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Planning to buy a house.
Nakatomi2010
Registered User regular
Registered User regular
Wife and Ihave decided that 4 years of being married, and having moved through 4 different apartments that we want to move into a home at the end of our current lease.
Our current lease expires in September, so I was wondering what time frame we should be looking at to start house hunting and such.... Yes we're financially boned, but between now and September we're fairly confident that we can get out of that hole...
Who should we talk to, when should we talk to them? The whole shibang... Also keeping in mind our current apartment complex needs 60 days notice of when we're leaving, so I have no idea how to work that one out....
Help...
Also, what bills should I be expecting that I currently don't get while in the apartment complex I live in right now. for example, i currently don't pay pest control, lawn care, property taxes... What else?
Our current lease expires in September, so I was wondering what time frame we should be looking at to start house hunting and such.... Yes we're financially boned, but between now and September we're fairly confident that we can get out of that hole...
Who should we talk to, when should we talk to them? The whole shibang... Also keeping in mind our current apartment complex needs 60 days notice of when we're leaving, so I have no idea how to work that one out....
Help...
Also, what bills should I be expecting that I currently don't get while in the apartment complex I live in right now. for example, i currently don't pay pest control, lawn care, property taxes... What else?
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Nakatomi2010 on
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You may want to look into renting a house. With the way the mortgage market is going, you'll most likely have to have a good down payment or excellent credit to even look at a mortgage. Renting will generally be cheaper than mortgage + taxes, as well, not including repairs. But of course you don't "own" it.
As for costs, expect to pay
natural gas
water
electricity
garbage
pest control if you're into that
yard work, or do it yourself which will include purchase various lawn equipment
any sort of repair you will be footing the bill for, and do plan on keep moeny around for this just in case
See how many books I've read so far in 2010
You would probably be very lucky to be able to secure a loan with a 10% down payment, let alone if you've just dug yourself out of a financial hole. You should try to secure the loan before you even go house shopping, so you'll know what's in your range.
Are you planning on winning the lottery? Thanatos is right: unless you have a fat down payment you aren’t getting a loan. The days of easy money for people without great credit and a pile of cash are very, very over.
Just because the market is cheap right now doesn't mean you have to buy a house. If you don't already have a few grand tucked away for this, start saving for a year or 2.
See how many books I've read so far in 2010
Your expenses are really going to depend on the type, size, and location of the house obviously. Property taxes are what always take me by surprise. God I hate property taxes.
Doesn't mean you shouldn't start looking now, but just something to keep in mind. One thing to consider is buying a condo/townhouse before a house. Doesn't change the inital expense by much (depending on your area, budget, etc), but the upkeep/maintenance/etc is greatly reduced both from a cost and stress sense. We are very happy in our condo, as it's sort of middle ground between an apartment and a house.
Homeowners Insurance
Taxes on the Home
Mortgage Insurance
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Our services, with the exception of a fee to pull your credit report, are free. Your situation is exactly that which we assist with.
That being said, 10% downpayment is, for the time being, where it begins. Generally you're looking at needing 700+ credit, no lates within 12 months and 10-20% down to get into any loan. Buying a home is a process which can and should take years not months. You're right to look into this now, but there's a huge difference between beginning the process and actually purchasing a home.
Feel free to PM me with any specific questions. This is what I do for a living.
To clarify, PMI isn't forced unless you're a deadbeat who doesn't get their own HOI. Homeowners Insurance is necessary for maintaining a home, and scales based on property value.
Depending on where you're looking for houses -- and what your income level is -- you could also consider USDA Rural Development Loans. They have upper income limits and are only available outside metropolitan areas and will require good credit, but they allow you to finance 100% of the purchase price -- though obviously if you have money for a down payment you'll be in better shape.
USDA loans are fantastic. I cannot stress how fantastic their program and customer service is compared to the Saxons and Littons of the world. If you can get one, you'll be in good hands.
pleasepaypreacher.net
I thought PMI was required on almost all mortgages unless you had 20% or more equity? That insurance is in place for the bank's purposes in case you lose the house, not to protect your belongings/house like homeowners. Am I mistaken?
no, you're right... the only way a normal bank (i.e. not some fly by night operation) would forgo PMI in this lending climate would be to do a secondary mortgage just to get the primary up to an 80% loan to value ration... like 10% down, 10% 2nd mortgage, 80% 1st mortgage... although even that is hard to do now... i have an almost 800 FICO and i HAD to get PMI if i didn't put down 20%... that's one of the reasons i held off buying
that said, the rates now are low as hell... my GF's cousins just secured a 4.25% mortgage :shock:
Yes and no, but the actual practice is less constant. Some programs require PMI for less than 20% equity, though it was generally a "stopgap" for sub-prime loans and no downpayment loans. With the current products out there you may or may not find PMI necessary, but in general you won't find much in the current climate.
Generally speaking, PMI should be avoided due to its use as a "oops" button with bad loans. If you have a prime loan that you qualify for, you won't need PMI. If you have a sub-prime loan that requires PMI you're in a bad product and shouldn't sign the papers.
Of course, that's a generalized and sweeping statement. Rule of thumb is that if your lender requires PMI you're not in a "fair" loan product. And yes, a lot of that has to do with stricter downpayment requirements which are, thankfully, in place once again.
Pay attention to the property taxes. These can get very high in certain towns (or whole states like NH).
I operated under the assumption that HoAs were not mandatory, and you'd be a fool to join one. Especially one that requires you to take on $100 worth of water a month.
That's not necessarily true. If you are a first-time home buyer, you can get an FHA loan. Basically, your downpayment is lower, but your monthly payments will be higher.
If you are a first time buyer, you'll also have to get your mortgage insured for the first year. My house went for $137,500 when I bought it. My mortgage insurance is about $100, which brings my monthly payment to about $1100. I have an FHA loan.
