So you have decided to be all adult-y and buy a house. Congrats! I have not regretted it (yet) and I love my house. Here are some tips to help you on your house buying experience. (There’s a tl;dr version at bottom)
1. Be rich
- OK, let’s be honest, no graduate student is, but this is what really helps the most. Once you can meet the magical 20% down payment, you can opt out of mortgage insurance and are more likely to obtain a mortgage.
- But again, we’re not all rich, and as graduate students, it’s evermore unlikely, so… do you have rich relatives? Think any of them would consider giving you a loan to help you to that 20% amount? It is an easier way to get the money without taking out another loan, and relatives usually charge you less in interest (usually!). Family can gift you somewhere between $10,000-13,000. (look it up before asking) [This is what books suggest, not something I’ve had personal success with, FYI]
- Not related to the Romneys? No worries, the majority of mortgage toting Americans are not. No worries! It is just going to be harder for you to get a mortgage – But not impossible.
2. Tips for getting the mortgage
- If you have taken some time off between undergrad and grad school, you’re more likely to have a regular job record and some income, which will make it easier to obtain a mortgage.
- If you are like me, having little money or work experience, it will be harder to obtain a mortgage – But not impossible. Here are some tips:
i. Credit Unions or banks associated with the university are more likely to understand your situation.
ii. Keep your acceptance letter &/or teaching/RA contract handy. Especially the one with the numbers ($$$) on it. Banks like proof of income (& enrollment).
3. Preapproval doesn’t mean you have a mortgage
- I would bold this twice if I could. This is what tripped up my process.
- This probably goes under #2, but it is important. (MORE BOLDING)
- After a bank preapproves you, check with them and make sure everything is OK. Make sure they know you are a graduate student. Make sure all the t’s are crossed before you start looking for a house.
- Trust me.
4. When you are absolutely, positively sure that you have a mortgage (See #3) – Feel free to start shopping for houses!!
5. Getting a realtor
- If you can, get a recommendation from someone, but I’m not sure how important this is. I went in blind and had a positive experience.
- As a buyer, you should not have to pay for their fees. These are covered in closing costs.
6. Things to keep in mind when shopping for a house:
- Resale Potential – As a graduate student, your plan is to live there for a few years and GTFO. Make sure you buy somewhere where you expect to sell quickly and at least return your investment, if not grow.
- “Needs some work” — These are great properties to increase the value on your investment. But it takes time and effort. You’re not necessarily in the business to house flip – you are a graduate student. And likely buying a house because it’s cheaper than renting. If you want to flip it, that is fine with me, but remember your motivations for buying in the first place.
- Location — You probably do not need to hear this, but this was the most important thing for me when choosing a place after its condition. Keep an eye on bus routes and check your university’s parking situation.
Steps to buying a house
1. Consider your finances/life plan/responsibility level and decide you want to buy
2. Figure out your budget
- Use online calculators to determine estimated monthly mortgage
- How big of a loan you feel comfortable taking out
- How much available for down payment
3. Apply for a mortgage
- Documents needed – W2s, bank statements, letters of enrollment/employment contracts
4. Double check preapprovals
5. Triple check preapproval
6. Contact a realtor/start looking at houses
7. Put an offer down/haggle/ start buying process
- Get the seller to pay for closing costs (realtor will help decide how much)
- And anything else that needs to be fixed (I didn’t have success with this)
8. Usually 45 days from agreeing on price to do following
- Home inspection
- Finalize mortgage information
- Gather finances for down payment
7. Closing date
- Lots of signing paperwork
- Switching over utilities
- Getting title of house
- I recommend champagne and donuts.