Give me your best advice about buying a house!

[hopefulfaith]

Dh has applied for a job that we will know about in approximately 8 weeks. He's a good candidate, and there's a good likelihood that he may get the job. If he does, then we will have to move to the next town over (~55 miles) and buy our first home. We are currently renting.

We're trying to get our ducks in a row right now just in case he is selected - if he gets it, then we have to pick up and move ASAP.

Neither of us has ever owned a home, and we have no idea how to go about any of it. I've been trying to learn about mortgages online - reading Motley Fool and such, but I'd love to hear from people who have BTDT.

What do you regret?
What do you wish you had done?
What did you do right?

For example, how did you decide how much house you could afford?
How did you decide how much to put down? (In our case, I've been a sahm for 2.5 years and our savings is pretty well shot....but we have a refund this year...)

Let's hear it!

Thanks!!

[_betsy_]

You want to buy the moderate home in the expenive area, not the expensive home in the moderate area. In the first scenerio, there will be afar more people interested in buying it when you are ready to sell than in the second scenerio.

Check your credit report. Make sure there's no discrepencies. Get your credit score in good shape now.

Don't get yourself into a bad situation by buying too much house. Your first house doesn't have to be the biggest, nicest house you've ever lived in. You don't want to be house poor. You don't want it to be a constant struggle.

As far as how much to borrow - generally, they will approve you for FAR more than you can/should actually borrow. You need to know your budget ahead of time - figure out how much taxes will be, and how much you are comfortable spending each month. Remember to think about home owner's dues, condo association fees, maintenance costs, etc. Trash, landscaping, snow removal, water, utilities, etc. all adds up, especially if you are used to all that being covereing rent.

[JackieR]

In general I have found that people who use about half of what they're approved for are those who are most comfortable with their mortgage. If you or your spouse is former military, check into a v.a. loan - no down payment and no mortgage insurance required...just closing costs. Another thought is to rent when you first move to the new town - get to know the area really well, and then select your home. This is something we didn't do when we moved here and we often have regrets about our location choice (though we do love our home). Just a few thoughts of the top of my head - good luck!

[BetsyS]

My advice is to be very sure that you will stay in your new house 3-5 years. We just sold our first house, and we lost $10,000 on the deal because we've only been here 2.5 years. And not a paper loss. We are writing a check out of our savings for $10,000 to the mortgage company. Ouch.

Put as much down as you can afford. At least 10%, preferably 20%. It's alot, but if you can't put that much down, you might need to reconsider renting for a few more years.

Some things we did right:
Our mortgage payment was less than 25% of our take home pay. That made it very easy to pay each month, with plenty left over for other stuff. This might make you get less house than you want, but I think it's a good guideline.

We bought in a modest neighborhood. Everyone does their own yards (as opposed to yardmen), there really isn't an active homeowners' association to tell you that the grass is 1/8 inch too long, that sort of thing. This worked for us.

A good location. Our house sold, probably on location mainly, after about 80 days on the market. That's really good for around here right now. Our location is excellent, though (close to 2 interstates, good schools, cheap taxes), and that really helped.

Don't forget the "extra" costs of home ownership. Stuff that is a pain--the broken dishwasher, the cost of a heater repair or AC tuneup--and stuff that you just want--curtain rods, blinds, paint, mulch for the front bed. Make sure that your budget isn't so stretched that you can't afford to really make your home your own. That is (to me) the fun of home ownership.

[texaspeach]

watching this thread with interest! my DH just took a new job as well, and we're planning to buy soon.

[Vypros]

1. Do NOT take a loan where the payment is any more than 25% of your paycheck.

2. Do not forget that taxes and homeowners insurance will be factored into said payment and they will account for at least $100 to $150 of that payment.

3. If you cannot stick to that guideline, you are living beyond your means and need to save a larger downpayment or buy a cheaper house.

4. After you buy your house, set aside 1% of your salary a year to maintenance/repairs.

5. Do not take an ARM, they will screw you in the long term (lots of people taking their ARMs a few years ago are being foreclosed upon today which is why the market is so messed up right now).

6. At the worst, take a 30 year fixed rate mortgage and don't be afraid to shop around for the best interest rate you can possibly find. A difference of even 1% with a mortgage can make the difference over thousands of dollars over the life of the loan.

