Our Experience Buying Our First Home using VA

Below, you’ll find many “dairy entries” describing our process of buying our very first home and using the VA home loan. Hopefully this will help any service members, vets, or their spouses!

July 25: Yesterday, we officially got pre-approved for the VA VHDA home loan! VHDA means first-time buyer (because that’s what we are!). The minimum credit score for this loan (as well as the standard VA loan) is a 620. If you read my post about his credit score experience, you know we worked long and hard to get here! My score was far past that, but because it’s VA, only his mattered. My score will only be used as a small push. It will not be factored into any rates or payments. The interest rate our lender gave us was 3.8%, which is pretty good. Tomorrow, we are officially going house hunting with our awesome Realtor.

July 26: Well, that was quick. Around 7pm tonight, we officially signed an offer on a home. In our area, there isn’t much to choose from. In the city and neighborhood we wanted to be in, most homes are owned by 80-year-olds–and they have the decor, walls, and bathrooms of an 80-year-old. Today, we found the rare gem that was owned by an 80-year-old with great test and reno skills. We knew we had to jump on it! Did I mention it’s 100 yards from the doors of my work? The seller has until 8pm tomorrow to answer our offer. Praying like nobody’s business! Also, today, we started squaring away the financial side of things–the side I know nothing about. I’m going to do a separate post on this. I had no idea what money we’d have to have going into this, and I didn’t find much luck on-line, so hopefully that post will help. Our set closing date, if approved by the seller, is August 27th. In other words, we’ll be moving in the week before the school year starts. Ouch.

July 27: The seller responded with a (crazy) counter-offer today. We asked full listing-price, closing costs, home warranty, and the fridge, washer, and dryer. Considering the housing market sucks and no one asks full price anymore, I figured that would be an easy yes. They came back with full asking price, less than half the closing costs, warranty, fridge, washer, dryer, and the real kicker: they want to stay in the house a month after closing without paying any rent to us. I’m laughing. Not really. I’m irritated. We countered back with our original offer, but asked $1,500 less in closing costs than originally and said they could stay for 7-10 days after closing–which still pisses me off–but not enough to let a house go. Heard back from our realtor and she said they want overnight to think about it. Ugh. We decided that if they come back with anything crazy again, we’re out.

August 1: Yesterday, the sellers officially signed the contract, so we’re all locked in and official. We ended up with a better deal than where we I left off. We upped the asking price by $1,500 and asked for that $1,500 in closing costs, and we finally won with an accepted offer. They even said they wouldn’t need to stay there anymore. Thankfully $1,500 only will cost us one fast food meal a month. Doable! Also yesterday, we signed FIFTY SEVEN pieces of paper with our loan officer, Chris Norwood of TowneBank Mortgage. He is freakin’ fantastic! He has jumped through so many hoops for us, and I’ve felt he’s actually invested in us and our home. We cut his company a $430 check to cover the appraisal fee and the credit report fee. So now, it’s just a waiting game. Waiting on (1) the lender appraisal, (2) the VA appraisal, (3) the home inspection on August 5th, and (4) the final loan approval. I’m so nervous about all of this. If things go wrong, this is where it’s going to happen. So I’m just praying that this is the right time and God has great plans for us and this house! If the house doesn’t appraise, we’d either have to (a) bring the difference in cash–yeah, no, (b) drop the asking price and hope the seller agrees, or (c) walk away. So while B is ideal, it’s probably the least plausible. And of course it’s scary having someone look at all of your finances and deciding whether you’re worthy of their money. Knowing they could knit-pick at one little thing and that could decide our entire future–it’s nauseating, actually. As the old Army motto goes,lets Hurry Up and Wait!

August 6: We had our home inspection yesterday. I was so nervous leading up to the 1 P.M. appointment time that I was sure I was going to hurl. I didn’t hurl. The home inspection went about as well as home inspections can. Mostly small things like “That vent under the house needs to be open in the summer” or “Those shingles need to be nailed down more” or “This valve is missing the knob.”  The homeowner is a retired Army officer turned DOD Civilian, so you can imagine that he kept up the house. Now we’re in the position where we have to decide what to ask them to fix or what to take on ourselves. These homeowners (while probably loaded due to above careers) are nearing 80, the wife has dementia, and he’s taking her to Florida to be with their children. It’s so hard for me to ask them to fix this stuff because I know, for them, it requires calling people in and paying them. Clearly they aren’t getting on a roof anytime soon. Nothing is urgent, and we’re leaning towards not asking them to fix anything. We’re young and we have time and the little bit of money it will cost to fix the minor things. But I reckon we’ll talk to our realtor and see what she thinks before we make any decisions. We have until the 10th to decide. Now it’s waiting on appraisals and the loan. The scariest parts.

