(Closed) First Time Home Buyers: So Confused!

posted 5 years ago in Home
Post # 3
Member
4099 posts
Honey bee
  • Wedding: May 2013

@Mrs. Bear Cheese Pie:  We went to a realitor.. We called a number on a sign, and talked to them… They will guide you through the process, and a realitor is always nice to have.. Ours got us through the process with relatively little problems. (We built).. Usually, the realitor will know a broker who can look into mortgages for you too, and tell you your limits, or you can go to your bank/credit union and see what they can do for you mortgage-wise

Post # 4
Member
45391 posts
Honey Beekeeper
  • Wedding: November 1999

It makes the process easier of you are pre-approved for a mortgage.This lets you know what amount the bank will approve for your mortgage. They take into account your income, credit history and the amount of your down payment.

Don’t forget that there will be additional costs in home buying- moving expenses, changing your utilities, legall expenses etc. Do not spend all your savings on the down payment. You still need to maintain an emergency fund.

Here in Canada, you can also use a mortgage broker to find you the best deal on a mortgage. their fee is paid by the lender, not the customer. They are often able to save you a significant amount.

Do not use the seler’s realtor. No matter what realtors will tell you, they cannot possibly negotiate the best deal for you and the seller. You want to pay the least possible, the seller wants to get the most possible. It is a conflict of interest for the realtor.

Ask friends, acquaintances, colleagues for recommendations for a realtor.

Do some research yourselves so you are prepared to meet with your realtor.

Identify your must haves vs your nice to haves.- 3 bedrooms may be a must have , whereas a hot tub is a nice to have.

Make sure that one of your “subjects” is that your offer is subject to a home insoection. The money you pay to a licensed professional is well worth it to know exactly what the condition of the house is, any items needing immediate repair and those which will need repair ion the near future.

Post # 5
Member
7318 posts
Busy Beekeeper
  • Wedding: October 2011 - Bed & Breakfast

You start with a good, long, hard look at your current finances. Do you have a 6 month emergency fund AND a down payment (FHA is 3.5%) AND closing costs saved in the bank right now? If not, you’re not ready to buy. Do you have enough money left over every month after your mortgage payment (principal, interest, HOA dues, property taxes, mortgage insurance if your down payment is less than 20%, and home owner’s insurance) to save an additional 2% of your total purchase price each year for home repairs without touching your retirement savings amount? 

Once you do that, if your finances say that you are ready to buy, look at your credit reports and scores. Fix any inaccurate information (this can take a few months) and do what you can to raise your scores if you need to. I think FHA minimum is a 630 FICO??? And remember that they go with whomever has the lower score of the two of you. If one of you has less than good credit, can you get approved on just the salary of the person with the higher score? Also, do you have a stable job history and earning profile? lenders typically want to see at least 2 years with your current employers and stable income.

If your report/scores/employment are good, the next step is to figure out what your monthly payment amount will actually buy you. Tke the payment amount that you are okay with (an amount that allows you to save for home maintenance/repairs and retirement and college fund for kiddo and whatever other long-term financial goals you have… and eat… eating is important 🙂 ) and start subtracting.  Example: So if your comfortable payment is $1200, subtract $150 for property taxes ($1800/year assumption, adjust higher or lower as appropriate for your area), then subtract $70 for home owner’s insurance, then subtract $100 for mortgage insurance (could be more or less depending on your loan amount), then subtract $50 for HOA dues (if appropriate). You are left with $830 that actually goes toward paying interest and paying down your loan’s principal. Assuming a 3.4% APR (what my credit union is offering right now), you can purchase a $190k house for that amount (just played with a mortgage calculator on realtor.com to figure that out).

Once you figure out what you can actually afford, go on a site like realtor.com and see if you like the houses that are available in your target neighborhood in your price range. If you like what you see, set up meetings with 3 realtors and 3 lenders to decide who you want to work with. pick a realtor and 2 lenders, get pre-approved by the lenders (if you did your homework, this should be easy), and start shopping. If you don’ like what you see, then you need to spend more time saving for a larger downpayment (get to 20% and you can ditch the mortgage insurance, meaning that you have an extra $100/month that you can pay toward principal and interest, which increases your purchasing power) and do other things to improve your financial situation.

 

Good luck!

Post # 6
Member
5408 posts
Bee Keeper

Good advice so far but I wanted to add that you can go to any open houses you see before you have done any other steps. It might give you a better idea of the market in your area. 

Post # 7
Member
606 posts
Busy bee
  • Wedding: March 2014 - Brazil Room

– Get an agent that gets paid from the sale of the home (closing costs) and not directly from you

– Get pre-approved from the bank

– Check out house websites like redfin.com and check daily

– Get an idea of the type/age/style of home you want (but be open minded about things you can and can’t change!)… try not to get one that has an HOA!

– Do house drive bys to get idea of neighborhoods you like

– And remember that once they accept your offer, you CAN back out if something wacky shows up in your house or termite inspections

 

good luck!

Post # 8
Member
1335 posts
Bumble bee
  • Wedding: May 2014

My personal experience/.02 cents:

You will eventually need to find a realtor you like, work well with, seems interested, and someone you trust to work for you.  Someone whom takes into consideration things you want/need in a home, and then finds homes for you to view.  Finding a home online, and then contacting the listing realtor is totally fine, but keep in my mind that they are also the seller’s realtor and you may run into a conflict of interest. 

With that said, MOST realtors would have you first and foremost get a pre-approval letter from a lender.  They use that pre-approval letter (most times) with the bids you put into homes you like to assure the seller you are a serious buyer. 

These two things would be my first two steps.

