I'm going to buy a house, I could use some help!

[s15driftking]

Well, The wife and I have been married for about 6 months now and we figured we'd take the plunge and buy our first home. Nothign too fancy, we just want to build some equity, get a decent home, and get that phat 8k check from the government. Besides, we are paying about 200 dollars less in rent than it would cost to own decent house.

I am taking advice o nthe "do's and donts" of home buying.

So far, here is what i have come up with.

A coworker of mine once worked in the realty business and calculated based on what i want to spend and told me how expensive of a house i can buy (he factored in mortgage, interest, average taxes, and insurance)

My realtor gave me a couple of loan officers numbers and i think i found a decent guy.

1. What should i look out for when shopping for a decent rate? help me out guys.

2. he made it sound like once i stepped foot in the door to try and get approved then we were in business for good, is that binding?

3. how do i shop around for the best rates? Any advice would be great!

4. in this market (nationwide) how much (percentage) can i expect to get off of a house. Lets say theres a house for 200,000 dollars, what should i offer, and what factors should i take into consideration?


Thanks for all the advice in advance guys, Im getting kind of excited to shop for a home. I have to be in contract by mid April to get the 8K.

Thanks Brothers! - Bobby

[tuxpuff]

I bought my first place in the spring...snatched up that 8K also. One of my best friends is an agent and mortgage guy so unfortunately I don't know the answer to your main questions...but offer what you think is fair considering how long the property has been on the market. There can be a negotiation period also. Good luck with the purchase!

[AAlmeter]

Originally Posted by s15driftking

Well, The wife and I have been married for about 6 months now and we figured we'd take the plunge and buy our first home. Nothign too fancy, we just want to build some equity, get a decent home, and get that phat 8k check from the government. Besides, we are paying about 200 dollars less in rent than it would cost to own decent house.

I am taking advice o nthe "do's and donts" of home buying.

So far, here is what i have come up with.

A coworker of mine once worked in the realty business and calculated based on what i want to spend and told me how expensive of a house i can buy (he factored in mortgage, interest, average taxes, and insurance)

My realtor gave me a couple of loan officers numbers and i think i found a decent guy.

1. What should i look out for when shopping for a decent rate? help me out guys.

2. he made it sound like once i stepped foot in the door to try and get approved then we were in business for good, is that binding?

3. how do i shop around for the best rates? Any advice would be great!

4. in this market (nationwide) how much (percentage) can i expect to get off of a house. Lets say theres a house for 200,000 dollars, what should i offer, and what factors should i take into consideration?


Thanks for all the advice in advance guys, Im getting kind of excited to shop for a home. I have to be in contract by mid April to get the 8K.

Thanks Brothers! - Bobby

Talk things through with your mortgage broker, understand everything, sign nothing. Get a feeling for what you can afford in monthly payments and what you can put down. Try your best to put down a full 20%, and make sure you have a fixed rate mortgage (in almost all circumstances).

Once you're comfortable with YOUR budget, get pre-approved. You may get approved for more or less than what you feel is appropriate, shop with the lower number in mind. Generally speaking, a pre-approval is necessary to get in with a realtor.

Most brokers will shop a variety of lenders and will work to get you the best deal. Make sure you use an honest broker (assuming you use a broker). If you find one with references that you're comfortable with, stick with them. The credit checks they will run are hard inquiries, each one will count against your credit rating, costing you more money in the long run.

Be sure to always keep closing costs in mind. Both your realtor and broker will be able to give you a good faith estimate of the costs, and figure out whether you will pay them, the seller will, or you'll roll them into your mortgage.

There are too many factors to consider in giving a value on a house. Supply/demand, condition, location, quality, appeal, etc. Your realtor will help you and be sure to educate yourself. Take a look at the comparables in the area, they'll tell you the asking and sale price of homes in the area that recently went. Some websites can also give you info (trulia.com being one).

