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First time home buying
Jasconius
sword criminalmad onlineRegistered User regular
sword criminalmad onlineRegistered User regular
I may have come to the point where I am ready to buy a house. I don't know anything about this process and would appreciate some up to date links about information (especially in the post-bubble market).
I am 24, and have never owned a house, or even tried to look for and buy one. I understand that this may yield me marvelous and fabulous prizes.
But I don't know what they are...
Right now I can handle between 1,000 and 1,500 in monthly housing costs (which would have to include things like insurance, and other maintenancy type stuff)
In the down payment department, I don't know what I am looking at. I've seen places online that say "at least 10%", but about a year ago I talked to a realtor who said that for first time buyers it's something ridiculously low like less than 3,000 dollars
I can probably go up to 5-7k for a down payment if someone held a gun to my head.
My credit is... not bad, but it's not overwhelming either. I have no bad marks against my credit (one medical debt collection which has been resolved now for several months), I have low credit card availability but high utilization ( > 50%). Basically my score would probably be in the mid 600's on a sun-shiny day.
I understand that a realtor will be able to walk me through most of this stuff... but a realtors primary responsibility is to make me buy a house, so I would like to get some other non-salesman perspectives on this.
It seems that financially, I can afford the actual ownership of a house on a monthly basis... its the actual down payment/acquisition part that I have doubts on.
In this completely decimated florida market there are frankly some amazing houses on the market for low prices, so it seems like a good time to buy...
Like I said, any anecdotal first-time-buyer stuff, and links to good information would be greatly appreciated.
I am 24, and have never owned a house, or even tried to look for and buy one. I understand that this may yield me marvelous and fabulous prizes.
But I don't know what they are...
Right now I can handle between 1,000 and 1,500 in monthly housing costs (which would have to include things like insurance, and other maintenancy type stuff)
In the down payment department, I don't know what I am looking at. I've seen places online that say "at least 10%", but about a year ago I talked to a realtor who said that for first time buyers it's something ridiculously low like less than 3,000 dollars
I can probably go up to 5-7k for a down payment if someone held a gun to my head.
My credit is... not bad, but it's not overwhelming either. I have no bad marks against my credit (one medical debt collection which has been resolved now for several months), I have low credit card availability but high utilization ( > 50%). Basically my score would probably be in the mid 600's on a sun-shiny day.
I understand that a realtor will be able to walk me through most of this stuff... but a realtors primary responsibility is to make me buy a house, so I would like to get some other non-salesman perspectives on this.
It seems that financially, I can afford the actual ownership of a house on a monthly basis... its the actual down payment/acquisition part that I have doubts on.
In this completely decimated florida market there are frankly some amazing houses on the market for low prices, so it seems like a good time to buy...
Like I said, any anecdotal first-time-buyer stuff, and links to good information would be greatly appreciated.
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Does that $1-1.5k need to include all your monthly bills like utilities, or just insurance and mortgage? If you go with any kind of house that is wrapped up in an HOA, you'll need to take those fees into account as well, along with seemingly random assessments, and you'll want to still be able to have decent savings in case anything breaks.
We bought a house a year and a half ago, and our realtor took care of pretty much everything. Your realtor is supposed to be on your side; that's why you sign on with one, and if you're feeling a ton of pressure yours sucks and you should probably find a new one.
PS. It's the time to buy pretty much only if you see the exact house you want to spend your life in at a cost you can easily afford. People are STILL saying things like "IT'S THE TIME TO BUY", and perhaps for some that's the case, but not for everyone and don't feel pressured. The era of the "starter home" is over, and there's a very good chance you'll have a difficult time flipping your house for what you paid for it if you need to. Will the purchase leave you with some savings? If you lost your job tomorrow would you have a few months's worth of money for bills in your account to hold you while you frantically scramble for a new one?
1-1.5k is intended specifically for mortgage and house related upkeep like insurance, lawncare, pest control, and I suppose HOA. Utilities would be totally separate. For reference, I already pay 1050 in rent
re: savings, I am emerging from a period of being college poor and am within a couple of months of beginning to develop a healthy savings. By the time I actually would go to buy a house, my job would be guaranteed for a period of time that would allow me to put money in the bank (at least several hundred dollars per month comfortably, maybe more if the mortgage is low). I also fetch enough so that if I needed to move in an emergency I could handle the mortgage long enough to find a renter, even at a loss... I feel comfortable about the whole "buying this house will not incontrovertibly bankrupt me, should the worst happen" thing, which is why I am even considering it.
