Blogs: Money Matters

Home-Buying Basics: The Money

Published Online: Friday, February 7, 2014
Unless you’re lucky enough to have come into a sudden windfall of cash (win the lottery or inherit a large estate recently?), then you will need to get a mortgage in order to become a first-time homebuyer. There are plenty of places to get a mortgage, and when we set out to buy our first home, my husband and I were initially set on working with Quicken Loans since it is a large, national company. However, our broker recommended a local bank that she had worked with personally in the past. Following her advice may be the reason we ended up getting our house.
 
If you are a first-time homebuyer, make sure you work with the right broker, and then listen to his or her counsel. Since our broker knew the agent selling the house we wanted, she knew what sort of advice he would give the sellers and gave us valuable insights on how to handle the negotiation. When we told her that we were planning to get our mortgage through Quicken, she told us that the seller’s agent was more comfortable working with a particular local bank because he had done a lot of business with it and knew its loan officers.
 
Best foot forward
Beyond the mortgage, our broker explained that the larger the up-front deposit we were willing to put down on the house, the more attractive our offer would be. As our broker explained, putting down a bigger portion of our 20% down payment as a deposit would make us serious contenders to get the house despite the fact that there were already two other offers: one at the asking price and one above it.
 
Since we had all the money for our down payment easily accessible, we decided it was time to go big or go home (to our rented apartment) and offered to make a $10,000 deposit. As a result, our offer looked the safest—the fact that we were willing to make a large down payment and a large deposit let the sellers know we were serious and that we wouldn’t run into financing trouble down the line before we closed on the house.
 
As a result, less than 24 hours after we put in our offer (which was $5000 below the asking price), we got the house.
 
Getting to the finish line
Being under contract for the house was just the first step, however. The mortgage company still needed to comb through all of our assets and debts (mostly a huge amount of student loans) before approving our mortgage, plus the house had to be appraised for at least what we had offered.
 
If the appraisal came back below our offer on the house, then the bank might not have approved the loan—both a blessing and a curse. While it wouldn’t have been good to find out the house was worth less, it could have given us some bargaining power to go back to the sellers and negotiate a lower price. After getting so far into the process of selling the house, the sellers might have been willing to agree to keep the deal from falling through. Of course, the sellers might also have walked away from the deal with the hope that someone else would buy the house.
 
Our appraisal came in just above what we offered for the house, and the home inspection revealed nothing to worry about. However, as an example of how badly a home inspection can go, it turned out there was mold throughout the house our sellers were planning to buy. However, since they didn’t want to lose buyers for their house, they went through with the sale and moved into a temporary rental.
 
In my next post, I’ll dig into the new monthly expenses first-time homeowners have to budget for. These are important to take into account when buying a home so you don’t end up making yourself “house poor” when buying your dream home.
About
Laura Joszt
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In this blog, the editor of Physician's Money Digest tackles financial issues impacting today's younger health care professionals, including recent graduates, students, and individuals who need a crash course in finances. Have a question about how to handle your own financial challenges? Send it to us at moneymatters@pharmacytimes.com.
Author Bio
As the editor of Physician's Money Digest, Laura Joszt writes and edits finance articles geared toward the health care professional. Before joining PMD, Laura covered technology for NJ Biz. She received her master's degree in business journalism from NYU, complete with MBA-level courses in finance, accounting, and economics.
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