The writer’s new home in Savannah
Looking back, I still can’t believe that a bank gave me and my husband a mortgage in the midst of a global pandemic. My husband had just had his salary cut by 50%, and we were living with my parents in Westchester County, New York, because we could no longer afford the rent on our apartment in Brooklyn. But the house we bid on in Savannah (my husband grew up there), which we had only seen online, was within our budget range — in the end, we paid $340,000 for it and got an interest rate of 3.25%. (Some mortgage rates are below 3%. Compare the best mortgage rates you can get here.)
Now, our monthly mortgage payment is $1,500 less than our rent in Brooklyn. In New York City, some parking spaces go for what we bought an entire house for in Savannah. Our real estate agent walked us through the house on FaceTime before we put in our offer.
However, the process of getting approved for a mortgage was so stressful that I lost weight. But we did leave it more educated about mortgages, and so incredibly grateful for our home and far less stressful life in Savannah. Here’s what we learned about getting a mortgage. (You can find the lenders with the best rates here.)
1. I didn’t need as much saved for the down payment as I thought I would
I always thought that no one would give you a house unless you had 20% of the cost of the house saved as a down payment. As creative professionals living in New York City for twenty years, we could barely afford a babysitter— forget about tens of thousands of dollars. I didn’t realize, however, that if you’re a first-time homeowner with a credit score of 580 or higher, you’re eligible for a Federal Housing Administration (FHA) loan with just a 3.5% down payment. In our case, this was $11,900, which we had, though barely. (Need to save for your down payment? These are some of the best savings accounts.)
2. Mortgage APRs vary, a lot
Before we bought a home, I thought mortgage rates were pretty much fixed. But when I started looking around, I was seeing rates that varied by as much as 1%. That explains why it is worthwhile to shop around to get the best quote. (You can find the lenders with the best rates here.) Indeed, mortgage rates change every day, and finding the best rate can mean thousands and thousands of dollars you save over the life of the loan.
3. Getting pre-approved is easy. Getting the actual mortgage is not.
Most sellers we encountered wanted us to be pre-approved for a mortgage before they would consider a bid. Getting pre-approved, at least for us, was very easy — the lender checked our credit score and monthly income — and gave us a pre-approval letter.
Getting the actual mortgage, though, was a whole different story. We had to provide our tax returns for the past two years, along with proof of income and information about our assets. We also had to let the lender have access to our daily transactions in our bank accounts. This made my husband so nervous that he was scared to buy even basic groceries, for fear that an errant purchase would make the underwriters deny our loan. That said, it was all worth it (did you see how cute my house is?!). (You can find the lenders with the best rates here.)
4. Our lender made us take a financial literacy course
While they were underwriting our loan, our lenders made us take a financial literacy course from Freddie Mac that included advice on how to create a budget, as well as suggestions on how much income to designate for home improvements every year to maintain the value of the house. At the end, we had to pass a test. My husband actually appreciated this aspect of the process, even though the course took many hours to complete — he had never had any financial literacy training before.
5. Our mortgage was sold before we made our first monthly payment.
Even before we paid our first monthly payment on our mortgage, our loan was sold to another bank. We found this out when we received a statement in the mail from a bank that was totally unfamiliar to us. I almost threw the statement in the trash — fortunately, I had the foresight to open it. This is apparently totally normal. The terms of our loan didn’t change — the only thing that changed was who we send the money to.
Bottom line: More than a year later, and we’re incredibly grateful. Even despite job loss and various other travails, we’ve never struggled to pay our mortgage. And every day, this house we found online feels more and more like our home. (You can find the lenders with the best mortgage rates here.)