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Buying my first home
Molsen
Registered User new member
Registered User new member
I have been renting for a couple years, saving up some money and I would like to start looking into purchasing a house. From time to time I have done some research, but I kind of need some motivation to get off my ass and get things done. I figured asking a few questions here would help me get started.
The basic research I have done so far is determing my budget (down payment+yearly gross to determine what my price range is), browsing various website postings for houses in my price range+ area I want to live in, etc.
I figure the first step I need to take is to get approved for a loan. Should I just go to my bank and ask to talk with someone there about a home loan? Are there other, possibly better places that would offer better rates/higher loan amounts?
Second, what about a realtor? I'm assuming I need one, as browsing through internet listings hasn't gotten me too far. I'd like to just sit down and tell someone what I want and then be able to actually go to some houses in person. What is the best way to go about choosing a realtor? Are there any fees I should watch out for? Can I trust them to tell me everything I need to do such as inspections and what not? Also, what type of homes would a realtor be able to show me? Only ones that their company is selling? Or would they be able to show me houses being sold by other realtors? What about forclosures or bank owned properties?
Speaking offorclosures, there are obviously a lot of them on the market and they usually have a "sold as-is" clause. Should I just avoid this situation altogether, despite the alluring prices? I know a few people who have gone through foreclosures and basically gutted their house, selling everything they could. I don't think I would feel comfortable buying a house like this, not knowing what the previous owner could have done because they were angry their home was being taken from them.
Any other general advice for a first time home buyer would be great. Anything I should try to avoid/ look out for?
Thanks in advance.
The basic research I have done so far is determing my budget (down payment+yearly gross to determine what my price range is), browsing various website postings for houses in my price range+ area I want to live in, etc.
I figure the first step I need to take is to get approved for a loan. Should I just go to my bank and ask to talk with someone there about a home loan? Are there other, possibly better places that would offer better rates/higher loan amounts?
Second, what about a realtor? I'm assuming I need one, as browsing through internet listings hasn't gotten me too far. I'd like to just sit down and tell someone what I want and then be able to actually go to some houses in person. What is the best way to go about choosing a realtor? Are there any fees I should watch out for? Can I trust them to tell me everything I need to do such as inspections and what not? Also, what type of homes would a realtor be able to show me? Only ones that their company is selling? Or would they be able to show me houses being sold by other realtors? What about forclosures or bank owned properties?
Speaking offorclosures, there are obviously a lot of them on the market and they usually have a "sold as-is" clause. Should I just avoid this situation altogether, despite the alluring prices? I know a few people who have gone through foreclosures and basically gutted their house, selling everything they could. I don't think I would feel comfortable buying a house like this, not knowing what the previous owner could have done because they were angry their home was being taken from them.
Any other general advice for a first time home buyer would be great. Anything I should try to avoid/ look out for?
Thanks in advance.
Molsen on
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As-is houses: I'm not sure how common this is, but I'd only recommend if if you can have inspections done. Then find out your costs to get the house livable and see if your actually saving money.
Foreclosures: I've seen people buy foreclosures over the years and its not really that easy. The biggest obstacle is that if the foreclosure goes to auction your required to have cash on hand which very few people happen to have. You also need to be able to follow what houses are going into foreclosure and the date they are being auctioned off at which almost always changes multiple times. This doesn't even get into the fact that you can't see the inside of the house so you don't know how trashed it is and if you want to live in a specific location you may need to wait around to find a house. Also the majority of foreclosures just aren't worth buying and those that are usually have competition.
Your bank should have someone who can help you get started on the loan. Pre-approved is better than pre-qualified. Right now, depending on the market, you're looking at at least 5% down, plus closing costs and you're going to have to be an excellent credit risk.
Always get an inspection. This goes for new, used, forclosed, whatever. But especially if you're looking at foreclosures. People going into foreclosure get angry, and there's just no telling what they might do to a place. I've heard of them pouring cement down the sinks and toilets, turning on the faucets and just leaving so that the whole place is filled with water and/or mold...