7. Do not enter this thinking that you can sell the house on a whim. If you are looking for a temporary place to live, don't do it. Turn around time for selling a house can take up to a year.

8. Put 20% down AT LEAST to avoid PMI insurance.

9. Do not make an offer on a house until you've seen it at LEAST twice, but preferably three times. You miss a LOT of stuff on your first viewing. Go through the house with a fine tooth comb and do not be afraid to ask questions.

[Valian]

Be honest with yourselves about WHY you are buying a home.

If you don't like lawn care or like to go on long vacations, or even just take off for a lot of weekends, consider a condo instead. Are you willing to mow the lawn or shovel at a corner house? Would you do better in a house without sidewalks (for us, yes!)

Be honest about how much home remodeling you want to do/can afford to do and if you have any real skill for it.

This may sound like silly advice, but a lot of people get discouraged after looking and then settle. Only buy a house that you LOVE. Or at least that you really like, A LOT. We knew we didn't like this house very much, I passed it over a few times and we bought it mostly because we wanted to own, rather than wanting to own THIS house and that makes a big difference in how we feel about living here.

Choose location over most anything else. I think wistfully of the house (w/a fireplace and extra half bath) that we passed over but not when I think of the neighborhood.

The BIG 5 in a house are: roof, plumbing, electrical, windows and foundation.

You will pay big $$ for repairs or even maintenence, so these are the things to care about first, when shopping. Make a check list or scale and rate each house you look at on their condition for each of these. Read up on how to assess these: diagonal cracks in a foundation mean something different than vertical or horizontal cracks. Learn to check for dry rot in the basement by pushing your thumbnail into the supporting beams, know about 100 amp and 200amp means, and whether the box was changed or if the home was fully rewired (or is still on bulb and tube), look to see if the home has 1, 2 or 3 layers of shingles. If it was recently updated, was it a complete tear-off?

The Virgin Homeowner is a good guide to home care/upkeep.

[Pancakes]

Loads of great information has already been posted, but I did want to comment on one thing the previous poster mentioned. Do check what the taxes will be on your house, sometimes they can be MUCH more than 100-150 per month. Taxes and insurance are 500 dollars of our monthly house payment.

You can also call the local utilities to get an idea of what the average utility bills are on the home you are considering. This will help you budget whether or not you want to afford the house in question.

Do not buy the first house you see.

Visit the house three times, like the PP poster stated. Make sure you drive by at all hours of the day and night to see what the neighborhood is like. Talk to the neighbors if you want.

Do not get an ARM loan.

READ YOUR PAPERWORK! Closing on a house takes a long time and many people rush through and throw their signature on the papers, hell I've done that. However, I've known people to get screwed because they didn't read the paperwork and the mortgage broker told lies.

Yes, get the inspection even if they tell you it's optional.



There is so much more that could be said...lol

[ShaggyDaddy]

I wish I had known this in hindsight:

1) Don't buy a house because you think you are supposed to, to fulfil "the american dream", or because everyone else is.

2) Don't buy a house unless you know what your commute will be like daily, and make sure there are other jobs in the same field that are also a decent commute.

3) Don't buy a new home - Every home has issues with construction, and you want the previous family to have dealt with it before you.

4) Don't buy a home unless you are 115% positive you will want to live there for the next 7-10 years.

5) Don't buy a home in a market that you don't understand, in an area you don't know... What if the grocery store next to your neighborhood is the worst in town? What if the pizza place doesn't deliver, what if you can't get decent broadband? Etc Etc.

[Mamm2]

I would highly suggest you rent first. This gives you time to get to know the area (very important). I wish I would have done this. I would have realized how bad traffic was during rush hour and that most jobs are far from where we live. We also would have realized that stucco homes have a stigma in this area.

All in all considering how quickly we purchased because we were going crazy in the hotel room we did not do too bad.

Location, location, location is key. Also check taxes and good schools for resale.

[MistyB]

What I have learned or observed from others...

Totally buy within your means!! Figure out what you can afford to pay total for monthly rent and then buy something with a payment LOWER than that. Monthly repair and maintenance things ALWAYS happen and if you do not account for them...they can bury you. Something always needs to be fixed and you will be paying for it out of your pocket.

