Thinking about Buying a house...Help me not screw myself

Reverend_Chaos · April 2014

My wife and I have been talking about starting the process of looking for a house. We are not in a huge hurry, so we have time to do things right. I have done a little bit of research and it seems like going and getting pre-approved for a loan would be my first step, followed by finding a buyer's only broker and negotiating a flat brokerage fee.

I know that once we find something we are serious about, we should have an inspector come and take a look at it to ensure I don't purchase the titanic on it's way down.

Any other pointers?

NotYou · April 2014

Don't buy as an investment. Only buy if it makes sense financially, even if the market drops out on you. If you do that, then you'll be happy with what you bought regardless.

Dr. Frenchenstein · April 2014

a house IS an investment, regardless of your intent when you buy it. that being said, don't go into a house thinking "hot damn i'm going to flip this sucker in 5 years and move into a mansion with the profits"

However, some tips:
-Make sure all work done on the home was permitted/properly inspected. This is especially true for rehabs.
-Don't do an FHA loan. you will pretty much be locked out of any sort of helpful program if one pops up. also, i hear PMI is locked in for the life of the loan instead of just until you hit the 20% number.
-check out the property at night, just go over there and park for an hour or 2 and observe.
-When you get an inspection, and he finds a bunch of stuff wrong that the seller has to fix, it's worth it to either have him come back or hire another one to make sure the seller actually fixed everything properly.
-your neighbors are a gamble, if the house next to you is terrible shape, don't assume it will get fixed up soon.
-don't fall in love with a house at first glance, it's easy to do this, and then overlook a lot of stuff you should be on the lookout for.

Xaquin · April 2014

THIS THREAD! can help you!

jimb213 · April 2014

If you don't have a 20% down payment ready to go, don't buy a house.

It's the biggest expenditure you're ever likely to make, so don't take it lightly. Do LOTS of research and don't rush into anything.

Read this blog post about reasons to not buy a house. Even if you think it's a bunch of BS, it's a different viewpoint worth considering.

useless4 · April 2014

That's a vaguely thought out all based on little fact blog post, yep.
Since the housing bubble has crashed people have some weird ideas about houses and how evil they are. Houses haven't lost/made you money til you sell them, always remember that - until then it's just a perceived value. You can only get that real value the minute someone hands you the check and you hand them the house.

1. Buy a house when you are going to live in an area for sometime. If you think you're going to move in a year, it's not the right time to buy a house. I would say plan out at least five years.
2. Look at the area and see if you see any warning signs for things that bother you. For me it's parking. If everyone is parked in their driveways, and you see cute little eight year olds running everywhere realize that in 8 more years the place will be over run with second and third cars as kids get licenses.If people hang out side all night partying (any neighborhood could fall to this) and you like absolute quiet this wouldn't be the neighborhood for you. Look at lawn ointments as a warning sign to check for wind chimes... no one likes wind chimes when they just won't stop.
3. Used to be buy the smallest house in the nicest neighbor hood you can afford... I am still not sure if that holds true. We bought one of the bigger townhouses in an area with smaller townhouses and our values are raising nicely.
4. Look at commute times. Then look around to see if there are new developments being built. We bought in an area that is booming and the road infrastructure just can't support it - at all.
5. If it's a new neighborhood look at surrounding shops. Are they staying in business or is it a ghost town of empty store fronts? It takes forever for a ghost town shopping center to recover sometimes. I know one in a nice place in dallas that has sat empty for nearly 15 years, only a year after it originally tried to open.

MegaMan001 · April 2014

Going to your prospective house / apartment during rush hour and evening is probably the best thing I started doing. That little cute place on a cut-through between two major roads that's quiet in the afternoon probably turns into a goddamn go-kart track at rush hour.

Jasconius · April 2014

getting pre-approved for a loan would be my first step

most people wont even talk to you until you do, so yeah

a buyer's only broker

why?

negotiating a flat brokerage fee

sellers usually pay the fees. don't even bother.

Any other pointers?

A lot of realtors are lecherous fucks. choose wisely.

