Merging Into Life: Buying Your First Home

[00:01:49]
Steven Vieira: Like we like to say here, it takes a small village to bring you through the process. Typically, a lot of people start with the real estate agent. But what my recommendation would be is really to start on the lending side first and maybe even look personally at your own monthly budget, so what fits your monthly budget, before you even approach the lender and ask them what you think the bank will qualify you for. What I’ve found throughout my career is that the bank usually can qualify someone for more than what they are comfortable with paying. How is your credit score and do you know the ranges that it should be?

[00:02:25]
Amanda Greene: Head to the show notes for more information, including what you need to know about credit scores.

[00:02:30]
Steven Vieira: That’s something that just recently in the last few years has changed dramatically. If I go back five, even 10 years, a good credit score was usually over 700. Now, in modern day, it’s really closer to 800. I like to say start with a monthly budget, then approach the lender. Try to get a pre-qualification done where you’ll know where you’re comfortable and where the bank is comfortable lending you the money. From there, selecting a good real estate agent, looking at an insurance agent, as well as, as you get closer to the process, finding a good company that will stand behind you that’ll protect the home.

[00:03:09]
Amanda Greene: Any other professionals we’ll meet along the way of the home buying process?

[00:03:13]
Steven Vieira: Well, there’s always the closing agent, so there’ll be an attorney involved when you show up to closing. Normally, that’s someone that the lender will select. But in certain states, you have the right to select an attorney to represent your interest because typically that attorney will represent the lender’s interest. Even though your interest and the lender interest often coincide, you both want to have clear title to a home, you both want to have the process go smoothly, and you want everything that you’re signing that day to be explained to you. So a good attorney is someone that will make the process much easier for you in the long run.

There’s also different levels at the lender. So there’s the processor, there’s the underwriter, and knowing what each one does is going to be important because a processor is there to collect your documents. They’re there to help you with the process to make the loan package look the best that it can be before it’s delivered to the underwriter. The underwriter is somebody that normally you don’t talk to. They are working behind the scenes. And what you’re doing is you’re trying to present the best case possible for your financial situation in order to get approved for the loan, so it’s very important that you work with both the processor and the loan officer in that transaction to get that financial picture polished.

[00:04:36]
Amanda Greene: There’s a lot of people involved in the process of buying a house, but all of these other people along the way, are these people that your lender and your real estate agent will introduce you to for the most part, or are we having to go out and seek these 10+ people on our own individually?

[00:04:51]
Steven Vieira: Well, rely on your loan officer and a good real estate agent to point you in the right direction to set a lot of these services up. As far as the lender is concerned, selecting a lender is just as important. You want to make sure that you’re going with somebody you trust. Here at AAA, we act as a broker in the transaction so we work with many different lenders, and that could be a huge advantage where the loan officer will know the different programs, whether it be first-time home buyers, FHA program, or possibly a Veterans Administration loan. For people that have been in the military and have received their accreditation to do a VA loan, that’s a very unique program where you could put no money into the transaction. And today, that’s becoming extremely important for a lot of first-time home buyers that are seeing these home prices rise and they’re not able to come up with the down payments that they had in the past.

So you could be a first-time home buyer and maybe a first-time home buying program is not right for you because you’ve gone ahead and you’ve saved a little bit more than what, typically, you see in those programs. So a first-time home buyer program is typically 3. 5% or 3% down, or even less in some cases. But if you’ve saved more than that, you may get into what’s called just conventional financing, which has better rates and terms sometimes. So it’s very individualized on the types of programs that you’d be looking at, but in general, you’d be looking at conventional financing. So looking at different programs and products, I think, is one of the areas where your loan officer, if they’re working for a broker and can look at different lenders for you and point you in the right direction, that’s going to be very important.

[00:06:35]
Amanda Greene: I have seen on Instagram a million times people joking about how if you’re in the process of buying a home, you definitely should not be making any big expenses throughout the process, right? Wait to get a new car. Wait to take out a new credit card. When you’re in this process of buying a home, don’t do anything crazy with your finances.

[00:06:55]
Steven Vieira: However, life gets in the way sometimes. So if your car dies and you need a new one and that’s your only source to get to work, which is producing income, which makes the loan happen, I would put a caveat to that. Try not to make any big purchases. Make sure that if you’re going to do something big, just make sure you consult your loan officer before you do it.

[00:07:17]
Amanda Greene: It always comes right back to the budget, which is a necessary thing, but we have to talk costs. And through the home buying process, there are a lot of expenses that, having never done it before, can be surprising, right? You don’t know what you don’t know, and so there are a lot of costs along the way. So I would love it if you could help break down those costs. For example. How do you determine how much you should spend on a down payment?

