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Well ladies I think I need to take a step back from wedding planning for a bit because..... we're buying a house! We want to close before April 30 to get the first time homebuyer's credit, but honestly I'm a little clueless about where to start. Do we go get preapprovals first? (and how?) Or do we get a realtor first? Any advice would be appreciated!
I got my preapproval first. It made things MUCH easier. It's a pain in the arse to go through all that crap and I felt a lot more confident knowing we were approved and ready to go. This way you know the homes you are looking at are for sure in your budget and also you have a leg up on the competition if you are already preapproved and ready to go. If they get two of the same offers and one person still has to secure their financing, but you already have yours in order...which one do you think they'll choose? I would get a referral for a mortgage broker/consultant - don't just start applying online or any of those sites, they farm your information out to everyone and they all wind up pulling your credit which could knock your credit score down a few points and possibly cost you are cheaper interest rate. Read up about mortgages and points and all of that stuff. Depending on how long you plan on staying in the house, buying down the interest rate with points is not a bad thing.
Definately find a good realtor in the area...get referrals from friends/family, etc. and depending on your area, be prepared for a wild ride...those that CAN buy a house right now are taking advantage of the lower home prices and the credit as well and there are LOT of first time buyers out there. We bid OVER asking price on a few homes and still lost out on a few. It was very stressful...
Make sure you get preapproved and not prequalified...being prequalified is worthless. Preapproved is when they actually pull your credit and verify your income and assets, etc.
Good luck!
HA! I love this title! It sounds like a super kitchy, smart-aleck cultural studies book. I don't know WHY, of course, but it does.
I got nothing about buying a house though other than to say good luck! That's really exciting!
We found a good realtor first and then got pre-approval. I know a lot of other people do it the other way around though!
We bought a house last spring and this is my advice...be realistic. I gather that you are a first time homebuyer and that's important. Research cities and neighborhoods that will be good for first time home buyers. That is, places that you will enjoy living in and that will have a good number of nice homes within your budget. Also, come up with a realistic list of musts. This is your first home so you probably will not be able to buy the 4,000 square foot home with gourmet kitchen, master suite, walk in closests, huge yard etc etc... Also, really think about what budget you are comfortable with and how that translate into your mortage ahead of time. We were pre-approved for a lot more then we were comfotable paying, so really crunch the numbers yourself.
I don't want to sound scary, but I think everything I wrote above is important! FI and I made an effort to reasearch and find a city (inner ring suburb outside of Cleveland, Ohio) that had a lot of options for first time homebuyers. We found a house that we love!
A good example of someone who has not been realistic with home buying is one of my close co-workers who is also in her mid 20s. Her and her FI have been looking for a house since March 09. They keep looking in really high end suburbs that just don't have houses for first time homebuyers. They also refuse to look at houses that don't have a ton of land, or a full master suite with connecting bathroom. They are basically are now looking at major fixer uppers because they refuse to look in places that are not as fancy.
My city might not be super ritzy, but it is a tight knit, artsy, safe community that we love!
Good luck with the hunt!
A lot of times realtors will not take you out to look at houses until you are pre-approved. Mortgage companies in our area have lenders they work with exclusively, and you can get a pre-approval through them. Otherwise, you can go to the bank of your choice and get pre-approved. (That's what we did). You'll need a couple of years of financial information to bring to the mortgage office... like paystubs, tax info, etc. When you make an appointment to get preapproved, just ask them what all you will need. Good luck! This was an exciting (but yes, stressful) time in our lives when we bought our house!
I have to say get Pre-Approved FIRST. THEN find a Realtor. If you go to a realtor first; you will be at a higher risk of looking (& falling in Love With) places outside your budget. After you are pre-aproved & know what you can afford; THEN you have a good Idea of what to tell your realtor.
When we first started; we went to a bank with a mortgage consultant that we already knew and trusted. If you don't know anyone in the banking industry I would just check around. Do you know how much of a downpayment you will have? If you do I would start by calling banks and telling them you are interested in seeing how much you can get preapproved for & they will set up a meeting. They'll ask you all kinds of questions. We had to have 2 of our previous Pay stubs; Checking & Savings Balances; & Drivers License & Tax Info History. I'd probably check into 3 or so different ones to see what kind of interest rates they can offer u. Also; your interests rates will depend on the amount of $ you have to put down. The more down; the better rates!
