Post # 1
The hubs and I had a talk tonight after a rather mediocre rental search the other day, and now we’re actually considering checking out the housing market in my work area and buying! Eep! We are TOTALLY new to this (I’ve only rented an apartment through my Uni, and he’s lived at home), so we’re just trying to get our wits about us and figure out the way to go about starting a home search (or really, a pre-search!).
I’ve read a few older threads to get an idea about it, but I know the market changes often, so if anyone has new tips, that’d be awesome and much appreciated.
I think (and let me know if I’m wrong) it should go something like this? :
-bank visit (to see about a mortgage pre-approval, get an idea of what range we’d be looking at, etc) What do we need to bring to this? Taxes? Pay stubs? I’m starting my job in August…will they need me to/make me wait until I’ve got pay stubs from there, or will my summer stubs and my contract be enough?
-check out online listings for homes in our range *and do the slow creeper drive by of our favorites :-)*
-visit open houses /get a realtor (is there one you should do before another?)
-I’ve heard that rates are crazy in favor of buyers (like, 0 down, 3.5% crazy!)…any tips/info about needing a downpayment amount or extra expenses that one might not automatically consider (various taxes or maintenance, etc).
I’m seriously like a new little fawn wobbling about when it comes to this…totally new territory! So for all of you bees that have been there, please give me your need to knows/wish I knew/best tips/common sense advice. Gracias!
Post # 3
Bankrate.com is a great site….with calculators to see what you can afford, first time buyer tips, etc.
Post # 4
A lot of advice varys by what state/metropolitan area you’re in. If you’re in MD/DC/VA for example, you’d be completely wasting your time doing creeper drivebys. Any house on the market that is priced within 10% of market value gets several offers in less than a week. You can driveby all you want, but the owners are inside deciding which offer they want to take.
Also, zero-downpayments is why there are an influx of short sales and foreclosures on the market. In my area, even a 5% down payment isn’t enough to look like a promising buyer. Sellers are going with cash offers or offers with high down payments because they are less likely to fall through. We won our home in a bidding war of FIVE offers. We were not the highest offer, but we had 20% for a down payment and had proven financing from a previous sale that fell through due to the sellers.
Additionally, if you put down a smaller down payment you will pay PMI each month AND you won’t get the best interest rate.
I recommend using a mortgage calculator another bee posted and then looking online at how much house that can afford you. I also recommend educating yourself online on websites targeted at first time homebuyers. There is way more at play than what I can fit in this reply.
Post # 5
Definitely do your research with various types of loans. DH and I got a USDA loan where we had to put zero down and got a 3.75% interest rate. We also don’t have to pay any PMI since the USDA insures our loan. We were the only people to put an offer on the house we bought and it really was a steal (we’re in Maryland btw). Just make sure you do your homework.
Post # 6
Thanks, bees. Great advice so far 🙂 We’re looking in the Midwest (MN/ND/SD area) in smaller towns (~15K pop.). I know I’ll be browsing online sites to learn as much as I can, and maybe we’ll call our bank and some realtors to get a solid feel on our target market to see how long houses are listing, what sellers are wanting/buyers are giving, etc.
Post # 7
@indibee: Woohoo– I’m from South Dakota 🙂 We’re living in Iowa right now while Darling Husband finishes up his doctorate. We’ve owned 5 houses in the last 3 years. We’ve never gotten a mortgage (only used cash), so I can’t really comment on that side of things. As a seller though, we won’t entertain any offer without preapproval and if two offers come through at similar prices/closing dates, we always choose the one that looks more secure (couple has a downpayment, not a government loan– as in not VHA/FHA– because in our area they are much more likely to fall through). The “steps” you outlined in your original post seem like a great place to start your search.
When buying, keep in mind the things you can’t change about a house. A house could be super ugly/outdated, smell, and even seem too small– but all of these things can be changed! What can’t be changed is location, lot size, and some structural things (make sure you get a basement and not a slab foundation in the midwest– tornados!). Some things can be changed but get expensive– switching boiler heat to forced air heat/central air, updating an electrical box/system if you purchase on older house with the ceramic plug style. Also, find a knowledgable realtor that you can trust– interview a few. You’re making a huge investment and you need an expert, not just someone that leaves you with warm fuzzies!
