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Buying a New House!!! Or am I?
RadicalTurnip
Registered User regular
Registered User regular
The wife and I decided we were likely enough to stay around the area long enough that we want to look at getting a house. We may want to move in around five years...but we may want to stay here forever, we aren't sure. Of course, a house that would support a future family would be awesome, but it's not necessary. But that's mostly beside the point. Our Realtor is a friend of hers (that is an actual Realtor) that she thinks is doing smashingly, and I think is doing alright...but not great. So we've had a few questions that he's mostly given answers to but he doesn't seem very sure of them or he sorta' evades the question. We're mostly looking ad HUD homes, Short-sales, and repossessions because they're apparently the way to get a good deal. This makes sense to me, but he still hasn't been able to get me to understand what the *actual* difference is between these three. Our idea is to look at a bunch of houses, find ones that we like that want more than we're willing to spend, and then low-ball the crap out of a lot of them and see who bites...seems like a douche move; but if I can get a nicer house for $40k cheaper, it sounds worth it, so I don't really feel bad, they don't have to accept.
On top of that, I have a friend whose wife is a bank manager that tells me that we should really be looking at a Credit Union rather than a Bank for our loan because "they can offer a lower price because there aren't so many regulations they have to follow." Which...sounds good and bad. We already got a loan quote from a guy our Realtor has recommended to us, but I'm working a semi-dead beat job, and am $50k in debt from student loans, and she is working part-time for a crappy job, and also working for herself doing photography and selling a pyramid-scheme-esque product that she actually really likes, and apparently sells pretty well; and also doing temp work (like directing children's plays at the local Children's Theater and stuff like that). Anyway, since her income is fluctuating, he said he could really only look at my income...and our "debt ratio" was too high to give us a loan. Our credit scores are good (mid-700s for both of us), and we went to annualcreditreport.com or whatever looking for any problems, but it seemed about right.
The weird thing is that my wife's father had invested a fair amount of money for her when she was a baby, and it is now *our* money, but we don't really want to use it for anything other than supplementing a down payment...and mostly retiring sometime in the future. Anyway, this money was recently officially transferred from her mother being the primary to my wife being the primary so it's all sitting in a liquid account until we figure out how much of a down payment we want to make and where/if/how we want to invest it. There amount of money there is equivalent to the amount of money total we are looking at to spend on a house...so it felt strange to me to be rejected on a loan...
Anyway, it's a confusing situation and we're both new at this...and it's a situation where the wrong move could literally cost of thousands of tens-of-thousands of dollars, so I figured it would be good to get as much advice and understanding as possible. For Laws and regulations-sake, we live in Kansas, and we're first-time homebuyers. So, I guess I'll do a bullet-form question to clarify the actual questions...but any extra advice not covered is very welcome.
*I know a few years ago there used to be a tax-credit for first-time home-buyers. Is there anything like that going on that I need to know about?
*Is a Credit Union really going to give me a better rate on a loan?
*Is there anything I need to be really worried about when I go to a credit union for a loan? "Regulations" that would make me protected that they may not have to follow?
*What's the difference between repossessions, HUD homes, and Short Sale homes?
*Would I be more likely to get a loan from the same company that is handling our large sum of money, since they would somehow..."know" that we have all this money?
*Does it make sense to consolidate my student loans into our mortgage if/when we move, since theoretically our house will be worth a lot more than we pay for it?
*Would consolidating my student loans from the 11ish loans across three companies into one loan help our credit enough to make a difference? My student loans are our "oldest" form of credit.
*If we can manage to not "commit" to a favorite house, is making a lot of lowball offers the best way to go about getting a really nice home? Are there other good strategies to consider?
*Any other advice or problems that I may not foresee?
On top of that, I have a friend whose wife is a bank manager that tells me that we should really be looking at a Credit Union rather than a Bank for our loan because "they can offer a lower price because there aren't so many regulations they have to follow." Which...sounds good and bad. We already got a loan quote from a guy our Realtor has recommended to us, but I'm working a semi-dead beat job, and am $50k in debt from student loans, and she is working part-time for a crappy job, and also working for herself doing photography and selling a pyramid-scheme-esque product that she actually really likes, and apparently sells pretty well; and also doing temp work (like directing children's plays at the local Children's Theater and stuff like that). Anyway, since her income is fluctuating, he said he could really only look at my income...and our "debt ratio" was too high to give us a loan. Our credit scores are good (mid-700s for both of us), and we went to annualcreditreport.com or whatever looking for any problems, but it seemed about right.