As far as the Tax Credit. There isn't anything you do before hand. (that I know of) We closed before December 1st; so we will just be claiming it this year on our income taxes.
Well hope this helps. As stated above; This is a VERY EXCITING TIME; But is VERY STRESSFUL!!!
I agree with everything posted above by jaylii9 (great input on the being realistic thing and scoping out the neighborhoods!!!)
I would still do it the other way around with the realtor/mortgage approval though. It doesn't do you much good to have a great realtor and be standing inside a house you love and not be 100% certain you can actually buy it. And, what if something comes up and for whatever reason you don't get approved for what you expected, or something is on your credit that you didn't know about (but you can avoid this by pulling your reports and knowing what's on them all first) or if you have a super jerk underwriter that takes forever and your go over the fianance contingency date in the contract, etc. There is just so much that can happen.
I actually had my real estate license a few years ago and HATED it. But, i can tell you that from a realtor's perspective it also did make us feel like the buyer was more serious having their financing in order first. Realtors don't make a dime unless you buy the house, so they spend all that time with you upfront, carting you around, gas, sometimes lunch, a days worth of work...sometimes many, many times...for not one single penny unless you actually purchase the home and you do it with them. So, in that regard I do suggest you find someone you like and are comfortable with, so that you are not wasting their time and yours, but that also you are 100% ready to take the plunge before you go out looking.
Search your local MLS scour it....KNOW YOUR MARKET...save homes on your list and watch how long they are on the market...if the nicer ones in your price range are disappearing in less than 30 days...you have some competition in your area...pick up everyone of those little homes for sale books on your way out of the grocery store.
Research property taxes (big one!) and schools. Even if you don't plan on having children in this home...when you go to sell it, the buyer might...so check into local school systems and make sure they are okay.
I don't know about some of those things, but I will say that try to get that 1-year insurance package thing that we got. The person who is selling you the home pays for it and it basically covers anything int he house breaking the first year you buy it. So if the AC thing breaks or the fridge doesn't work, etv....the insurance covers it. Last thing you want is to move into a home and then be like, "oh, XYZ broke and it costs $3,500". In the first 3 months, my garbage disposal went out and so did my garage opener. It cost me $50 each time for a deductible to get it all fixed. It would have cost so much more!
It's called a home warranty. You can buy it yourself, too if the seller isn't willing to offer it. I've heard mixed reviews, been a lifesaver for some and a big hassle that doesn't cover much for others. Look into the plan beforehand.
Ejs...do you remember what company yours is/was through? Sounds like one of hte good ones.
I would talk to lenders first to get a ball park of how much you will get approved for. PLEASE don't borrow the max that they allow! When we got our house we were making less than 90K/year together and they told us we can afford a 500K house, that's completly absurd!! Lenders will sell you the biggest loan possible, they dont care if you default on it.
We started talking to about 5 different lenders and then narrowed it down to the top 2, then we kept in touch with them until we found the house we wanted. Talk to more than one lender and don't be afraid to let them know that they have competition. Hubby was talking to one of ours one day and the guy told him what the interest rate would be if we locked it in that day. Hubby told him that we had just gotten a better interest rate from a different lender and the guy responded with "Oh, I just got an e-mail, I can offer you this now" Yea, ok!
Don't get an ARM! Interest rates are so low right now that they can really only go up in 3-5 years when your ARM would adjust.
Make sure you get a home inspection!!
I'm with Ejs... I think home warranties are a great idea. Our garbage disposal also broke.... new one installed for $50! thermostat broke... they installed a new digital one for $50. Definitely recommend, if just for peace of mind.
@blueshoes2....I'd like to buy one now. hehe. We have had a really nice digital thermostat in the box since we moved in...but it's so damn confusing neither of us wants to attempt it so that we screw up something with the heating system. So there it sits in the box...
Do you know what company yours is with?
AH YES. The home inspection...likely the best few hundred bucks you'll spend. And, the best few hundred you've ever thrown away if the house turns out to have a major problem, like one of the ones we made an offer on did!!
Thanks for all of the advice everyone! To answer some questions... we have been looking into houses/areas for about a year now and I think we have a good idea of what we want and where. We have three suburbs picked out that have really good schools, lower taxes, and aren't the "ritzy" areas of town that we could only afford if we got a condo.