Foreclosures can be a nightmare in general. A friend of mine made a reasonable offer on a pre-foreclosure house, but the bank still decided to foreclose and sell it at auction, for a fraction of what she offered. It's fucked up out there, that's all I have to say about that.
It's hard to find spec homes anymore because builders just aren't building anymore. But it might be worth investigating.
Tip #1 - make your realtor do most of the leg work for you. it's their job after all.
Tip #2 - read everything. every little piece of paper that they shove in your face when you actually get around to buying. Gotta understand what you're getting into, and if there are any catches along the way.
And that's about all I got...
The Best in Terms of Pants on JCCC3
Like the others suggested, make sure you pick the right realtor. But, don't rely on him/her to find the house for you. Even though he/she might show you places, there are still plenty of realty sites to check out on your own. Finding the right house isn't the only thing a realtor is good for anyway... he/she'll help you out with making the right offer and everything that comes afterwards.
A good agent should have successfully represented a lot of customers (sold a lot), has a deep experience selling/buying in the area, will answer any questions you have, will give you a shitton of information on buying a house, will interview you and find out what you what in a house, including if you're going to start a family (public schools?), and should feed you leads. All real estate agents should have access to all MLS listings in their area and should show you ones that fit your criteria, regardless of who's representing the seller.
IMO there could be issues involved if the realtor is representing both the buyer and the seller. Besides the opportunity for a double commission, there is the reality that without a buyer, there is no sale. Though it is true that this situation still exists even if you have a buyers agent, and the seller is represented by another real estate agency. When the same real estate agency if working both sides, they have more information at their disposal.
I'm not sure what the concern is with buying "as-is." When you've just shot a giant wad of cash into a place, and signed on to more debt then you've ever seen in your life, and now you own a place and have to deal with whatever headaches came with it, to you it's "as-is" even if the sale contract stipulates the seller has to fix things. In fact, having an "as-is" contract and having any defects that arise out of the home inspection be addressed as as cash back at closing is probably going to be better for you.
For example, let's say you make an offer contingent upon a good home inspection. The inspector find out the roof and foundation has issues. You could (1) require the seller to fix it (2) get estimates for repair and reduce the purchase price accordingly or (3) get estimates and take cash back at closing. With (1) the seller gets to determine who does the repairs and oversees the work, and given how repair contracting can be, also might dictate the timeline of the repairs. Don't be greedy and do (2) unless you have the money and the werewithal to fix the issues found in home inspection. Things like broken roof and foundation can cause other i$$ue$ if not addressed in the proper timetable. (3) gets you the money to effect repairs, and should be your best bet, assuming the appraisal is genuine.
Foreclosed homes? Avoid, unless you have experience in effecting massive home-related repairs. Most likely whoever occupied the house and got foreclosed on let any maintenance issues lie unrepaired, and could have damaged or actively neglected things so that a lot of work needs be done before it's habitable to your liking. Also any really good deals on foreclosed properties will likely be snapped up by investors for cash.
FSBO's? Never bought one, realtors don't like them (no doubt cause there's no seller's commision). They are cause for concern because there's a lot of paperwork that goes into selling a house; if the seller doesn't know what they're doing, the buyer might get boned.
Edit: If you have a lot of cash reserves sitting around, don't move it around a lot, that spooks the mortgage broker.
When I bought a house, I didn't do this, and although everything went pretty well, I would never do it again. The risk of something going belly up on a purchase in the (normally) 5 figures is just too great to warrant not hedging your bets for another few hundred or so. Basically, the second task in buying a house beyond finding a property you like and afford is going to be mitigating the risk of purchase. You want to do everything in your power to make sure you aren't getting in over your head, and there are people you can hire to help you do this. Generally those people are NOT the people you will be buying the house from, or people directly involved in the transaction in any way.
Watch out for Mortgage Life insurance. This is the stuff that'll pay off your mortgage in the event of bad things happening (your death). It's far more cost effective to buy general life insurance in an amount large enough to take care of your mortgage as well as whatever else you'll need.
