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I would not go for foreclosures for your first home. They are a mess to deal with and you usually have to fix up problems on the inside that the old owners left. Try to visualize homes with your stuff, I had a hard time at first getting over the weird wallpaper and paint colors.
DON'T get a house where your payments would be at the top of your loan. You want your house payments to be around 30% of your income. I was qualified for a loan that would be 75% of my income... crazy right? How would I pay for food?!
Make a list of "must have" & "must NOT have". If a house is painted crazy colors, you can ignore that because you can paint over it (like missASB said).
Foreclosures depend... usually they've been vacant for awhile & aren't taken care of. So most of them are fixer-uppers. If you know how to do repairs & don't mind having to do remodels or something like that, you could get an amazing deal on a house.
Stay away from short sales! Unless you're in no hurry to buy... it can take up to 6 months to even get a response back.
I slightly disagree with MissAsB. If you find a foreclosure, make sure it's 2/3-3/4 or less the market value of the homes around it. Hopefully it'll be 1/2-3/4 of your budget so that you can fix things. But I do agree, usually people who get foreclosed on go through and tear stuff up. I've walked through many a foreclosed homes as well as many newly built...grew up doing it. Anyways, budget wise I wouldn't consider getting a loan for an amount greater than 30% of your and your Fiance's incomes. I'd also suggest a 15 year.
Also, have a friend who you trust who knows electrical/plumbing look at the house before you purchase it.
Definitely go UNDER what you're qualified for. Keep in mind it's a first home--make a list of MUST HAVES and what you're willing to compromise on. Be open minded--your first home will likely not have every single thing you want. I woudln't do a forclosure--soooo much work, plus money is usually needed up front for repairs anyways.
Look at old/new, just to give you an idea of what's there. You may LOVE old homes, but you may also realize they are more work, more expenses, and more unpredictable than newer homes (the wiring? the plumbing? is the AC unit ready to go out? that'll cost you 3K...). You never know what you may like =]
@MsAB haha...yes, I will get my imagination to work to see past everyone else's decor choices that may not be my own taste. Sometimes it is really hard though...
@serabell Thank you, I can't agree more! We actually took a homebuyer education class before we started the process and the FI sat down and put together a budget with a housing counselor. One of the best decisions ever. Now we know exactly what "our" budget is, not what the lender approved us for.
@beekiss.. I will definately take your advice and have a friend look at the electrical/plumbing. My dad has 7 brothers and 4 of them are general contractors, so they will be people that I can lean on during the process. I'm also trying to gage how much "free labor" I can get out of them :) That will probably determine if we can swing a foreclosed property or not.
@ejs...yes, you read my mind:) I am a little afraid of all of those hidden costs with older homes...
All this advice is great! I would also recommend checking out a few new home communities as well. You might like them as much and alot of the Arizona builders are offering interest rates in the 2-4%'s since they are desperate. Also if you do look at new communites make sure your realtor is with you so you get the best deal.
Make sure you also budget in the other costs of living in a house (insurance, utilities, repairs). You often forget about those when you are thinking about housing costs.
Generally I'd agree about avoiding foreclosures, except that you're in AZ---you guys have the same glut we have out in CA right now, I think, and there are some astounding deals to be had here. So I wouldn't rule out foreclosures entirely---we have several friends who've gotten homes that way for literally half of what they sold for just a few years ago. But *do* have any home (and especially a foreclosure) thoroughly inspected. And I'd avoid short sales, just because banks are so backed up with these right now that you could be waiting forever. (Foreclosures are generally not as hard to deal with on that front.)
I'm an old home lover---ours is a century old---and while they do come with challenges, a good inspection can assess most of that....and it's good to remember that new homes aren't all perfect either. Check the builder's track record to make sure there are no problems with their other developments, and have the home inspected just as you would with an older home.
Most of all, though, have fun looking---check out things you might not think are appealing at first glance, because you might surprise yourself. I agree with the must have/would like to have/must not have list, which was critical for us. Good luck!
When you look at a lot of houses it can become a blur.
Take pictures.
Make a checklist of your needs and wants and print out a copy for each home you visit. Include things like # of bedrooms, near parks and schools, transit if that is important etc etc
Don't rely on friends to check out the plumbing and electrical. It is well worth the money to have it checked by a licensed, qualified home inspector.
Here is what I learned:
1- I thought I wanted an older home but I could buy a LOT more/nicer house with a new home due to the market in my area (like, if our exact house was listed by a person rather than a builder it would easily have cost 30k more)
2- don't fall in love too fast. i thought i loved the first house because it was so much better than where i was renting and it was just like..... omg its so pretty! after looking at different places i realized i really needed features that house didn't have
3- must have/must not have are important!
