We were so excited in 2015 when we made the very last payment on our $100,000 of student loan debt. We were completely debt free after 2 years of marriage. We had done something extremely difficult, and accomplished it together as newlywed couple. Even better, we loved that we had gotten our marriage off to a great start.
Then in 2016 we bought our first home. We planned on it being a "5 year home" but let's be honest...nothing goes as planned. We purchased our home prior to Lorelai's arrival, and quickly learned the house was not what we wanted in a family home. We stumbled across a home one day on Zillow this fall that we fell in love with. Later that week, we were under contract to buy a home. Thankfully we had done some beneficial updates to our house (see our posts here) and we flipped it easily. However there was a short week where we held two mortgages at once. My stress level was through the roof, so I advise never doing that...ever...ever...ever unless you are 100% financially able. We budgeted for an emergency of paying two mortgages, but in no way did I actually want to do that.
So here we are now. We've been in our new home almost 4 weeks. But we were reminded through this process about a few things that we found helpful when obtaining a new mortgage.
1. Shop Around. Banks LOVE to get your business. They all offered to match the best rate I could find. Which is a lot of fun for the consumer. Don't just go to one place, go to a couple places and get the breakdown of what all the closing costs will be from each bank as well.
2. Remember Mortgages are Sold. It is very common in the mortgage industry for a bank to work with you to obtain a mortgage, then after the transaction is complete they turn around and sell it to another financial institution. It won't affect your agreement or rate, but since we like to make extra payments on our mortgage...and I tend to be very hands-on with debt monitoring.. I care a lot about the ability to check my mortgage balance and pay online through user-friendly apps and websites. It is completely okay to ask the bank you are working with if they hold or sell their residential mortgages, if you care about that.
3. Pay down Existing Debt. One way to increase your credit score is to pay down existing debt. Even though we pay off our credit card each month, we had one card that had a relatively high balance on it that month. We made sure to pay off our credit cards mid-month so they had a zero balance at the end of the month to help give our credit score a little extra boost!
4. Get your Financials in Order. Even though we obtained a mortgage a year prior, we had already forgotten how much financial information you need to send over. W-2s, Tax Returns, Pay Stubs, Bank statements...the works. It takes time to collect these. Thankfully we went through the same mortgage company and since our file was only 1 calendar year old, we went ahead and just updated with the most recent year's financials. It was at that time I realized how much had changes in a year though. Kevin was no longer working for one, which made a big difference in our financials.
5. Have Proof for any Red-Flags. I hadn't realized how many insurance claims I had this year until they started asking about big checks. From a hail claim on the roof, hail claim on my car, and a car accident. All of these large insurance checks raised some red flags for the bank. I had to provide proof of each incident, so they knew it wasn't some sort of issue with our financials.
6. Decide How You Will Pay a Down payment. We have a separate post on preparing for home ownership, and the earlier you start the better off you will be! We give tips on how to start saving for a down payment. If this is your second home purchase, you'll need to decide if you are going to use equity in your home for a down payment (for example selling your home before you buy, or obtaining a HELOC) or if you are saving up cash for a new down payment. We chose to save up cash for a new down payment, in order to allow ourselves as much flexibility as possible.
7. Don't base your budget on what the bank tells you. The bank was willing to let us hold TWO mortgages. I was blown away. They looked at our financials and thought "Yep, you could have mortgages equal to more than your take-home pay at your primary job". That is crazy to me. Do not base what you want to spend on a home on how much you can obtain a mortgage for. You should budget and decide prior to going to the bank how much you want to spend, don't let a bank tell you what you can afford as it will probably be much higher than you actually can. In this post there are a few steps to help you determine how much you should spend on a home!
Those are just a few things we learned from going through this process a second time!
Then in 2016 we bought our first home. We planned on it being a "5 year home" but let's be honest...nothing goes as planned. We purchased our home prior to Lorelai's arrival, and quickly learned the house was not what we wanted in a family home. We stumbled across a home one day on Zillow this fall that we fell in love with. Later that week, we were under contract to buy a home. Thankfully we had done some beneficial updates to our house (see our posts here) and we flipped it easily. However there was a short week where we held two mortgages at once. My stress level was through the roof, so I advise never doing that...ever...ever...ever unless you are 100% financially able. We budgeted for an emergency of paying two mortgages, but in no way did I actually want to do that.So here we are now. We've been in our new home almost 4 weeks. But we were reminded through this process about a few things that we found helpful when obtaining a new mortgage.
1. Shop Around. Banks LOVE to get your business. They all offered to match the best rate I could find. Which is a lot of fun for the consumer. Don't just go to one place, go to a couple places and get the breakdown of what all the closing costs will be from each bank as well.
2. Remember Mortgages are Sold. It is very common in the mortgage industry for a bank to work with you to obtain a mortgage, then after the transaction is complete they turn around and sell it to another financial institution. It won't affect your agreement or rate, but since we like to make extra payments on our mortgage...and I tend to be very hands-on with debt monitoring.. I care a lot about the ability to check my mortgage balance and pay online through user-friendly apps and websites. It is completely okay to ask the bank you are working with if they hold or sell their residential mortgages, if you care about that.
3. Pay down Existing Debt. One way to increase your credit score is to pay down existing debt. Even though we pay off our credit card each month, we had one card that had a relatively high balance on it that month. We made sure to pay off our credit cards mid-month so they had a zero balance at the end of the month to help give our credit score a little extra boost!
4. Get your Financials in Order. Even though we obtained a mortgage a year prior, we had already forgotten how much financial information you need to send over. W-2s, Tax Returns, Pay Stubs, Bank statements...the works. It takes time to collect these. Thankfully we went through the same mortgage company and since our file was only 1 calendar year old, we went ahead and just updated with the most recent year's financials. It was at that time I realized how much had changes in a year though. Kevin was no longer working for one, which made a big difference in our financials.
5. Have Proof for any Red-Flags. I hadn't realized how many insurance claims I had this year until they started asking about big checks. From a hail claim on the roof, hail claim on my car, and a car accident. All of these large insurance checks raised some red flags for the bank. I had to provide proof of each incident, so they knew it wasn't some sort of issue with our financials.
6. Decide How You Will Pay a Down payment. We have a separate post on preparing for home ownership, and the earlier you start the better off you will be! We give tips on how to start saving for a down payment. If this is your second home purchase, you'll need to decide if you are going to use equity in your home for a down payment (for example selling your home before you buy, or obtaining a HELOC) or if you are saving up cash for a new down payment. We chose to save up cash for a new down payment, in order to allow ourselves as much flexibility as possible.
7. Don't base your budget on what the bank tells you. The bank was willing to let us hold TWO mortgages. I was blown away. They looked at our financials and thought "Yep, you could have mortgages equal to more than your take-home pay at your primary job". That is crazy to me. Do not base what you want to spend on a home on how much you can obtain a mortgage for. You should budget and decide prior to going to the bank how much you want to spend, don't let a bank tell you what you can afford as it will probably be much higher than you actually can. In this post there are a few steps to help you determine how much you should spend on a home!
Those are just a few things we learned from going through this process a second time!
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