Author's note: This is a write-up about Abbie and my project about the process of buying a house. It was a little easier than expected at times, but at different times a lot harder. I think write ups are written in essay form, so that's what I did. I feel like from the beginning to the end, the voice changes somehow. Please give feedback about that. Thanks to our banker Stephen Boldt, our realtor Jan Farber, and my mom for giving me the project idea.
There are a few things that school doesn't teach you. Many of them are unimportant and easily self-learned, but one of the most nerve-racking and significant things you do in your lifetime is buy a house. It will be one of the most important purchases you make -- it's no sweater -- you can't buy it, try it, then return it with a simple receipt. You are buying a place to retreat, relax, work, sleep, play: a place to live -- a home.
When Abbie and I decided to simulate a young couple buying a house for the first time, we thought it would be completely out of grasp and difficult, but I think we both later realized that, with a little professional insight and guidance, you can grasp a few elementary terms and get the overall gist of it. It might be a little stressful, tedious, and stretched out, but can be done.
If I were to put the process into my own steps, I would separate the entire process into two general areas -- the loan and the house. Before going to any real estate agent, you'll first need to know your general budget, so contact a loan officer at a local bank. Before we went to our first meeting about loans, we had no idea what it would be like.When meeting with Stephen Boldt, our banker for the project, he divided up the process into four steps: prequalification, preapproval, underwriting, and approval.
The prequalification is the consideration stage. Banks don't just give money to anyone. Factors of qualifying for a large loan include your sources and amount of income, credit score, and debt to service ratio. For all of our scores and incomes, Abbie and I just used the numbers for the average American; our yearly income combined after tax was approximately 83,000 dollars, and we were assuming to have saved 30,000 of that for a few years. Once it is determined that you are permitted a loan, it's time to figure out how much.
Step two is preapproval. Before asking for the money, you'll need an amount. Nowadays, there are easy tools to figure out how much you can get. We, along with the guidance of Stephen Boldt, used the "How Much Can I Borrow?" tool on the Wells Fargo site. While filling it out, Abbie and I came across some more elements that are considered by the bank when loaning money. Monthly payments towards anything else that needs to be paid off are an important factor. The bank needs to make sure you will be able to pay them back. To be realistic, we determined that our monthly payments included $650 of auto payments, $175 of student loans, and $110 of other payments (our example: a snow mobile). We also estimated $600 dollars for credit cards each month. Abbie and I also needed to chose a term for how long we wanted to extend our payments for -- we chose 30 years at a 4 percent interest rate. Lastly, for precautionary measures, we added a yearly 800 dollars for property insurance.
We submitted the numbers and came upon the budget of around 230,00. Since the next step of getting a loan would come after choosing a house, we moved on and met with realtor Jan Farber. Normally, the first thing someone would do is browse houses, looking for listings and open houses to go to, and so on, but we were not able to actually go to open houses, according to Jan Farber for reasons unknown. Either way, we simply browsed a real estate website that listed all lots for sale in Wisconsin. Abbie and I decided to stay in the Pewaukee area, so we put it into the search, which was simple enough for us, but I must say, there was a little difficulty for Jan attempting to use our laptops. Past that, though, we found a house that fit our budget and taste. It ended up being a Colonial style house on Foxwood Lane for the haggling price of $230,000.
Finalizing your loan should be next on your agenda. Mr. Boldt didn't explain much of this part to us in great detail, but it sounded like all you can do is submit the files you filled out earlier and hope that the bank grants you your wish. If they do approve, all that is left is to sign a few papers. After finding a home that you would like and confirming the loan, the next step is to, along with hiring an inspector for $350 to make sure your house is really what you thought it was, there is a fairly long form to fill out. There's not actually much to the forms, just a few names here, a few phone numbers there. It asks the price of the purchase, also which of the appliances are included, the terms of your loan and a little more. After completion the forms should be given to your realtor for them to pass them on to the realtor of the house for sale. That realtor will either accept or counteroffer, trying to haggle the price higher. Abbie and I just assumed that our offer was accepted.
In a nutshell, this is what I learned about purchasing a house. I'm sure that in real life it will be a lot more stress-inducing and difficult considering it will be my hard earned money that I will be investing, but I did gain a lot from this project considering I knew nothing about the subject to begin with. When first suggested this project, I was unsure. Now, though, I'm glad my mom gave me this idea because I feel like just knowing this much now will help me in the future.