August 11: We decided not to take any action on home inspection items. We got an email from the selling agent saying it was such a blessing because the couple was under so much stress. It really confirmed our decision. I also found in that email that the owners are planning on being out by the end of this week. Seeing as our current closing day is slam in the middle of my first week back to school, I just emailed our lender to see if it was possible that we close even earlier. Probably not, but it’s worth a shot to avoid the stress of school starting and moving! Crossing my fingers we can get into the house early, even if by just a few days. UPDATE: The lender said it all comes down to the appraisal; after that, things move pretty quickly. The appraisal is being done tomorrow, so [prayer hands], we may be able to get in this house a little early!

August 20: There’s a dead period after the home inspection that’s enough to drive Hilary Clinton nuts. We close in a week, and we still haven’t heard a word on our appraisal or our loan. Our realtor emailed our loan officer, but he hadn’t received the appraisal info (the appraisal was done exactly a week ago). I’m literally going crazy. Here I am packing up our entire house, and the two biggest things that could totally ruin our home-buying haven’t been cleared yet. It’s super terrifying to think about. So I’m just trying to have faith that if this is our house, I have nothing to worry about.

September 4:
Well, we have been in our new house for one week. We closed on August 29th (a Friday). Closing took thirty minutes. We cleaned and painted Fri/Sat, and moved in Sat evening and Sunday. Unpacked on Monday. Pure chaos seeing as the school year started on Tuesday. I have so much painting to do still, but I did get painted the ugly bright red kitchen and dining room, as well as M’s room. Obviously can’t paint that one during baby naps!! Look out for lots of house project posts.

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New Home Pinspiration: Tropical & Airy

The most exciting part of buying a new home, at least for me, is new paint and decor! After living in Hawaii, I was so inspired by the open, airy homes with tropical furniture and decor. We’re not talking Hawaiian print. We’re talking subtle colors, patterns, and artwork that convey the comfort and peace found on the North Shore. The current colors in our soon-to-be-home are burgundy, baby boy powder blue, pastel jade green….Need I continue? So, here’s my color palette decisions for the new home. (These are from Pinterest and photos should link to pin!)

KITCHEN: Citron, white, & chrome

 

Behr Color: Citron (+ plus Chalkboard Paint!)

DINING ROOM: Dark teal, white, gold accents

(only bottom half of wall will be dark teal; top will be white)

color perfection. i love how the wood and whites pop against the teal. Benjamin Moore Dark Harbor, mixed 25% darker.

 Behr Color: Realm bottom half, Luster White top half

LIVING ROOM: light aqua, burnt orange and green accents

living room

Behr Color: Parsnip

GUEST BEDROOM: navy, yellow accents, white

Yellow, Navy and Gray! Future Dining Room colors?? Hmmm . . . already have the gray walls. Note to future self: All shopping trips will now revolve around the colors yellow and navy.

Behr Color: Clay Pebble

HALL BATH: greige, citron, white accents

Horizon Stripe Shower Curtain - Citron #westelm

Behr Color: Citronette

MASTER BEDROOM: light greige, white, ocean color accents (various shades of teal)

I am not good at decorating on my own, but sometimes I see things that make my heart feel nice and warm. This room is one of those. For some reason I can imagine that right outside that door is the beautiful ocean where I can surf with my family all day.

Behr Color: Weathered White

MASTER BATH: aqua, white, yellow accents

Yellow bathroom tile with white

Behr Color: Luster White, Hawaiian Pineapple accent wall

FAMILY ROOM: golden yellow, greige, teal accents

greige and yellow for a starter.

Behr Color: Cumin

M’s TODDLER ROOM: aqua, gray, red-orange

hrm, possibly a redo when he's a toddler. wallcolour is the same and i'm loving the grey and red.

Behr Color: Dinner Mint (+ Chalkboard wall)

HALLWAYS: Luster White

I’ll be sure to post before and after photos so you can see how it comes to life!

