financing first home

Financing our First Home: Assembing the Team

Ever since we learned that I am inheriting enough money for a down payment, Tim and I started thinking of buying a home. We first made our first home wishlist so we could clarify exaclty what we are looking for.

After using this wishlist to look what’s on the market, it was clear to us that we needed a lot more money than we originally though. It became clear to us that buying a home was a little out of our league. We needed some help.

It was time to assemble our team.

First members: Our parents

Luckily, we come from a family background of home owners, all of whom were able to give us advice on what to do and who to talk to while buying a house.  Our parents told us the stories of how they bought their houses, how they sold their houses, and, based on their experiences, the best way to finance a house. In addition to this advice, our parents gave us moral support, with promises of financial support if it was needed.

We instantly became more confident.

Yet, we still needed more advice before we started going to viewings and more seriously checking out the market. Things have changed since our parents’ bought their first homes. Interest rates have gone down, prices have gone up, and our credit scores are fresh out of the abuse that student loans and university spending inflicts on young people.

Second member: Our bank

We have a great relationship with our bank so decided to try them first to see exactly how much money we could get for a mortgage before capping our spending at a price that would prove to be unattainable. Our bank also gave us great advice, outlined the house buying process, and updated us on recent trends in the market.

This step proved extremely useful.Our bank treated us as people rather than a set of numbers. Both of us have issues that would make us undesirable borrowers – from low income to bad credit – and our bank’s mortgage specialist was able to look past these numbers, ask us about the circumstances that led to these numbers, and put together a pre-approval application that more accurately reflects our current situation.

This pre-approval also reflected our future ambitions, including leaving us with enough money to one day support kids. They treated us like a team of borrowers rather than individuals who are happening to buy a house together. With the help of our parents’ advice, we were able to get a pre-approval that works for us.

Third member: Our Mortgage Broker

Although we already had a pre-approval in the works, we thought it would be a smart move to also include a Mortgage Broker. Being an expert in mortgages, Mortgage Brokers have an expansive knowledge of current mortgage conditions and rates. Furthermore, as a third party, Mortgage Brokers are able to tell you comparable rates to choose the best mortgage, and tell you if your bank is trying to take advantage of you.

Although helpful, we know that our bank’s mortgage specialist isn’t giving us unbiased information. Adding an impartial voice to our team, or at least a different perspective, would be a great way to ensure we get the best information possible. Although we will probably go with our bank in the end, this perspective will be valuable to finding the best financing for us.

Best of all, Mortgage Brokers are free. Brokers get their money through commissions from lenders, and not from billing borrowers. So, if its free and it helps, why not? Qualities of a good Mortgage Broker:

  • Experience - Your mortgage advise will only be as good as the person giving it. Your broker should have worked with mortgages for a number of years and be expeirenced with a number of different types of mortgages. When experience is lacking, your broker should at least be supervised by someone who is.
  • Independence - Your broker should be independent, or should be from a firm that is independent, from lending agencies. Any ties to financial institutions should set up red flags.
  • Objectivity - Being a third party, your broker should be able to look at your current life situation and find the best borrowing scheme that fits into your life plans.
Regardless of whether or not we actually go with our mortgage broker, he has given us valuable information that we can use while purchasing our first home.

Fourth Member: Our Realtor

To get a realtor or not ro get a realtor, that if the question. As we’ve learned, the decision of whether or not to get a realtor is pretty controversial, and here’s why:

Team Realtor: By getting a Realtor, you are not only hiring someone who is knowledgable of the market and will look for places for you  (thus saving you a lot of time) you are getting a representative who will walk you through the buying process, warn you of any challenges or problems of buying a particular property, and will represent you in making an offer.

Team Independence: So far, we have mixed messages about whether or not Realtors cost anything. Some say there is a finders fee that buyers have to pay, others say the seller pays all realtor costs. One view is that if you opt not having a Realtor yourself, the Realtor who represents the seller will work harder to have the seller accept your offer so that they can have the full commision. And since there is full disclosure of a property, you can still be assured that you aren’t being sold broken goods.

We are still on the fence about which direction we should. We have contacted a few Realtors – some of whom have offered to set up informal listing serves to alert us of new properties listed on their site – but have not made any commitments either way. We are continuing to look at listings ourselves, and will make the decision of whether or not to hire a realtor to represent our offer when we find a place

Still to be added to our team

Fifth Member: Our Home Inspector

It is still to early in our home search to have hired or approached a home inspector, but we have watched too many episodes of Holmes on Homes to skip this step. At this point, we have a list of inspectors in the city to contact when we are ready to make an offer.

Sixth Member: Our Notary

Again, it is still too early for us to have a Notary lined up. Yet, as one of the final members of our team, it is still important for us to have a Notary in mind to help us tie up the legal end of our home-buying team.

They say that it takes a whole village to raise a child, but it looks like you need to hire a SWAT team of specialized players to buy a house.

  • Lisha @ 1house1couple

    I wouldn’t been too worried about the process. Like you said, by having a team on your side, they will all give you advice so  you can make your decisions from there. 

    Good luck on finding a nice home that fits your budget. And my best advice would be to not go over budget, lol! ;) Also, I wanted to remind you that the June $50 giftcard giveaway is almost over, and June 30th is the last day you can leave any comments on June posts at 1house1couple so you can win. Good luck Alan and Tim! And thanks for coming over! :) ~Lisha

  • Cruiser

    Hi Alan – excellent synopsis of the real estate process…a few things we have learned about mortgages…always pay weekly (even though the finance guys will tell you it makes very little difference to your pay off timeframe – but it does over the long haul), try for the shortest ammortization period you can afford, and variable rates have saved us tons of money over the years…