Good luck

I will take the opposite approach as most, I rent by choice. I have been down the homeowner route twice before and the second one was a new home built just for us. I know I am throwing all that money away, have no equity etc. I choose to rent a town house simply because it allows me to live in an area I would probably not be able to afford owning. I never have to do yard work, shovel snow, paint, fix broken appliances (except washer and dryer) and the only utility I have is electric and its a killer low rate for an all electric home. We recently had an issue with a dishwasher flooding the floor. No fault of ours and had we owned the place would have been out thousands to repair the damage. The landlord is a friend from business and had it all fixed in under a week and apologized for the trouble (he got a few nice cigars too ). The reason I am rambling like this is simply to point out all the added cost of owning your own home. The HUGE mistake I made in both previous ownerships was I believed the bank as to what I could afford. On paper they were right, it all added up. But in reality there was little wiggle room for when the home needed a furnace, a hot water tank, the car blew a transmission and so forth. For the better part of 20 years I was living to support my house.

So my advise is do not assume their numbers are correct even if the bottom line shows extra money each month. A friend took the number his bank gave him last year and took 40% off the monthly figure that they approved him for. Waited until they found a home in that range and bought it. A few months back he said that they were struggling even though both him and his wife got raises and they haven't changed their lifestyles. He would not have made it if he bought in their range.

Chas

[Ratters]

Yep, don't buy what you are approved for, but what you can comfortably afford. I bought my house last year, and even doing an FHA loan I was still paying less that I was in rent and now have the tax deduction. And with my "Obama money" I only ended up being out about 9k out of pocket for the whole initial purchase. For me I was tired of renting and wanted something I can do what I want with and not worry if the dogs had an accident or destroyed something. Just remember you are responsible for EVERYTHING that goes wrong with the house. All those little things can add up big over the year so remember to budget for repairs and maintenence.

Once you make an offer you are bound if it is accepted, if they come back wanting different terms you are no longer locked in.

For interest rates, shop around. And they do change, I had mine knocked down a quarter percent a week before closing. And if you are planning on staying a long time, it's worth it to buy down the loan a bit. I plan on living here forever so it was well worth it to me. As for being bound to the lender, that is not true, at least here in CA, unless you have a signed acceptance offer and submitted all your paperwork to the bank. Just remember it's a long process and it's hard to change lenders mid stream and make your closing.

And pay attention to whether it's a short sale, forclosure, or straight sale, as there's different plusses and minuses to each. Mine was a short sale but luckily went pretty quickly. They did try to screw me at the end though with the bank holding the second. They waited till the last minute to ask for more money, even though I thought everything was squared away. Luckily for me the seller and my agent took care of most of it to make sure the deal went through.

Oh, and offer what you feel comfortable with. Don't worry about the asking price, or what percent you can get off of it, just look at the comps and what seems to be a fair and reasonable price to you. So much depends on the market in your area and the current buying conditions. I bought my house when there was very little competition around here. Then four months later all of a sudden every house was getting 8 offers and they were going at asking or above. Now it's cooled off again. So really, don't worry about anything but what you are comfortable with and what you think the house is worth. Picture it like bidding on cbid.

Good luck.

[Hitagain]

Dont over look renting a home with the option to buy. I sold a couple of homes that way, gave the tenent a 25% rent credit to there down payment if the bought the home. Both home sold in 6 months and I covered my carrying cost for those months. The tenents where able to lower their morgage payments and didnt feel like they where stuck in a home they didn't like.

[MedicCook]

Usually the total morgtage payment they tell you before closing is always higher after closing. Make sure to read the fine print and make sure they have included certain things like the home owners insurance and property and school taxes into the morgtage payment. They may tell you verbally but never put it in writing and you are the one that gets screwed in the end. The big tip is if your monthly payment is at your just getting by point look for something cheaper. You always need to have a nice buffer of income so you are not living pay check to pay check.

[themoneycollector]

1). When shopping for rates, be realistic about closing costs. It's expensive and don't fall for the GFE that gives you some lowball number. Because on the day of closing, you can bet it won't be what the GFE said.

