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Buying a house...
Nakatomi2010
Registered User regular
Registered User regular
For a married couple who do not have time to go to a bank and talk to someone right now, could someone explain to me the best way to go about finding out if one can buy a house, in addition to the average time frame required to find a suitable house+close?
My wife is giving birth at the end of August, and our lease expires at the end of September, we already know we're moving to another city to be closer to her parents to dodge the cost of daycare, but we'd like to move into a proper house instead of an apartment complex, I've been doing apartment living for a decade now, and with a child on the way I'd like to finally just settle into a house rather than continue to be nomadic...
My new job earns me a bit more money, and my wife may be getting a promotion, so money isn't as big an issue anymore... What is an issue is our debt to income ratio, which my wife calculated at about 17%... We've crunch the numbers and determined that we can afford it, but we don't know what the process is for doing it... Tlak to a real estate person first, or a banker, or what?
Assume we're stupid....
My wife is giving birth at the end of August, and our lease expires at the end of September, we already know we're moving to another city to be closer to her parents to dodge the cost of daycare, but we'd like to move into a proper house instead of an apartment complex, I've been doing apartment living for a decade now, and with a child on the way I'd like to finally just settle into a house rather than continue to be nomadic...
My new job earns me a bit more money, and my wife may be getting a promotion, so money isn't as big an issue anymore... What is an issue is our debt to income ratio, which my wife calculated at about 17%... We've crunch the numbers and determined that we can afford it, but we don't know what the process is for doing it... Tlak to a real estate person first, or a banker, or what?
Assume we're stupid....
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Nakatomi2010 on
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Save every dime you can now for downpayment. You may think you can afford a particular mortgage payment, but if your PITI (principal, interest, tax and insurance) is more than about 31% of your income then most lenders will not think you can afford that payment.
Take to a realtor (preferably one you know personally) and she might be able to hook you up with a preferred mortgage broker. Having a personal connection can lead to more flexible considerations.
Then you should begin looking in the area you want to settle in for houses in your price range. This is where a real estate agent comes in handy, but it's sometimes cheaper to do it on your own first.
EDIT: Ok, first what you should be really doing is making sure you and your wife's credit is in good shape. That means paying down (or paying off, if possible) any outstanding debts that would appear on your credit report, making sure your taxes are in order and having an adaquate savings in place to pay the initial down payment on the house as well as the closing costs. There's no point in going to a bank and aksing for money if you have a horrible credit rating, unless you like the sweet sting of rejection.
As said though, what takes time is everything that comes after you submit your offer. Figure a minimum of 30 days, 45 is more likely. If the house is bank-owned (forclosed on) figure 60 days, as they take their time.
There are mortgage calculators online too, showing you an estimated payment. Get your finances in order and figure out what you can afford each month.
It's sort of a chicken or egg argument in terms of going to a realtor first or the bank. True, realtors know several lenders who may be willing to help you, but most will want to at least have a general idea of what you can afford before goign forward. The other side if you don't want to go to the expense of a realtor at all, then you might want the pre-approval first.
Option "C" is to go to a non-profit and get their opinion and reference to a broker/realtor.
You're really pushing that non-profit Crowing.
I am, mainly because I believe that many people, when faced with this sort of decision, would benefit greatly from the counseling and knowledge gained by the process.
Nothing hidden. $20 to pull credit. I dislike pumping a company/industry I'm involved in, so I keep simple. Regardless, from working in foreclosure prevention for a long while now, I will advocate for the knowledge and guidance provided by professionals. I believe that counseling should be done for every large loan taken. Borrowing $200+k is no small matter.
Then you don't.
Just an option. I tend to believe that the 6 hours of financial training and one-on-one personal appointment to be worthwhile. If someone doesn't want to spend $20 then they don't spend $20. Regardless, you get a home.
The part that takes longest is finding the house you want. It's a pretty big decision and buyers remorse is not something you want with your home or else you'll get depressed every time you go home after work. Foreclosures are often more beat-up than they appear. Make absolutely sure you get an inspection before you commit to anything. Sometimes, if you can afford it, it's good to get two from different people incase there is something one of them missed. Knowing what kind of additional costs you can be expecting is cruicial to not blowing your wad and then having to come up with $30k for a new roof.
