First time home buyers!

[mamamilkers]

I am curious what everyone's tips are for first time home buyers-- I'll take anything you got from deciding if you can afford it to how to get a loan to dealing with realtors to picking the right house and everything in between.

Let's hear 'em!

[Eman'smom]

Be looking at "starter homes" not dream homes.

Buy below (well below) your means, banks want to give you a ton of money that often means nothing can go wrong in your life.


We did a FSBO it worked out very well.

[Amila]

Hi! We just closed on our first home in October...hmm some tips...

Make sure your realtor is working for you not against you, and make sure that you do NOT use the same realtor that the seller is using (sounds stupid, but we almost did it)

Don't be afraid to low ball an offer- you just never know

Make sure you get a 30-year fixed rate mortgage that has you paying toward the PRINCIPLE as well as the interest. You do not want an interest-only loan. Shop around. We had a woman at weichert tell us that we would not be able to get any good loan, and that no other person would be able to do better...and then we found someone who got us a GREAT loan.

Realize that if you get a fixer-upper, it will cost you A LOT more money than you think, and it will take a LOT more time than you think to fix it.

Ther are tons of hidden costs associated with buying a home.

Be prepared to possibly have to come up with more money than you expect at closing (in our case it was $2000 more : )

If you are buying a home, make sure to ask lots of questions about lead-based paint if the home was built before 1978, and see if you can get the seller to remediate any LBP before you move in. LBP is a nightmare (I am dealing with it now)

Buying a home as-is CAN be a good option to save on money, but be prepared to deal with it being a big risk.

Don't pay more than $500 for homeowners insurance. You should NEVER pay more than this.

Make sure you include a termite inspection in your home inspection.

Get two carbon monoxide detectors- one for the basement and one for the hallway by your bedroom if you have a furnace b/c they can give off CM.

*Note: replacement windows cost a LOT- like $200 a piece.

If you want to build on to the home- make sure you check out permits in your town before you buy the home

Don't get too attached to a house until closing!

HTH!!!

[Amila]

DP adds:

Check the electrical! 200- amp is the norm.
ours is 100-amp and our wiring is soooo old it all has to be replaced. luckily FIL is an electrician

Check for water damage around tub and sink

If it an old home your sink and tub can contain lead as well- ours is cast iron/porcelain and it is leaching lead all over the place.

Do a sex offender search, some states actually provide addresses of sex offenders..if one is living right next door you might want to reconsider.

Talk to the neighbors...they may know stuff about the house the seller isn't disclosing.

Have the water tested if you have a well

i will add others as I think of them...

[shelf]

first and most important, start saving now if you aren't already. Save for a downpayment, closing costs, extras for the new house.

check your credit. make sure everything on your credit report is correct. Make any changes necessary. Try to pay off some things on your credit report to raise your score. The better your FICO, the better the interest rate you will get.

Shop around for realtors. And while you're talking to them, find out who they use for their mortgages. It may be you find a better fit with using one realtor and picking another's mortgage person.

When you find a home you love, get it inspected. Even if it is a new home, get it inspected. There are things the builder may have missed.

Figure out how much you can afford monthly, deduct $100 or so and then figure out how much mortgage you can afford. You tell the realtor what you want, don't go by what they say you can afford. They may put you in a range you may not be comfortable with. (be sure to add in taxes and insurance) I say deduct $100 because you never know what will come up and while $100 a month doesn't sound like a lot, if you put that money aside for household stuff, it comes in handy. No running up the credit cards when the water heater craps out, etc.

[fuller2]

Just wanted to emphasize the point that when you buy, all the maintenence is paid by YOU--and there is almost always something to fix, paint, or replace. You should not buy a house unless you have very good idea of condition, and if you have the funds available to deal with whatever condition it is in, as well as regular maitenance.

Does it need a new roof? That's $10-$20,000 you're going to have to come up with on top of buying the house. How is the heating system? plumbing? etc. The biggest shock for me going from a renter to owner was that owning can be a LOT more expensive than renting, even if your monthly payment is less. (You might seem to be 'saving' $200 a month, for instance--but as soon as you spend $5000 on a heating system upgrade that monthly cost has gone way up.) The mortgage deduction is usually not all that much, and may not account for anything if you have a low income or don't itemize deductions.

And don't forget how much money you will be paying in interest. You can buy a house for $150K and spend more than double that in interest over the course of the loan. I paid the bank $16,000 on my house last year. I only reduced the mortgage principle by a couple of thousand dollars. You might think of it as paying rent to the bank, which really owns the place, while having to maintain the house yourself! Some people think owning is a big racket, a sham, because of this.