As far as prices/down payment etc. I have about 10K that I can put towards a house + the 8K tax credit. I figure we'll put about 15K down and save 3K for closing costs/moving expenses. The houses we will probably be looking at are around 180-220K. Hopefully towards the lower end of that. We can make the monthly payments if we get a loan @5% or less for anything up to 250K but I don't want us to be too strapped in case one of us should lose our job or ya know... life happens. :)
Sounds like there is a general consensus that we need to get preapproved first so I guess that is what we will do! It is going to be a busy year girls!
Oh and about inspection etc., I am very lucky that my dad is in the construction business and he will be doing our initial inspections for us. If he gives the go-ahead then I'll hire a professional who can do the nitty-gritty stuff... but it is nice to know that I won't waste money inspecting a house that has defects that are obvious (to people who know about such things).
Congrats! So exciting!
As you get pre-approved, make sure to get your credit checked in a small time-period, so it counts as one credit check and not several, which would affect your credit score.
To get you in the nesting mood: thisyounghouse.com
@2010bridetobe: Ours expired last year :( Once I get home I can look through my paperwork and PM you :)
My closing costs were higher than $3000 with a home in a similar price range, but I also bought down my rate a bit. Be sure you also have the $ upfront to pay for the inspection and possibly the appraisal. Some lenders require you to pay the appraisal fee upfront, others I think will roll it into the closing costs.
Generally speaking the first time credit needs to be claimed on your taxes AFTER your buy the house, but there are some programs that will allow you to sort of borrow it upfront to use as a downpayment now. You may have to find a specific lender that works within those program guidelines so call around and ask about that before planning on having the $8k credit towards closing.
Good luck!
And, great about your Dad. That's a major PLUS!
My other piece of advice is to ask your seller for closing costs. It is a buyers market right now so it could happen. Our sellers covered $5,000 worth of closing costs which was awesome!
Also, Corgi, from your post above it sounded like you think you will receive the $8,000 before you close on the home. In most cases that won't happen. FI and I amended our taxes this year after we closed on the home and then got the $8,000 about a month later.
This is a very good thread... what do you need in order to get pre-approved for a house? Good credit, obviously, but do you need a large amount of money invested? I'm clueless too...
@ambereyes - The approval is all about income and credit, not so much savings. They want to see that you don't have a lot of bad debt. Your income will tell them how much you can afford and your credit rating will have an impact on the interest rate you get.
Good luck Corgi-it's such an exciting time for you!
I'm going to second a lot of people by saying:
1. Find a mortgage company you trust and that responds back quickly to you. Will you be getting a private company loan or the government FHA loan? FHA doesn't require a large down payment, but they have a lot of restrictions about the type of places they will approve you to live in. For example, if you're looking at a new developed condo or townhome development, they must be something like 90% occupied. Basically, know all the rules and regs of your loan before you fall in love with a place that you might not get loan approval for. We also avoided all short sales and foreclosures simply because we wanted to close quickly to qualify for the tax credit (that we thought was expiring end of Nov)
2. Get preapproved. Be prepared to tell them what you make at your current job and perhaps even at your previous job if you worked someone else recently. Students loans, savings accounts, credit cards, 401Ks, checking accounts, IRAs etc. I believe banks/credit unions look for good credit ratings and it helps to have a decent down payment saved and enough for closing costs.
3. Find a realtor you trust. We had our best man's wife as ours and it was the best decision we ever made! Know what your "must haves" are and what your deal breakers are. Is laundry in unit a must have? Good school districts? Attached garage?
4. Include in your offer a stipulation that the seller pay for some of the closing costs. For some reason we didn't do this, and I wish we had!
5. Do get a professional home inspector, and do ask the seller to either fix the issues or offer a credit to you to have someone you choose to fix any issues. Make the sale (and earnest money) contingent on a successful inspection.
6. Get a real estate lawyer, get a real estate lawyer, get a real estate lawyer! Most realtors have lawyers they recommend.
7. Don't get caught up in the decoration, furniture or wall colors of a home. Those things can be changed. Location and square footage can not.
8. Don't buy a place for your full preapproval amount. Just because you preapprove for something doesn't mean you want to spend that much. Crunch the numbers and figure out how much your mortgage payment, taxes and any home owners association fees will be monthly. At what amount are you comfortable? WIll you want to spend any $ updating? Remember to budget for that too.
