A single girl's home adventure

How To Buy a House, Part 1

on October 2, 2013

During my house buying experience I spent a lot of time confused and frustrated by a lack of information. I consider myself a fairly intelligent person. But this was my first time buying a house. I am a planner – I like lists and being prepared and knowing what’s coming next. I don’t jump into things blindly. Very very Type A. I struggled with the process this far though- the only information I could find online was very vague. And asking a coworker who recently bought a house was funny, but frustrating. Her response? “Oh it was so stressful I had my boyfriend do most of the paperwork”

Disclaimer: In no way am I a real estate or finance professional. The following is what I experienced and what worked for me. I hope to provide others in this situation an idea of what to expect.

The first step is NOT looking for your dream house. The first steps are boring, grown-up stuff.

For me first priority was putting myself in a financial situation where I could AFFORD to buy a house. This meant paying off what debts I could (like credit card balances), building up my savings (for closing costs and repairs), and making sure my credit score was healthy. I know everyone reads and hears to check their credit reports regularly, and if you’ve been ignoring this I’m not going to yell at you.

I understand. I was young and not incredibly responsible at one point too. But once I did check all 3 full reports I did find a discrepancy with one if the big 3 reporting agencies and had to go through the resolution process. Which was a pain. And took a while. Not something you want to deal with when you’re trying to schedule a closing so do it early!

The three big credit reporting agencies are:



As far as paying off debts, I still have a monthly car payment and student loan payment, but no credit card debts. I used Dave Ramsey‘s snowball method to pay off all those little debts that build up. I borrowed his book Financial Peace from a friend, but I know its available at my local library.

Even then, no looking for houses. Next I estimated out how much I could afford to pay monthly for my mortgage, taxes and insurance (since I was putting less than 20% down an escrowed mortgage is necessary). I wrote out my monthly income and subtracted out all of my monthly bills, estimated utilities, my usual grocery and gas budget, my monthly discretionary budget (aka fun money), a set amount to savings, a set amount to retirement, and an extra cushion. Don’t forget your cushion! We’ve all been there – walking through the mall after buying a gift and see the perfect pair of boots. What the heck? There’s a little money leftover this week and tighten the belt next week, right? Then the next day cut the tags off and wear your new boots, and promptly blow a tire on the way to work. Now you’re eating saltines and drinking water for 2 weeks. Or is that just me? Don’t answer that.

Some banks offer monthly summaries to show where you spend your money by category, or use a service like Mint. Personally, I used a few months worth of checking statements and pen and paper, but I’m old fashioned I guess. However you do it, figure out what you spend a month on things that aren’t bills.

Around this time I met with a mortgage consultant from my bank to discuss what types of loans were available to me as well as what the bank thought I could afford. I was surprised that the bank’s answer was significantly higher than my answer. Awesome, right? I can get even more than I thought!

When I got home I ran a test scenario at the bank’s max through a mortgage calculator to see what my monthly payment would be and realized that if I spent as much as I was pre-approved for I would have barely enough leftover after all my bills to cover gas to get to work and $40 of groceries a week.

I don’t know about you, but I don’t want to eat pasta alone on my floor every night. It was important to me to not make myself “house poor” – to not get myself into a mortgage payment so high that my discretionary budget was too tight to live the lifestyle I enjoy. What’s the point of buying a house if you can’t afford furniture to fill it?

To make sure that wouldn’t happen I estimated how many times a month I went to a girls’ night or bought things to pursue my hobbies (my indulgence- books and knitting supplies), and I made sure to account for that continuing while I owned a house.

I used the mortgage calculator linked above and tried different sale price scenarios to get an idea of how much the sale price and my down payment would have to be. I also made sure to keep in mind that closing costs would run between $7,000-$9,000 – the required down payment percentage would be ON TOP of that. I ended up with a range I would be comfortable in. It was considerably lower than what the bank told me but I knew I wouldn’t be putting myself in to a position to fail.

And during the search I had to keep reminding myself of this limit. It’s hard though – you see these beautiful homes that look perfect, and they’re priced a little higher or have higher taxes than you originally budgeted for but only a little bit higher. And I would try to rationalize it – “But if I had this updated en suite master bath I wouldn’t mind not going out to eat!”. But I really I would keep going out to eat, and just rack up debt.

So be realistic during this step. If you don’t cook now, most likely a bigger, more expensive kitchen isn’t going to magically turn you into a gourmet chef who enjoys cooking. You’re going to continue to enjoy your meals out. If you pride yourself on always looking fashionable and having nice clothes, that’s fine. No judgment – I have actually had need of an entire clothes room when 2 double closets couldn’t contain my wardrobe. But you can’t pay more for a master suite with a walk-in master closet and not be able to afford to stock it. Budget accordingly. This will help you in the next step (and next post) – looking for a house, and defining your needs vs. wants.

Another (not really) pro-tip: while you’re doing all of this work keep copies of EVERYTHING. Yes. E.V.E.R.Y.T.H.I.N.G. Especially if you can scan everything, it makes things go much smoother later!


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