Are you ready? I have a proven x-step program that will help you — yes, you — buy a house.
- Have your wife decide she wants to buy a house.
Important Caveat: You do not need to be married to reach this point. You can be unwed and have someone else decide to buy a house with you. It is important that you do not want to buy a house initially.
- Agree with your wife.
This just good strategy.
- Decide you want to buy a house.
- Realize that this has been a part of your wife’s plan for the better part of a year and be overwhelmed by the sheer deluge of house-related facts she contains in her brain.
- Go look at houses.
This was an important step. Ash and I went to go see two houses in neighborhoods we liked. On our own, without an appointment, and without the ability to, you know, enter the house and see what it was like on the inside. Instead we went and looked at the outside of the houses and decided that Ashleigh liked one and we both didn’t like the other one.
- Cry to the heavens in rage as the one house your wife liked is no longer on the market because someone bought it.
- Have your wife tell you that this will be a long process.
- Disbelieve your wife within the safety of your brain about the length and ease of buying a house.
- Disbelieve your wife in writing, in word, or in deed.
Step 9 is not required but it was one of the steps that we followed. I think I said something like, “I think we can get a house. We have like $10,000 in savings1. Why don’t we just offer that to the homeowner as a down payment?”
Substeps to Step 9
- a. Prove that a 20% down payment on a $300,000 house is $6,000.
- b. Realize the error in your math.
Step 9B isn’t required either. Sometimes you don’t need anyone to helpfully point this out to you! In which case, proceed to step 10.
- c. Say things like, “Well, at our current savings rate we will have the $60,000 down payment … in 7 years” and “If we cut our budget by 56.3% and took out all of our retirement savings and got a 25% raise every year for the next 3 years, we’d have the down payment by this September.” Wait a beat and realize your mistake.
You will repeat step 10 multiple times while trying to purchase a home.
- Meet with a realtor
We had a really good realtor, although I didn’t realize this until we were about halfway through the process. Her name is Brenda Ball, if you’re interested.
We are not currently anywhere close to halfway through the process.
- At the meeting with the realtor, she or he2 will answer questions like, “What if we have no down payment,” with statements such as, “Well, you can do a 0% down payment with Navy Federal.”3 It is important that you ignore any caveats after this sentence, especially caveats like, “but I wouldn’t recommend that” or “When did you serve?” These things will only distract you from step 13.
- Regain hope while in conversation with the realtor.
- Walk away from the conversation with the realtor with hope brimming from every follicle and cell of your being.
Having good, hopeful hair is an important part of buying a house. You cannot buy a house if you are bald.
- Develop a plan to save the money you need.
- Forget about the whole house plan for, like, 6 months.
Step 16 isn’t necessary. But I do remember there was a large gap between our first meeting with Brenda and when we actually went and looked at houses, under her supervision. We also developed a plan to save a bunch of money we needed but we decided to spend it on killing Ashleigh’s student loans. This was not a bad decision.
- Get a bunch of money.
Step 17 is essential. Buying a house is really really expensive and we could not have purchased our house without the generosity of my parents, who very kindly gifted a portion of my grandmother’s inheritance to us. It was tremendous. We could not have done it without their help.
- “Remember” about the whole house thing. Visit several houses with your realtor.
Once we got the sliver of money we needed for a down payment (about $12,000 in our savings account), it was time to actually look at houses.
Having around $12,000 in savings is really nice. Trying to buy a house with $12,000 … there’s a reason this is an x-step list.
A conventional loan with no mortgage insurance requires a 20% down payment. 20% down on a $300,000 home is $60,000. $12,000 is … yes, 20% of a 20% down payment (also known as 4% down).
This wasn’t bad math that we were doing at the time. With an FHA loan, you can make a 3.5% down payment: $10,500 on a $300,000 house.
However, we live in Southern California, one of the real estate capitals of the world. $300,000 gets you a 350-square-foot 1-bedroom beach-ish4 condo or a 15,000-square-foot behemoth hundreds of miles from civilization5. We wanted to live in Carlsbad (we were priced out), Encinitas (again, priced out), Vista, or Oceanside.
And that’s how we ended up with a price range from $300,000 to $350,000. And we were very aware that a 3.5% down payment on a $350,000 house was $12,250 ($250 more than we had saved for this eventuality). But $250 is a relatively small amount. Lots of small amounts like $250 will show up when you’re buying a house. The problem is that they also add up, too.
- Find 0 houses your first time out.
We wanted a 3-bedroom home. We weren’t considering two-bedroom houses because we wanted to buy a house that we could grow into. Ashleigh received the following advice which I will pass on to you:
“While you might plan on living in a house for 5 only years, you might have to be there longer. Don’t buy a house you are itching to get out of.”
This is good advice.
All the houses we visited that first day were ones we wanted to get out of. And that was before we entered these houses.
- Get offered a new job.
This was a very important step for us in the long term. I got offered and accepted a new job working with Qualcomm, which meant a large raise and a job switch. Oh, and temporary employment status. That was a problem much further down the line.
- Look at more houses.
- Find one you like! Make an offer.
We made our first offer on a seriously underpriced 4-bedroom house in Oceanside on October 27th. To obtain the house, I wrote a really long letter about how much we liked the house. With specifics. How we looked forward to running downstairs on Christmas morning. The beautiful tilework. Their excellent work on the closets. Etc etc.
Since the house was a short sale (e.g. the owners were getting kicked out and the bank was selling the house at a loss; or, everyone is unhappy), our realtor revised the letter to make it a bit more generic and a lot less specific in its warmth. Her feedback was, “You don’t want to necessarily remind them that they’re being kicked out of their home.”
