hubby!