(Closed) FIRST TIME HOME BUYERS, any tips?!????!

posted 4 years ago in Home
Post # 16
Member
1296 posts
Bumble bee
  • Wedding: June 2016

Look into USDA home loans. We bought our 70k house with no down payment when we were 20 and 22. They’re for rural areas, so yours might not be covered, but it’s worth checking out. They were going to give us twice as much, but we knew we couldn’t afford the payments and chose a “stepping stone” house.

Get your money figured out before you talk to your realtor, or else you’ll really just be wasting their time. It can take MONTHS for loans and such to come through. It took almost over a year after we went under contract.

Post # 17
Member
1828 posts
Buzzing bee
  • Wedding: November 2014

We just bought a home well below our max budget and are very happy about we did. We were approved for a crazy amount, even with all my pharmacy school debt ($225k!) and went way under that. We put 10% down because we wanted to keep a chunk in savings. One thing that is cool is once we build up our savings again, we can start throwing extra payments towards the mortage and once we reach 20% equity, our PMI (mortgage insurance) will drop off. So we’re hoping to only have to pay it for a couple of years. It was worth it to us. We also just switched both of our cars and got homeowner’s insurance through Nationwide and that is saving us $200/yr on car insurance and they offered a great homeowner’s rate ($442/yr). Definitely reccomend them!

Post # 18
Member
93 posts
Worker bee
  • Wedding: May 2017

cls9q:  It’s a great idea to write down every expense. You should also try to find out an estimate of how much yearly property taxes are. Renting for $1,200 monthly is much different than when you buy a house and have $1,200 monthly mortgage payments because you have to factor in things like property taxes, home insurance, home maintenance, etc. It’s a good idea to talk to a realtor, but I would recommend talking to a few. We met with four (I believe) before we found one we were comfortable with and wasn’t super pushy and annoying. Haha 

Also, as a PP said, make sure you find a good inspector! We had one that we thought was good, but since moving in, we have had to fix a bunch of things that he should have caught in the inspection.   

Good of luck with your house search! This is such an exciting time for you (: 

  • This reply was modified 4 years, 5 months ago by  a.nichole.
Post # 19
Member
490 posts
Helper bee
  • Wedding: May 2015

We just bought a house in May (hopefully will be fully moved in tonight!! ekk!) but the closer told us that in August buying a home is going to take much longer, something with the laws?  So I would try to get preapproved now if you can.  The preapproval process can take a while and they come back for stuff multiple times, so go ahead and get that started.

For the mortgage and the cost, go ahead and figure out what you can comfortably afford and then (not sure how it works there), our monthly mortgage payment is actually our mortgage, our insurance and our taxes each month.  Which is nice because it is spread out over the year.  I think a lot of places do that as my sister who lives in another state has that too.  🙂

Good luck!  If you put less than 20% down (we did) there is mortgage insurance of about $100 or so a month. You just need to make sure that can come off your mortgage when you reach 20%.

Post # 20
Member
1243 posts
Bumble bee

cls9q:  I HIGHLY recommend looking at redfin.com, and if available in your area, attending one of their in-person home buyer sessions. In my area, it was held at a local restaurant and included dinner. I attended two sessions: one for first-time homebuyers and another specifically about home inspections. Going to these was a huge help for me, as there were real estate, financing, and trade experts in the room to ask questions. Another benefit: these sessions give insight, data, and guidance for your specific area. There was zero pressure to use their services, and everyone was very friendly. It was a great starting off point for me.

Post # 21
Member
432 posts
Helper bee
  • Wedding: September 2015

I will echo the recommendation to use Redfin if you’re able. We closed a few weeks ago and moved in on Wednesday. Redfin was totally awesome to work with, and best of all for buyers, they split their commission with you! So we got a nice check in the mail that more than covered our closing costs!

