By Matthew Mullen, Relationship Banker at Rockland Trust
Working at a bank, it may seem like I would have a leg-up on the first time homebuyer process. The reality is I didn’t have any insider info that my friends couldn’t easily find on the web.
But what I did have was good financial habits and just as important, a trusted resource -- my colleague Joel Sugarman, a senior loan officer at Rockland Trust.
Like a lot of millennials, I moved back in with my parents to start saving after college. The goal was to buy a house with my girlfriend, Amy to create equity as opposed to dishing out cash month after month for rent.
We pooled our savings and by mid-October 2017, we kicked off the process by working to get our pre-approval. This is where your lender checks to make sure your income justifies the loan amount you need. For us, the process was fairly easy and straightforward. We just provided financial documents, such as bank account statements, tax returns, and pay stubs.
With our pre-approval in hand and now an idea of how much house we could afford, we set out to look for the perfect place to call home. We worked with our real estate agent and spent countless hours scouring real estate websites looking for an address that checked all our boxes. Is the house in our price range? Is it in a desirable location? Does it have some or all of the features we want?
Once we both agreed that a listing was worth seeing in person, we would send Joel the links of these listings and he would break down the price, down payment, taxes, and estimated insurance. This gave us a realistic view on the affordability of what we were looking at, and helped us adjust our expectations so we could find the right place.
We found our home in mid-November. The seller was eager to close and everything moved quickly especially since Joel was our liaison with the processor and continued to answer our questions.
So, on December 18, 2017, we closed on our house and Amy and I officially became homeowners!
So, what did I learn? One of the biggest lessons was around the budgeting and financing of home-buying. Taxes, private mortgage insurance (PMI), and insurance are some examples of expenses that play a role in your monthly budget and determining what you can or cannot afford. PMI is required if you’re putting down less than 20 percent down on your home as a way to protect the lender in case you default and is added to your monthly mortgage payment until you pay down a certain amount of your principal balance, depending on the mortgage program you select.
Also, never underestimate the power of cash, especially if you get into a competitive bidding situation. All potential homeowners should be sure they have a healthy savings account. This means more than just covering your closing costs. Emergency funds are important because you never know what will happen, like needing to make repairs after closing on your home or a period of unemployment. You want to be sure you can afford your home long term no matter the circumstances.
Being a new homeowner has been fun, though the nor’easters in early 2018 created some anxiety - Would our power go out? Would a tree fall on our roof? The benefits of adulting…
We have some things we would like to change, but know that the work we put in will pay off in the long run. I can tell you for certain that one of the best feelings in the world is seeing an investment goal you’ve worked long and hard for come to fruition.
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