Evigilant · April 2014

Having just bought a house, a few things:

Know your expenses and income. If you need to put down 10% - 20%, have that on hand ready to go rather than taking out a loan just for that. If you can't put down 10%-20% AND not have great loan options, don't buy a house: take a few more months/years and save up for that 10%-20%. I say that only if you aren't willing to take out a loan just for the down payment. Negotiate with the seller to see if they are willing to cover closing costs in return for you bumping up the loan amount.
Know your expenses for the place you're going to live. If your current situation has you not paying for sewer/trash/etc., you will have to take that into account when you buy a house and you pay for ALL of the utilities.
Have a "rainy" day fund. It should be at least 3 months of mortgage payments + utilities, so that in the worst case scenario, you have 3 months saved up and can survive on. This should be an amount you save every month outside of that 10-20% down payment. If your monthly payment is only ~$1k then have about ~$3-4k in savings for your rainy day fund. After that, never touch it unless it's the situation you need to pull from the rainy day fund.
Research the neighborhood. The comment about going to the place at night and hang out for an hour or two is sound judgment. Do it. If you don't do it and find out afterwards that at 2:00am every weekend night it turns into a party area and can't sleep, you're the one at fault.
If things don't go your way, be ready to back away. A house will come and go: never be too attached to a place that you're willing to compromise and accept less than ideal conditions. Think of it more along these lines: they're the ones passing on your money. If you really, really, really like a place but then come to find out that X is going to bug you for Z years, re-evaluate how much X means to you. Do this at the initial house inspection and final inspection. After you sign that contract to purchase the house, those are your main two opportunities to walk away if it's not to your liking and after closing if X is never resolved, then it's your problem.
GO TO BOTH THE INITIAL AND FINAL HOUSE INSPECTIONS. Don't send an attorney or someone in your place, you should physically be there. You aren't there to double check the work of the house inspector, you aren't there to validate their findings. You're there to receive immediate information from an inspection on something that will occupy 10-30 years of your life.
Don't wait till the last minute to pick your final loan rate. It's a crap shoot, if you find a rate that's really to your liking early on, lock it in as early as you can.
Shop around different mortgage companies. If you do it all within a month, then every company you shop around will in those 30 days won't affect your credit score.
Have all your documentation ready to go. At the very minimum, have the past 2-3 years worth of pay stubs and tax information (W-2s) on hand. Keep that revolving, so that every month, you're just adding to that list.
At the very minimum, find a realtor whom is going to work for you and not just for a closing. What I mean is, find a realtor who has a lot of patience, one whom will show you many places after they get a list of what you want and don't want. I've used two realtors now: the first one was not that great but the second one was amazing. You're there to buy a house, not to be their buddy or friend.
I can't stress this last one enough: be willing to walk away from anything that's not to your liking. You don't have to be a anal when picking a place but for example if the basement is flooded and you think that's going to be too much effort to waterproof and maintain and you want to avoid that, do not in any circumstances proceed with the contract. Give them the option to repair/fix it to your liking and if it's not suitable, then walk away. There are plenty of houses on the market, you're the one with the money. Don't get locked into a property that you're going to regret; because once you sign those papers, it's now your problem.

Lastly, and this is important: So, you've found a house, submitted all the documentation and it's been accepted, you're waiting for closing but you recognize you need to purchase some big things once you close and move in. DO NOT IN ANY CIRCUMSTANCES open up a new account for anything. Don't open up a new account at home depot/lowes/best buy/h.g. well/sears/etc. If you have been waiting for years and years to purchase a house, you can afford to wait until after you sign the documents and the title gets transferred to you. DO NOT OPEN AN ACCOUNT. I cannot stress that enough. Your lender will do a credit check before closing, and if they see new activity it's an immediate red flag.

On the day of your closing, plan to be there. Immediately after closing, if there are any big ticket items you need to purchase THEN open up a credit account with those stores. Until then, you can afford to wait.

lessthanpi · April 2014

My wife and I found this book to be amazingly helpful.

Penny Arcade

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