Post # 22
Member
963 posts
Busy bee
  • Wedding: March 2015 - On a Cliff Overlooking the Bay, Florida

cls9q:  I work in finance check with your financial institution to see if they have any first time homeowners deals. We just bought out first house and we ended up getting 100% financing. the only “down payment” we had was buying points (lowering the interest rate) the interest rate is slightly higher for 100% financing but the money we had for a down payment we used to lower the interest rate almost a full point!  and ended up getting a better rate than the regular 10% down interest rate,

Biggest thing is NO new credit within 6 months of applying for a mortgage banks do not like that (and some will make you wait the 6 months) Paying of the 5K in CC bills will definately help you, credit score go up it usally take about 60 to reflect on your credit as companys only report items to the credit bureau 1 time a month (usually mid-month)

Post # 23
Member
1603 posts
Bumble bee
  • Wedding: August 2014

cls9q: We’re in Canada so the specifics might be a bit different, but yes, we were approved for an atrociously high amount over what we would truly afford. The problem with our situation is that I work in a unionized environment and get all the benefits of it, at the expense of a 40% deduction rate. So when the banks looked at my gross and based our preapproval off that, it did not consider the fact that my take-home pay is significantly lower than someone making the same wage in a different, non-governmental job. We had to go in and decide what our max was based on our actual net cashflow, and then go on from there (about $75,000 less than what we had been preapproved for).

It’s ridiculous how it’s based on your gross and not your net. I’m sure someone smarter than me knows why it is the way it is, though.

Post # 24
Member
714 posts
Busy bee
  • Wedding: September 2015

I just purchased my first home last month and I did the FHA loan. I didn’t put anything down and didn’t pay closing costs. My credit score was 700’s and the only debt I have was my car 10k. I got approved by myself for 150k. Ask a lot of questions about first time homebuyers. They will finance your closing costs and you won’t have to put anything down, you can but you don’t have to. I had about 15k saved but wanted to make sure I had plenty in savings just in case anything happened, like an emergency and I couldn’t work.

Post # 25
Member
13563 posts
Honey Beekeeper

Congratulations on looking for your first house! My husband and I went through this process last year. I had so much anxiety about it, but with a good deal of research on our end, we were pretty happy with how the process went for us.

When we started the house purchase process, we were approved for significantly more than we felt we could afford while still saving money toward other goals. What you can afford is up to you, not the bank. The bank will give you an idea of what you can be approved for, but it’s really up to you and your husband what you are comfortable paying!

There are several ways to get a loan without the full 20% down — you will just likely have to go a route other than a conventional mortgage, and depending on the kind of loan, you might be subject to having to pay private mortgage insurance, which will add to your monthly cost. We did a conventional loan with 20% down so I’m not an expert on the other loan options, but I know you definitely have options.

Something that was really helpful for us — we worked with a lender who runs a first-time homebuyer education class locally. She was especially well equipped to help answer our questions. We had gotten our preapproval from a different institution, but she was so great at helping us feel informed and in control of our home purchase that we got our mortgage through her bank. I never felt like she was trying to take advantage of us or our naivete. I wonder if there’s a first-time homebuyer class in your area? Or maybe you could call a few different banks or credit unions in your area to see if anyone can talk with you about your options as a first-time homebuyer?

On your end, it will be super helpful if you can start to gather your last few paystubs, all of your account statements, your tax returns, etc. That will help a lender determine what you can be preapproved for. And just getting that paperwork in order took me a pretty long time.

Also…this may sound silly, but I bought the Home Buying Kit for Dummies off Amazon. It has entire chapters dedicated just to budgeting, the approval process, and all the of the other processes you’ll encounter down the line. It was great to have a reference of what we *should* be doing when, and it helped us figure out what questions we needed to be asking so that we’d feel prepared every step of the way.

In terms of a realtor, make sure you find someone you trust and who seems on top of things. Have any of your friends purchased homes lately? They may be able to recommend (or warn against!) their own realtor. Your realtor is obviously a big part of the process once you’re really looking for houses, but I think you’re spot on making sure you’re comfortable with the financial side first.

Good luck and try to have fun!!!!!!!

Post # 26
Member
4038 posts
Honey bee
  • Wedding: October 2016

I’m in New Jersey where everything is just over the top ridiculously expensive.. I think u got a lot of great advice, I’ll just add to a couple of things people mentioned,

1. We put 20% down, we had the ability to so we did and we don’t have to pay the PMI which is an extra monthly payment to pay off the interest on that so for us it would have been an extra $117/per month..

