So here’s the thing about being a first-time home buyer. You make mistakes–or at least I did. Not huge irreparable mistakes–but mistakes. And so today, since my wounds are still raw, I thought it would be a good idea to share some of those mistakes with you all here so that you all don’t make the same ones. There is SO much that goes into buying a home, and you put your faith in so many different folks–from the real-estate agents, to the lenders, and the escrow peeps and the insurance dudes–that something is bound to go awry somewhere along the way. But it’s all good, it’s all part of the process…so today, I’m gonna talk to you about our first big flub. (In case you’re new here, and haven’t been following along, I’m documenting my experience of becoming a first-time home-buyer with the online real-estate site, Trulia. And in order for this post to make sense, you may want to catch up a bit on this post about how I got pre-approved for a loan, and this post on actually finding our dream jungalow.)
So, the basic gist of our flub-up? We should have gotten a loan for the full appraisal (and loan approval) amount of $590,000. You see, I was so excited about the fact that we were getting the house for less than our offer, that it didn’t occur to me to take out a loan for more money than the house cost. I didn’t even realize what a mess-up that was until last week, when I found myself at the bank feeling very confused, a bit embarrassed and really bummed.
Now I should probably preface this by saying that (in case it’s not already painfully obvious) I’m pretty ignorant when it comes to this whole credit schtick. I didn’t have any student loans (I went to school in-state, my parents helped me out, I worked and I was on scholarship, too). And right after college I moved to Italy and stayed for seven years. I had never had a real credit card until I got back to the U.S. and I was almost 30. So, I spent the last six years building up enough credit to be able to qualify for a loan–no easy feat when you’re a freelancer with a short credit history, and your looking for a house post subprime mortgage crisis.
Now that you understand just how late to the party I was, let’s get back to the bank. So here I am sitting across from this not-so-friendly banker thinking, I own a house now! I can get a loan because I own a house. I always hear people saying things like ‘take a loan out against the house’ so I am thinking, ‘Perfect. We’ll take out a $20,000 loan to redo the horrible galley kitchen, fix the sewage and do the termite stuff.”
Well, much to my dismay, I quickly (and not-so kindly) discovered that just because I have the keys in my hand to our new pad, doesn’t mean I can take a loan out against the house. After actually welling up at the bank (so embarrassing I was totally PMSsing…) I learned that I can’t get a loan against the house until at least six months has passed of paying mortgage. I didn’t have enough ‘equity’ in the home, even though we put down 20%. Such. A. Bummer. Everyone was like “Oh, yeah, you should have borrowed more when you bought the house to pay for the updates.” Oy. If someone told me that during the home-buying process than I wasn’t listening.
So, where there is a will there is a way. The not-so-friendly banker suggested that I try and raise my credit limit on my credit card in order to help pay for the house updates. It’s pretty complicated because not all home-improvement folks accept credit card as payment so we have to shuffle our money around, live off the credit cards while we use our actual money to pay our contractor and the other kind fellows who are helping to fix up our house. But, it’s a way to get the updates done before we move on July 1st, so we are basically doing the best we can with our stupid mistake. I was also kicking myself for not doing more research to prevent silly things like that from happening. Especially when there was help right under my nose on the super helpful Trulia blog where there is a whole section on Money Matters that addresses issues just like these, from Credit Lessons to The 10 most important questions to ask your Lender, or even post like: What You Need To Know About Home Improvements and Taxes–which you better believe I’ve read about five times already. So much helpful stuff. Anyway, you live you learn, right?
So, yes. The above image is of the kitchen as it looks right now (remember how it looked before?). I’ll be sharing an update on that soon, including what tile we finally decided on! We’re living off credit cards but our kitchen is now an open space as opposed to a horrible galley kitchen and it’s gonna be amazing :D