- Get rejected
We received our first rejection on October 31st. The 4-bedroom house had 17 offers in 4 days and the one accepted was an all-cash offer. But this was a momentary setback.
- Find another one you like! And another. MAKE ALL THE OFFERS.
We made two more offers in the next week. One was a place where they wanted an accepted offer to see the house; another wanted a standard offer.
- a. Accepted Offer Before Visit
I never saw this place but they:
- required an accepted offer before we were allowed to see the place
- tried to upsell us on potted plants, refrigerators, washing machines, outside of the residential transaction.
Ashleigh went and saw the place. She liked it but the prospect of paying $250 cash for ficuses (ficusii?) was not something she liked. However, we still made an offer.
A few days later our offer was rejected. Someone had offered to purchase the ficuses.
- b. Normal Offer (Bellerive)
Ashleigh saw our normal offer house first and then I went and saw it with our realtor. It was listed at $350,000 which was pretty high for the market at the time. It was also pretty high for the property at the time.
Built in 1969, it had popcorn ceilings, carpet from 1970, paint and wall paper from 1970, deteriorating stucco, two un-updated bathrooms (complete with 1970s showerheads and soap scum), and was built on an enormous hill.
But it also had a deck, a white picket fence, a tastefully retro kitchen with a double convection oven, hardwood floors, built-in buffets, gorgeous trees, and large rooms. It had good bones.
But it wasn’t worth $350,000. So we offered $305,000.
- b. i. Counter-offer
Wouldn’t you know it? We got the counter-offer shortly there after. They would accept $325,000. So we countered their counter.
- b. ii. Counter-counter-offer
We had wanted to pay $315,000 for the house as we figured that was reasonable. At this point, we were still looking at an FHA loan, which meant we would need: ($315,000 x 3.5%) $11,025 for our down payment. To cover the cost of the updates we might need, we were considering an FHA 203k loan, which allows you to borrow as if your home were worth an additional 10% of the appraised value and use the additional amount to create some improvements. We could have $30,000 for improvements that way; we figured we’d only use about $20,000 for the improvements to make it liveable.
- b. iii. Rejection.
Our counter-offer was rejected. We felt bad about it at the time but not too bad. We didn’t think the house was worth the extra $10,000 they wanted in purchase price. So we kept looking. Also, we couldn’t really afford that. The extra $300 bucks in down payment was a consideration. Also, so was the inflating loan size.
That was an important consideration. While we could afford a $313,000 loan, that would mean, at the rates we were expecting, around $2,300 for a mortgage. That was getting into tight territory.
With the 203K loan, that meant we had to put down $12,000. Our payment would be around $2,400.6
This was slightly more than double our rent at the time.
- Make more offers.
Repeat step 10. Feel more and more desperate.
We put in offers on 6 more houses. One got accepted en masse7 and then rejected shortly thereafter (I think they had 5 cash offers out of 17) in the next month. The rest fell by the wayside, as real estate agents enjoyed bathing in money, or whatever they were doing.
Conversations at the time varied from “We shouldn’t have pushed so hard on the counter-offer” to unpleasant words about our buyer to arguments about whether we should buy a house or not.
On November 28, 2012, our long-languishing counter-offer on Bellerive Court was accepted. They counter-signed our expired offer8. Reading through the emails after the fact, the seller’s realtor told our realtor that she could “sell it all day at that price.”
Upon reflection, this was probably not the case.
- Enter Escrow.
One thing you’ve got to have in order to buy a house is this thing called “earnest money.”9 Basically, “earnest money” is cold, hard cash that you’ll provide to the escrow company in order to prove to your seller that you mean business. Or something like that.
In our case, we were offering $3,000 (which I think is fairly standard). This basically secures your offer for a period of time for you to do all the inspections and title research and ley line surveying and private investigating that you will need in order to transfer one plot of land from someone else’s possession to your possession.
If you’ve heard about someone buying a house, you’ve heard about the some kind of thing called “entering escrow.” We were doing that here: after our accepted offer, we (the sellers) funded the escrow account (with our $3,000). The house couldn’t be sold to anyone else for something like 45 days. We were promising that, 45 days after the escrow started, we would buy the house.
So we’d buy the house on January 12, 2013.
- Get a loan.
As discussed earlier, we would be financing this home purchase. Our realtor referred us to an FHA specialist who asked us to tell him everything about our finances ever. This was disconcerting at first. Then it was … concerting.
Our specific loan process was arduous. I will try to write it up at some point the future. Right now, I’ve been sitting on this post for 6 months. So up it goes.
- Round and/or wildly inaccurate numbers are really really important to use in Steps 8 and 9. Otherwise you will proceed to step 10 and stay there for a long time.
- Since our realtor is a woman, I’ll dispense with the very progressive switching the gender of my pronouns.
- We were seriously considering a 0% down loan for a while (I don’t remember if Brenda warned us away from it or not). That was, until we realized that the fees and interest rate associated with it would make it cost-prohibitive for us. Also, neither my wife nor I served in the military.
- This is a condo that, on a good day, allows you to walk to the beach in a few hours.
- Remember the earlier note about round numbers. These are fairly accurate numbers right here and also include such diverse payments as: mortgage insurance, FHA fees, property taxes, and homeowners insurance.
- This means that the seller accepted multiple offers and made multiple counters. Once they received all the confirmed offers back, they can chose which one to sign or continue to negotiate with.They did not choose our offer.
- Usually you set an expiration on your offer. I think is probably so that, 5 years later, someone doesn’t try to force you to buy a house.