2. As Bride to bee2017 mentioned, absolutely spend that extra money to get a home warranty which overs repairs on basically everything in the house (fridge, washer, dryer, appliances, plumbing issues, etc.) Weichert Home warranty was ours and it was great…

3. Taxes can and will go up every year, in New Jersey for example, our property taxes have gone up almost $2,000 in two years, we currently pay over 12,000 a year in property taxes.. astronomical. I’m not saying u will have to pay anywhere near that amount in FL but just keep that in mind and understand that taxes raising is a possibility and u don’t want to be blindsided (don’t worry though NJ is its own shitstorm in itself)

4. We paid a lot of money in closing costs.. I think it was almost 11,000.. Again NJ is fucked up but just make sure u talk to mortgage company and realtor so u have enough to pay those costs..

5. Get pre-approved so u know what price range u can afford. And don’t go to the higher end of ur affordability, in other words, the banks will decide that u can comfortably pay up to 35% of ur salary on ur mortgage and still be comfortable.. they can us a VERY high number on what they believed we could comfortably afford. Put it this way, we stayed far away from that high number and ended up buying a house that was 150k less than the banks number..

Post # 27
Member
4698 posts
Honey bee
  • Wedding: September 2014

You will more than likely be approved for more than what you can comfortably afford (both times we were approved for an amount that would result in a lifestyle adjustment). You need to crunch the numbers on your own to determine what you can really afford, according to my bank: no more than 30- 32% of your gross annual income should go to ‘mortgage expenses’ (principle, interest, property taxes, heating, and condo fees- if applicable)

I would personally never, ever purchase a home with less than 20% down. There are benefits to a larger down payment.. Your mortgage is lower from the start, you’ll reduce the amount you have to pay in mortgage insurance premiums (CMHC in Canada), and you’ll pay less interest overall.

But, you also have to take into account closing costs. If you don’t have 20% + closing costs, I’d personally wait it out. It probably sucks to live with your parents after living on your own but, in the long run.. I think it would make more sense to wait until you have a larger downpayment, its better for you in the long run.

Post # 28
Member
330 posts
Helper bee
  • Wedding: September 2015

Plan on paying less for a mortgage than you would on rent (because there are hidden maintenance costs and untimely expenses that WILL arrise). I agree with other Bees, count on purchasing with only one of your incomes to ensure you can afford a home.  What usually gets people in trouble is not counting on the maintenance that is needed on a home that isn’t needed when renting. For example: lawn mower and supplies for maintaining a yard, water heater failure, hvac failure, roof failure, plumbing issues, fridge/dishwasher, washer dryer expenses.  All these add up quick.  In the first 5 years, I had to replace my HVAC, dishwasher, water heater, washer and dryer and buy a new lawn mower.  When all was said and done, we had spent over $12,000!

20% down will avoid your need to pay PMI.  I would highly recommend having money to put down and having the additional funds for maintenance and closing costs.

Good Luck!

Post # 29
Member
1607 posts
Bumble bee
  • Wedding: October 2013

I don’t think anyone’s mentioned, but keep in mind that your parents will have to pay gift tax on whatever they give you over the 14k annual exemption, and gift tax is pretty hefty.  

Post # 30
Member
2805 posts
Sugar bee
  • Wedding: May 2016

Everyone has already answered your major questions, so I’ll just add a few “other” 

– Get a GOOD inspector. Some walk through, look at a few things, and sign off on it. You want the kind of inspector that crawls into every space their body fits and really inspect. A good inspector can not only stop you from buying a home that has been fraudulently marketed, but can also help you know minor issues in the home and suggest a timeline for repairs and such. For example, you might be able to wait three years for a roof, but you need a new furnace within a year, type of advice. Paying an extra $100 is worth it. 

-Regardless of the sale price, if property taxes are high, be prepared to walk away. Once taxes are figured into the mortgage, it can seriously raise it. Lower listing prices seem like a steal, but are not always.

-You are likely going to be pre-approved for a mortgage that you cannot realistically afford. While banks take into consideration your other bills and debts when deciding on an amount, that amount is often higher because banks are not going to figure in enough money for a reasonable “disposable income.”(though they do figure it in, its never enough).  If you use the max amount they offer, it is unlikely you will have much money left over for repairs, let alone a social life. Try to go under your pre-approval by 10-20k to provide yourself a bit of a cushion. If you are worried about getting your realtor to show you enough houses at the lower range, ask the bank to draw up your pre-approval letter at a lower amount. 

Finally, Look at LOTS of houses! The more you look at, the easier it is to decide exactly what it is you are looking for in a home. 

Happy Hunting!!!

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