[00:07:44]
Steven Vieira: Well, that’s a great question, and a lot of people ask me that, and my answer is pretty much always the same. If you can save 20%, save 20% because that’s going to give you the best products available, it’s going to avoid something called private mortgage insurance, which is insurance for the lender against you defaulting on the loan. So it’s insurance that really doesn’t help you at all, other than the fact that it’ll allow you to put a smaller down payment down than 20%. Now, most people don’t have 20% nowadays so it’s understandable, but it does go in increments. So if you can put a 10% down, if you can put a 15% down, a 5% down versus a 3%, the bigger the down payment, the better it is. And what you’re saying brings up a good point.

Read more: Why You Should Get Prequalified For a Home Mortgage

At this stage, you’ve kind of worked on your monthly budget and you’ve figured out, “How much I can afford each month.” You should really start to look at having a budget for the purchase of this home because you’re going to have the down payment, then you’re going to have the traditional closing costs, so you’re going to pay for that attorney, the credit check, the title insurance, the recording in the town hall. There’s a myriad of costs that go with buying a house other than the down payment so you’re going to need to save for both of those buckets right now.

And then you’re also going to have those settling in costs and those ongoing costs that now, maybe you need to buy a lawnmower for the new home. You’re going to need to look at home insurance and other ongoing costs that you’ll see in the future. Taxes are a big item as well. So you want to make sure that you’re not only doing your monthly budget, but you’re also doing a budget just for the purchase of this home to make sure that you have enough saved for these costs and then kind of a cushion after the fact. Because what inevitably happens is you fall in love with that house and you go ahead and you purchase it and you move in. And then that first day, you find something that needs fixing or that shag carpet from the ’70s that you don’t want to see anymore, you want to take that out. So you want to have kind of a cushion after all of these other costs are paid so that makes the first year in your home enjoyable.

[00:09:55]
Amanda Greene: Absolutely. You want to be able to make that first house, apartment, condo, or whatever you’re buying into a home. Thanks for that great financial advice, Steven. He’ll be back later. Now, let’s get into the most important points in picking out the best home for you.

[00:10:12]
Monica Soyemi: Hey, everyone. My name is Monica Soyemi. I’m a realtor, real estate investor, homeowner here in New York, and I am really excited to be here today.

[00:10:22]
Amanda Greene: How did you get into real estate?

[00:10:24]
Monica Soyemi: It was such a funny journey actually. So before real estate, I was a professional opera singer, so I traveled the world singing. And when COVID happened, I realized I wasn’t able to sing anymore. So I’m thinking, “Oh my gosh. I can’t travel and sing. What am I going to do?” So I started researching ways to create income that wasn’t necessarily connected to a job, found real estate. So I bought my first property and then I said, “Hey, I really like this.” My agent was super helpful and I said, “Hey, maybe I should become an agent,” and I guess the rest is history.

[00:10:52]
Amanda Greene: Oh my gosh. That’s amazing. Did you just say you were an opera singer?

[00:10:55]
Monica Soyemi: Literally opera, yes.

[00:10:57]
Amanda Greene: How about I ask you a question and you answer it in song.

[00:11:00]
Monica Soyemi: Okay. Let’s do it. Let’s do it.

[00:11:01]
Amanda Greene: Ooh. Okay, I love this.

[00:11:01]
Monica Soyemi: Oh my gosh.

[00:11:01]
Amanda Greene: Okay, great. Let’s see. Tell me a little bit about you and what you like to do for fun.

[00:11:08]
Monica Soyemi: I love to travel, 30 countries.

[00:11:19]
Amanda Greene: Monica! You are amazing.

[00:11:19]
Monica Soyemi: Thanks. Oh my gosh. That is so fun.

[00:11:21]
Amanda Greene: I couldn’t have an opera singer on the show without at least a short song, but let’s get down to the business of choosing your first home. Paying for it is one thing, but committing to a home can be so incredibly nerve-wracking, so let’s get some inside tips. We hear a lot that first-time home buyers often have to make compromises. You’re not going to get everything you want in your first home. You can dream really big. Is this something you find to be true, and if so, how do you manage expectation?

[00:11:51]
Monica Soyemi: I definitely find that to be true. Even today, I’m showing a client a home upstate and the home isn’t exactly perfect, but it has the majority of what she wants. I say it’s kind of like dating. The home, as long as it’s got 70-80% of what you need, we can work on the rest. So in this case, it’s got the school district she wants. It’s got the style of home that she wants. It’s got the space that she wants. The bathroom may need some updating. The kitchens may need some updating. And those are all things that you can address over time. Those major things like how far it is from work is something that may not be compromisable, something like the school district for your family, something like the costs of living. The neighborhood, the area may not be something you can compromise on. But painting, we can change the color of the cabinets.

[00:12:38]
Amanda Greene: It’s always so funny when you’re watching those home buying shows and the couple comes in and there’s this beautiful home that meets all of their expectations, and then they come into a bathroom that’s pink and they’re like, “Ugh, no. The bathroom’s pink. No way.”

