March 16, 2018
I received the call I had been waiting 6 months to get, I was finally approved for a home loan. When I started the process of meeting with a realtor and really discussing what I wanted, where I was with my DEBT, how much I owed in student loans after 3 private university master’s degrees and 1 private university ungraduated degree, I was shocked when I was told all the steps necessary to get a loan. Yes, there are shady people out there who will give you a home loan but its not going to be in your best interest.
Steps:
1. Stop using credit cards- ALL OF THEM, even the gas card.
2. Start paying credit cards off. This is easier than it sounds. At least for me since I had smaller cards I could easily pay off at $200 here and $300 there. It got trickier when it was a $600 amount that needed to be paid in full.
3. Start using cash for every expense.
4. Pay down some more of your credit cards. The goal is less than 49% usage, but really its closer to 30% usage per card.
5. In paying off your debt, it then takes up to 6 weeks for the credit card companies to update the Credit Bureaus like Equifax, Transunion, and Experian. So then there is the waiting game to see how much all that cash to cards has really paid off on your CREDIT SCORE.
6. You need at least a FICO of 680 to get a decent interest rate and to qualify for specific programs that will save you lots of money in the long run. You also need to have 30-49% Debt to Income Ratio.
7. Student Loans- I have a lot for attending 4 private universities pursuing my dreams and literally travelling the world (3 continents down). Which changed the types of loan programs available to me since most finance companies (bank or separate entitity) look at the total student loan amount and say your payments should be 1%. Which for most people is not that bad. For me, 1% of my student loans is equal to my full monthly paycheck, making it impossible for me to pay student loans, car payments, utilities, cell phone, and get food. By working with my loan holder (Fed Loan Servicing) I was able to get on an income driven repayment plan and when that came back as double my car payment, I called back and asked what other programs they had.
a. It turns out that there are several programs under the umbrealla of Income Driven Repament Plan and YOU have to ask which would be the best for you based on wanting your payment to be $X amount. I wanted mine closer to $500 month which is a considerable savings from the initial approval at consolidation. So I called and asked what plan I needed to switch to and how to do it. The people I spoke to were super helpful, emailed me the form, told me what box to check and how to upload it to their site.
b. Also, if you work for a school district in any capacity (teacher, classroom assistant, administrator, janitor) and you have student loans you qualify for Public Service Forgiveness Program. So call and get the information. It’s a simple form that you fill out stating you work there and get their TAX ID (its on our W2 form) and the principal signs off confirming you work there. The upside of this program is you do not pay interest when they forgive your outstanding loan balance. On the Income Driven plan you are expected to say thank you sir for forgiving my huge debt and adding the balance as income to my tax return for which I will now have to pay taxes on imaginary income. So, if you have a balance of $50,000 when forgiveness arrives under income driven plans you will be expected to pay taxes on that imaginary money since the government considers it income. So, to cover my bottom line I have enrolled in both programs to make sure there is some forgiveness of my massive student loan debt.
8. So now that my credit score is rising, I am steadily paying off credit cards I also had to impatiently wait to be told if all I was doing was ENOUGH. By ENOUGH, I mean enough to get me to a 680 Fico Score, a decent debt to income ratio, and proof that I do have enough money to pay a mortgage. Because it is not just how much you make, they look at how much you spend and if there really is enough left over each and every month to make that mortgage since this is a 30-year contract not a 12-month contract.
9. From November 2017 through March 2018 I paid 7 credit cards off, stopped using all of my credit cards, and increased some of the payments on the higher balanced cards based on the 3 year plan printed on the statement. ALL of this really helped bring my score up over 40 in about 5 months.
10. This process also forced me to look at my spending habits and really evaluate some of the thoughtful gifts I send out throughout the year to friends and loved ones as well as clients. I had to really consider that expense as there is only so much work-related expenses a gal can write off.
11. Having to review my statements and pay with cash for three months made me really consider my purchases and if I REALLY needed an item versus I wanted a cool gadget, bag, water bottle, etc.
On March 16 I found out I had been financed for a house. By that Sunday I was out looking for houses closer to my work and in the area of Los Angeles County that I can actually afford to purchase a home on a single income. By the following Wednesday, I had found my house and had the realtor submit an offer which was accepted the next day. Friday we had the inspector come for the walk through. Later that afternoon I was getting a request to start the wire process to open escrow with the deposit. While it was a slow and tedious process, that felt overwhelming and discouraging at times, once it happened it really happened. Somehow, I am now purchasing my first home.
My first home is not glamorous, or in an exclusive neighborhood, but it is mine. It has many of the things I wanted in a home and there is great potential for small DIY projects to make it really homey, cozy, and reflect my style. I am really excited for this next adventure.
I was looking through a journal and found a list I made of things I wanted to accomplish during my 35th year, so far I am doing pretty damn good at checking them off.
√ Move Out- Homeownership
√ Weight Loss- Holding steady at 15 pounds down
√ Create distance from someone who can be toxic- The location of my home makes that possible
Make Candy….
Build a Woodshop
Make My Own Furniture
Build a Ceramics Studio