The "do I want to live here for X amount of time" is a question I still have to answer, but I want to know what else I am up against in the mean time.
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When you talk to a realtor, find out if sellers are still paying the closing costs or not. There are also appraisal fees you (or someone) will need to pay and I think some or most houses require earnest money. It's money that goes towards the house that you lose if you back out during a certain period of time. I think when I bought my house, I got the sellers to pay both the appraisal fees and closing costs and they also came down on the price after all was said and done. This was back in late 2008 though.
Some general, anectdotal advice I've heard as well. If you plan on buying this property as a place to live but also as some form of investment (because you plan on selling it), I've been told that houses are the easiest to sell while townhouses can be the most difficult because there's so many of them these days.
One final note, find out what kind of first time homebuyer credits exist for tax purposes. This may give you the potential to increase the amount on your down payment.
All in all, I'd suggest playing it safe. If you can't put down at least 10% on the house, I wouldn't risk it if I were you unless you have some form of plan in the event that you lose your job or your pay gets cut.
Mid 600s with fuckall to put down? Don't do it dude. You are not yet ready.
Don't worry, those aren't going anywhere. FL was exceptionally bubbly. Shit won't recover for years.
Disagree. Condo's and Co-ops are awesome. Lower maintainence and tax for a higher level quality of living (pool, lawncare, facilities)? Sign me the fuck up.
The tradeoff to this is that any condo that will approve a sale to you in your current situation will approve sales to other people in your situation, which increases the probablility that one or more people default raising your maintainence/taxes.
Thats what you could get a loan for - back before they started going batshit.
The formula worked then...and its a good place to start.
Qualifying for a loan....ok now thats a bitch. Banks have no taste for risk right now.....I mean none. Interest rates are high because they think EVERYONE will default on their loans. Unless you have stellar credit...don't bet on a warm welcome at any lending institution.
Downpayment - In previous years you would buy mortgage insurance if you had less than 20% down on your home. The insurance was supposed to protect the bank in case of default...but due to the mathmancers attempts at reselling and repackaging those risky insurance policys on the open market - a lot of lending institutions don't trust the mortgage insurance anymore. The net effect, is that you have to have 20% to put down.
Thats just the money side of things... Are you in a position to deal with any of this stuff? If yes, and you understand, we can talk about the things you look for in a home, what builds value, what takes away from value, etc.
Broken things to look out for, extras to ask for in the offer, etc. There's a ton of stuff . . . but in the end, if you cant afford to pay..then its not worth talkin about.
I was just going to ask, why she/he suggested to not get a condo. I'm likely going to start looking at homes next year and a condo sounded up my alley. Whats wrong with condo's?
The general consensus is that condos are the first to depreciate and last to appreciate. I have a condo now, and while I can say we aren't underwater, the townhouse has depreciated a LOT since we bought it in the fall of 2008. So much so that we couldn't refinance, even though the place has been improved since we moved in, even though we have stellar credit and 20% equity that we poured into the place. It's lost like $40K and that's in a GOOD neighborhood. YMMV though.
Its good that you are looking for some information, info is your friend. This is likely to be the single biggest purchase of your life, so it would behoove you to be as informed as possible.
Watch some HGTV, there are lots of good shows on there about first time home buying which can give you some idea's about what to ask. Be careful about watching anything with Mike Holmes. He is fantastic, and his show is great fun. But it will probably freak you out.
If you are serious about this, go to the bank and try to get pre-approved for a loan. You may find that getting a loan is harder then you think.
Your state may have some first time home buyer programs that could help you get into a house for a lower down payment. You will have to pay PMI, some people think PMI is the devil. Certainly, in an ideal world you would not want to pay it. But its not the end of the world. Rates are very low right now, and if you are all set to be a home owner in all other respects, and the only thing you are missing is a 20% down payment, it may be worth it. Just understand what it represents.
Get some books on first time home buying and learn the terms, and the steps.
The long and short of it all is this. Buying a home is a long and painful process. It is costly, from the down payment to paying for inspections and loan fees and closing costs and everything else. That is just to get you into a house.
