Good Morrow, dear reader. I have been absent from this blog for quite a while now and I know that the depression and debilitating sadness which my absence brought upon my readership was probably more than anyone should be made to go through. For that, I apologize to all three of you. The fact of the matter is I simply didn’t have the time or energy to blather on endlessly about topics of which I am no expert. You see, last November my wife and I got the idea in our heads to purchase a house. We are looking to grow our family, we would like to build up some equity, if we are going to have a mortgage we would like to start on it now so that we will be finished paying it off before we are 90 and lastly; we wanted a home of our own. Something that we picked out together. A place where we can see ourselves welcoming our children home for the holiday’s with their children. We bought a house.

Perhaps you, dear reader, are looking to do the same. Or perhaps you have already gone through the process and are looking for a few laughs as you read and reminisce over your own time in the financial trenches of the process toward home ownership. But, this article is for the newbie. I am hoping that what you read here scares the living shit out of you to the point of grand-mal seizures in order that you truly understand what you will go through if you decide to take the plunge and attempt to buy a house. If, after what you have read here, you still desire to purchase your own home, then God be with you. Because no one else will.

What I am going to do in the next couple thousand words is layout to the prospective buyer what exactly they are going to need in order to facilitate a smooth mortgage process. I will do this with the experience fresh on my mind as we only closed on our home a month ago. The first list will be what you need before anything else in order to walk into the mortgage lender’s office and not be told that unfortunately at this time there is nothing they can do for you.

BEFORE ANYTHING ELSE

1. You and your partner or you yourself will need pretty decent credit. The average credit score that most conventional mortgage lenders are looking for is at least 640. That is on the low-end. 680 is where you’d ideally like to be but that may be nearly unattainable for some people. Have no fear: FHA is here! A FHA loan is a home loan that is guaranteed by the US government. It is also the most popular option for first time home buyers. Therefore, they are a little more forgiving when it comes to the credit score required in order to qualify for a loan. In fact, technically the lowest score that would qualify for an FHA loan is 500. Think you’re in the clear now??? Guess again, flapjack! Good luck finding a mortgage company that handles FHA that will even talk to you without a score of at least 580. I can hear you saying, ‘but you just said that the minimum score required is 500!’ Yes, I did. However, that is the minimum score laid out by the dept. of Housing and Urban Development or HUD. That does not mean that a private company must be beholden to that particular number. Mortgage companies use what are called overlays. Let’s talk about those.
2. Overlays are essentially stipulations put forward by individual mortgage lenders in order to protect their money. Let me break it down for you. If you have a credit score of 580, you basically qualify for an FHA loan. Which requires that you put down 3.5% of the sale price of the house after your offer has been accepted by the seller. So why are we worried about that 580 number when the minimum credit score to qualify for an FHA is 500? Because, quite frankly, if your credit is under 580, you basically have shit credit. Meaning, you are a huge risk. Therefore, most lenders will try to cover their asses and thus is born the overlay. The overlay is them saying; “yes, we know that you technically qualify… but we are scared to death of doing business with you so we are requiring 580 rather than the 500 the US Govt. sees as acceptable.” It is a fail-safe for institutions with more money than God. Now, with some conventional loans, the strength of your credit score will be enough to waive the need to put any money down as your score will give the lender the peace of mind needed in order to give you a loan in good faith. That is because overlays mightn’t always be based on credit.  Sometimes, if you have good credit but are attempting to purchase a rather pricey house you will need to have a serious amount of salary. Or equity.  So, if you have less than a 580 credit score, you are required to put down 10% after the initial contract agreement. But again, you have a snowball’s chance in hell finding a lender who will work with folks with credit scores in the low 500’s. Remember, while overlays seem to be pretty uniform across the board, the individual lender is a private entity operating independently from the government even though they are issuing government-guaranteed loans. Meaning, they can do whatever they’d like with their overlays.
3. Clean Financial History. If you have defaulted on any government loans, such as student loans, you can pretty much forget your chances of getting an FHA loan unless the default was long enough ago that it fell off your credit score or if it was adjudicated. Defaulting on any loan will hurt you, but if you are a first time home buyer, you are more than likely going to be gunning for an FHA loan which means that you will need a very clean credit history with the government. My best advice; unless it is an absolute necessity, do not finance any large purchases for at least six months to a year prior to purchasing a home. Trust me on this one. Once the underwriting phase of your mortgage application begins, you will know exactly what I am talking about. Remember, the lender is looking at you as a risk. Do they want to take a big risk or a small risk? Make sure you are a small risk.
4. Up To Date Payments. Seriously, I cannot stress this one enough. Missing a credit card payment, car payment, medical bill, student loan, cell phone, hell anything really…  even a small payment because you simply forgot or because you had something going on that kept your attention away from your finances can really do damage to your credit. Pay attention to absolutely everything you owe money on and beg, scrape and work your ass off to make sure everything is paid on time. You are going to be scrutinized to the point of misery once the mortgage ball gets really rolling and you are going to want to be ready for any question your lender has for you. Make your life easier by limiting the number of those questions by making payments on time.
5. DO NOT PAY OFF COLLECTIONS – unless the collections agency agrees to immediately remove the derogatory mark on your credit report. For some reason, paying off bills in collections is basically a nothingburger. Unless the agency agrees to remove the mark you are basically throwing your money away. If they do agree to remove the mark, get the person’s name that you spoke to, a confirmation number of the transaction and the home address of the person you spoke to so you can send them an endless stream of pictures of you and your family crying via mail. (No, don’t do that.) If they do not agree to remove the mark, hang up the phone. No, I mean it. Just hang up.
6. Have Some Money to Put Down. This should seem like a no-brainer but having a nice pile of cash to sweeten the potential pot is going to help motivate your lender, who by the way could not care less about you, your family, your need for a home, your future or even your existence no matter how much they smile at you and tell you that they do.
7. Be Employed. This ain’t 2006, bucko. You’ll need a job and proof that you can actually make your monthly mortgage payments.
8. DO NOT HAVE ANY LARGE DEPOSITS IN YOUR ACCOUNTS – that cannot be accounted for easily. The mortgage company will analyze you as a risk and any potential extra debt will be held against you. Maybe your parents gave you a couple grand as a gift or maybe you won some money playing blackjack… great but you’d better be able to provide documentation of the deposits, where the funds came from and if you have to pay the deposits back. If not, you’ve just added about another 5-6 hours of headache across the entire process.
9. DO NOT make the mistake of believing the scores you see on Credit Karma or any other free credit site. They are usually way, way off. The truth is, the three major credit agencies; Experian, Equifx and Transunion are updating your score regularly depending on how frequently your outstanding account originators are reporting. But a credit report costs money.  Therefore, the best you are going to get on any free credit site is a good guess as to the movement of your credit. If you see your scores going up, then you at least have an idea of whether or not what you are doing is making a difference in your credit. If you see them going down, same story. Use these sites as a gauge for credit movement, nothing else.