Account for mortgage, home insurance and property taxes when figuring out how much you can afford. For some reason many people neglect to think of the impact of taxes each month when running numbers. Escrow your taxes so they are already taken out monthly. In some cases you can escrow your Home Owners Assoc dues so they come out too. For us, those two thing alone equal $870 a month (crazy but we have great schools and community resources) outside of the mortgage and insurance ($1,500+). Trying to come up with that amount at various time throughout the year could wreck a budget. Suze Orman and many other people say not to escrow but to leave that money in a high interest bearing account to make money off it until the bill is due. I disagree.

Try to get the minimum space that you can see yourself living in for 5 years. Don't buy too small but don't go too huge. We bought too big and now want to downsize as we have so much wasted space.

Be totally anal about the home inspection.

Do not buy in a place that is not zoned to a good school district, even if you plan on homeschooling. That has a horrible effect on property values.

Make sure the house is not near a main road or stop sign if possible.

Visit the house at all times of day to see what local traffic is like.

If the market is slow, do not buy, rent! You may get a great price on a home BUT if you need to sell it, you will be out of luck.

Sure I will think of more!

[shepav]

Originally Posted by BetsyS

My advice is to be very sure that you will stay in your new house 3-5 years. We just sold our first house, and we lost $10,000 on the deal because we've only been here 2.5 years. And not a paper loss. We are writing a check out of our savings for $10,000 to the mortgage company. Ouch.

We recently had to write a check for the same amount... and we were in our house for 2 1/2 years as well. My advice would be to only buy a house if you think you're going to live there forever... but I'm slightly burned by how much money we had to pay out.

20% down payment. I cannot stress this enough.

Don't buy a house to keep up with the Joneses. We did that and regret it. Now that we're renting, we have more money than a lot of the Joneses we know.

Consider how much time you want to spend in your home. We are now renting, and are free to have more fun on the weekends since we have no upkeep with our house. You'll have to mow, shovel on your own.

Rent in the area in which you are going to move. We're doing this now to learn the school systems, where our friends will be, etc.

There are always hidden costs of a home, so make sure you have wiggle room in your budget.

Be choosy on your real estate agent and be aggressive in your offer. You'd be surprised that in this market what people are willing to take.

[hopefulfaith]

This is fantastic, everyone - exactly what I need! - keep it coming!!

Also, has anyone ever used a "buyer's agent" when you are looking for a home? I have had that explained to me this way: when you see a home you like that is being offered by, say, Century 21, you go into that walk-thru and such with a Century 21 agent who is working FOR the people who want to sell the house. Subsequently, they are operating from a perspective that they want to sell the house to you to make money for themselves and for the people who are selling the home - they are not necessarily in it for YOUR best interest. A buyer's agent, then, is a real estate agent you hire to navigate the system with you who works for you to get you the best deal/best home for you.
Anyone?

Again, thanks so much. This is invaluable.

[Piglet68]

Originally Posted by hopefulfaith

has anyone ever used a "buyer's agent"

Around here everybody does this. You would not go looking for houses without a real estate agent who is working for YOU. You would never go into a home and take on the listing agent as your realtor.

In some circumstances this happens, though. Say you hire a realtor, you go house hunting, and subsequently she gets a listing for herself that you just love. You could end up having her as a dual agent. There are forms that have to be signed, and special considerations that the Real Estate Board puts into place to try and ensure both parties' best interests are being met. But it's definitely not a situation that is recommended.

Exciting stuff that you are looking for your first bought home! Great advice from everybody.

[kkfum]

since you are a first-time homebuyer, i would suggest using a buyer's agent. they can help you through any difficulties that may arise. but try to get a recommendation for one--not just for one that your company uses as a relocation agent. try to ask someone at dh's potential job or anyone else you may know in the area.

i also agree wholeheartedly with the 2 pp's who said to rent first. we moved to a different city for dh's job 2 years ago and had basically a weekend to buy a house. we are now selling our house because we went over our "set" budget and did buy too much house. even though we can afford it, it's making other things in our lives a bit tight and we still feel "house poor." however, just as important, after living here for year, we found a different area we didn't think we'd originally like, to where we are now trying to move. we are definitely going to lose money, but it's the best decision for us right now.

so, i would really, really consider renting for a year. when we bought our house we thought we wanted a larger home on over an acre, with lots of privacy and character. turns out, with a young child, i feel very isolated as a sahm in a neighborhood where the houses are far apart and the next youngest child is 8 years old, even though the house has lots of "woodsy" character. we are now trying to move to a village setting only 3 miles away---an old, smaller 1890s home with lots of character, close neighbors, and lots of stuff to walk to on only 1/3 acre. if you had told us 2 years ago that we would want this, we would have laughed...

good luck!!!!!