Owning a home is no way to save money. Things break and or need regular maintaining. As the home owner that's now your problem. So beyond your mortgage, taxes, PMI, utilities, food, and any other payments you have for a car, or student loans, or credit card payments. Do you have enough to pay a plumber when your pipes burst, or get a new water heater?
All this without becoming a hermit that now hates his house and his life because he bought a house he could barely afford?
If you are cool with all the above, and still want to go forward, then great! I do encourage home ownership. its a great feeling to have your own house. Just go in with your eyes open.
While you may end up with an agent that's honest and looking out for you, you should still put in your own due diligence and do not assume the information and choices being presented to you by your agent are necessarily in your best interest.
Something like that, at least that's what I was looking into a year or so ago.
For low down payment (less than 20%), you're going to want to look at FHA loan. Used to be you could get away with 3% down with them, and you'd have to pay mortgage insurance. 31-34% of your monthly income would be considered the most your could afford for PITI (principal + interest + taxes + insurance). This info is pre-meltdown and not sure if that plus the Fannie Mae blowup has changed their lending standards. Also see if there are state, county, and city programs for down payment assistance, though these are unlikely to be that available in the current economic environment.
So factor in another 5-10k to hold in reserve, as well as think about whether you want to move any time soon. You're quite young, so if you think you want to travel or move at all, I'd recommend holding off.
Simply put, your down payment is too small. 5% is the absolute minimum we will lend, and that's with perfect credit and a stellar job, plus 40% or less debt servicing (i.e. all bills together + debt < 40% of gross income). 10% is the usual minimum for average joes. I don't know what the prices are like there, but I'm guessing a house in the 'burbs or a decent condo is 200-250, so you're looking at 20-25 thousand, at a minimum. You need to keep saving, then start looking.
Giving out mortgages to people with tiny down payments and low cash flow is what fucked up North America's home equity market in the first place, and any decent lender won't give you a loan because you will probably hurt yourself. You never know when you could lose your job, get injured, or just have the place burn down; you need a good chunk of equity to absorb those emergency costs, should they arise.
I'm not saying you are a bad person, it's the lender's responsibility to make sure the buyer can handle the debt. Anyone who agrees to give you mortgage with the finances you describes is either stupid or a cheat. Don't trust them. Keep saving, you can always do it later.
It's all about down payment for me. I can maintain it easily once I have it. I'm aware of the phenomenon "house poor".
The only real reason that I don't have a decent amount of money in savings is that I've spent a good chunk of the last calendar year playing off ridiculous non-recurring debts what would make most people cry. Those bills are all done now and I can actually do other things.
The only question is, could I buy one in the next two to three months, or do I have to wait another half year lease or something until I can really go all the way.
If I started looking at houses without any intent to buy in the next 30 days, is that breaking some kind of hidden code?
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Max they're going is 30% now from what I've heard. Depending on the bank or credit union, if the landlord is willing to provide a reference and he's already paying $1000 a month they will sometimes use that as a basis. That's old school though.
Remember, renting is higher than owning for a reason, you're paying "maintenance" insurance on your dwelling to the landlord. Are you looking to get a larger space or keep it the same size Jasc? That's important because if it's the same size, your mortgage payment should be less than your rent.
annual x3? Really? Talk about house poor. I'm 28 and the wife and I bought our first home in March of last year (just in time to catch the 8,000 first time home buyer credit) and we only bought 1.8x our annual.
We make good money for our location (read: it's cheap to live here and we make 6 figures). With over 40k in liquid accounts plus our retirement accounts (only a couple years old), plus regular savings acc, and checking account, and we STILL only did 1.8x our annual pay. My credit is slightly higher than my wifes and my high of the big 3 was 780something. I have student loans still and we had 1 car payment no carrying credit card balances (we keep several cards open and active, but pay off each month) and we got a great rate at the time (4%+ Fixed) and didn't have to put much of anything down. Rates appear to be a bit better since but we also got the 8k back from our taxes which was NICE.