As far as costs for a house go: My gf and I just bought a home in september. We qualified for an 80-10-10 loan at 6% with my credit just above 700 and hers around 800. We had to pay about $16k as a downpayment with HOI coming in cheap due to a hookup. We were lucky to get a home in really good repair with a pool that has been replaced 4 years ago. The biggest expenses we have had was just buying shit for the house that we never needed before. Things like washer/dryer, refridgerator, bigger tv (not needed, but the other one would ahve been too small for the setup). Then you have all the tiny stuff you never think about. Shit like another plunger for the guest bathroom, placesettings for your table. furniture to fill up the 3 extra rooms that you didnt have inthe apartment but do now in the house. lawnmower, yard tools, tools in general to fix shit.
it adds up quick, and you WILL spend more a month on your utilities/luxury bills. overall tho it is much more rewarding to know that most of the money you spend a month will go towards a lasting equity instead of just thrown away in rent
edit: also pmi is needed unless you put down 20% or do an 80-10-10. it adds like $100-150/mo onto your mortgage
But, as with everything, you can negotiate to have the seller of the home pay for closing costs (I did).
edit: Oops. Already been said.
Depends on the state. In NY, closing costs can get up to 6-7% of the purchase price, for instance. On a 500,000 home, that can be as much as $35,000.
Just wanted to throw it out there, because a lot of people forget about closing costs.
Ours is mandatory. Like I said, we rent, and it's also in our lease that if the property manager gets a complaint about the lawn (HoA says grass can't be more than 6 inches tall), our rent goes up $100 a month. It's not a huge deal and better for the neighborhood overall, but it's there.
We're in a Chicago suburb, and our condo association dues are just under $300 a month, mostly because we have the biggest floorplan in our complex. It includes water, mowing/groundskeeping in summer, shovling in winter, (seen the poor bastard shovling at 2AM this winter), plus outside parking lot, and an outdoor pool. Plus general building maintenance, trash, of course.
Once you know around how much the bank will give you, and how much of a down payment you'll need for what the bank will give you, then you can start looking up listings in your price range. Solicit reccomendations from relatives and friends and coworkers for a real estate agent, when you're buying they are essentially free of charge as the seller will be paying closing costs, and there's a lot of procedural and legal things to navigate that they can help with, nevermind their familiarity with the local market.
Then it's just looking at houses. Hell, even if you don't do the financial stuff first, you should start looking at listings and going to open houses. The more familiar you are with prices/features in the areas you're interested in the better. Don't be afraid of going to an open house even if you think the place is too expensive for you. Those trips can be just as interesting to see what in fact does raise the price of a house in the area. Or what can lower it.
Beware, looking at housing listings can be addictive. We bought our house last September, and I still can't stop browsing them when I walk by.
same. any time i see a for sale sign i end up stopping and looking at the sheet
The Mortgage
Check your credit rating and score. If you have any delinquent accounts, pay them off like yesterday.
Get your finances in order. Pay off debts, and start saving for that down payment, and speaking of the down payment….
If you are putting down less than 20%, expect to be paying PMI. Some lenders will instead offer a ‘Soft Second’ which is a second mortgage in place of PMI. The soft second’s interest is tax deductable, but the PMI is not deductable.
Fixed vs ARM(Adjustable Rate Mortgage). While ARMs start lower, when they start adjusting, they can get really expensive, really fast.
Speak with a mortgage company. Now more than anytime in past few years they are looking for good, stable customers.
If the lender does not make you prove, or document your wages(aka, a No Doc Loan), walk away.
Many states/counties/towns have first time buyer programs that can offer assistance on the down payment, or closing cost assistance, or a reduction on the mortgage rate.
The rule of thumb is the mortgage + tax payment should not go above 33% of your gross income.
Most mortgage companies include estimated property taxes in the payments. Make sure to send them your tax statements from the city/town so they don't over/under pay.
Have an emergency fund available. At least a few months of payments just in case the worst happens.
Your People
A lawyer who specializes in real estate is very important. Real estate purchases have rather insane amounts of paperwork in heavy legalese.
Consider the services of a buyer’s agent. They are Realtor’s who work with the buyer to find a home(as opposed to seller’s agents), and help keep the process moving smoothly. A number of buyer’s agents are paid by the seller for a completed transaction, but by law must work for your best interest. In the three ring circus that can be home buying, they are the closest thing to a ring master.
The home inspector’s job is pretty obvious, and for a condo will generally run a few hundred and more for a house.
Before and after the purchase
Most people before the purchase suffer from buyer’s remorse. It’s pretty natural
Be prepared to sign and initial a lot of papers at the closing. Your hand may cramp up.
Try to make payments towards the principal when you can (Use a separate check and right in the memo ‘Pay to principal’). If you have a 30 year fixed mortgage and can make an extra ‘13th’ payment towards the principal each year, you will cut up to 11 years off the length of the mortgage.
Good luck with your house hunting quest!
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Amusingly enough, this isn't really true right now -- at least in all the rate averages I've looked at over the past few months. Adjustable rates for the moment tend to be starting higher than fixed rate, so there is no good reason to choose an adjustable rate mortgage right now.
To clarify, you're only eligible if you close before July 1st this year -- unless of course they extend it or something.
its only for first time homebuyers as well. in all honesty if you need to take this loan youre probably better off not buying the house. it will provide some cash right now, but you'll start paying it off right away and its just one more thing to have to worry about ontop of all the other added expenses
Well, you start paying it off in 2 years. And it's a 0% interest loan, so honestly there's no reason not to take it. It certainly shouldn't be a large factor in you deciding to buy a house, but if you are planning to buy anyway, it's a nice extra incentive.