[00:12:50]
Monica Soyemi: Yes.

[00:12:51]
Amanda Greene: You can paint the bathroom.

[00:12:53]
Monica Soyemi: Exactly. 100%. And I love to remind my clients this. Sometimes, even the exterior of the house is a weird, wonky, pink color, but you can even paint the exterior of the house. There’s so many things that a nice coat of paint, some nice updated fixtures can really do to make your house a home.

[00:13:10]
Amanda Greene: A really important step in buying your first home is working with an agent, and it kind of feels like there are so many.

[00:13:19]
Monica Soyemi: Yeah.

[00:13:19]
Amanda Greene: And you’re fed all of these on social media, like different agents promoting themselves. And even if you do a quick Google search, there are just so many. So how should a prospective buyer choose a real estate agent?

[00:13:32]
Monica Soyemi: I always like to recommend getting a referral. Referrals are always the best. If you have a family member who’s bought a home before, or a cousin or a friend who has had a good experience with their agent, referrals are always best. Most of my clients come from referrals. People who had a great experience with me and they said, “I loved Monica. I know you’re looking to buy or sell. Reach out to her.” And also, social media. You can kind of cut through a lot of the noise sometimes by just seeing agents who are just sharing information online, not necessarily looking for business, but they just want to be helpful.

[00:14:02]
Amanda Greene: This is such an exciting move in life, and the excitement that you feel when you walk into a home and you feel, “Oh. This could be it,” right?

[00:14:11]
Monica Soyemi: Yeah.

[00:14:11]
Amanda Greene: And your heart is in it.

[00:14:12]
Monica Soyemi: Yeah.

[00:14:12]
Amanda Greene: You have to do that, right? You have to picture yourself in it and sort of get a little attached to even be able to make the next step to make an offer. But it’s important to also not get too attached because you never know …

[00:14:24]
Monica Soyemi: Exactly.

[00:14:24]
Amanda Greene: What’s behind the next closed door or what’s in the foundation. So do you have a checklist for people that they can use to kind of stay focused and really consider if the property they’re looking at is right for them?

[00:14:38]
Monica Soyemi: Yeah. So every time I go and see a home with a client, I ask them a couple of questions. What would you rate the home, scale of 1- 10, and why would you rate it that? And when we go through the list of why they would or wouldn’t, I ask them, “Is that something that you would consider a deal breaker? Is that something you could not live without?” And after we review and we see that, “Oh my goodness. The home has Y and Z, but it doesn’t have X,” we’re able to really make educated decisions. So I always tell my clients if it’s got at least 70%, we should put it in an offer. We’ve got to really address what are you willing to do in terms of rehab or no rehab. Or sometimes, clients want to see a home two hours away from their job. But during the first meeting, we said, ” You don’t want to drive further than an hour.” So a lot of the times, we can cut our losses and cut certain showings and certain emotional ties when you can just keep the blinders on for the clients.

[00:15:31]
Amanda Greene: Okay, this is the biggest part now: making the offer. It’s a big deal.

[00:15:35]
Monica Soyemi: It’s a big, big deal. When it comes to writing offers, it’s not as complex as a lot of social media can make it seem. So step one is really getting that pre- approval. So pre-approval is when you go to the bank, you submit your financials to a mortgage lender, and based off of your financials, they will tell you, “Hey, I’m going to lend you, Amanda, up to $500,000 based off of your income, your credit, your debts.” You’re going to hear the word “DTI” a lot as well, debt to income. So you get your pre- approval letter from the bank first, we see a home that you like, and from there the next step is writing the offer where we’re going to outline what is the purchase price, what we’re offering.

We’re going to outline how much money you’re going to put at the contract signing. That’s called your earnest money deposit. We’re going to let them know when we plan to close. We’re going to also let them know if we have any contingencies, which essentially means is there anything that would cause you not to move forward with this purchase? And we also will let them know if there’s any concessions we’re looking for or any additional information that the seller should know before they select our offer. So we have a document that states all of those terms. We have a document attached to that as the pre-approval. We send that together in an email to the seller’s agent. And now, you have just submitted an offer.

[00:16:52]
Amanda Greene: That’s very exciting. Thanks, Monica. Let’s bring Steven Vieira back. Before we go, on average, how long does it take to buy a home right now?

[00:17:05]
Steven Vieira: It’s different for every person and how prepared they are. I find that in most cases, in a normal environment, you’re looking at 60-90 days before you purchase a home. This environment is a little bit more difficult because as we’ve seen post-COVID, the prices of housing and the limited availability of housing out there, we’ve seen people in the process for six, eight, even 12 months at this point. But again, if you’re working with a loan officer and you’re understanding what you need to keep, your pay stubs, your W2 forms, your bank statements, you’re keeping these fresh and in the process with the loan officer, then you’re going to find that it gets easier as you go along.