Sign with a realtor, but be cautious of what are THEIR personal listings, and don't be steered into buying one of their listings. They get the full commission if you buy their listing from them and then they are playing for both the seller and buyer. If you get someone else's listing then they typically split the commission between the two agents, plus they aren't directly working for the seller TOO which is good. Granted they still like money but if they're smart they will treat you great and try to get the best deal for you even if it means taking more of their time and less commission from a cheaper sale. The long game is what's important and if you like them you're likely so spread word of mouth to friends and family when they need to buy and/or sell. Plus whenever you go to sell your house down the line (be it 3 years or 20) and if they are still around you're likely to use them again.
EDIT: Try for the seller paying your closing costs, plus make sure they get a termite inspection (paid by them) and then they give you the proof, this should come with a contract/coverage for a year from the pest place.
Get a good inspector (ask around don't always automatically go with whomever the realtor recommends).
Be there w/ the inspector when he walks through and speak up if you notice anything or have questions.
Pay close attention to the roof, water heater, and the Heat/AC (in Florida, mainly the AC ).
Check out the attic yourself, open and close the garage door to check the automatic opener. Look for cracks around the tops of walls/windows/doors. Pay attention to the way doors close. Do they close/sit normally or are they hard to open/close or hang weird (settling issues).
Find out if it's a slab or pier&beam (crawl space). I prefer/recommend slab. Look up the difference for yourself.
Ask the inspector/agent about the age of the house, find out the type of shingles used on the roof. Check the foundation on the outside perimeter of the house for anything out of place.
There is more that is specific to the type of house and/or that I'm forgetting but that's a start.
ASK QUESTIONS ASK QUESTIONS ASK QUESTIONS
I have a 2b/1ba and am looking for the same or an extra bathroom.
and re: the last few posts, the houses I am eyeing are approximately 2.1-2.5x my annual income.
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For an average family, 3x's their income is the average house. For instance, $150,000 house is what you'd expect from a small family of 3-4. The average income there is probably $50,000-$60,000. A $3,000,000 house is probably silly to buy for a family of two.
Based on what you've told us about what you have available for a down payment now and your credit history (you can also look at creditkarma.com to get a decent estimate of your current score), I'd have to say that you probably can't complete a home purchase within the next 3 months.
I'd recommend doing some research (I read that book and it helped me good bit on what to expect, etc) and saving up for a larger down payment. Every dollar you put down at the start can save you like $3-4 over the life of the loan.
Dual Agency (which is what you described) is illegal in Florida, so the OP should definitely get a buyer's agent.
This. Every single person in the housing industry that I know (personally) says not to buy a fucking condo. You will never sell it, and if by some miracle you do in any kind of timely fashion it's probably because you lost at least 10% on the sale. If you want to stay there it doesn't really matter how much you lose, but I'm guessing you probably won't find one that meets the criteria of "something you would want to live in forever" for what you have to put into it now. This goes for townhouses as well, but to a lesser degree... depending on your area you may actually be able to sell a townhouse for what you paid for it.
Hire your own realtor to take you around (which it sounds like you're doing); absolutely do not work through the seller's realtor alone. Your realtor is legally obligated to have YOUR best interests in mind, while the seller's realtor is obviously looking out for the seller.
I will never buy a condo. Even if I got a diamond the size of a walnut and any painting from the louvre as a bonus.
The entire reason I am interested in a house (either purchase or rental if necessary) is that I am tired of being able to tap out morse code on my bedroom wall and have the neighbor respond.
I want something with large pockets of air and fence between me and my neighbors bath tub.
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Beyond the down Payment there are a lot of things that cost money. When my wife and I bought our first home a couple years back, I could not believe all the things we had to cough up at the beginning outside of that down payment.
Closing costs, Inspection, a years worth of home owners insurance, prepay the taxes.
That's all before you move into your new home and decide you now need a ton of new stuff. Little things for the yard, and big things to decorate with.
we blew through over 10k inside of a few short months after moving in on all the things that came up, and the rest of the first year was just more expenses. Now into year 3, things have slowed down considerably. But holy crap! Owning a home is EXPENSIVE
i bought my house, which is like 3.5x my annual income back in 08 with no money down. I'm sitting at 5% 30 yr mortgage. i am super underwater at the moment, but unless i sell the place it really doesn't mean anything except for my tax assessment. To be honest i REALLY regret buying it. i think it's mostly some personal stuff: the seller was a scam artist, he did a shit job on rehabbing/concealed a bunch of stuff which i am still in the process of suing him for, my roommate and GF hated each other, my roommate hated my dog, etc etc. currently i live in my parents' second house for close to free, and rent out my house.
anyways, it's tough to find a place you can afford on your own. especially that soon out of college. Have you tried looking around for single family homes to rent? that may sate your desire to not live on the other side of a paper thin wall from your neighbor, without you having to sign your life away. Buying a house that soon is not just the next stage in life, it should be a conscious decision, like: I love this house, i can afford it, i'm buying it.