Because of interest and the cost of keeping the place up, if I sell my house in 3 years I will have to get more than $50K than I paid for it just to break even. If I get less, and in this market I might, I will actually have lost money--possibly tens of thousands of dollars--and I would have been much better off renting this whole time and putting my down payment into a bank account instead. When people say they 'made' money selling their house, I don't believe it's true unless they first subtract their interest payments etc.

A word of warning while you're looking--sometimes 'renovations' are just cosmetic coverups of much deeper problems. I know someone who bought a 'just renovated' house--and it turned out the bathroom vent covers didn't actually cover any vents, and that tile grout had completely stopped up the plumbing in the same bathroom--whoever was working had just wiped off their tools into the toilet. The kitchen cabinets didn't leave a wide enough space for a normal refrigerator! and they had to buy a special one. Many other similar issues. Don't be fooled by a pretty exterior--the bones are what is important.

That said, I'm very happy I bought and would do it again....though next time I am going to be a lot smarter about the costs of owning.

[jkpmomtoboys]

A lot of advice about a 30 year loan depends on where you live. For instance, in the Bay Area, no one gets a 30 year fixed loan. It's just not done. Especially for a starter home....there are many other options out there--make sure your lender knows about them...

My advice is to stretch on the home. Not out of your comfort zone but stretch as much as you can. Because even though people assume they're only going to be in a "Starter" home for 5-7 years it may be a lot longer.

Focus on the things in the home you cannot change. Do you like the location? The lot size? The street? These are important to like because you can't change them. Too many people focus on paint, window coverings, etc... these things you can change. You can update bathrooms but you can't get more land.


If you have a specific area in mind, find a realtor who specializes in that area. If not, find a realtor in your area who specializes in houses near your price range. A high end realtor isn't going to have enough info about starter homes b/c they just don't do that kind of sale regularly enough.

Ask the selling realtor why the people are moving. Many times you will get some interesting information.

Talk to the neighbors. Walk around. How friendly is everyone? How many kids on the street? Are people home during the day?

Oh and very important (b/c I'm a Planning Commissioner -- if there is vacant land around, ask what the plans are for the land. What's it zoned for? And what is permitted in your area? You don't want to fall in love with a single story with single stories around it only to find they are allowed to build a second story no problem.

Hope this helps!

[Herausgeber]

Don't pay more than $500 for homeowners insurance. You should NEVER pay more than this.

Amila, how do you figure? The cost of your policy depends on the replacement value of your house. There is no policy in the world that could cover my house at this premium.

[Herausgeber]

1. Always get the home inspection.

2. Straighten up your credit before you start looking at houses. If the only loan you can get is subprime because of your credit issues, you should probably stick with renting for a while.

3. Find something that will suit your family's needs for at least 5-7 years.

4. Don't bank on making a big profit when you sell.

5. Bring your good-faith estimate to closing and go over the final closing documents line by line. Do not let anyone rush you. Don't get so caught up in the momentum to get the house that you just pay a bunch of junk fees. Doing this saved me several thousand dollars.

6. Don't use all your cash as a down payment.

7. Steer clear of exotic loans, like interest-only loans or those with negative amortization. 80/20 loans can be great, though. I know it seems like everyone is stretching with the wacky, lower-payment loans, but they will come back to bite you in the butt later unless you have a LOT of financial self-discipline.

[Amila]

Our realtor said that you should never pay more than $500. Maybe that was just for our price range? Our home cost $162,000.

[meisterfrau]

Get a home inspection by a licensed, experienced home inspector. If he or she says something is likely to break soon, believe it!

Unless you are familiar with the area, drive around a LOT before you make a commitment. When I moved into my first apartment, I failed to do this and was not happy with how close I actually was to the "bad" part of town. Search here and here to check for levels of pollution and other important data about the community. Check here to see if the property is in a flood zone. DH and I bought our first house in April, and it's in a flood zone. The policy is more than $1000 a year and is required by the lender (and we'd have it anyway, b/c I am not about to go without).

[RiverSky]

Originally Posted by Amila

Our realtor said that you should never pay more than $500. Maybe that was just for our price range? Our home cost $162,000.

When we bought our house, I called EVERYONE to get house insurance and couldn't get any quotes under $2500, then I found one for $1700. Wow, I felt so lucky. But the next year, the rate went up to $3100...as did the rates from all the other companies, too.