What to take away from this: if you have lousy credit, put your aspirations of home ownership on the back-burner for a while and work on your credit. Use your desire for a house as fuel to get your financial house in order. It might be disheartening to read that, but in the end it’d be much more painful to get all excited and set your heart(s) on a house only to be told repeatedly that there is no way you can purchase said house. If you have money saved up for a house and need to dip into it to take care of some credit issues, go ahead and do it. The score is key to you even getting your foot in the mortgage door. In the end, if your credit is good enough but you’ve spent some of your savings to get it to that point, you can always offer less on a down payment for the home which will mean a higher monthly mortgage payment. That is when you have to ask the difficult question; are we / am I financially ready for this? It ain’t worth having your dream house if you have to sleep on a blanket on the floor of it and eat Alpo for dinner at your non-existent dining room table.

You’ve worked on your credit, you have a job, you have some money ready to put down. You found the house that you want to buy. You have been pre-approved for the mortgage and your offer has been accepted! Congratulations! Welcome to the worst few weeks /  months of your life. Now, some people will tell you that pre-approval means that you are basically going to get your mortgage. In theory, they are correct but that doesn’t mean that something won’t crop up in the time between the application is filed and the closing date nor does it mean that the underwriter won’t churn something up which could be a deal breaker for you. So gird your loins and prepare for the exhausting and at times potentially humiliating battle ahead. Keep whiskey on hand. Now let’s take a look at the mortgage process and what you can expect.

