Adulting task: learning about financing

Buying a house is new territory. I didn’t know the first thing about buying a house but I did know I needed money.

Since I was 18, I’ve been working full-time. I went to school while I worked and always put money away in my savings accounts.

The way I manage my finances is by saving a lot, and then spending in bulk. I never buy things I know I can’t afford, I always look for deals, I live below my means and I pay my credit card off right away every time. Everything I was doing, worked well for purchasing my house. In the back of my head, I guess I was always preparing for my house. I didn’t know why I saved money, but I knew it would come in handy one day.

Here is what I learned about finances in the process:

1. Have enough money for a downpayment
   1. The more money you put down right away, the less you owe in the long run (because you borrow less from the bank/credit union/whatever institution gives you money)
   2. If you put down 20% or more, you avoid extra fees
2. Shop around for mortgage deals
   1. Banks aren’t the only places that lend money. Ask credit unions and mortgage brokers what their rates are. I also asked about additional fees, what services are included, insurance and really anything I wanted. I sent a list of questions to everyone I considered a potential lender. I knew who I wanted to work with because they had the best rate and the quickest email responses.
3. Work on your credit
   1. Luckily, I had a great credit score and enough money for a large downpayment so getting financed (getting the mortgage loan) was easy. My financial advisor said it’s hard for people to get approved with poor credit so if you’re slacking on your credit card payments- cut that out. One missed payment affects your credit score and your chances at approval.
4. Every time your credit gets checked, it affects your credit score. 
   1. This was kind of complicated for me to understand but it didn’t affect my credit score that much. But it’s worth knowing.
5. If you get a loan from family, they need to write a letter saying it’s a gift. 
   1. There were moments when I kept getting outbid and losing houses. It was so discouraging and after expressing my disappointment to my parents, they said they would lend me some money if I really needed it. I told my financial institution and they let me know that if the money is coming from an external source, a letter is needed to express it’s a gift.
6. There are multiple kind of mortages. Ask someone else to explain because I am still learning about fixed vs. variable rates.

That’s all I can remember for now.

I’ll do the research and mistakes so you don’t have to. – Liz