9. And remember to have fun!
Thank you, DaisyBride! So is it safe to say that you have to be completely free of debt before you decide to buy a house? What if we have a couple of thousand on our credit cards but we have a clean credit rating because we pay monthly and on time? Also, do they prefer 25% down payment? Or is a little bit less than that acceptable?
This is quite an interesting topic, and most beneficial for many of us who are starting out new lives as newlyweds. Thank you to those bees who are contributing so much of their knowledge and experience :)
Ambereyes- The pre-approval process is really looking at income and credit rating. They will also look to see that you have been steadily employed for at least two years.
I think most people have debt, so don't worry about that. FI has student loans, we have car loans, FI still has some credit card debt that we are trying to pay off. Nothing ridiculous in terms of debt, but we have it. We never heard a word from our lender that our debt was a problem.
They mostly want to make sure that you pay your bills and can afford to pay a mortgage.
Also, with our down payment...we went with an FHA loan and put 3.5% down. We could have put more down, but they did not want more! I think it will be hard to find %100 financing in this economy, but I also don't think you need to put 25% down either. You will have to pay PMI until you reach 20% of your mortgage, but for us that was no biggie.
I agree about having a 'seller's contribution' toward the closing costs. Ours were maybe about $6000 on a 125000 house. But, we wrote in our offer that the sellers would cover up to 7% of the closing costs, thereby reducing the actual amount of cash we had to put forth at closing in a cashier's check.
And, definitely buy a house you know you're going to be able to afford, no matter what. I'm a grad student and my husband works full time. While we were preapproved for more, we only looked at houses that we could afford on just his income. Better safe than sorry! :)
Good luck, have fun shopping! (I always say: House shopping is fun. House buying is not!)
My new house blog: www.thefruitshaveroots.blogspot.com
Corgi, you won't be able to use the homebuyers credit as a downpayment. You can't get it until you have closed on the house unless you find a way to take out a temporary loan for that amount. Before you go to get approval, try to not use your credit cards very much, keeping the balances low. That way it looks better on your credit report. You need to have at least 20% down in order to avoid paying PMI (insurance for the bank in case you end up not paying for the house). Since the market is slow, you should be able to get the seller to pay for most if not all of the closing costs. Make sure you get a fixed rate loan for 15 or 30 years. If it is longer than 30 years, you will end up paying way too much in interest! Plus make sure you think about how much you can afford now, not when you get a raise next year or things like that. If you can, try to find a buyers agent when looking at a realtor. A normal real estate agent will tell anything that you say to the seller but a buyers agent has a loyalty to you only. We had one and it was great because we were able to ask him questions without worrying that he would go to the seller and tell them everything that we said. Get a home inspection. I didn't get the home warranty, but we didn't need it. Good luck!
Ambereyes - As Jaylii9 said, you don't have to be totally free of debt but it's good to be able to show that you are working on it. I have student loans.
I'm not sure about the downpayment requirements these days. We bought pre-recession and we were able to borrow 100%, which was great b/c closing costs were like 9K.
Closing costs in this area are pretty high, I think it has to do with the taxes.
DEF 100% get Approved BEFORE you even look at a house, that way if your in a rush to close before another bidder, you already have your pre-approval & can close faster.
Also, to add to MissAsB, she is correct, you can't use the $8000 towards your downpayment, because you recieve the 8K after you file your taxes. BUT, my husband and I just read last night that you can be granted an extension on your taxes. Therefore when you close in April, you can complete your 2009 taxes after April and claim your home (even though it was purchased in 2010) therefore you will receive the 8K in 2010, vs waiting to include your home on your 2010 taxes, & recieveing the tax credit in 2011. I'm kinda all over the place, but does this make sense?
When I talk to my husband, I will ask him for the website that explains everything about claiming your house purchaed in 2010 for your 2009 taxes. :)
Try to put 20% down . . . you'll save on the mortgage insurance! And get a good inspector. Talk to different people in your area to see who they've used.
Of course, the more you put down, the better your chances at getting a loan. And the sellers know that, so they may take slightly less if they really want to sell.
Yes, you could file an extension in order to get the credit in 2010 or you can file your return in April like usual but file an amended return to get the tax credit. The instructions for the 2009 1040 will explain how to claim the homeowners credit. BTW, I'm a tax accountant just so you know I'm not just making things up!
Or if you need help when you are filing your taxes, you can PM me! 
@MissAsB: Out of curiosity, are there any benefits of filing for an amended return vs. the extension?
