Three years ago my husband and I decided that we either needed to rent a bigger house or we needed to buy a bigger house. Given that the monthly rent of a bigger house would be roughly the same as a monthly mortgage payment, we decided to call our bank and find out if we would qualify for a loan.
Less than two months later we were moving into our house. I'm told that our process was especially fast. We found a house quickly and the sellers requested a short escrow.
Still, we had to go through the same process of any typical homebuyer. Here was our order of events.
A timeline for how to buy a house
1. We had enough money in savings for a modest down payment.
We'd done enough research to know typical home prices in our area. And we knew we'd never save up 20% while having to pay a couple thousand a month in rent. So we opted to put 5% down and pay private mortgage insurance.
2. We got pre-approved for a loan.
We didn't HAVE to get pre-approved but we didn't even know if we would qualify for a loan or how much we would qualify for if we did qualify. Plus, we'd read that pre-approval helps sellers take you more seriously.
Our pre-approval also sped up our escrow process significantly because we'd already submitted most of our paperwork including:
Two months of pay stubs.
Three months of checking and savings account statements.
Two years of W-2s and 1099s.
A copy of your driver's license.
3. We found a realtor.
4. We found a house.
We put in an offer that didn't get accepted. Whatever. We didn't want that stupid house anyway.
5. We found another house.
We wanted it really badly and not just because they served pizza at the open house. Our realtor wasn't even with us (to know how good the pizza was). We called her and said we wanted to put in an offer. We knew we'd have a lot of competition so we aimed high.
6. The sellers countered.
There were almost twenty initial offers. They asked for our highest and best offer.
7. We countered.
We went high because we figured that if the house appraised for less, we could renegotiate. I thought we were brilliant.
"Why has no one ever thought of this?!"
8. They countered.
They liked our price but they wanted us to take out the appraisal contingency.
"Oh, I guess other people have thought of this."
So if the house appraised for less than what we offered, we'd be agreeing to make up the difference in cold hard cash, because our bank (no bank) would give us a loan worth more than the house.
The sellers also asked for a 35 day closing. Because we'd already done most of the loan process paperwork, our mortgage broker thought he could make that happen.
9. We countered.
We knew we were still in competition with another buyer so we couldn't just say, "hell no" to the removal of the appraisal contingency. We countered that we would pay over the appraisal price but only up to a certain amount. So we put a cap on how much we would pay in cash.
Our realtor had never heard of anyone doing that before, but that's what we were comfortable with so her legal department helped with the wording and that's the counter offer we made.
10. They accepted our offer.
To be honest, we were in total shock. It felt like we'd ultimately fought our way to the title belt, only it was a home title and we were, you know, really out of shape. We proceeded with cautious optimism in case this was too good to be true.
11. We notified our mortgage broker and he sent us a Good Faith Estimate (GFE).
The GFE gave us estimates of closing costs, principal plus interest payments, and our escrow payments (insurance and property taxes) based on our accepted offer. It was eye opening. S**t was getting real.
12. We set up home inspections.
Part of our agreement with the seller was that we only had one week to remove the inspection contingency clause from our contract. This clause basically says, "Look, I've seen the movie, The Money Pit. I'm only agreeing to buy this home for x amount of money after an inspection."
We had a general inspection, a separate sewage inspection and a mold inspection. Based on the recommendations of those inspectors we wrote a letter to the sellers requesting some repairs. They agreed to fix all of the things we requested – most notably, a pipe under the house that needed to be replaced.
13. We locked a rate on our loan and our loan went to underwriting.
I picture underwriting like Gringotts Wizarding Bank in Harry Potter and imagine goblins thumbing through my bank statements. Do goblins have thumbs? (Chris, could we put a picture here?)
[Editor's note: I worked in a mortgage company while in college and met several in-house underwriters. They were all uniformly nice humans with thumbs.]
14. The bank set up a home appraisal that we paid $400 for.
We never even met the appraiser. It felt like shopping, if shopping feels like handing someone 400 bucks and walking away with nothing in return.
15. We put a deposit on our down payment into escrow.
It had to be a cashier's check. I kept hoping the bank teller would ask me why I needed such a large cashier's check so that I could say, "We're buying a house." She didn't ask.
Upon further reflection, I've concluded that bank cashiers are probably trained to not ask customers what they are doing with the money they withdraw.
16. Our loan came back from underwriting as approved with conditions.
This, we were told, is not uncommon. We had to write letters of explanation for some higher deposit amounts in our bank account.
17. Our appraisal came back in our favor.
The house appraised for slightly more than we offered to pay for it. So we didn't have to use that cap clause after all.
18. Our loan conditions were cleared by underwriting.
We were officially approved for a home loan. It felt like graduating from college. Oh, ok. I earned this, but am I ready for it?
19. A whole lot was going on that we didn't have to deal with.
Escrow was looking into the home title. The mortgage company requested termite inspection reports. Our realtor was shuffling requested paperwork. Our mortgage broker was sending loan paperwork to escrow.
I was just hanging out, taking pregnancy tests and telling my husband that it was a very good thing that we were moving into a bigger house.
20. We had to wire a whole bunch of money to escrow.
This included the balance of our down payment and closing costs.
20. Escrow called us to set up closing. AKA come sign all the paperwork.
I don't like to sign things without reading them fully but we would have been sitting in that conference room for a week if we tried to read every paper we signed that day.
21. Our loan was funded.
And suddenly we owned a house and owed a mortgage. And our daughter was running around her very own bedroom dancing in front of her mirrored closet doors while my husband painted her walls a color that we chose. And I got out of painting the entire house but still got to pick an orange color for what would be our son's room eight months down the line.
As freelancers and artists who came to home ownership a little later in life than some, the whole process was fascinating (and, yes, a little stressful) and we're thankful every day for our house.
Your home buying process may not follow ours in exact order, but I do hope it follows ours in the amount of joy your home brings to you.