2). Be up front with your brokers/lenders. I was getting quotes until the last minute and went with the one that had a good rate and I felt good about. I didn't experience anything 'binding', but I would just say don't sign anything until you're ready.

3). Use brokers (who shop around for you, but take a commission) and traditional lenders (include both online and local banks)

4). There's so much that goes into an offer. Since you are a buyer, get a realtor (it's free for buyers), and ask them to give you a neighborhood analysis. See what other homes in the neighborhood have listed and ultimately sold for and how long they were on the market.

I would also say don't get too attached to any particular home. Realtors/Lenders/Sellers will eat you up if you bring too much emotion into the process. Be ready to walk away if the numbers don't work or something is not right. There's always another house. Good luck.

[chippewastud79]

Use a broker for your loan, they cost you about an extra $500 in the end but they are worth it. My lender shops rates to a number of different mortgage companies and got our last mortgage at a rate comparable to what we paid on our first home 5 years ago.

Definitely put down as much as you can afford. Chances are you won't be in the home forever and you want to have the equity when you sell. A friend put 0% down and is upside down on their mortgage (not that they are in danger of not being able to afford it).

Definitely get yourself a great realtor who is agressive and willing to go to bat for you. There are sellers out there who are motivated, but you need an agent who is going to back up your offers. Always run 'comps' to find out what other houses have sold for and what they are worth in the area.

Don't fall in love with a house just for the sake of getting 'the one'. There are plenty of houses for sale out there, especially in Ohio. Look at 100 houses if you have to and find the one that is best for you at the best price (the second part is more important than the first).

Try condos, save time and money on maintenance. Plus the HOA may include a nice selection of options like pool, tennis, workout facility, clubhouse etc.

Offer as low as you want, within reason. On a $200K house I would literally consider going $50K below. There is a starting point for every negotiation and the closer to their asking price the closer they are to 'their' number, you want the house for your number. Sellers need to sell, they are in competition with 100's of other houses. In this market, buyers hold the power.

[mosesbotbol]

Do you have any friends that are real estate brokers?

Start going to open houses off of CL or any real estate site. Use your friend as the refering broker so if you move forward, you'll be able to get some kind of kick back from your buddy. There are other things you can do to get money back at closing too. You should feel that when you are ready to make an offer, you know the whole real estate scene for your area. Like looking for a used car; someone tells you year/make/model/mileage and you guess right on the money. You have to be like that for the properties you are looking at.

Shop around on rates. You'll have to get your credit checked etc, but once they know where you stand in terms of debt to income, you'll get an idea of what types of rates are available to you. I would suggest a fixed rate mortgage. Rates are low and it's good to know your payment will be the same for the whole loan.

Once you settle on a rate, get pre-approved and don't over extend yourself. You have to feel 100% confident that the payment will be ok. Allow for maintenence, condo fee's, and heat/AC.

Make any offer contigent on a home inspection. Tiger Home Inspections is an excellent company that can make a diamond sound like coal they are so thourough.

You are looking at one of the best real estate markets in decades, you are lucky to be looking right now and actually have money to buy something!

[mikeyj23]

1. Be careful not to strictly go with a percentage rate; be sure to look at the "total package" of the loan. What type of loan is it (FHA, conventional), what are the points paid on the loan, what's the origination fee, closing costs, etc. We bought in August and got a 5% rate, and I chose to go through my bank Wells Fargo rather than going through a broker. It ended up being much easier and straightforward that way, and we wouldn't have gotten a better rate anywhere else.

2. I'd be extremely wary of a loan salesman who makes you feel committed once he gives you a GFE. I made the mistake of talking to someone just like that at a big mortgage company (Quicken Loans), and he was extremely rude after I chose not to go with him, even though he'd never actually sent me a GFE. He personally insulted me for going with someone else, since he'd given me such "personal service," "confidence," etc. Load of bull, in my opinion. Avoid Quicken like the plague. They even make you pay $500 upfront to "start doing business." With the sheer number of mortgage companies out there, you can afford to avoid them.