To file to get the refund this year, you have to 'amend' your tax return and fill out a 1040x form. You can do this on Turbo Tax or have a professional help you with it. (My mom works for H&R Block, lol). You'll actually be adding it to your 2008 (if you close this year) or 2009 (if you close next year) return. This way, you'll get the refund in several weeks instead of after filing next year's return in April. :)
Ditto to what Miss AsB said... she's the professional, I'm the daughter of a professional. ;)
Okay there is tons of good advice so I'll just try to respond to everything in turn:
- We are definitely doing a 15 or 30 year fixed rate.... FI is an accountant and might actually break up with me if I suggested an ARM
- I know that we won't have the 8K from the govt before closing... I have other money in savings that is a "rainy day fund" that I am going to use and when the 8K comes I will pay my fund back
- We don't have 20%. I know I will have to pay PMI but if we waited until we had 20% we'd miss out on the tax credit. We should be done with PMI by the end of 2012 and we have decided its worth it to us
- We will definitely not buy more than we can afford. My guess is that we'll be preapproved for something like 250-300K. My brother and his fiance make barely more than half of what we make and they got approved for 230. We plan to look in the 180-220 range, hoping to hit something around 200.
- I've heard quite about about these FHA loans and it seems like something I should look into... can anyone give a readers' digest version of what they are all about? Are there income limits for who can get them?
- Excellent point about closing costs... I was hoping to ask for that but I still wanted to keep some money separate just in case. And if I don't need it well... it will go into the down payment or the wedding or a new couch. :)
- Oh also... I AM a lawyer so I can probably take care of most stuff by myself or with the help of my boss... and if not I'm sure my boss has a friend that specializes in realty.
- Lastly... people asking about debt, we are not debt free. We both have student loans and FI has a car payment. Neither of us carry a balance on your credit cards though, we've both paid them off every month for quite a while and I think that is what companies will care about.
@AnnieAAA: There isn't really any difference except that you have to use the 1040x in order to amend. But if you are filing an extension and think that you are going to owe tax, you have to make the tax payment before you even file so it is sort of complicated to determine that if you don't fill out the tax return first!
I don't want to sound negitive but I wouldn't count on having the $8K tax return in your hand in time for closing. Basically what you have to do is find a lender that will loan you the money until you get your rebate check. Since banks have less money to loan right now, its really hard/impossible to find someone that can do this. If you can, more power to you, but I wouldn't count/depend on it.
We monitored Realtor.com for a while. It helped us understand the areas etc. It is the office site of the MLS, so just as soon as any agent in the USA lists a house on the MLS, it shows up on that website.
Be prepared that a short sale could get stuck with the bank approving the offer. Our realtor told us to expect a 4-6 month closing. An option we considered was to write in the contract that the seller will pay the $8 (amount of tax credit) that we would loose if we did not close by the end of the credit window.
Some banks may require that you get a licensed inspector to look at your house. My FI and his dad are in construction as well, but it is still very important to have someone who is trained and certified to come and do this. We also had a WDO (Wood Destroying Organisms inspection) done. This helped look at places where the ceiling had leaked, etc. Worth the extra $150.
We picked our house and then got pre-approved.
Be careful to not open any credit cards in the next couple months etc. They will ask why anything has hit your credit. Also, try not to transfer money around. I recently changed brokers and it was a pain showing the closing of the one account, transfer to the new account, etc. I think they wanted to go back like 6 months or something.
It sound like you have a good head on your shoulders Corgi! I understand that this is a great opportunity and that you don't want to miss it. I wish that they had changed the credit so that we could use it to get our new place, if they had we probably would sell our old one even if it was at a loss but alas, the government doesn't care about us!
Sorry, didn't see your most recent post!
One other suggestion that I don't see on here is that not only did we ask for the sellers to pay closing costs, but in order for them to come down to the price we wanted, we bought the house "as is". Basically we had the 10 day window to allow the inspector to come and show us stuff and we could back out at any time and get our good faith money back. I know it sounds really scary, but it let us get the price and do the repairs ourselves. Also, we know the quality of the work being done, rather than the seller fixing the stuff poorly.
The FHA loans are about the same rates when I looked into them. From my understanding it is much hard/impossible to get the PMI off of these.
One other tip, since our house had been sold in 2004, we were able to use the survey from when the house had last sold. It saved us about $400. No fences or anything had been changed since then and I think they said you have like a 5 year window to use the same survey.
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