First time home buyers! - Page 2

[jkpmomtoboys]

Originally Posted by mirlee

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.

I think this may be regional. I've never heard of "hand money". And we didn't have to pay our realtor at all when we bought a house. The seller pays the realtors.

[oldgirl,newtricks]

Called escrow in most places and it processes through the realtor. Not payment to the realtor. The amount varies widely though out the country. I've never heard it called hand money either.

[root*children]

I haven't bought a house yet, so I'm probably not the best source of info. But, you do need that $2K-$3K, just for all those extra little costs, I think is what PP is talking about when she said "hand money". Like inspections, etc. In our area, there are classes offered for first-time home buyers. I've taken them, and now qualify for REALLY GOOD loans from different non-profits. Ask around. If you can't find anyone who knows, I'd contact the Rural Development or Habitat for Humanity or someone who deals with first time home buyers and ask about classes. They are very cheap and taught by professionals. They also give you HEAPS of info to take home, so you don't just forget everything

Ours was offered through The Affordable Housing Coalition (which I'm not sure is national), and it qualifies us for a $10K downpayment loan that will be 1% below the lowest mortgage rate offered locally - that loan is through Neighborhood Housing Services, which is national.

[mightymoo]

Originally Posted by oldgirl,newtricks

Called escrow in most places and it processes through the realtor. Not payment to the realtor. The amount varies widely though out the country. I've never heard it called hand money either.

Yeah, I've never heard it called hand money, but regional variations are very common in real estate. In the NW, they called it 'earnest money' and in MA they call it a deposit, generally its an amount you put down with the offer or purchase and sale to show the seller you are a serious buyer. How its handled varies, in MA it is deposited in an escrow account with the realtor's brokerage. Ultimately it goes toward your down payment, but if you break the offer contract the seller may have the right to keep it (but there are many ways you can legally get out of the contract and get your money back if things don't work out, inspections, financing, etc). How much is generally put down varies greatly between areas of the country, but the realtor will be able to tell you and you can do whatever you want, you just may risk looking like a serious buyer if you put significantly less than the norm down.

I didn't really understand the deposit/earnest money / serious buyer thing myself until we put our house on the market - we got an offer from someone who was really out there in terms of how she thought she was going to finance this house (wanted to pay $30K more than hte asking price at closing and get that money back from us, so she could basically finance that money instead, but had no down payment, it was very strange and no bank was going to do this) and yet they couldn't manage to come up with the reasonable and customary 1% earnest money, it was a big red flag to us that these buyers were not going to be able to fulfill this contract and we would risk taking our house off the market when we couldn't afford to wait to have it sold.

[laneysprout]

We just bought our first house and once our offer was accepted by the seller, we wrote him a check for $3,000 to take the house off the market (that money went into escrow). When we closed on the house, this "deposit" we made was used to cover the closing costs (lawyers fees, filing costs, etc.) and we actually ended up getting about $300 of it back. We also had to pay for an inspection, separate from the $3,000, which cost about $200.

Also, it was my understanding that niether the seller nor the buyer pays the real estate agents, but that their commissions come out of the sale price of the house (so, if a house sells for $200K, the commission is 7 percent which the agents for both parties would then split). That's why the sale prices are usually "marked up" slightly.

[mightymoo]

Originally Posted by laneysprout

Also, it was my understanding that niether the seller nor the buyer pays the real estate agents, but that their commissions come out of the sale price of the house (so, if a house sells for $200K, the commission is 7 percent which the agents for both parties would then split). That's why the sale prices are usually "marked up" slightly.

That's the seller paying for it - its his house, all the money goes to him less the debts he owes (mortgage) and less the commission. Hypothetically, if a seller sold the house for the exact amount of his mortgage, he/she would still owe the realtor their commission out of pocket. Also, list prices aren't 'marked up' - agents use comparable sales to determine how much the house should sell for and list it based on that, the commission doesn't enter the equation. If other similar size and location houses sold for X price, they list it at X price, not X + commission. Sometimes they list it for higher than the comps sold for to allow for negotiation.

You may find FSBOs that are lower priced because they feel maybe they can manage to sell it faster if they lower their price the cost of the comission, but just as often you see FSBOs who are higher priced becuase they really have no way of determining the market value and often they want to keep that comission themselves, not give it to the buyer.

[SleeplessMommy]

* buy a less $$$ house than the bank will approve you for
* get mortgage preapproval
* Once you are pre-approved, cancel all discretionary spending until after house is bought. No new cars, furntiure, vacations, etc. Consumer debt of any kind can affect your mortgage approval.
* in today's "soft" housing market, try to make low offers. Comps from 12 months ago will not cut it, prices are falling!
* look at the school/property takes on the house before making offer. This may vary between school systems. We pay LOTS in property taxes!
* look for houses with "fixable" defects - clutter, ugly carpet (over hardwood), bad paint jobs, cigarette smoke smell, overgrown bushes, etc. You can make these houses nicer through sweat equity. Also, avoid houses with non-fixable defects - concrete slab in cold climate, busy road, flood-prone low-lying ground, etc.
* test for radon
* To avoid heartbreak, fall in love AFTER you buy the house, not before.
* Expect to spend lots of money in the first few months you own the home. small repairs, curtains, small furnishings, cleaning, etc. Thousands of dollars!

some interesting reading here: http://money.cnn.com/real_estate/index.html

[AngelBee]

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[grisandole]

I highly recommend the book, "The Virgin Homeowner". We've bought three houses, and I still reference it. She has a great chapter about how to find a quality inspector. A good inspector is crucial!

Also, budget extra money for property taxes, because in some areas they go up quite a bit each year...when we lived in IL ours jumped almost 1500 in one year. I think that's a regional issue, because we haven't had that happen here in AZ (they will go up slightly, but nothing remotely that drastic).