The weird thing is that my wife's father had invested a fair amount of money for her when she was a baby, and it is now *our* money, but we don't really want to use it for anything other than supplementing a down payment...and mostly retiring sometime in the future. Anyway, this money was recently officially transferred from her mother being the primary to my wife being the primary so it's all sitting in a liquid account until we figure out how much of a down payment we want to make and where/if/how we want to invest it. There amount of money there is equivalent to the amount of money total we are looking at to spend on a house...so it felt strange to me to be rejected on a loan...
Anyway, it's a confusing situation and we're both new at this...and it's a situation where the wrong move could literally cost of thousands of tens-of-thousands of dollars, so I figured it would be good to get as much advice and understanding as possible. For Laws and regulations-sake, we live in Kansas, and we're first-time homebuyers. So, I guess I'll do a bullet-form question to clarify the actual questions...but any extra advice not covered is very welcome.
*I know a few years ago there used to be a tax-credit for first-time home-buyers. Is there anything like that going on that I need to know about?
*Is a Credit Union really going to give me a better rate on a loan?
*Is there anything I need to be really worried about when I go to a credit union for a loan? "Regulations" that would make me protected that they may not have to follow?
*What's the difference between repossessions, HUD homes, and Short Sale homes?
*Would I be more likely to get a loan from the same company that is handling our large sum of money, since they would somehow..."know" that we have all this money?
*Does it make sense to consolidate my student loans into our mortgage if/when we move, since theoretically our house will be worth a lot more than we pay for it?
*Would consolidating my student loans from the 11ish loans across three companies into one loan help our credit enough to make a difference? My student loans are our "oldest" form of credit.
*If we can manage to not "commit" to a favorite house, is making a lot of lowball offers the best way to go about getting a really nice home? Are there other good strategies to consider?
*Any other advice or problems that I may not foresee?
RadicalTurnip on
0
Posts
Answers (that I can) are in bold.
I'm not being rude, but this book was helpful in answering a lot of my questions about mortgages.
A credit union will probably give you a better rate, but shop around extensively. And your mortgage has a good chance of being sold, but even if it isnt there's unlikely any added risk when working with a CU. The note must be honored even if the servicer changes.
Short sales are where he owner hasn't been evicted and is trying to get out. foreclosures are where the bank has evicted the tenants and seized the property (much higher chance the evicted tenant has stolen from or damaged the property either actively or through negligence). Both scenarios have lower incidence of successful sales since there's the selling bank involved. No idea about HUD, but the fact your realtor can't tell you this is concerning, unless he's just trying to steer you away from a difficult first homebuying experience.
Not really. The fact you might have $150K in the bank is not going to affect their risk analysis of your borrowing $120K. If you can buy it outright, why are you asking me to loan you a shitload of money?
Generally you don't want to fuck with your credit profile too much (besides paying down debt) in the run up to securing a mortgage.
A good tactic is to put an expiration on the offer, forces them to act faster. Not sure how many houses you expect to put offers on, but factor in several hundred bucks each on an inspection, and dont have 2 offers on the table at once.
It's all about location and demographics. If youre making offers on houses in neighborhoods with a lot of short sales and foreclosures, then that is likely not good for future valuations until that inventory clears or demographics shift to make that neighborhood desirable. If you buy into a shitty neighborhood you won't make much if you sell whole it's still a shitty neighborhood.
Short Sales, Repos, and the like have low price tags often to hide liens and other encumbrances on a property. You may buy a home for $40k and end up owing much more by holding those liens when you take possession of the property. Be sure to track down all the details of the property before purchasing. In addition, many are "stripped" by former owners and less than scrupulous lenders for supplies, copper and other materials for a quick buck so make sure you have a solid, reputable home inspection before purchasing.
Your job situation is the exact opposite of where you should be at when you want to buy a house. Your wife lacks stable long term employment and you lack satisfaction at your current position, neither are good signs for the long term financial stability required to purchase and keep a home, and you may be better off in a rental until your work situation dies down. Similarly, the amount of debt you have from your student loans seems a much more pressing concern than the purchasing of a house, and you will may run into trouble securing a loan while that is looming over your head.
Have you considered retiring your student debt with this windfall? It might not be the best path depending on what other lines of credit you have, but being free of a 50k anchor would allow you to be much more flexible long term.
1- I don't think that tax credit is still around, but there's always the First time home buyer bonuses you need to look into.