Money Matters: Homebuying Costs, Paperwork, and the VA Loan

Today (gasp), we officially put in an offer on a home! The seller has until 8pm tomorrow to answer it, and I’ll be freaking out and will have high blood pressure until then. Needless to say, I’ve been doing some researching on this process in the last few days. Something I wanted to know was, “Exactly what kind of money will we have to pay out of pocket?” I found a few vague sites that were speaking finance talk that I didn’t understand. That didn’t help. So, now that we’ve gotten it all squared away ourselves, here’s some info that might help you out if you’re in that boat. Note: We used the VA loan, which isn’t a standard loan, so some requirements might be different (like the fact that we don’t have a down payment). We also had a 30-day closing timeline, so some time frames may differ. We asked for closing costs, too. I’ve also included a list of paperwork we needed. That would have been helpful. Instead, I ran around like a crazy person looking through filing cabinets and calling companies for records.

Basics:

Asking Price of Home: $180,000

VA Funding Fee (financed with price above): $3,870

Approximate Closing Costs: $5,715.13

What’s Due and When:

  • What: Deposit / Due: when writing offer
    • We wrote this check for $500 to our real estate agent’s company at the time we wrote the offer with her. Basically, this deposit ensures the buyer that you’re serious. If something falls through, you typically get this back. The only way you won’t is if you just randomly peace out on the seller (“I found a better house. I don’t want yours anymore”).
  • What: Appraisal Fee and Credit Report Cost / Due: in the 7 days after offer is accepted
    • For us, this totaled $430 ($400 appraisal and $30 credit report). This check was due to the lender by the 7th day after our offer was accepted. Not 7 business days. 7 days.
  • What: Home Inspection / Due: in the 10 days after offer is accepted
    • The home inspection has to take place in the 10 days after the offer is accepted. This amount all depends on the square footage of the home. Ours is 1,903 sq. ft. and the approximate inspection cost is $350.
  • What: Escrow or “Good Faith” Fund / Due: from time offer is accepted until closing
    • This was definitely the most confusing concept for me. This sum of money, 1% of the asking price ($1,800) for us, is “due” from the time your offer is accepted until you close. For our lender, we didn’t have to cut him a check for $1,800. Here’s the deal. The $500 deposit and $430 check to the lender count towards this (considering they prove that you really are invested in making this home yours). The inspection does not count towards this–in most cases. So, let’s subtract $930 from $1,800. We’ve got $870 left. Basically, all we had to do was provide bank statements showing we had this much money or more in our regular (checking/savings) bank accounts. And that’s it. I have read where some lenders do require a check in hand, but thankfully, it wasn’t ours! If you follow through with the deal, this money is credited back to you at closing.

Paperwork Needed for Lender

  • Lenders don’t like when family members gift you with money to cover the out of pocket expenses of home-buying. My dad sends me a monthly check to help with student loans, so I had to have him write a statement that it was not a gift and is for student loans. The repeated check from him on our bank statement was additional proof for this.
  • W2’s from the last 3 years
  • Federal tax returns from the last 3 years
  • DD 214 (for VA loan only)
  • Paystubs for most recent 30 days
  • Copy of Driver’s License of Gov’t ID
  • Home buyer education class
  • Proof that any collections are paid
  • Landlord information
  • Copy of last three months of bank statements
  • 2 examples of 12-month-long good payment history (credit cards, loans, phone bill, electric bill, insurance payment, etc.) – We used phone and insurance

Fixing His Credit Score

Recently, my husband and I had to do some major work at tackling a bad credit score. We wanted to use his VA loan to buy a house, but he wasn’t approved at first. Due to military pay gone horribly wrong (that we are still fighting), my husband’s credit needed help. After researching the heck out of what a credit score really was, and by watching his like a hawk, we managed to make his score go up 58 points in just 3 months. We are now VA approved and house hunting! Below, I’ve tried to sum up the basics of a credit score. Be advised that I am not a financial officer, and I have an English degree. I hate numbers. This is your average gal talking about money. The best advice will come from a financial adviser or lender.

What a credit score is: a number, determined by an equation with many factors (an equation that no one knows), that shows how financially responsible you are. Note: It says responsible. Not stable. Not wealthy. You can have $1,000,000 in your bank account and have an awful credit score! When applying for any type of loan, credit card, rental house, even electricity or cable TV, companies may require your credit score to be above a certain place so they can be sure you can and will pay their bills. What your credit score needs to be depends on what you’re purchasing. It’s always a good idea to be in the 650-700 range or higher. Most home loans require a minimum of around 640 to 660.