What I did from there, and this may be a tad on the crazy/OCD side of me is that I sought a financial advisor.  Someone who looked thru my expenses diligently, and could honestly tell me what I could afford.  Your pre-approval letter is an estimate – even a maximum of what they would lend to you.  I was approved for X amount, but after scouring thru my expenses, I was really only comfortable paying a mortgage on something that was $20,000 less.  I was shocked to learn that, and super grateful I had someone to put me back in reality.  From there, I only looked at places in that price range, so that I would not be ‘house heavy’.

Then, you start the process of house hunting! Once you find something you like, or multiple places even, you bid!  A realtor will include all of your ‘items’ in the bid that you want…do you want the seller paying closing costs (another expense you have to spare) or will you pay your own?! Do you want appliances to stay?  Do you want your bid to include some furniture you saw, etc?!  Oh, and always make sure you buy inspection pending!! Once your offer is ‘accepted’ you will have a timeline to get an inspector in.  Pending those results your offer will stand, or you can put things they find back on the seller, etc.

The seller than – usually – will counter bid with their ‘terms’, and eventually you meet in the middle (well, hopefully!).  You have your inspection, you get approved for your actual loan, you sign your life away to a mortgage, and you live happily ever after 🙂

Post # 9
Member
29 posts
Newbee
  • Wedding: August 2012

You can look on the HUD website for a local housing counseling agency that offers a pre-buy workshop.  Sometimes it’s a one time class, other times it can be one night a week for a few weeks.  Usually you get a certificate of completion that can occasionally be used for a lower rate/different term depending on the type of mortgage you go with.

 

I work with mortgages for a living and please just remember…your pre-approval from the bank just covers basic financial obligations and may not be reflective of what you can actually afford.  If you have a $15 a day Starbucks habit, your preapproval will not reflect that. 

Make sure to factor in the cost of taxes and insurance…taxes can jump way up from year to year so don’t start out at your max budget so you have wiggle room for your payments.

Take your time at closing!!!  Yes, the keys on the table look very enticing and it’s easy to just sign and be done…but that fine print wil come back and bite you if you aren’t careful.  Hiring an attorney to represent you at closing will be a huge investment that will definitely pay off.

Good luck!!!

Post # 10
Member
9174 posts
Buzzing Beekeeper
  • Wedding: August 2013 - Rocky Mountains USA

@julies1949:  THIS. great advice. 

Post # 11
Member
1460 posts
Bumble bee
  • Wedding: October 2012

The first thing I did was go to my credit union to talk to them.  Back then I was able to qualify for an 80/20 loan and didn’t have to pay the 20% down but I did have to have a certain amount of of money in my account in order to cover closing costs.  The 20 part is a fixed rate for 15 years and the 80 is an ARM for 30 years that has decreased every year since I’ve had the mortgage. I’m not sure they do 80/20 loans anymore.  I’ve been told that after the mortgage fiasco they’ve gone back to 20% down.

The important thing is to find out what options you have.  Once you know how much you can spend on a house you can find a realtor who will help you find the right house.  Make sure you find a realtor that you click with…it makes things much easier.

Post # 13
Member
10369 posts
Sugar Beekeeper
  • Wedding: September 2010

Real estate agents wouldn’t even meet us until we got pre-approved, and there’s no point in looking until you know what a bank will approve you for, anyway.

Do you have a down payment? Can you show income with no gaps for at least 2-3 years? Have you checked your credit report recently?

Don’t go through your realtor to get a mortgage lender/broker. There’s a reason why they recommend them – they get a kickback. The internet is your friend – do your own research and save thousands of dollars!

We are in the process of trying to buy our first home, and it’s been kind of a nightmare. The Bay Area market is ridiculously competitive right now – very little inventory and a ton of buyers due to low interest rates, the bottoming out of bubble prices, and freaking all-cash foreign investers. We’ve been outbid 3 times by all-cash buyers….on half million dollar 2-bedroom fixer-uppers. It’s pretty depressing. Hope you have better luck!

Post # 14
Member
239 posts
Helper bee
  • Wedding: April 2012

I just wanted to mention something that we ran into when we first thought about buying. The money meant for the down payment has to be “seasoned” in a bank account for two months. Don’t ask me why, but loan agents will not pre-approve you unless the money’s been sitting untouched for two months!

Post # 15
Member
533 posts
Busy bee

Don’t rush anything. Take your time. We wouldn’t have any issues being approved now, but we won’t rush into anything. 

How much have you saved? Here if you don’t have 20% you have to pay lenders mortage insurance. Use the banks mortage calculators. Figure out how much you could borrow, then work out what you could comfortably afford to pay back. What if interest rates rise? Will you be screwed? Never ever ever borrow your max. 

You also have to be aware of the fees ‘n hidden bits. It can cost a bit.

We are going to build. But we are looking at everything. Keeping an eye on real estate databases for Aussies.

We are going to organize an appointment with a mortage broker. Do you have these over there? They’ll do all the leg work for us with the loans. Pre-approval is great but the bank may say you can have 400,000 but when they evaluate the house you can be pushed back. The house may be worth a lot less than you paid. 

 

Honestly with everything. Just don’t rush it. Take your time.

Post # 16
Member
2106 posts
Buzzing bee
  • Wedding: September 2012

@NovaGrey:  HOAs are not inherently terrible. I love that our HOA organizes security for our neighborhood including off duty cops and a neighborhood watch. I also like that it regulates fences, sheds, and such so that I don’t have to worry about my neighbors building and blocking our view. The HOA also responsible for keeping nonresidents out of the community pool. 

Yes, there are horror stories out there. We pay fees that are standard to the area and reap many benefits. My husband will probably join the board in the future. 

 

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