[ChattyCat]

You should put aside 1-2% of the purchase price of your home every year. This should be used to cover necessary repairs and upgrades. New appliances, roof, paint, etc. That means if you bought a $200000 house, you should save $2-4000 a year just for home maintenance. That's roughly an extra $2-300 a month on top of your mortgage/insurance/taxes that you should set aside. Think about that, when you think about how much you can afford and should spend.

15 year fixed rate mortgages will net you a better interest rate and you'll pay much less interest over the life of the loan. Also, you will build equity faster and own your house much sooner. It often pays to buy a house that costs a little less and get a shorter term loan.

Bigger is not always better. Bigger house means more to clean, more to furnish, more to heat, more to cool, etc. It may seem great when you're moving out of an apartment to get a big house, but it might be wiser to go only slightly bigger.

Find out if there is a Homeowner's Association (HOA). READ what ALL the covenants are. You may find a perfect house, but realize that the neighborhood covenants suck. Some places are ok, just wanting to make sure that you don't paint your house hot pink/lime green stripes to protect the values of homes in the neighborhood. Others will dictate what kind of fence you are allowed to erect (only picket for example), not allow you to have clotheslines, make you get approval for any landscaping change, etc. It helps to know what you're getting into BEFORE you put an offer in on a house.

A newer house doesn't equal a house in good condition. Many fixtures and appliances will have long warranties, if you are the original owner of a home. But, if you buy a house that is a couple years old from the original owner, none of these warranties will transfer. You will still likely be repairing and replacing things.

[GoddessKristie]

We're still renting so I'm not speaking from experience but I heard a few months back about these awesome savings accounts called Individual Development Accounts. They sound pretty awesome, it's a matching program where you can get (in our area anyway) up to a 6:1 match. For each dollar you put in it will get matched. Check out www.cfed.org toward the bottom you can click on IDA's and find out more info and institutions in your area who offer them.
Let us know how it goes!

[wombat]

Home Inspections: don't use one recommended by the realtor. We did. He did a 'legal' job but I felt he was working for the realtor - i.e. he told us what he had to tell us but he didn't want the sale to fall through. Eg. he told us the deck needed fixing. He neglected to mention it couldn't possibly be legal and permitted. He obviously relies on business from the realtor and I got the feeling he didn't want to be too negative and sour the deal for the realtor.

Before putting in an offer, call the local county (or check their website) - the planning and permit dept. and see if there are any outstanding permits on the property. You only need give them the address - permits are public record. Contractors sometimes don't bother with permits, or may take one out but then never get a final inspection. Some people are blase about permits but the fact is your homeowner's insurance doesn't cover illegal additions (ie extra bathrooms, decks etc) and if your local planning dept decides to get tough, it'll cost you in time and money to rectify any illegal additions.

I was amazed when the seller accepted our low offer (20,000 less than original price) in a hot market. Sellers just need to close sometimes. Don't be afraid to make low offers.

Do read any HOA rules - they can have bizarre rules. One HOA near us has a 'no flatbed trucks can be parked in driveways'. One family's truck doesn't fit in their garage and the HOA won't allow them to park it in the driveway. It's unbelievable. Ours is ok but we still need permission for a lot of things - like front yard landscaping, repainting our house etc.

Buying your first home is a great opportunity to convince your dh and family they can and need to do without cable TV, mobile phones, etc. I finally got rid of the cable TV MIL is so concerned about this sacrifice she regularly sends dh's tv shows on tapes

[formerluddite]

what great tips and ideas!

one that i differ on is to buy a "starter home." if you know you're going to need more room in a few years, do your best to get what you'll need now. next time you'll be the seller, and be paying the 6% realtor fee, 1.5% city transfer tax fee (that's what it is here in oakland, ca), etc. that can add up to a hit of about 10% of your selling price, maybe all of your equity. and if you're in california where prop taxes can increase only a small amount each year, your next home (after 5-10 years in your first home) might end up costing another $2,000/yr in higher taxes.

[philomom]

I agree with inspection and getting pre-approved.

Also, if you are worried about resale value, stay in the "good" school districts. Even if you plan to homeschool, its vital to how much your house could be worth in a few years.

Buy less than you can afford on paper.

Check "your" house at several times of the day. There could be traffic issues or noisy neighbors if you saw it only at 10 am on a Tuesday morning.

Walk the property carefully, see where the water runs. You want it to run away from the house!

Be careful of odors. Dog smell may come out. Smoke or mildew smells may be impossible to erase.

Good luck!

[dillonandmarasmom]

We bought one for about 2/3 what we were pre-approved for. Though we had a fair amount in a cash reserve prior to buying, we ended up spending much less than expected on closing costs, which was helpful when we had to paint, furnish and do minor fix-its.
We looked at homes in established neighborhoods so we wouldn't have any surprises down the road.
30 year fixed loan--do *not* go with interest only (lots of foreclosures these days...)
Get a home inspection by a reputable service
Talk to the potential neighbors if you can
Visit the area at different times of the day/days of the week to get a feel for things like quiet/noisy, heavy/light traffic, safe or not.

Other than that, you've received lots of good advice. Do your best not to let love at first sight guide you in this decision. Especially these days when so many homes are being staged prior to being opened up for show. You truly don't know what's under that fresh coat of paint...
Owning a home is an amazing feeling. Sure, you are the one responsible for repairs and maintenance, it can be a real headache when the toilet backs up or the water heater quits, but in the long run you have this wonderful place that you own. It truly is one of your best investments.

[dinade]

One thing as a mom that was important to me:
fence,
no pool or water features (fear of my kids drowning for some reason)
cul de sac
all bedrooms on the same level
home inspection
nice neighbors
kids in the neighborhood
make sure i can afford it on one salary