3. When shopping, start with what's closest to you. In my case, now that I'm a teacher the best rates can be found at an Educational Credit Union. If you're involved in a profession or hobby that is in any way related to the banking industry, use that to your advantage. Check with your bank and see what their rates are. After all that, check with some online mortgage brokers and see what they can dig up for you. Compare GFEs side by side and check out every item, including the total $$ paid over the loan. Small numbers in a mortgage can end up being big numbers when all is said and done.

4. Unfortunately, you can't expect to take off a percentage from a home's price. Try to find out if there are any other offers on the house. When we bought, our first offer was the listing price, and ended up offering higher since we had seller pay closing costs. Your realtor will be the best advice-giver for your first offer.

As others have said, be aware of the total monthly payment rather than just the mortgage portion. The mortgage might only be 900/month, but you'll end up paying closer to 1400 or 1500/month with everything included. Homeowner's Insurance, HOA dues, and taxes can eat up your money.

Best of luck! It's a daunting process, but if you do your due diligence and make sure you understand every step of the process, you'll feel confident in your decision at the end.

[BigCat]

Originally Posted by mikeyj23

2. I'd be extremely wary of a loan salesman who makes you feel committed once he gives you a GFE. I made the mistake of talking to someone just like that at a big mortgage company (Quicken Loans), and he was extremely rude after I chose not to go with him, even though he'd never actually sent me a GFE. He personally insulted me for going with someone else, since he'd given me such "personal service," "confidence," etc. Load of bull, in my opinion. Avoid Quicken like the plague. They even make you pay $500 upfront to "start doing business." With the sheer number of mortgage companies out there, you can afford to avoid them.

While the guy wasn't rude to me, Quicken tried to pull the same stuff with me. They wanted a $500 "deposit" before they would give me a GFE. They insisted it would go to closing costs. I asked them what happened if we paid it and then decided to go with another lender. He said it wouldn't be refunded. I laughed and hung up. Called a few other lenders and they were all willing to provide a GFE within minutes at no cost.

If you get a good real estate agent, he or she can probably hook you up with recommendations to lenders, etc. That is what we did (my wife and I just bought 6 months ago). The realtor gave us some names - I called around and told them I was shopping for the best rate and best costs. They gave me their offers and we picked the best one. We ended up with a nice rate.

I think you're around my age - you may not have 20% to put down. You can get an FHA loan where you only have to put down 3.5%. More is better, but keep in mind that closing costs are going to be higher than you think (10-15k depending on whether you pay points to bring your interest rate down) and you will need cash on hand for moving, doing any initial work to the house before you move in, etc. Its a far more expensive process than I originally anticipated when I was doing the financial planning. There is also a lot less variety out there with FHA loans - they are government insured, so the FHA loan offered by Bank of America is not going to differ dramatically from that issued by Chase, for example.

As for what you should expect to pay, that is going to depend a lot on the area and what type of property you are buying. You can choose between buying a foreclosure, a short sale or from a non-distressed buyer. Foreclosures tend to be priced around where the bank is willing to accept offers and there is less wiggle room on the price. If its a good deal, it is going to attract multiple buyers. I actually saw a few foreclosed homes going for more than they were listed after a few potential buyers put in bids. A short sale has similarities with a foreclosure in that the bank ultimately has to decide what to accept. The trouble is, you don't know if the asking price, which is set by the homeowner, is something the bank would accept. You would have to look into that. Also, a short sale is a misnomer - they take months from initial offer to the closing table. We bought a short sale and it took 4 months to close. The banks move slowly in deciding what to accept or reject. We got a great deal so it was worth the wait, but you have to be prepared to wait.

Good luck - it can be a fun process. We looked at probably 40 houses before finding "the one". And it was true what they say - you know when you walk in that it's "the one". I didn't buy it, but that's what happened to us.