[00:17:46]
Amanda Greene: Keeping your paperwork up to date is important. That’s good to know. So the last step of each episode is a short quiz we like to give our lucky guest. Today’s is called “What should we do if?” Are you ready?

[00:17:59]
Steven Vieira: I am ready.

[00:18:01]
Amanda Greene: What should you do if you find your dream home, but it’s slightly above your budget? Should you A, stretch your budget and go for it, B, look for ways to negotiate the price or find alternative financing options, or C, settle for a cheaper option?

[00:18:18]
Steven Vieira: Oh, boy. I guess that depends on your personality. This is one of the few situations where I would say A, stretch your budget and go a little bit higher, as long as you’re not going too high. I’ve yet to find anybody that has bought a house and stretched a little bit further, 10 years into the future, that regretted that decision.

[00:18:37]
Amanda Greene: Just to be clear, Steven’s thoughts on budgeting are based on his own personal journey. It’s not to be taken as financial advice. I think that one is definitely a personality thing because I would not have said A.

[00:18:49]
Steven Vieira: Most people would be more conservative. And honestly, I’m a very conservative person myself. When it comes to investing, I’m very conservative. But when it comes to a home, I made that leap. Me and my wife made that leap and we were very happy that we did that. Even though we struggled that first couple of years, it worked out in the end for us.

[00:19:08]
Amanda Greene: What should you do if, during the home inspection, significant issues are found? Should you A, ignore the problems and hope they won’t be too costly in the future, B, negotiate with the seller for repairs or a lower price or C, walk away and search for a different property?

[00:19:27]
Steven Vieira: That’s a great question, and sometimes it’s B, sometimes it’s C. Generally speaking, it’s B. So if, during a home inspection, we found that the foundation is deteriorating, well that could be a deal killer altogether because a foundation is extremely important and expensive to replace. It could be more than the cost of the house itself. But generally speaking, we find that if it’s a roof, if it’s a furnace, those things can be negotiating and can be worked on, and everyone will be happy in the end. Those bigger items, that’s where you get into C where maybe you want to run.

[00:20:03]
Amanda Greene: Okay, Steven. Last one. What should you do if you’ve found a home that meets all your criteria, but it’s a seller’s market with fierce competition? What’s your strategy? A, offer above asking price to secure the property, B, make a compelling offer with personalized touches to stand out or C, wait for the market to cool down before making an offer.

[00:20:28]
Steven Vieira: Well, I would definitely say B. If you can personalize it, there are a lot of sellers that respond to that. A lot of people, I’ve heard, think of a letter to the seller as kind of a corny thing to do, but not in my mind. If you touch the seller’s heart, they’re going to bend over backwards to help you out.

[00:20:45]
Amanda Greene: And by a compelling letter, do you mean explain that you want to raise your future family there and all the things that you dream about doing in the home, in the backyard? That’s what you’re talking about?

[00:20:55]
Steven Vieira: I know from experience. I sold my aunt’s house, it’s been almost 15 years ago now, and we had several offers on the table. And it was me and my five cousins that were selling my aunt’s house. So to us, the difference in sale price was not that big a deal. It wouldn’t have made a difference in my life or their lives, but we went with the one that had the letter and we still keep in touch with that person today. They went to the school system that they wanted, they raised their family there, and it’s just a nice thing to have that connection. So it works.

[00:21:32]
Amanda Greene: That’s really special. I’m also very corny so I would go with the letter writing myself as well. Thank you so much for sharing all of your expertise in this area because the process of buying a home for the first time is a lot and you want to make sure you have the right professionals around you to guide you, so thank you for walking us through the process.

[00:21:52]
Steven Vieira: Well, thank you. I appreciate your time.

[00:21:55]
Amanda Greene: As with most big or, in this case, massive purchases, get your finances and order first and check your credit score. Find a lender and then find a realtor. Ask around. Get recommendations for people your friends and family have had good experiences with. Think about what’s important to you and your family and stick to the plan. Don’t let an impressive home suck you into a way-too-long commute or a lifetime of renovations that you do not want to do. Then, be patient and enjoy the ride. I’ve got so much good information to pass on to my friend. But now that I think about it, I’m just going to share the link to this episode.

You’ve been listening to Merging Into Life, where we navigate life’s milestones one episode at a time, brought to you by AAA Northeast with assistance from JAR Audio. I’m your host, Amanda Greene. If you’re learning as much as I am, follow us wherever you get your podcasts. And leave a review, we’d love to know what you think. Email us at podcast@AAANortheast.com. The views and opinions expressed in this podcast are not necessarily the views of AAA Northeast, AAA, and/or its affiliates.