1. You have your pre-approval or pre-approval letter (qualifying letter) and you have applied for the mortgage. Now comes the fun part; underwriting. Assuming that you have signed the initial contract with the seller and have put down either your 1%, 3.5%, 10% or 20% you are going to enter the hellish nightmare that is underwriting. The underwriter will scrutinize your financial history and current financial situation with laser-like focus. They will want documentation of EVERYTHING. What do I mean by everything? Literally everything. Did you get a bonus at work? Excellent! They will need documentation of the bonus and an explanation of whether or not the bonus was a one time deal or a recurring bonus sent from and signed by your boss or financial officer. Did you miss a car payment three years ago when you fell out of a tree whilst trying to retrieve a frisbee and ended up breaking your grandpepep’s neck with the fall thus putting you into a spiral of booze and depression for a few months which facilitated you forgetting to make one payment on a loan that you hadn’t until that point and never since that one incident been late on? Sucks, man… but they will need a letter of explanation for that. Did you ever pee in the shower? They won’t need to know that but by the end of the process it wouldn’t surprise you if they asked that question and then for a detailed report from a licensed plumber explaining after extensive testing if there are any trace amounts of piss in your shower pipes. Yeah, it gets that bad.
2. You have been approved… with conditions! Phew! You have made it! You are approved… wait what? What conditions? Huh? Ok, here is the best analogy I can come up with. Let me set the scene; doctor’s office, rectal exam, doctor has stubby sausage fingers, cold lube. “Well, Mr.(s) so-and-so, looks pretty good to me from what I can see! We are almost done. I am going to pull my finger out now, take a deep breath in and exhale when I tell you to… ok now. Much better, right? Excellent. Almost done, things are looking good. Just oneeeee little condition left” Well, that’s a relief! That wasn’t so bad. I mean, it wasn’t great but not as bad as I thought it would… hey, wait. Um… what condition? Why do you have a street cone covered in superglue and broken glass? “Oh, no worries. This is the condition I was mentioning a second ago, now shut up because we are going mucho-deepo on this one, pally. Scream if you want to, you are here because you asked for it!!!! HAHAHAHAHAHAHAHA” *Ram*. That, dear reader, is being conditionally approved. The nightmare of underwriting on steroids. Your lender, whom you initially liked, began to sort of distrust and now semi-loathe has basically become your own personal financial Charles Manson.
3. You will need; at least three months of pay stubs, two most recent years of W-2’s, proof of current employment, bank statements for at least three months, letters of explanation, gift letters (if necessary), pint of blood, the patience of a saint. The process become almost interminable at this point. You will routinely ask yourself if iit is all worth it. You may even want to throw in the towel from time to time. remember; you have come this far. Just see it out. I reached out to my realtor during this phase to vent about how I was essentially losing my mind and his response which I am parroting to you here: “please just give them whatever they ask for, it will be over soon.” He was right. Bite your tongue, scream into a pillow, punch a stuffed animal and move forward in the process. Don’t let the process beat you. Also, get ready for an emotional rollercoaster. Some days will be smooth and you’ll think you are on your way. Some days you will wonder if the sale will even go through. You will reach out to your lender almost daily because there will most assuredly be fresh hell on a daily basis. You will get cryptic responses if any at all. Basically, the worst of it is upon you; the waiting. A lot of the process is doing what you are told and handing over what you are told to hand over and then simply sitting there on your hands while to wait for the next shoe to drop. The waiting is without a doubt, the worst part of the entire process. Keep more whisky on hand.
4. Pray to whatever higher power you believe in that the appraisal goes well. If the appraisal comes in too low, you are screwed. If the appraisal comes in too high you are screwed. If the home was built before 1975, and you are trying to get an FHA loan, and there is any sort of chipped paint on the exterior of the house or the interior of the house, you are screwed. I had to paint the outside trim of my windows on a blustery Winter day with the help of my realtor in order to have the appraiser come BACK to the house to see that we had fixed some chipped paint issues. Which of course, cost me another appraisal fee. I remember thinking to myself; “I am painting a house that I don’t even own. I am working on a house that I might not even get considering the endless pitfalls and booby-traps of the underwriting process. I am either crazy or I might be the dumbest motherfucker in the world.” And while that last part might be true, it doesn’t change the fact that the work needed to be done because before 1975 apparently everyone used lead paint. Meaning, that while your lead-painted house might impervious to the effects of kryptonite, it is still considered to be a potential health hazard. Even if the chipped paint isn’t lead-based… you are still going to have to fix the issue before the appraiser signs off on the property and assesses the value. So that’s fun.
5. Once all of that crap is behind you, you are cleared to close. Which means that you can kiss every dime in your bank account goodbye. There will be disclosures that make you want to weep. There will be closing costs that make you want to puke. There will be inspections you have to pay for. There will be title insurance you have to pay for. There will be the fee your lawyer charges you which must be paid. There will be loan origination fees, a full year’s home insurance premium which must be purchased by the time of closing, there will be pro-rated taxes to pay, there will be much more heartache before the day comes when you sit there with your lawyer and sign forty-five minutes to an hour’s worth of paperwork.

But once it is done and you have a minute to take a breath, you will realize it was all worth it. This is just a brief glimpse into the wacky world of mortgages and indeed my story could fill out an entire book. Also, my story is unique in some respects and incredibly common in others. It is difficult to put into words what my family and I went through during this process. There were a lot of factors in play that made our hunt for the perfect home a bit more pressing and much more daunting than the average house hunter’s journey. Maybe I will write a book on it one day when I am not so traumatized. This long winded blog post is written to be a warning of what is to come for the first time home buyer. I can say, that our realtor was excellent in many respects but at the time I felt that he hadn’t adequately prepared us for the process. It is only now that I realize that no one can really adequately prepare you for the process. It is something that you can read about but until you are in the trenches yourself you will never really know how excruciating it can be. In conclusion, I wrote this because during the mortgage process I turned to the internet almost daily for advice and to read other people’s stories. Unfortunately, the majority of information on the process comes from mortgage lenders themselves or companies that deal with facilitating the mortgage process. You can’t get a truly straight answer from someone trying to sell you something so I thought I would explain what it was like and what to look out for from a purchaser’s point of view. I hope that it helps anyone out there looking to purchase a house.

We went through it and survived. So can you.