[PeteSB75]

Do yourself a favor and take any advice from your real estate broker with a healthy grain of salt. They are there to advise you, but they may not always have your best interest, as a buyer, in mind. Just keep in mind that their commission is a percentage of the sale price, so listen to their recommendations, but don't feel obligated to follow them. The better agents will realize that doing their best representing a buyer means the buyer will come back when it is time to sell, but not all will follow that logic. If you can find a fee-based agent that you pay directly instead of paying through sale commission, I would think it well worth your money.

[srduggins]

When you do find a house, hire your own inspector. Don't use one provided by the agent or lender.

[s15driftking]

Got preapproved for more than we wanted to spend so we are good there. found a couple nice places so we drove past them on our own (the wife and I) before we turned them over to our realtor. We are going to see about 16 houses this coming weekend, 8 Saturday and 8 Sunday.

Question, how do i find the deals (ie - REO's & homes that have been on the market for a while). Our goal is to buy a nice starter home and make some money on it in 7-10 years. What should i look for? how old should i buy? how old shouldnt i buy? etc?

[Rabidsquirrel]

A good way to base your offer is to look at the DOM (Days on Market). The house we just bought was on the market for 141 days. Our offer was 4% less than the list price, with an additional $8000 back for settlement costs.

[AlohaStyle]

There are a lot of good replies here so I won't say what others have said, but it's impossible for us to tell you how much to offer on a house. Every situation is different. You need to look at prior sales history for every house you are interested in so you know in advance where the sellers are coming from. If the sellers just put the house on the market for $200k and you know they paid $150k for it 7 years ago, you know they have wiggle room in the negotiation. If the house has been on the market for 8 months and they have lowered the price down to $200k from $275k and they paid $260k for it 4 years ago, there probably isn't much wiggle room left. They are already selling near the basement.

So there's no right or wrong answer here, it just depends.

Good luck brother, it's an exciting time! My wife and I unfortunately bought our first house shortly before the market collapsed. So we have a lot to figure out in the next couple of years...

[BigCat]

Perhaps I'm just being cranky, but it seems to me that it would be appropriate to acknowledge those who gave you thoughtful responses to your first post with a "thanks" or a "piss off" before moving on to further questions. Flat out ignoring them seems rude to me. Just my

[s15driftking]

Originally Posted by BigCat

Perhaps I'm just being cranky, but it seems to me that it would be appropriate to acknowledge those who gave you thoughtful responses to your first post with a "thanks" or a "piss off" before moving on to further questions. Flat out ignoring them seems rude to me. Just my

I absolutely appreciate all the advice/stories/situations/scenarios that were previously given in the thread. I made note to thank eveyrone in advance in the initial post.

I wil ladmit that my lack of constant thank-you's must be a mere oversight of this entire situation. Its starting to become stressfull as we just had our first ful lday of househunting today... And the last 2 weeks have bee ncrazy with nixxing and approving houses our realtor was sending us.

I apologize if anyone that posted here feels angry/offended that I did not directly thank them for their words of wisdom/advice. I have a much greater grasp on what to look for in terms of quality and "deal-ability" and I know that I'm going to find a great home. thanks to everyone... and yes bigcat, you must be cranky!!

[XTRazzer]

A couple of things come to mind, same as I told my brother who is looking right now in Akron, OH...

Some day you have to sell the place. Be it five years, ten years, or more. Location helps here as does a good school system. You buy a home at a point where it needs windows, roof, siding, kitchens, baths, and so forth it will take you longer to get the costs back and profit when selling. Also consider how good you are at doing home repairs yourself and how much time you want to devote to it.

Townhouses and Condos are not the best investment in Ohio as they usually cost around the same as a house. In other markets townhouses and condos offer a lot of space at a good price plus the HOA or equivalent helps with maintenance. Each has it's pros and cons but typically a townhouse or condo sits on the market longer.

Get at least two home inspections. Don't sign a waiver releasing the inspector from liability. The other option is to have one inspector and then get a friend or family member that knows houses to have a look at it.