This is a post I’ve been excited to write for a long time now but wanted to hold off until all my research was done. Well here we are.
I teased it already in my ‘29 Things About Me Post‘ but I am excited to share with you all the my husband and I purchased a home and are moving to the Chicago Suburbs! This wasn’t an easy decision to make, I am so in love with Chicago and all the amazing experiences it has given us over the years but after being cooped up in our tiny one-bedroom apartment these past six weeks, we finally broke and decided to pull the trigger on a home purchase. I will note that this wasn’t a spur of the moment decision. We had it in our financial plan to buy a house either this year or next year. We had the funds saved a ready to go for a down payment but were waiting on the right house to come on the market. At one point we were so discouraged that we decided to push the purchase out another year. Just as we were about to give up hope and sign another year’s lease, the right house in the right location at the right price came on the market and we jumped at the opportunity!
So here we are.
Where to Start
Of course we poured over Zillow and Realtor.com before we officially started the house hunting process (who doesn’t!?) The house hunting process truly started when we reached out to a local mortgage broker to understand how our finances translated into home purchasing power. To anyone looking to start the home buying purchase, I cannot recommend enough working with mortgage broker first.
Our first call with our lender was so helpful and gave us a good sense of how much house we could buy. During the call he also brought up other financial aspects of owning a home that would be important factors for us to consider when putting an offer on a home like real estate taxes, homeowners insurance and mortgage insurance. We left our conversation with our mortgage lender with direction and confident in our ability to make a home purchase. We used what we learned to tighten up the filters on our Zillow home search and screen out any homes that would be a financial stretch.
Assemble a Dream Team
After meeting with our mortgage lender and getting our pre-approval letter, which told realtors that we were pre-approved for a mortgage up to specified amount, we reached out to our realtors. Our first communication was to let them know that we were pre-approved for a mortgage and that we were actively starting the house hunt. At this point, we communicated what exactly we were looking for in home which included:
- Targeted Area
- Purchase Price Range
- Number of Bedrooms
- Number of Bathrooms
- Other Must Haves (for us this included a finished basement and a master en-suite)
From there our realtors were able to set us up with an MLS search that sent us new home listings that fell within our criteria as they went on the market. At the time we didn’t realize how crucial having this search in place would be. In the end, it was pivotal in our home buying process because we were able to set up a showing soon after the listing was active.
Before moving too far along in the home search, I’d recommend assembling the rest of your “dream team” and let them know that you’re actively house hunting. Other professionals you’ll need to work with include a real estate attorney and home insurance agent. Don’t fret if you don’t already have connections with or know one of these professionals, your realtors likely have trusted contacts that they will put you in touch with when the time comes.
I will just say that I was so grateful for our dream team as they made all the difference when putting an offer on the house and later negotiations. Without them I don’t think I’d be here writing this exciting life update!
Run The Numbers
Running the numbers was one of my favorite parts of the home purchase process with actually looking at the houses being my absolute favorite part (obviously). In preparation of this big purchase and financial goal, my husband and I started the number crunching by replicating our monthly cash flow in an Excel spreadsheet. We created the spreadsheet so that it could be easily updated with different housing amounts.
To keep the sheet very high level, we lumped all our non-essential, non-fixed expenses into the “credit card” category. The first reason being that most of our non-fixed and non-essential expenses go on our credit card and second being it gave us an easy way for us to manipulate our credit card spending to understand how much we could allocate to non-essential expenses without disrupting our savings goals post home purchase.
Once we had our cash flow template in place, we were able to run a cash flow analysis for each home that we saw and considered to be a strong candidate as a future home. A house would fall out of contention if the monthly housing costs (mortgage, real estate taxes and insurance) ate away at our ability to keep saving post home purchase or if the non-essentials fell below a level we weren’t capable of sustaining. We wanted to be realistic in our assumptions and used the past few months to truly understand our spending habits and set figures around what was a reasonable credit card spending level.
While I’d encourage you all to take a similar deep dive into your expenses before committing to a 30 year mortgage payment, a simpler approach is to make sure all housing related expenses fall within 30-35% of your after-tax income. At that level, you should still be on track to have a reasonable amount for non-essentials and savings.
I plan to share the whole story of buying a house during a global pandemic at some point, but for the purposes of this post, we had to act fast. I was so thankful that we had our dream team lined up ahead of time and that we had a strong understanding of how much house we could afford without jeopardizing other financial goals. We decided to look at the house on a Monday, scheduled a same day listing appointment that afternoon at 4:30 pm, put in our initial offer at 7 pm and had a our final offer accepted by 11 pm. Like I said, everything happened really fast but we were able to make those decisions with confidence because we were prepared.
At lot has happened since having our offer accepted but I am thankful that the home inspection and attorney review process went smoothly. All that’s left is to wait until our closing date in June. In the meantime, I plan on sharing more on our home buying process and the steps we are taking between now and moving in. My hope is that by sharing our story, you’ll be more prepared when it’s time to make your home purchase.