buying my house
My last post dealt with how I found my house. This post explains how I paid for it. Please note that the links are to explanatory definitions.
Buying My House
I saved over $15,000 for a down payment and closing costs from August of 2007 to about fall 2008 by coming up with (and sticking to) spending plans, increasing my income, taking advantage of windfalls, and reining in unnecessary spending. That wasn’t enough to put 20% down on a house in the price range I could afford mortgage payments for, but it was enough to put down ten percent. I knew this meant that I would have to pay mortgage insurance until I got a sufficient amount of equity in the house, but I was prepared to deal with that. The task before me was to find a mortgage to make up the remaining 90% of the price of a home.
I had been cleaning up my credit for years. At its worst, back when I was still in school, my credit score was in the high 500-s. I have only had one 30-day credit card payment delinquency on my report in my entire history, so over time the score rose without any effort on my part. But it didn’t become near-perfect without effort. There were other problems: I had a judgment against me for taxes once when I was in college and couldn’t afford to pay for my mistake in withholding. I paid the bill eventually, but the mark remains on my report to this day. Also, for years my total balance owed was too high in proportion to my available credit. Paying off all my credit cards fixed that problem. For years I refrained from having any unnecessary requests for credit. I paid my bills on time. I checked and fixed mistakes on my credit reports. It all paid off, and by the time I was shopping for mortgages, I was confident. My own credit checks yielded scores in the low 800-s and high 700-s.
The mortgage lady asked for a month of recent pay stubs, two years’ W-2’s, two months’ bank statements, and information on my pay rate, in addition to how much I wanted to borrow and how much I wanted to put down. At first, I omitted info from those documents that would let her run my credit. I didn’t want her putting a ding on my score until I knew her company was “the one.” Instead, I gave her copies of the credit reports and scores that I had pulled myself. She looked at my information and sent me a good faith estimate. This document listed an estimate of closing costs, an estimate of other items I’d have to pay at closing, and an estimate of what my monthly principal, interest, tax and insurance payments would be. It listed the interest rate, too. This document served as this company’s informal pre-approval. (Actual pre-approvals consisted of a letter on letterhead.)
At this point, I had something to compare other quotes to. I applied for pre-approvals from my credit union, my bank, and at a trusted website where lenders supposedly compete for your business. Among them all, I got a better rate quote from the first place – the one my realtor referred me to. So, I did an official application with this mortgage company. Now the first quotes the mortgage lady gave me were for both conventional and FHA mortgages, so that I could compare the two. But I already knew I wanted a conventional mortgage – I would get a better rate, and pay less over time. In fact, even my monthly payments would be lower. The only drawback to a conventional mortgage was that I wouldn’t be able to get a seller’s assist from my lender for any more than 3% of the purchase price. I could live with that. I had to provide proof of payment of that delinquent tax bill, updated copies of all the documents I initially gave the mortgage lady, and a form signed by my employer, vouching for my employment status and pay rate, in order to finalize my loan approval.
The rate I was quoted was 5.75% for a 30-year fixed conventional mortgage with no points. When I was officially approved, I was given the opportunity to lock the rate, and then I hesitated. The news was all saying that rates were due to fall. There were about three weeks between my approval and my closing date, and rates had been seesawing up and down wildly. Did I want to take the chance of locking high and seeing rates fall by my closing date? Or worse, not locking at all and seeing the interest rates rise? I chose to lock the rate. When I closed, the rates had fallen by three tenths of a point below my rate – but I wasn’t sick about it. (But if it had dipped below five percent, I would have been fit to be tied.)
There were some other factors that affected my purchase. The mortgage company requires that my homeowners’ hazard insurance and property taxes be included in escrow. I couldn’t control the taxes, but I could get my own hazard insurance quotes and choose the one that would cost me the least. I did a lot of calling (running up my cell phone minutes) to find the best insurance for the lowest price – it was hard, but I found a good deal. There was some negotiation with the sellers on price that affected the final numbers, bringing down the principal amount borrowed and my actual closing costs. Last minute adjustments, which affected the amount I paid at the table, included settling utility and tax payments which the sellers had made. The house passed through appraisal without a problem, so that didn’t affect my mortgage. Before closing, I was provided with a copy of the Settlement Sheet that explained all the things being paid, and I actually came out better at closing than the good faith estimate projected.
After all is said and done, my mortgage process was clear and everything was on the up and up. The only way for me to have received a better deal would have been to sit out the market, which ah, wasn’t going to happen. So, that’s how I bought my house.
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10 Responses to “buying my house”
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Hello. I was reading someone elses blog and saw you on their blogroll. Would you be interested in exchanging blog roll links? If so, feel free to email me.
Thanks.
I am horrible at updating my blog roll! I’ve been meaning to do it for weeks now. That’s why I usually don’t do blog link exchanges – I’m afraid I won’t get around to holding up my end of the bargain…
Nice site. There’s some good information on here. I’ll be checking back regularly.
Thanks!
Hi Sistah Ant, I just read your home buying experience. Good read, and I’m glad it worked out for you! It seems like you and Mr. Ant did a lot of research and got the best deal available at the time. Thanks for the mention, and good luck with your new home!
Thanks, Patrick! There’s some good informative information on that site you’ve got there.
Awesome, sounds like you did everything right. Hope you’re enjoying your new home.
Thanks!
Congratulations on your new home! I hope when it’s my turn, I’m as efficient and intelligent as you were. And thanks for sharing your experience as well.
Thanks! I hope sharing my experience has been of some help to you and others.
great post. not sure if you’re even remotely interested but you could definitely teach one of those 1st time home buyer’s course.
Hmm… never thought of that…
[...] and Buying My House [Sistah [...]
This was very detailed. It looks like your hard work and research paid off. I’m happy for you.
Thanks!
This is one of the best run-downs i’ve read of a house purchase. Very succinct! I’m going to bookmark it and refer any of my first-time house-shopping friends to your summary … Congrats again! Did break out the *side spin* on the kitchen floor when you finally got in??
lol (my friend and i did that in the first “big” house i lived in!! woo hoo!)
I made carpet angels on the living room floor! And Mister Ant and I played tag in all the space.
[...] and was given further support following Bank of England data on mortgage lending and approvals buying my house – sistahant.com 01/31/2009 Buying My HouseI saved over $15,000 for a down payment and closing costs [...]