MOORHEAD, Minn. — Life after college can be a weird time, both in your personal life and in your financial life.
You've moved out of the dorms, you've survived crappy apartment after crappy apartment, you have the job of your dreams and are finally raking in that sweet, sweet cash money and you're just ready to have somewhere you can call your own — or at the very least, somewhere you can paint the walls without losing your deposit.
It's about time to start looking for your first home.
But take it from someone who knows (or someones who know), there really is a lot to figure out before you step into the world of home ownership.
Keely Schlichting, vice president and mortgage production manager with Bell Bank Mortgage, says there's nothing wrong with shopping around for a lender. And with almost 20 years of experience in real estate lending, she knows what she's talking about.
"(At Bell), we know we might not be the best for everybody," she says. "Or we might be. It all depends on who you mesh with. Talk to two or three lenders, get a feel for who you think is going to be the best fit."
Schlichting suggests asking friends or co-workers who've gone through the process which lender they went through and take the time to compare and get a couple of options.
"It's sort of like 'interviewing' your lender," Schlichting says.
But buying a home is more than just finding the perfect lender. Here are a few other things to do when buying your first home.
Before you buy your first home, it's important to work on building a good credit history. Paying your bills and paying them on time will help make you look good to lenders. The better your credit score, the more likely you'll qualify for your perfect loan program. Your qualification depends on factors like credit score, debt-to-income ratio and assets.
Your financial homework should also be a time when you decide how much you can afford and create a budget. How much can you pay each month for a mortgage? After all the bills are paid, do you still have enough money left over for necessities? Emergencies? Fun?
Buying a house can give you many benefits, but homeowners need to be ready for all responsibilities and costs that come with it.
Meet with a lender
Once you find the lender that's right for you, it's time to figure out what you may qualify for.
Mortgage lenders will meet with you and ask questions to try to get a feel for what you're hoping for in terms of payments. There are several options for loans — all of which require certain things must be met before qualifying. They'll discuss financial goals, assets you have set aside for the purchase and even the type of home you are looking for. All of this is necessary to figure out exactly what loan type will best fit your needs.
After you apply for a loan, it's time to get approved. The preapproval letter is sort of like the golden ticket to finding your chocolate factory (or home). It tells you exactly what you will be able to borrow, which helps to figure out what homes you should and shouldn't be looking at.
Most real estate agents will encourage homebuyers not to look at homes until they figure out what they can afford. That way, they can avoid falling in love with something above their price range.
Chill out, bro
Once you've applied for your loan, chill out.
Keep your job, don't buy a car, don't open a credit card. Just keep your finances steady from preapproval to closing. Lenders pull credit reports at preapproval to make sure things check out and again at closing, just to make sure nothing has changed. New loans or credit card accounts on your credit report can jeopardize the closing and final loan approval.
Instead, pay down any existing loans to under 30 percent of your available credit limit and pay your bills on time every month. Buying a home is all about financial responsibility. It's sort of like when you were a kid and your parents got you a goldfish to take care of before getting you that puppy.
Now comes the fun part: shopping!
Nathan Larson, a buying agent with Park Co. Realtors in Fargo, says there are many things to think about when looking for your first home.
"Take a look at different neighborhoods to see if you're going to like living there," Larson says. "Research schools, and look at houses in those districts you might be interested in."
Also, be prepared to settle on a few things.
"Don't expect your first home to be perfect," Larson says. "Your first home is your down payment on your dream home."
Building equity through your first starter home is the way to get into that big two-story, farmhouse-style home with a wraparound porch that I've — ope, I mean YOU'VE — always dreamed of.
Once you've found a home you like in a great neighborhood, make an offer. Your Realtor can help guide you through appropriate offers to make sure you're getting the best deal possible.
Lock 'er in — it's closing day
Once your offer is accepted, your lender will work with you to lock in interest rates, sign disclosure documents and submit all of it for final loan approval.
Once your final loan is approved, it's closing day! Be sure to have all funds lined up for the closing, review documents to make sure there are no errors and everything meets your expectations and do some hand stretches. You're going to be signing your name a lot.
All that's left is to grab your keys and head home.