Best of luck and congrats on starting the process to buy your first house 🙂
Post # 8
It’s usually always cheaper to buy land and build on it, therefore being able to customise more of a ‘dream’ home.
Always offer less than what they are asking.
Get a building inspector to come through if you’re looking to buy an older house.
Take heating into account, because while it mgiht seem like a lovely house during summer, it may cost you a fortune to heat in winter.
Post # 9
– always try to buy in a good school district, it preserves your property values
– drive by neighborboods at differemt times of day/week to see if they are loud, lots of kids, well lit at night, etc
– google your street/neighborhood/neighbors to see if there is any flooding/natural distasters there
-look for crime statistics
– go to lots of open houses, but not for houses out of your price range. just like buying a wedding dress, its no good looking at something thats way out of budget and falling in love with it
– lots of people will tell you that you’ll just walk into a house and know it should be yours. again, this might not happen, or if it does, please think practically if it is still a good value and fits your needs
– always consider maintenance/upkeep costs. try to look past ugly fixtures or paint, you can easily change those, but things like narrows staircases (whe you will scrape your knuckles carrying a laundry basket) cannot be fixed so easily.
Post # 10
Since you do not have your job yet, you will need to go off his income or wait until you have been working a few months. They really want to make sure you have a stable employment now.
Going to a bank or doing preapprovals on places like Lendingtree is your first step. You need to get a preapproval letter in order to have your offer taken seriously.
I would look for a realtor soon. Since you are the buyer, you won’t be paying them. I would look for a buyer’s agent (it is a specific type of agent). A regular agent will be a seller’s agent (even if they work with you) and will tell everything that you say to the agent representing the sellers.
We just bought in December and I did not see any 0% down unless it is a special rural development loan. If you are a first time buyer, you can put down 3.5% on a FHA loan but you will still pay PMI until you have 20% in the house. I would look to save up as much as you can.
We did quick drivebys on the houses before we went in to see them but we didn’t do different hour drivebys until we were getting close to the one that we wanted to buy. It takes a lot of time to driveby all the time so we didn’t want to do it for everything.
When you are looking at homes, try to figure out the increase in taxes, insurance, maintenance, etc when you are thinking about the max you want to spend. The mortgage is only one piece of the puzzle.
Get an inspector no matter what age the home is. I have seen a lot of brand new homes that are dressed up trash.
Good luck and have fun!
Post # 11
@CEtoSAHM: Yay! I’m originally from IA (great place!). Thanks for the advice. I’d *love* to buy outright, and that’s something I’ll chat with the bank lender about tomorrow (he called this AM to set up a little ‘so you want to buy a house maybe’ meeting. LOL). We’ll discuss things like whether to buy now, or save up x amount for a down payment, or destroy our student loans ASAP, etc. And thank you for the reminder about what can be fixed up/changed. Hubs isn’t really a ‘vision’ kind of guy…he thinks if we buy it with a purple wall it’s going to be a purple wall. I think I need to get him into some HGTV shows to see how easily things can be spruced 🙂
@BerryBerry: We’ve talked about this as well. There are some great lots for sale, and then you get to buy the house that you want. So much to consider! (And yes, heat in the midwest is the first thing I ask about after what rent is going to be when looking for apts, youch!)
@kerensa: & @MrsSaltWaterTaffy: Thanks for the wonderful advice! We’re still super new to this, and not sure if it’s a great deal/buynow kind of situation or rent for a year or so and save up kind of deal. Plus, we may want to wait until I make partner or he finds a job in this area, so that could shift things around from 1-3 years. But we’re just excited to check out the prospects and take the leap if the timing and funding is right. Eek!
