Finding Our Homestead: An Update

Back in June, I shared that my husband and I are in the process of becoming homeowners for the first time. I wrote briefly about making an offer on a house and putting our debt snowball on hold, and I thought that now, several weeks deeper into the process, I'd go into a little more detail about what it has been like. Because as someone who has always lived with my parents or rented from a landlord, I've been completely clueless from the start.

First off, (I guess this is pretty obvious, but I gotta say it anyway) when you're broke, your house options are pretty limited. 

I've heard plenty of stories about people with $50,000 household incomes getting approved for $450,000 mortgages. They began their house search with a $150,000 budget, only to learn after speaking with a lender that they can actually spend three times that amount (Just like how the limit on my first credit card was $7,000, when I worked as a sandwich maker at Firehouse Subs; a classic debt trap). So of course, these home-buyers get themselves into trouble by picking out the biggest, fanciest one for which the bank will loan them the money.

After hearing this so often, especially on the Dave Ramsey podcast, I assumed we would be approved for a ridiculously large sum of money and be tempted to go over-budget to get something nice.

That did not happen.

We have modest incomes and an, ahem, significant amount of debt. The maximum mortgage loan amount our lender gave us was about $50,000 less than we'd expected. And, thanks to my credit score being 5 points lower than the requirement (FIVE. POINTS.), we qualified only for a rural development loan. 100% financing, but only in select, specific areas.

Now, keep in mind that we'd created a long list of properties and had spent a few full days looking at places with our realtor. It turned out that only about four homes on our list were rural development (RD) eligible. Then, two of these RD homes sold within 24 hours of us learning this information.

Basically, we were left with two houses to choose from.

It's worth mentioning that the other houses on our original list were selling unbelievably quickly as well. We started to feel the pressure to make a decision because the options were disappearing before we could even blink, and new options weren't replacing them.

We took a Saturday morning and revisited our two remaining options with our realtor and my husband's parents. My father-in-law has done a lot of remodeling over the years, and we thought it'd be handy to have him and my mother-in-law along. They might be able to spot some structural problems that would help us make our decision before we paid for a home inspection.

One of the two houses- the newer, fancier place in a more convenient location- sat on a mere 0.66 acre, 90% of which sloped at a severe angle and placed the back of the house at a the base of a steep hill. Not only would we have no yard to garden or raise chickens or pretty much anything else, this was also an obvious flood risk, even to me (and I'm obviously not a home professional).

The yard was a deal-breaker.

So. We'd made our decision. We went with the other house, a modest, 1221 sq. ft., three-bedroom home built in 1964. Quaint. Simple. Brimming with potential. 1 acre of decent land. Plenty of lovely shade trees but also a perfectly flat, sunny plot for a garden.

We put in an offer that day and worked with our realtor to get things rolling. The next several days consisted of back and forth negotiations between us and the sellers until we both settled on an agreement.

Part of our offer included $500 up front in earnest money, an out-of-pocket cash expense I wasn't expecting so soon.

The next big step was the home inspection (which cost us $525, then and there). A pretty anxiety-ridden experience. When you're purchasing an older home, there's no telling what kind of problems the inspection will uncover. We were present in the house while two inspectors gave the property a thorough look-over, crawling under the house and climbing up into the attic. When they finished, they gave us a little presentation with colorful photos depicting their findings.

The major issues involved mold in the attic, a leaky shower, and water pipes in need of changing; nothing devastating. There were other small things too, of course, but nothing we shouldn't be able to do ourselves.  

After these findings, we had to re-enter negotiation with the sellers regarding repairs that needed to be done. Once that was settled, the next part of the process was the appraisal.

Another scary experience. If the house appraises for less than your contract says you will pay, the mortgage company isn't going to pay for the house. They won't pay for something that's worth less than the amount it costs. That would mean more negotiation and possibly losing the house altogether. If it appraises for more than your contracted agreement, hooray for you; you've already got some equity.

In our situation, for us to get truly 100% financing, we needed the house to appraise for $3,000 more than the agreed-upon price in our contract. It appraised for $1,000 more than that price, which was okay, but that means we'll have to shuck out $2,000 to pay closing fees.

It's confusing.

The pest inspection happened last week. Another $75, but tacked on at the end. We haven't heard back from that yet.

In the meantime, our closing date is set for the end of this month (!!!!). My recent job change is complicating matters, but we're hoping that we won't have to postpone closing because of it. As of now, we've entered a quiet period where, apparently, all you do is wait for closing and hope it all works out okay.

And you know how I am when it comes to waiting in silence.


So yeah. We've already put over $1000 cash into this place, which means it's starting to feel like ours. We've made list after list of things we want to do as soon as we get the keys, how we need to prioritize repairs, and things we would like to do if we could cash flow it over time.

One wonderful thing is, despite being an older house, there is no carpet, no horrendous 60's wallpaper, and no garish paint choices.

Just a nice, clean, blank slate.

I'll update as things progress. Hopefully, there will be no more news until we get the keys!


Jessica A. Walsh said...

Wow - congrats! That is a nice blank slate - you're so lucky. We had to rip down wallpaper that was wallpapered over wallpaper. Best of luck to you both!

Jessica said...

Yesssss. No carpet = #blessed.

Can't wait to be along for the journey of your first home.