4- when it comes time to buy the house, make sure you keep money on hand for all the moving expenses and moving-in fix up stuff. We kept money out to do certain things and I'm SO glad that we did because if we didn't do it right away we might not have. This included: new furniture for 3 rooms, painting 3 rooms, getting ceiling fans installed in the vaulted rooms. I actually wish we would've just gone ahead and done a fence right away too because now it looks like it'll have to wait.
have SO much fun shopping! I know a lot of people hate it, but we had a blast shopping and buying our home :)
we're first time homebuyers, and we purchased a foreclosure last year. it was awesome, we saved a lot, which enabled us to remodel the kitchen and baths. make sure you have cash for emergencies, and don't put all of your savings into your down payment. you'll need cash for closing costs, too, so don't forget to budget for that. also, get a home inspection! it's a few hundred bucks, but you'll know what potential problems their may be with the house. inspections are soo important, especially for older homes. i also advise getting a mortgage that could be paid by a single income if it had to come to that, in case one of you is laid off or has health issues. you never know what the future holds, and it's always good to be prepared. :)
Go to as many homes as possible just to look around. This might seem like a pain, especially if it's a house you're not THAT interested in, but seeing it in person may surprise you. Pictures lie! What seems perfect in pictures might not be so nice in person.
Think about the lifestyle you want to live outside from being homeowners. Let that determine your budget, not what you're qualified for. I agree with the other Bees about not borrowing your max, although whatever amount you choose is a very personal matter, and you shouldn't let others convince you otherwise (especially your real estate agent).
When we first started looking, everything seemed really nice! It took awhile before we were able to fine-tune our ideals. (For instance, we were dreaming of a small house in the countryside with a LOT of land ... after driving on a few dirt and gravel roads, we realized we wanted neighbors and a store nearby!)
Also think about resale value and how long you see yourselves in the home. This factor holds a lot of weight when you've narrowed down your choices.
As for the paint, ignore it! By the end of our house search, we were hoping for some really fugly interiors! That way there would be less ppl interested! What we ended up getting is a house with funky colors, and a ton of garden work. It was also put on the market during winter, and we got a deal! Fi doesn't mind hacking away the yard and I think painting is fun, so even after minor work, we'd be able to resell it for a higher price -- but it'll be our forever home 
.
Good luck on your search and keep us updated! I love seeing older homes and would love to see the gems you end up finding!
We got a foreclosure for $112k less then the original listing! I say if you dont mind doing work and are handy foreclosures are great!
the best best advise i can give you is to go with an independant home inspector!
my 1st house i went with a guy who worked for himself and was certified and he was AMAZING & cheap ($150). He went thru EVERYTHING in the house down to making sure every drawer in the kitchen & bedroom worked properly. No after moving in.
House #2 Went with NPI, i couldnt find the paper work from the prev inspector because everything was packed up! The inspection was horrible! the guy pretty much told us the deck needed to be stained and outlets were missing covers. Every section on the written report said to consult certified plummer etc... and it was $800. And we had sooooo many surprises like the gas leaked, the water line to fridge & dishwasher were busted, circulator pumps on furnace we broken, the roof leaked etc etc. Luckly for me FI is VERY handy and we didnt need to hire anyone :D
I think you have gotten some great advice so far!
I also agree that you should take a lot of pictures. It's amazing how much you forget once you have looked at a bunch of houses. I always started taking pictures of each home by taking a picture of the house and address so we would remember which one was which:)
I would also write out a list of must haves and things that would be great but not necessary. I think it's important for first time homebuyers to realize that you will not get everything you want, so it's important to figure out what is most important. Also think about these 3 things: location, cost and size/amenities. What things are most important to you?
We decided that location and size of home was most important to us. We don't have the fanciest kitchen, but we will work on improvements over the years.
I second mishelleez, when you find the home you want get a professional inspection. I think ours was $250-300 and it was some of the best money we spent. Of course they can't catch everything but they will catch most things.
As far as the shopping process goes, you have to walk a fine line between going with your gut and being too impulsive. I was one of those people that knew whether or not I was interested usually within 5 seconds of walking in the door but I always tried to make myself look past that and search out the good points unless it was an obvious no. When we did find our house I made myself look for the bad.
Decide what you're comfortable taking on. We realized we were happy to do superficial fixes and upgrades a little at a time but didn't want a place we had to completely gut and redo. Actually, that's a lie. We did but we didn't get that house and are much happier with the one we did end up in.