Things that determine your credit score:

  • Open Credit Utilization: The percent of your credit card “allowance” that your actually using. It = credit card maximum allowances divided by credit card balances. Ex. If you have a $10 balance on your credit card with a $100 max, your credit utilization is 10%. You want to keep your credit utilization between 1% and 20%. 0% will hurt you just as much as 50% will. For this reason, I never fully pay the balance on our credit cards. If my balance is $30 come due date, I’ll pay like $25. The amount you leave on it (in that case $5) will acrue interest, but if it’s only $5, your interest may be all of like 0.30 cents, which is worth not risking your score dropping due to a 0% utilization.
  • Percent of On-Time Payments: This is just what it sounds like. It’s the number of payments you’ve had divided by the number of them that were paid on time. You want this number to be 100%, but not lower than like 98% or 97%.
  • Average Age of Open Credit Lines: This is the average of how long you have had credit accounts open. This is where young people get hurt because most won’t have more than 2 years or so. If you’ve had a credit card for 2 years and student loans for 4 years, your average age of credit will be 3. The higher that number, the better. That’s not something you can change quickly. What you can do, however, is not close out your oldest credit card. For example, my husband has a credit card through the Army PX (Military Star Card) that he no longer uses. However, because it is his oldest credit card, I did not close it out because it would make this number drop.
  • Total Number of Accounts: This is simply how many credit lines you’ve had open–ever. Again, this number makes young people suffer because we have less credit experiences. Most young people will only have 2 to 3. Having student loans helped me drastically here. Do not rush into getting new credit lines to improve this number. It will happen over time.
  • Hard Credit Inquiries: A credit inquiry is where a company pulls your credit to see whether they should approve you for their loan or service. A hard inquiry is a detailed one that goes on your credit report. You only want between 0 and 2 at a time. If you go applying for a bunch of credit cards and loans at once, it will destroy your credit. There are soft inquiries (done by home loan lenders, etc.) that do not go on your credit report, and, therefore, do not affect your credit. Hard inquiries usually take 12 months to fall off your credit report (making your credit score go up when it does), but some can take longer. So, when you apply for something that pulls credit, make sure it is worth it!
  • Derogatory Marks: These are kind of like stamps from companies that say “You are bad with money!” They usually happen when you continually miss or refuse payments with a company. These derogatory marks only come off after months and months of improving your on-time payments with that company. It’s hard to get one of these, but when you get one, you can almost be guaranteed to be denied for a loan or credit card. One or two missed payments rarely ever make a company give you a derogatory mark.

Steps to Improve Credit:

  1. Shop for a credit card. If your credit score is low, look into a secured credit card (where you pay the max on it…so you’re spending your own money…thereby eliminating the risk for the credit card company). My husband got the Capital One secured card and we only put a $200 max on it. It worked wonders!
  2. Use the credit card like I explained under the “credit utilization” section. We put $30 of gas in a car once every credit statement period. That was an easy way to make sure we didn’t go over-board on spending and ruin our utilization. This method alone did amazing things with credit!
  3. Use a free app like Credit Karma. While the credit score is not exact (because it’s not a FICO [a.k.a. official] credit score), it will give you an accurate picture of the categories listed above. My credit score on CK is about 40 points lower than Experian, while my husband’s is 20 points higher. So, don’t worry too much about the exact credit score it gives you. However, if your credit score jumps by like 30 points on Credit Karma, you can bet it probably made a big jump with FICO, too.
  4. Use your one free credit report per year. You can get it online through various websites. Just make sure it’s actually free! You shouldn’t have to put in any credit card info. This is how my husband found out he had a student loan debt in collections, which of course killed his credit a few years ago. The school told him he wouldn’t have to pay the loan back while he was in the Army, but he was told wrong. And of course, when they tried to contact him about the loan being due, he was on the other side of the world and never got a word of it. The only way we found out was by pulling his credit report a year later. It will let you see exactly what may be hurting your credit score. There are also cases where someone may have stolen your identity or opened a card or loan in your name. This will alert you to anything like that, and you can then dispute that item.
  5. You can get a small personal loan (for, say, $1,000), but this is a long-term change. It can take 1 to 2 years for this loan to positively affect your credit score. As you see with my husband, a credit card works much faster (and is easier to get).

I hope this info will give you a basic no-brainer look at what it takes to, hopefully, pull your credit score up! Have you found anything else that works? What advice do you have for other readers?