2- I've heard it's easier to get a loan through a CU, but I don't know if the rates are necessarily better, It just depends. Also you'd need to be a member of one for a while I'd assume, instead of just walking up to one and asking for a loan. Your chances would probably be better if they had a history with you. (that's been the case with everyone I know in a CU, including myself)
3- There's nothing shady about a credit union, stop worrying about that. It's not a title pawn
4- No idea on this one other than the fact that you're dealing with the bank who is dealing with both the owner and probably the court, so you might be waiting (x) months to actually move into that dream home after you've bought it.
5- I don't know if you'd be more likely to get a loan from a bank because it's "your bank" but you should definitely ask them if you haven't.
6- No bank is going to give you an extra 50K on your mortgage to pay off your student loans. This will never happen. Ever. Also in this economy no bank would give you a second mortgage to pay off your 50K student loans.
7- You need to take your student loans out of this equation, like entirely. That needs to be a separate conversation with a separate financial consultant. There's a student loan thread here on the forums that's a good resource for that.
Short Sales are likely to be in much better shape than Foreclosures (but not always). it's also tough to lowball on short sales, b/c the bank will be a HUGE pain in the ass at the price they advertise. i've heard stories about banks putting the kibosh on a deal at the very last minute.
No more tax credit program that i'm aware of either. that went on for like 2 years or so, but it's long over now. You get a pretty sizeable tax return your first year though. you can write off all the closing costs, as well as your interest. I could definitely see you getting turned down for a loan if both of you have relatively low income jobs, however i think credit is loosening up a bit, which could be a terrible thing...
I think my dad picked up a HUD house for less than $5,000 because it was in such bad shape. Generally you only want a HUD home if you're willing to dump oodles of money into it and repair the shit out of it. Replacing windows, replacing shingles, replacing insulation, drywall, flooring, carpets, doors, etc.
Dude. Pay off your student loans with that money, then put at least 20% down on the house so you're not paying PMI (I believe that's still the standard)
Or just buy a damn house. If you have the money, in hand, you're going to be better off anyway and save on the actual cost of a home vs going through a bank with a 30 year mortgage....
Also, having money in the bank doesn't mean the bank believes it's your money. Otherwise I could get all my friends to put 20K in my account, get a million dollar loan for a business, then fly to Mexico and disappear right?
Just an example of how little having money in your account matters. I had a friend who needed to borrow 2K for a car. They were asking 10K, he had 8K and he also had a four thousand dollar overdraft protection account set up for him. So even if he missed one payment, the bank could just take the loan out of the overdraft account and then charge him out the ass in penalties, and they still wouldn't give him the loan. For that matter, the bank could take his 10K car because he couldn't pay the 2K and easily get their money back at auction, but they still would not give him the loan, solely based on his lack of established credit.
Regarding investments versus property: Eh...
If you can get a loan at 3.75% and an average return on your other investments at 5%, you still have to take into account the fact that (depending on place) most real estate investments are more stable than any other investment markets. Plus, if the value on your house tanks 20%, you still get to live in it. If the value of your portfolio tanks 20%, you just have 20% less money than you had: money which you probably wanted to pay your mortgage. You can leave your money in your investments for another 10 years to recover your losses, but it sucks to have a bunch of investments you'll pray will recover when you're trying really hard to get together your monthly payments.
Sure, there's a good question in there, but one of them is a much less risky approach.
just make sure you aren't plunking everything you have into the house. as far as the difference between investing and paying cash, like i said, it's something to look into. no investment is 100% "safe"
For instance: You need surgery to remove something or fix something broken with you. Your obviously amazing healthcare covers 80% of it, and you're stuck with a $15,000 bill.
As a homeowner you leverage your home as a borrowing vehicle and get a low 1.5-5% interest loan.
You're a renter... either you put it on credit cards with a whopping 20-39% interest rate, or hope your credit rating will secure you a nice loan at 10%, maybe 8% if your bank really fucking likes you (if they liked you that much you probably had enough money to drop $15,000 right on the spot though).
Plus as long as you make your mortgage, you have a roof over your head. Avoiding the obvious 30 year goal of not having to pay mortgage or rent ever fucking again (you still pay taxes but that's nothing).
Initially I had the same idea as you, cruise around looking at short sales and foreclosures, but my experience with putting offers in on these is I would sit and wait. and wait. and wait. and wait, then hear back something like oh just kidding, this guy took out 3 mortgages on his home so you can't buy it for another year.
I went traditional, the place I bought is newer, everything is well maintained, and I don't have to sink 15-30k into it JUST to be able to sell it again.
if you are sitting on cash mlike that get rid of those student loans and put 20% down on a traditional sale, you will enjoy life much more because of it.