DONT BECOME CASH POOR. If you are making a downpayment of 20% (id recommend this. you dont have to pay mortgage insurance which can easily be another $150/mo) or doing an 80/10/10 loan, make sure you have a good amount of cash left over to be able to afford any unforseen problems. Get your realtor to try and get the seller to provide 6-12 months of warranty service. There are some things the inspector can't check. We have American Homeshield and it's basically a $60 co-pay for a year for stuff that breaks.
As far as closing, our house took about 3 weeks to close and we closed at 6pm the day before we had to be out of the apartment. Our broker busted his ass to get everything done by our deadline, but even up to the very end they couldn't tell us if we would get it on time or not. Very stressful. I'd expect atleast a month if not 6 weeks to get lending. This was september 08 and it's gotten much worse since then.
Having a Realtor can really help make the entire affair easier. Good Realtor's know the areas well, as well as help move the process along. There's a lot of things when it pieces to purchasing a home, and a good buyer's agent will be there to assist you make sense of all of it.
It also sounds like you and your wife are first time home buyers. Look for your local Home Buyer's Course in your area(these are non-profits that typically charge a small nominal fee) and can qualify you for lower mortgage rates. And there's that first time home buyer's tax credit this year, too.
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This is all good advice. No matter how nice the house looks, get an inspection. They'll usually run you $200-$300. The best part is, if the inspector misses something that comes up as a preexisting condition he should have caught, he's liable for the repairs.
We got an FHA loan, which only required a 3.5% down payment. Our PMI (mortgage insurance) is about $40 a month. It varies from lender to lender, but you can ask to have that removed as soon as a year after purchasing your house.
We didn't find out our final closing costs until 4:55 the day before we were due to close (we were closing on a Saturday). Once you've put in an offer and it's been accepted, basically all that's left for you to do is get and pay for the inspection, and wait until closing. You shouldn't badger your broker, but keeping up with them, asking how far along things are etc, is always a good idea.
Also, get a lawyer for closing. I know Illinois requires one, so it may not be an option to not have one. If it is, still get a lawyer. Your realtor will most likely have one they've worked with and trust. It cost us $500, and was worth every penny.
For example, in Baltimore I could get $12500 from the city and $2500 from my job. My realtor only knew a little about the $2500 from my job, and didn't know anything about the money from the city. We had to do a 30 minute meeting with a housing counselor in order to get the $12500 ($10000 of which is part of a zero-interest loan that does have to be paid back when the house sells). By the time we met with him, he didn't have any information that we didn't already know about, but that's because we researched like crazy and discovered we had to talk with a housing counselor to get the money from the state!
The non-profit may charge for the credit report (whereas a bank will simply pull yours and eat the cost, assuming you're going to stick with them), but the non-profit will give you more details about what you should expect for an interest rate, and what sort of loans to avoid.
Essentially, Crow's advice is to spend the cost of a credit report in order to take a local "how to buy a house" class. Which I endorse, unless you're autodidactic and want to figure it out on your own.
we just bought our first house. we went through a realtor first. the realtors site had some tools to give a rough estimate to start our search and from there we talked to their lender to see what we would pay etc. from that point looked around for a good loan but ulitmately went with the realtor's broker
Also know that the monthly payment and closing costs on the pre-approval are all estimated, and usually quite high estimates. Our closing costs were shown as nearly $9k on it, but actual closing was just under $4k.
we ended up settling on a net payment and then tacked on the sellers assist. it didn't finish up that way but its an option.
also keep in mind if you buy this year, there is an $8K tax credit if you qualify and will vary depending on state.
PA has you pay more in taxes upfront as an example
It took almost six weeks between deciding - offering - hearing back - closing.
It was new from a builder, so maybe a private seller would go quicker. We were required to go to things like pre-construction meetings - on an already built house! we were STANDING IN IT when they told us this.
With foreclosed houses, almost all of the ones we looked at required pre-approval from the bank that owned it.
Don't bid on foreclosed houses that have more then one loan. It will take forever to close according to everyone we talked to.
Avoid short sells since you are in a hurry. They can take up to six months just for the bank to consider your offer.
I made the mistake of buying a car in November and looking for houses in February... my credit took a hit from the credit lines being opened and the addition of a joint credit card with my new wife. The credit drop didn't hurt me too bad (we ended up paying cash for it anyways) but it was annoying.