All this advice is really helpful! We most definitely do not want to rely on our folks for advice, because although we love them and they’re smart, it can become over-involved pretty quick, and they haven’t purchased a home in ages. It’s a much different market than 20 years ago. Having you bees is an awesome resource…all these folks who’ve already been there 🙂
Post # 12
- Wedding: October 2011 - Bed & Breakfast
I think your plan to meet with a lender first is really good in your situation since you do not have firm employment quite yet. Make sure you clearly explain this to the lender because it may have an effect on whether or not you can get approved, and for what amount.
Also, before you meet with a lender, know what your comfortable house budget amount is. Do not go by what the lender says you can afford because that number may leave you eating ramen noodles every night for a very long time. Take a hard look at your current housing expenditures (rent, gas, electric, and water bill). Do you need to stay at this amount in order to be cpomfortable (and be able to save for the future). How much more can you comfortably spend? Remember, a bigger house may mean a bigger gas and electric bill, water bill, etc. So you need to look at all of that in order to figure out how much your monthly mortgage payment should be.
Once you figure out what a comfortable mortgage payment is, subtract a few hundred from that monthly amount for property taxes (for rteference, we pay almost $600/month for property taxes), subtract $80ish for home owners insurance, and subtract $100-$300 for PMI (if you are paying less than 20% as a down payment). Whatever you have left will be how much you can afford for the principal & interest on a loan. Then you can use an online calculator to see how much that principal and interest amount will allow you to purchase. And there’s your house hunting budget!
Edit: Get a realtor BEFORE you go to any open houses. But don’t sign a representation contract yet, so that you can ditch your Realtor if it’s just not working for you. I say this because in my state, if you go to an open house without having a realtor that you are working with (your realtor does not have to be physically present with you when you go to the open house), and the seller’s realtor shows you the house, you can be stuck working with the seller’s realtor throughout the entire buying process if you choose to buy that house. So if you wanted to buy that house, the seller’s realtor would be your realtor, and whose interest do you think they would REALLY have at heart? This rule really depends on your state rules, but it would suck to get caught in it unawares.
Post # 13
Just popping in again to say thanks for all the advice!
@lovekiss: Hadn’t thought of the seller realtor thing with open houses, good call!
I went in today to just chat w/ the lender, and he ran our numbers without offically running our numbers (saves us a credit pull) and it’s looking like we’re right in the range we were hoping! So now we’ll just browse houses online, see if there’s some homes in the area we like, and maybe move on it. Eek, what an exciting day! All of your advice has been great, and I’ve been combing our budget over and over just to make sure we’re at a comfortable level. Just wanted to share the happy news that at least we’re not SOL, and we’re able to move forward if we like. Yahoo!
Post # 14
- Wedding: October 2011 - Bed & Breakfast
@indibee: That’s awesome that your number and the lender’s number agree. Whe you feel like you are really ready to get started, it’s a good idea to take the next step and get pre-approved by 2-3 lenders. This is when they will look at your bank statements, W2s, tax returns, and pull your credit. Since they will each be pulling your credit, make sure that you are working with those 2-3 lenders at the same time so they are pulling your credit right around the same time. Any credit pulls by mortgage lenders within 30 days of one another should only be counted on your credit report as a single pull, and therefore should not weigh your scores down too much. But if you talk to one lender who pulls your scores, and then start working with a 2nd lender 60 days later, that 2nd lender will also pull your scores. Then you will have 2 seperate hard pulls on your report, which has more of a negative impact.
I advise working with more than one lender because when it comes time to lock-in your rate you can compete lenders against eachother to get the best deal possible for you. Competing lenders saved us more than $25k because they kept lowering their rates and points to win our loan.
Pre-approval is a necessary step for some real estate agents. Our second agent (the awesome one!) refuses to take clients to showings until they are pre-approved. She’s not trying to be mean. She just doesn’t want to show a house that ends up being way out of the client’s pre-approved amount. You see, without pulling your credit a lender doesn’t know what rate you would qualify for, and the debt shown on your report may be different than what you’ve verbally told them, which could also affect the amount you are approved for. And since your rate significantly impacts your monthly payment amount, you may not really be able to afford the upper end of your budget at a higher rate. So the lender actually looking at your scores and report, and getting pre-approved is crucial to setting your budget before you start shopping in earnest.