The Millennial’s Guide to Buying a Home (NYC Edition)

Homeowners!

How To Buy a Home (for Dummies)*

(*this title might already be taken, oh well.)

STEP 1: Save.

Duh.

STEP 2: Get pre-approved for a loan (or as I like to call it, “why is everyone telling me to ‘shop around’ for a lender????”)

A MORTGAGE is the amount of money that a bank or lender is letting you borrow to purchase a house. When people advise you to start shopping around for a pre-approval, what they mean is that you need to visit the website or call the number of banks that you think might give you a solid mortgage loan offer. When you’re looking at houses, most sellers won’t take you seriously unless you’ve already been pre-approved.

Example: Say you’re purchasing a home for $400,000.

Scenario A: You opt for a conventional loan, which means you’re putting 20% of the home price as a down payment, which equates to $80,000. That means the lender is giving you the remaining balance as a loan.

STEP 3: Find a solid realtor to work with and start looking at homes.

Zillow.com, AKA Satan’s homepage.

STEP 4: Make an offer. Or two. Or ten.

So you found a house that caught your eye. You set up an appointment with the listing agent or attended an open house, toured the home, and now your heart is set on it. The home is within your budget and meets most of the criteria for what you were looking for.

No.

There’s a reason why everyone from your realtor and your broker to your family and friends warn you not to get too attached to a home before getting your offer accepted.

  • Competitive market. With insanely low rates and a shortage of existing homes or new builds, competition is more fierce than ever.
  • Cash offers. As they say, cash is King (or Queen), and many sellers prefer cash offers to mortgages.
  • Waived contingencies. A contingency is a stipulation that a buyer makes in their offer in order to move forward with the purchase. It’s basically saying that the offer comes with strings attached and is contingent on a mortgage, appraisal and inspection (these are the basics.) But because the buying landscape is so competitive these days, a lot of buyers will waive their contingencies in order to make for a more appealing offer and faster closing process for sellers. I do NOT recommend doing this: you may be more likely to get your offer accepted, but you could run into significant issues down the road and be on the hook for hundreds of thousands of dollars.
  • Overbidding. Unlike in the case of an underpriced home, in today’s market a home doesn’t even need to be underpriced for a ridiculous bidding situation. In the past couple of years, many people will begin their offer at the listing price or higher, if the home or location is desirable enough.

STEP 5: Post-offer acceptance.

But wait, there’s more!

STEP 6: Contract signing, process and negotiations.

If you’ve gotten this far, it means that your offer has been accepted, your attorney has sent you a deal sheet outline your terms to approve – e.g. your offer and your contingencies – and you’ve signed a contract. At contract signing, you review the legal terms with your attorney, sign a bunch of documents along with anyone else who is on the mortgage application or house title, and review the estimated closing costs.

Actual photo of me when I learned how much my closing costs were.

WHAT CLOSING COSTS ENTAIL:

This is what a standard closing costs document looks like. Source: Consumer Financial Protection Bureau.
  • DO NOT OPEN NEW LINES OF CREDIT
  • DO NOT CHANGE JOBS

STEP 7: Closing.

Closing day is the big one.

  1. Bank checks/Cashier’s Checks. This is to pay your remaining closing costs.

Congratulations! You are officially a homeowner.

Happy Hunting!

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