I may have to check out Mortgages for dummies or some other mortgage guide, or at least read the mortgage thread stickied at the top of H/A better (is that going to be of reasonable help?).
We've looked at one repo that wasn't great, but also not "terrible" condition. We've looked at two or three HUD homes, some of which were fine, and then it's mostly been Short-sale homes. I think the differences between the three are so little that our Realtor did an alright job of explaining them, I just didn't see a real reason *for* the difference, which contributed to my confusion...but half of the nuances when it comes to that sort of thing seem silly to me: but that's the way things are. I know there are a lot of worries about the "bargain" homes we're looking at, but I guess you guys will have to take my wordfor the fact that we're not planning on buying a money-sink or a piece of crap. My dad and brother are plumbers and my wife's dad worked as an architectural contractor for several years. Both groups get to verbally abuse any house we seriously consider (ending our interest in a few already). In addition, we plan on hiring the most reliable home-inspector that we know (my father has known him for a long time, and he did the inspection on my brother's house). Many of the houses we're looking at are pretty nice despite being HUD, repo, or Short-Sale quality.
The idea about putting a time-limit on the offer is exactly the sort of thing I wasn't sure if you were "allowed" to do or not, but that I wanted to do. Keep 'em coming guys!
Don't go in with the idea that you'll buy a place, and be able to sell it in two years and get all that equity back. That's what i was thinking when i bought mine i just wanted to get what i put into it back after 5-6 years, not make a profit or anything. i am currently quite a bit underwater, and trying to get a principal reduction.
With a house you're pretty much tied down, especially if you want to move across the country or something you're doubly fucked as your equity is in a house that you may or may not be able to sell based on a number of factors (especially speed).
You can specify whatever you like in the offer (as the recipient can tell you to piss off, or simply not respond), but the expiring offer bit is something that may speak to the owner/decision-maker. If it's REO, short sale, or repo-ed then you're dealing with a financial institution where this property is a tiny part of their overall asset portfolio, and they probably won't even have eyes on the offer until it's already expired if you specify something meaningful, like a week or less. Basically, an expiring offer may have some benefit when you're dealing with a private party sale, not one where a bank needs to approve seller-side.
If you need to borrow and it's your first home, then short sale/repo/HUD are very likely the wrong tree to bark up. There are certainly outliers, but if you're looking at this as an investment then you're probably better off looking into buying a multifamily home (duplex, triplex, quad) that's in good shape and be a landlord rather than trying to bottom feed SFH's. The notion that with buying you can get "rent" costs back instead of renting over say a 3 year time horizon is dubious at best. Even at the 5-10 year time horizon you have to consider factors out side your ability to discount (the Economy) and demographic shifts.
Not sure if the same applies for the US, where I assume you live, but if it is, well worth going to meet with one.
Check the zoning and such. Is there anything in the vicinity that might drag the prices down in the future. That light industrial zone that today houses the cotton and rainbow dealership might tomorrow be something out of Sarumans Isengard.
Is the area zoned and legal for residential units?
Is the house/apartment compliant with local laws regarding hight/size/whatever. What about other building laws? (Building codes is perhaps the word, my english fail me here)
Bring a builder/claims adjuster/or similar. Check every little nook and cranny for future problems and current problems. In Norway you can insure against problems that was the previous owners fault. Insurance company pays the fixing and reclaims the money from the seller. Might not work like that in the US. Might seem costly for something you will not use but compared to the price of the house its nothing.
Has the previous done any work with the wiring or plumbing. Get specifications and the name of the one who did the job. Work on and in "wet rooms" is also included in this.
Never trust your gut, only paperwork (As a "gut" person myself I found this hard)
Don't necessarily trust the real estate agent (representing the seller remember) If she answer "don't know" make her/him check.
I don't know if it is a sellers or buyers market in the US now, but the dream
NEVER bid more than you can comfortably afford. Remember you must be able to afford to live in the house. And financial problems are unfortunately a very common reason for divorces.
Check with the bank if you can get a loan on top for furniture and other necessities. If you move from a flat to an house you might need a lot. And I guess that its cheaper than credit cards or store credit.
b) You're not going to be able to easily make a ton of lowball offers, its unlikely you could make more than one offer at a time. Offers are binding if accepted and you wouldn't suddenly want to be on the hook for 3 or 4 places.
Each offer is likely to take at least 2 business days, longer if there's a counter-offer. You're likely better off picking one or two places you like and making stronger offers.
c) You might want to get a more experienced broker/realtor, I'm guessing the friend you're working with is young and new. A really good broker makes all the difference.