I think it totally depends upon the area you live in, what possible natural catastrophies could be there (I'm in Florida) and the price of the home. I'm sure your realtor was ONLY talking about your particular situation. It's definitely good to shop around, no matter where you are, though.

Of course, our taxes also went up drastically, $1600 the first year, then over $3000 the second. That's a good chunk of extra change a month that we have had to figure into our budget. It's definitely a good idea to not buy a house that is at the very tip top of what you can afford because stuff can happen and things can change.

Congrats & good luck!

p.s. make sure you get your taxes and insurance paid BY your mortgage company...that will add to your monthly payment but will make things SO MUCH EASIER.

[2busy2clean]

Home owner insurance is a one year insurance policy on the appliances which the seller should be asked to purchase. Our home owner insurance ended up buying us a new furnace!
Insurance for the house, will, of course, cost much more.

Hope that the right house comes along for you!

[lmonter]

Get an inspection. Otherwise you may end up remodeling *much* sooner than you want.

Look for good construction. If the house has good bones and is solidly built, you won't be SOL in a decade or less. Dh can distinguish this kind of thing much better than I can.

Have three times more money on hand than you think you'll need. In the first two years we bought: a new fridge, a new oven, two wood stoves (one to replace a sad old insert), a new water heater, new garage door, a master bathroom remodel (rotting floor because they never replaced the $3 wax ring) and something else. Oh, and dh put a fence up so the kids wouldn't run out into traffic. All that's left is the furnace that we never use, the washer and the dryer.

Get a standard mortgage, don't do the interest-only or ARM or any other funky thing. It'll only come back to haunt you.

If you have a yard, make sure you've got the stuff to take care of it. Another chunk of change.

After you move in, carbon monoxide detectors and fire alarms.

And yeah, windows are pricey. Keep that cost in mind as well, unless the windows are *quality* new ones. In our area, the metal ones freeze up (especially when you get condensation) and the vinyl casements die within 2-3 years. Just the kind of weather and quality of 'em.

Good luck!

[oldgirl,newtricks]

"Don't pay more than $500 for homeowners insurance. You should NEVER pay more than this."

Way off base. Replacement costs vary widely around the country.

We have bought or sold something on the average of every two years and we learn something new with each transaction. You would do well to know the real estate laws and customs in your area. Some places use attorneys, my state doesn't. Disclosures are set by state law, so become familiar with your state's disclosure requirements. You may be able to get MLS and watch for homes yourself.

I personally love old, fixer upper type houses, but I've done quite a bit of that. I can get more house for my money and put in what I want rather than paying for someone else's remodel. I wouldn't be scared off by older stuff.

First and foremost, don't sign anything you don't understand. Keep asking questions until you do understand. When figuring what you can afford, don't depend upon what lenders tell you. Those figures don't include taxes and insurance. You know what you can afford. We have always stayed well under what the lenders suggested. Shop for loans with a broker, rather than just using the local mortgage company. We live in Alaska and used a broker in Florida. With email, faxes and overnight mail you are not restricted to you locale.

You will get lower interest rates with a 15 year loan over a 30 year loan and you can still pay down the principal while enjoying a lower rate. If you don't have 20% to put down, you will most likely have to pay private mortgage insurance (PMI) which will up the cost of your payments. Understand what closing costs mean in your area. Be sure you have the cash to cover escrow money (either a % of the price of the home or a set $$ amount), cash for closing costs, cash to pay the house insurance prior to closing, moving costs, getting utilities and all of that stuff set up. We have yet to close a deal which didn't take a good chunk of change.

Choose location first, house second if you can. You can always fix a house later. You can't fix neighborhood problems. Find someone whose opinion you value and has "smarts" in real estate transactions and take them with you. Many of us took parents along when buying the first home. If they haven't done anything in 30 years, you might want to find someone with more recent experience.

Good luck. Have fun. It's always exciting but very stressful.

[Emmeline II]

*

[mightymoo]

Originally Posted by Amila

Our realtor said that you should never pay more than $500. Maybe that was just for our price range? Our home cost $162,000.

I'm sure that the realtor was speaking for the area and replacement cost of the home. It maybe that he/she deals so often with homes within that price range they just generalized. But, clearly someone with a brand new $700K home is going to pay a lot more than someone with an older $100K home to insure it for replacement, just like I pay more to insure my new minivan than we do for DH's 10 year old sedan.