And on that note, if for some reason you don't get the house you want, don't get too down about it. There's likely something out there that's an even better fit. (Even if you are positive you have scoured the market and think you know of everything in your price range. Not that I'm speaking from experience there or anything. ;-)
We just purchased our first home about a month ago.
1) That's awesome that you have already done your budget, you are ahead of the game!
2) Hire a great real estate broker. This is the one thing that is free since the sellers pay both commissions.
3) Go into every open house in the areas that you are interested in. Plan to spend your Saturdays and Sundays in the car driving around.
4) Before you make an appointment to go see a house make sure you do a drive by, in many cases you will end up wasting a lot of time since the house can look much different in person than in a listing.
5) Like a lot of other bees have mentioned, make you must have list. Mine was three bedrooms, location, and a yard I sacraficed everything else.
6) Be very cautious about buying a house that needs a lot of work since you can get it done for free. I am learning this the hard way. The first week we had so many people helping that we started every project at once and each week less people help. I am talking tradesmen who are doing a favor (brother, father, uncles, friends). They get busy with their own jobs and if you have any type of time constraints this may bring on a great deal of stress.
7) Have fun! To me it was more stressful than planning a wedding. The amount of house I saw and hated and the days I spent in a car started to wear on me. And their may be houses that you fall in love with and don't get, but it's okay.
8) Try to avoid bidding wars. I'm not sure what your market looks like but where I am nothing decent is on the market for longer than a week and a lot of the houses are selling for a lot more than they are worth.
I don't really have any experience in regards to forclosures except from watching others. It seems to be a nightmare. One of my friends put an offer in on a house and in order to look at it he had to pay to turn on the electricity, water, etc. he then had to wait 3 months after his offer was submitted to find out it he got the house, but in the meantime he couldn't bid on anything else just in case his offer was accepted. I'm sure this is different in each state, but I would proceed with caution and talk to your realtor first.
@Roxy Great points! Just curious where you live? We are in the Philly suburbs and the house prices are amazing here! There are 4 bdr/3 1/2 ba single family homes for less than $300,000 (normally between $350,000 to $400,000) and have been on the market for at least a few months. Guess it depends on where everybody is and how the economy is there...
We weren't going to look at single family homes (we have a townhouse now) for a few years, but when we saw the other day the great prices when searching online out of curiosity and fun, now we are interested in possibly buying a house. Great, great houses/prices in our area!
Good luck! And have fun looking-don't get too stressed! :)
Oh I agree with the drive bys like roxy says! That helped us to eliminate a lot of choices because we didn't like the area.
@Jenn23- We just bought a house north of Boston. The maket has turned over so quicky and has become a sellers market. If we didn't get in now we would have never gotten in. Just to give you an example, my brother bought his house last year and last month the house two doors down (same layout, same condition, etc.) sold for 100k more. I would have been so happy to buy my house for under 300k, but it's okay because we bought the worst house on the best street and will have instant equity as soon as we are done with the remodels.
Our house was on the market for 28 days and we didn't look at it because if a house was on the market that long there was usually something wrong.
@Roxy Wow, that's great you got the house when you did! So your area is booming-that's good (economically of course..not for house buyers!) We have houses here sitting for months and the prices keep dropping! And our area hasn't been affected as negatively as other area from the recession. It's funny how every town is different when it comes to this! Glad you found a great house. :)
We bought a foreclosure, and it was vacant 2.5 years. That being said, it went into foreclosure during that time so other than emptiness, it wasn't as "beat up" as some can be. There ARE some great foreclosure values to be found, but know your limits and don't get in over your head. The week we bought our house, the one around to corner sold for more than 80k more ;-) We only put in 8k to bring it back to market value.
I began house hunting last week and this is what I have learned so far:
I would compare the school districts/schools of the houses you are looking at. Better school districts/schools will give you a better profit when you are looking to sell because they are desirable. Also, make notes of each house you go to. My relator made copies of all of the houses and I wrote my own notes on the back of them.
Also, the houses that appear to be your favorite may not be your favorite in the end. Some homes are automatic NO's because when you get to the house there is water damage, structural damage, tiles (carpet or wood flooers) may seem loose, shower is too small, etc.
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Okay, so I just got the Conditional Loan Agreement from the Lender and everything looks great! We are ready to go shopping...
Any advice/words of wisdom on the home-buying process?
I'm excited and nervous all at the same time :) We are looking for a single family home in a historic district within our price range, which seems completely reasonable based on the internet research I've done so far.
We love older homes, but should we look at a few newer ones as well just in case?
How about single family homes? Has anyone went with a condo/townhome instead but started out looking at single family? Why?
How about foreclosed properties? Has anyone successfully bought a foreclosed home that you are living in right now?