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I think this must vary by market quite a bit, because every Condo I've been watching here in Winnipeg is on the market for less than a month and goes for 5-10% above list.
I have traditionally been an edge case for government programs in that I am single without kids and have a job.
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I'm not really commenting on whether it's a good idea for you in your situation to buy in the location you're seeking, cause there's a whole shitload on info that goes into that determination.
Im considering purchasing a single family home in Florida for investment purposes since I think there are a lot of value propositions in certain areas*, assuming a 7+ year time horizon.
Edit: I'm looking at broward county, not Tampa.
Condos are great if its a great building, its just very easy for a building to fall into hell. You need a nice building, with a good condo board, and owners, lots and lots of owners. Renters sink condos faster than anything.
Especially with how much you might be looking to take out a loan for, be really really aware of predatory lending. It just might not be worth it to buy.
etc.
First of all, I bought a condo because I'm living alone and know I'll be in the area for awhile. I snuck in with the 8k homebuyers credit, which was a big help. I got my condo for around 165k before said credit, which is dirt cheap in this area, because it was a short sale. Other condos in this complex recently sold for around 200k so I'm pretty happy with it, although it needed a lot in the way of paint and new appliances, so when all is said and done that credit will be gone and I'll probably be into this place for the full 165k.
Financially, I had a ton of money down but no credit history whatsoever. Paid cash for my car, rented previously, had a college scholarship, etc. The problem was that nobody cared how much money you brought to the table or how good your job was, with no credit rating people are going to piss all over your shoes. There's also such a thing as having too much money down (especially considering this won't be your forever home) in your house, as you want to respect future market fluctuations.
You've also really got to set a big buffer, as has been stated, for costs after putting money down. Closing costs would've put me back 6k, had I not had assistance from the seller's bank. Then you've got to consider things that you want to replace, things that you need to replace, and things that will conveniently break the day after you sign the paperwork. As I said, all of the work on this admittedly project-status condo put me back about 10k, but that included a new water heater, granite countertops, fans, paint, furniture, etc.
It's a monumental commitment, man. I love that I can get by on my $1200/month payments for mortgage/condo fees, but you've got to consider that you're supposed to be there for awhile. Don't feel rushed or pressured just because of where you are in life or the climate of the market. Remember, even when the economy's great and interest rates are up, people can still afford houses.
The fat check I brought with me to closing was 6 grand. That's in addition to the 1K in earnest money I put down and 100 dollars in option money I paid. So over the course of the month or so before closing, that was 7.1K immediately spent. Then, once you get the house, there are all manner of things that cost money (lawn mowers, weed whackers, changing the locks, new furniture, etc). It can add up pretty quick. Heating / AC (<3 texas heat) also is going to be more expensive. You also fix anything that breaks.
I would also recommend buying a house over a condo / townhome. I, too, was tired of listening to my annoying neighbors at my apartment, and I honesty never like living near Section 8 housing to begin with considering they kept breaking into people's cars (at least I was lucky). I used a realtor to buy a house, one that was recommended by other people. You just need to watch out, because the realtor is interested in getting you to buy a house more expensive than you may want, because that means they get a bigger paycheck as a percentage of the house price.
The market is good right now; if you have the means I highly recommend it. Now that Im about a month out from my purchase, I don't regret it one bit. Don't settle for a house; my sister spent 8 months searching for her house, and you might spend longer. You will know, when you get in the house, whether it is the right one for you.
A few years ago I had exactly such an arrangement where a significant portion of rent paid toward the house could be rolled up into a down payment if I wanted to buy the house.
I don't know how rare these deals are (though I would suspect they are preferable for people taking a blood bath in property investment).
My highest priority is getting out of an apartment, *buying* a house is a means, I'd just as soon rent one if the cost was the same. If I can find an owner who will give me the buying option... I would jump on that.
Is there an official term for that? Or a special way to search for such a home?
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