YASG. Buying a House is Hard, but Worth It

Buying a house is hard. There's no other way of saying it, really. A couple years ago, my spouse and I bought a house, and we still get little surprises along the way.

Down Payments Are Scary

The traditional down payment recommendation is 20% down. In my area, $300k is the price of most starter homes, not in the city, with a small yard. This equals $60k just to sit down and sign the initial paperwork. It doesn't even include inspections and appraisals.

Private Mortgage Insurance

There is a thing often referred to as PMI or Private Mortgage Insurance that is added to your mortgage payment every month. Figure out the exact monthly payment for your PMI if it applies before deciding if you're up for trading saving a bunch of money first or paying more money every month. In the right market, you'll gain quite a bit of equity as the value goes up along side you paying down the mortgage principal over time. On the other hand, having more money saved up before you make such a large purchase allows you to also build up your credit score over time, watch the interest rates, and avoid the extra charge added to your mortgage payment each month.

Federal Housing Association Insured Loans

We used the FHA or Federal Housing Association loan. This loan is available through certain lenders, and is insured by the Federal Housing Association and has an associated PMI monthly charge. This loan does have only 3.5% down requirements, and doesn't require great credit. Look into the requirements from your lender for this type of loan, and consider if the trade off is a good fit for you and your situation.

USDA Backed Loans

Another option if you're willing to buy in more rural areas, is a USDA loan. The main two requirements are a house within certain geographies and an income below a certain limit. Both of these limits change occasionally, but are fairly easy to find online and double check with a lender that is approved to service USDA loans.

The perks of a USDA loan include less money down (depending on income tiers)and lots of educational information along the way. This loan also comes with a PMI monthly charge with your mortgage, and care should be taken to consider if this trade off is right for you and your situation.

If you meet the requirements of this loan, it's a good idea to find a lender that can help you with it incase the house you choose also qualifies. This opens up your different financing options so that you receive even more information as the process goes on.

Go With Who You Know

Our mortgage is with a major national servicer, but we went through our credit union. This route allowed us to utilize a major servicer with all the built in features, but also to have a local contact person at our local branch. The servicer looked at both of our incomes and credit scores, and the credit union added in information that does not show up on our credit reports: personal account history, how often we were late on a payment for a car loan we had with the same credit union, etc.

This "personal" information that the credit union knew first hand really helped us out with getting slightly better terms for our loan. We had a similar experience when looking for credit cards. The bank where my spouse had an old unused account saw a mature customer that never had a negative balance. The lack of negative balance was due to the account being used little to none since age 16, but the age and statistics on the count that the were brought up in the banking history report were much more favorable than the skimpy credit report we otherwise had to show.

Our credit union had ties to traditional, FHA and USDA loans. Because of this, we were able to compare all three along the way to see which option worked best for the house we chose, our situation, and the exact terms within each offer.

You Are the Landlord

When something goes wrong in your apartment, you call the landlord. You are your own landlord once you buy a house. You get to call the plumber, appliance repair, electrician, and insurance guy. You have to juggle calls, information and payments.

It's overwhelming at times, but helpful to utilize family, friends and neighbors if you need references for a repair guy or company. Don't forget to check out any reviews you can find online as well. Take everything with a grain of salt though: family can do positive reviews, and the angrier someone is the more they spin an issue that may have nothing to do with the company.

Mortgage Payments Do Go Up

It's a common misconception being spread around: mortgage payments stay the same as long as you don't have any balloon payments or non-fixed interest rates. This isn't true. Part of the mortgage payment includes property taxes and home insurance. Even if the interest payments and principal are fixed at one rate, taxes and insurance go up over time.

Insurance can be affected by the positive gains in your property value as well as overall inflation in your area. Taxes can also be affected by positive gains in your property value, but also go up after taxes are passed to fund social projects like road improvements or public school education. I'm all for funding schools, roads, and firefighters, but it still stung a bit to see how much my payments went up when my escrow account came up short at the six month escrow review after my city and state each passed through vote increased taxes.

When the escrow account did not have enough money to pay insurance and taxes, I have the choice of coming up with the difference quickly and having a slightly higher monthly payment to cover the change in the future... or my monthly payment goes up high enough to cover the difference quickly and guess at any changes on the horizon.

Research, Research, Research

There are a million websites out there that have a wealth of information about money and mortgages. Check out sites like Nerd Wallet and Bank Rate to float through an informative wormhole of mortgage information, tips, and warning signs.