[mightymoo]

It's very important to find a good home inspectors. My parents are real estate agents, I remember they sold one house where they put a deal together and the home inspector found a TON of issues, the deal fell apart. They put another deal togehter and the second home inspector did not mention any of the issues the previous home inspector found, but came up with a few that the other one didn't.

Every home has *something* wrong with it. Building, Electrical and Plumbing codes are constantly being updated, so things will be out of code in a home that isn't newly built. Expect that no matter how nice or fixed up a house is, the home inspector will find something wrong with it - but not all issues are really big concerns, and some of course are. In areas where the ground freezes, foundations crack, etc. Things happen. Don't panic just becuase the inspector says something is wrong. However, what is important is really understanding what each issue means to you in terms of risk, cost to replace, etc. You don't want a home inspector that glosses over issues as no big deal, but you don't want one that makes everything out to be a huge issue either. Ask lots of questions of the home inspector, that is why you go on the inspection with him. If he says soemthing is wrong, ask what would happen if it wasn't fixed (sometimes the answer is nothing), roughly how much it costs to fix it (though they may not be willing to tell you that due to regulations on quoting prices, etc), how high a priority this is in terms of the issues he's found so far, is it a must fix before moving in? Is it a must fix before winter?, etc

We had a home inspector on our last house who said 'oh the furnace is old, you should have them service and certify it' - and we were like 'okay' we asked the sellers for that, they came back with money rather than doing it, we thought oh that really covers the cost of having it serviced, no big deal. Well, when the gas company serviced it they marked it unsafe and removed the front and took it with them so it could not be turned on. I wish the inspector had made it clear that he was saying he could not guarantee the furnace was serviceable and we had ot have someone else inspect it (which is what he says he meant by that) because we didn't hear it that way.

Ask anyone you know who bought or sold a house in the area who their home inspector was and what they thought of them. Like someone said about mortgage brokers, ask every realtor you talk to about it and see if someone comes up a lot.

Since we moved into the area my parents live, we hired the home inspector they considered the best in the business for our most recent home inspection. We have been much happier. He had a laptop with him, he would take a picture of everything he said was an issue and we got a report not only with the issues and the explainations but pictures of each thing, etc.

[mirlee]

One rule that we lived by was if the house costs $150,000, your payments will be roughtly 1% of that. Before we refinanced, our mortgage on our $66,000 was roughly $660.

Don't be afraid to refinance the house if you think you can better a better rate, even if you have only been there for two months. My boss did this and it worked our great for him. We refinanced and it worked well for us. This may not work if your credit isn't good.

Shop around for home inspectors. They are not all equal. Make sure you go with someone who is reputable. Lots of people who have done constrcution at some point try to make money by selling themselves as home inspectors. Working in contruction does not neccessarily mean they know about inspecting homes.


I just saw mightmoo's post on this:Since we moved into the area my parents live, we hired the home inspector they considered the best in the business for our most recent home inspection. We have been much happier. He had a laptop with him, he would take a picture of everything he said was an issue and we got a report not only with the issues and the explainations but pictures of each thing, etc.

We had the same experience. Our inspector was fantastic.We recommended him and would use him again in a heartbeat.

Before you even find a home, make sure you have $3000 cash. This is called hand money and you will need to give this, or some similar amount, to your realtor once you find a house you like to get the ball rolling. If that house doesn't work out, you get it back, if you buy it, it becomes part of what you contribute to the closing.

Home warranties aren't always a selling point, but they don't hurt. Ours replaced the water heater and a couple other things. Too bad the furnace and air conditioner broke AFTER it expired. It would have covered them too.

If you really like a house. Visit it more than once. Go during the day, during the night, and during peak rush hour times to see how long your commute to work will be.

Drive around the neighborhood each time you visit to get a feel for who you might live near.

Take other people to visit the house if you are very serious about it. They won't be seeing the same house you are. Your glasses may be rose colored in regards to the house.

[oldgirl,newtricks]

Going back to the replacement cost. The purchase price of the home doesn't always corrolate with the replacement cost. You can have an older home with things like hardwood floors which will be very expensive to replace in today's dollars. Our house is older and in an older neighborhood with some character. If I had to replace it, I wouldn't just throw up some builder grade house. I would need an architect to help design something which fit into the neighborhood and could be built on our lot. Our home is insured for $300,000 more than we paid for it two years ago, because that's what it would cost me to build on this lot.

Someone buying a brand new builder home, but paid more for that house, may have less expensive insurance than is on my home.

YMMV