This month marks one year from when I first strolled into a mortgage lender’s office with a few bank statements and paycheck stubs. I had no idea if I was even in the ballpark of owning a home. As it turns out, I wasn’t. But hey, at least I now knew how much I would have to save. I can’t speak for everyone but in my experience, it’s a lot easier to save when you’re working towards an actual number. Up to that point, I had been randomly nest-egging; saving here and there just because I knew I should.
Walking out of that meeting, if I was told I’d be owning my first home 7 months later, I’d call bullshit. My journey was a series of ups and downs but after a trail of personal checks and a disowned inlaw, it finally came to fruition. I own a home… in Hawaii of all places. I’m not an intelligent guy. If I can do it, so can you. My experiences are already chronicled in Honolulu Magazine’s Real Estate Blog. This post is about sharing some tips I’ve learned along the way.
1. Have Rich Parents
I can’t stress the importance of this first tip. I didn’t have any financial help from family but based on what I’ve heard from friends, it can save you time and grief. Your parents may not pay for the entire house but they’ll try to help you with the 20% down payment. The rest of the money will come from a mortgage lender. Every lender I’ve spoken to requires you to have your current job for at least two years so if you’re not there yet, keep saving and come back. Why is the 20% down payment important? Because if a mortgage lender helps you with a loan where you pay less than 20% down, you’ll owe a mortgage insurance. In my case, it’s an extra fee which is owed on top of your monthly mortgage payment. I live in a world where every dollar counts so as you can imagine, it’s a real pain in the ass. Certain lenders will allow you to pay this extra mortgage insurance in a lump sum premium. But if I had the money to pay that much extra up front, why not just pay the 20% down? I had to repeat myself several times to lenders saying that I have no extra help in the process. Expect the same.
2. Think AboutYour Maintenance Fee
For you rich pricks buying an actual house, enjoy sucking on your silver spoon. This tip is for us buying a townhouse or apartment where maintenance fees are due. A lot of know-it-all peers will discourage you from being subjected to maintenance fees. I found it funny that all of these peers still live with their parents. In all honesty, if you take into consideration the money you’d spend for sewage, water and landscaping, it comes out to about the same. What you have to be careful about is the places that offer electricity in their fee. This is especially for those of us in tropical climates. In most scenarios, the residents will abuse the electricity by running their air conditioners all day. What often happens is that the maintenance fee continuously gets raised until the resident board finally removes electricity from its included utilities. But why go through all of that? Just go with water and fill up the kiddie pool every now and then.
3. Save Everything
Once you make it to escrow, your mortgage lender will scrutinize your financial history for the past year. Be prepared to answer for every cent you’ve received. If you haven’t signed up for online banking yet… now’s the time. My lender asked for copies of checks, deposit slips, and pay stubs. Online portals made all of that very accessible. Otherwise, starting filing away every pay stub and bank statement. If anyone writes you a personal check, be prepared to ask them for a letter from them testifying why they “gifted” you the money.
4. Recommended Real Estate Agents (for Oahu)
Sunny Lee-Oshiro (Primary Properties) – She redefines the phrase “going the extra mile.” We communicated via phone, text and email at all hours of the day. If there was a property that I really wanted, she explored every possible avenue.
Diane Pizarro (Coldwell Banker Pacific Properties) – It’s one thing to help you get the ball rolling. But it’s another thing to show you how to even roll the ball. Diane laid out starter guide bible for me that was essential for someone like me who had no idea where to start.
5. Mortgage Lenders
Primary Residential Mortgage – some may criticize you for using a lender that works under the same umbrella as your real estate agent. Say what you want. When you’re in the crunch of escrow, it pays to have your agent and lender working close together to get things done.
Pacific Access Mortgage – they’re okay.
DO NOT USE AMERICAN SAVINGS BANK – they actually laughed at me when describing my budget.
Owning a home is not impossible. You can do it. Own something!