If you can't provide 20% of the down payment (i.e. the amount owed on the mortgage is 80% or greater than the value of the property), you'll be assessed private mortgage insurance. This insurance is there to protect the lender in the event that you default on the loan. The rates on this seem to vary from what I can tell, but a brief internet search seems to peg them around 0-2% of the house price. Try to avoid this if at all possible, this is a waste of your money.
If you can, make your pay schedule bi-weekly instead of once a month. Most people are paid bi-weekly, and matching your payments up to your paycheque can result in easier fiscal management for you. Cheque hits your account, house payment comes out, and you never have to worry about missing a payment. Also paying bi-weekly means you'll pay down your mortgage sooner (Equivalent to 13 monthly payments in a year instead of 12). As an example, I have a 40 year mortgage that will be paid off in 33.3 years because I'm paying bi-weekly instead of monthly.
Regarding a realtor, the best thing you can do is get a reccomendation from a friend, family member or co-worker. Barring that, investigate the local realtor offices and pick one out that you like the look of. There's no reason not to use a realtor when you're buying, because you're not going to be paying a dime for their services. And ostensibly they'll be there on your behalf and looking out for your interests. If you don't like the way you're being treated by one, swap to another.
At some point during the process (for us it was when we started making offers on homes), they'll probably ask you to sign an exclusivity document, stating that you'll work through them for all purchasing purposes for a period of time. This is to stop you using their expertise to see a bunch of homes, then on your own make offers to the home-owners in an effort to shave a few grand off the price of the place that would have normally gone to the buying agent. Don't sign that document unless you're comfortable with the idea of being stuck to that real estate agent for that period of time. If you violate it, you generally have to pay what their comission would have been out of your own pocket.
Get a home inspection. Get a home inspection. It bears repeating. I don't care if you're buying new. Get a home inspection. A few hundred dollars is a small cost compared to buying a house with severe damage you were unaware of. At the very least, even in some new homes, the inspector can make some good suggestions in terms of insulation and maintenance. My home inspection came with a large yearly home maintenance guide that I've found to be very useful.
That was a bit of a ramble. My wife and I just went through this process in the past 4 months up here in Canada, so it's been pretty much all I've been thinking about lately. Best of luck on your house search!
Edit: Oh yes, don't spend right up to your limit just on the house. You're going to have to cover your lawyer's fees for the title transfer and research, as well as paying whatever fees the government demands. That can add up to a serious chunk of money. We managed to miss out on a few thousand dollars of the land transfer fee because we were first time home buyers, but I'm not sure if you have anything similar down there.
Double edit: Because you're currently renting, your purchase is not going to be contigent on you selling your current home. This can act as a favourable bargaining chip when you start making offers on houses. Your offer won't have the dreaded "Conditional upon selling home" clause that some of them will, and that will be a plus to some people.
Should the OP do the pre-loan so early? I remember ours was only "good" for a certain amount of time (1? 6 months?), so I'd be worried about it expiring before they found a home to put an offer on.
I'd recomend getting a realtor, and have them show you a couple of places first.
Don't know the specifics stateside, but I'll but theres probably a tax shelter or two for use if you ask around, almost always is.
As-is sales will never fix any outstanding issues. In most states, the seller is required to disclose any known issues, but unless you have experience to know how much it's going to cost you to fix those issues, you're better off not going with an "as-is" sale. Unless you or someone you know has the experience to know just how much it's going to cost to get a foundation fixed, the roof replaced, etc., I'd stay away from as-is sales.
You also may have less legal recourse if there are significant issues with an "as-is" home sale, but that will depend upon the state laws.
I actually left my closing with a check for $600 and the keys to the house!
Question. What area are you in?
There's some sage (tyme) advice there.
Not to scare you to death, but yeah, we got our inspector through our realtor (a friend) and while the inspector didn't screw us, he definitely "missed" a couple of things we would have had the sellers fix or pay for before we bought the place. Specifically, there was no caulking done anywhere, not around any sink, or the bathtub, which caused water damage. Plus our patio window was completely jacked up.