[savithny]

Either the broker or the mortgage person should include taxes etc in their estimations of total payments. Don't go by the "total payment calculator" on any realty website, because it won't include your taxes. In our case, our taxes are almost 50% as much as our mortgage (ie: if our principal and interest was 1000, our payment would be 1500).

Like everyone else says, NEVER buy at the very top of what "they" say you can afford. If you're being pushed to that top end, push back -- find another broker who will work in the range you're comfortable with.

Look into state-sponsored homebuyer programs, too. In addition to VA loans and federal FHA loans, states have programs that may have different income limits reflecting your state's average incomes. We went with our state's first time homebuyer program, and we got a below-market interest rate and a closing cost assistance loan. The CCA loan is forgiven over 10 years, and since we plan (job circumstances willing) to keep this house at LEAST 10 years, it worked out.

But you know what, given what you say (moving to a new area, NEVER owned a home before) I really would make my first recommendation to rent for at least a year. We rented for 7+ years, which was longer than I would have liked, but necessary given DH's job. But what that meant is that we were very familiar with the community, the houses available, etc. We went to every open house we saw for the last 3-4 years before buying, and so when we saw our current house we both knew that it was what we wanted -- right school district, right configuration (I wanted at least 1.5 baths, which is hard to find in our price range), right neighborhood, on a bus line (so we didn't need to get another car). We were able to be pretty confident that even though it was the first house we looked at "officially," it was an opportunity we wanted to grab.

We also disregarded the 20% down issue - in our case, it was because we knew DH had a big promotion coming, which would put us *just* out of the income range eligible for the state mortgage assistance. While yes, we have PMI, the difference between the lower interest rate we locked in and the higher one we would have gotten with a non-state-secured loan, plus the bonus of the closing cost assistance, made it a better choice to buy with less down.

[Rhiannon Feimorgan]

This has been said before, but I think it needs to be said again. Get a home inspection!!!!

3 times now we've been ready to make an offer on a house only to have an inspector find some realy costly structural problem with said house. I am soooooooo happy we didn't find out about those things after we bought and end up stuck with a money pit.

[Staceyy]

Get a fixed rate mortgage. Get a preapproval letter from your mortgage company before you start looking for a house. We bought our home on my income only. Several years later I lost my job and have not worked since. Dh was able to step in and handle the mortgage expenses and all other expenses on his own. I was employed as a mortgage banker. Stay on top of the IRS guidelines. There are certain deductions you can take such as points and mortgage insurance premiums only available the year you make your purchase. The first few years of home ownership there are many expenses you won't have accounted for, do not spend all of your money at the closing. Set aside extra. The utility companies will require deposits, there will be cable and internet hookup expenses, if you have a lawn, you'll need a mower. You'll need new home furnishings and things such as paint and tools. You'll need to put up window coverings immediately so the neighbors can't see in. There will be other expenses unique to your situation. We had to install a gas line as I don't like cooking on electric stoves. We also had to install a security system, have the furnace serviced and the fireplace professionally cleaned.

[lucyem]

Interview at least 3 home inspectors and do not take the cheapest or the one your agent recommends. My husband is an inspector and one reason he got into the business was all the crappy ones out there. I cannot tell you how many people go for cheap. And too many agents & inspectors are a bit too close if you know what I mean. Get an inspector willing to go through the house with you. One willing to talk to you about the house even after the inspection is over. Make sure they are licensed if you state requires it (not all do). Make sure they are a member of a national organization. Check into their licenses. For example my husband is one of only a handful of certified radon testers in our state. Yet most inspectors will still test. But they have no proceedures and no clue what they are about which can result in abnormally high or low tests. Or better yet (not) they let the agent set the test.

A good inspection can save you thousands. A bad one can really cost you.

[Porcelain Interior]

With the new laws in place getting a mortgage is MUCH MUCH harder than it was the past few years. We bought our home in 2003, our first and we knew nothing. We just kept hearing people say, "anyone can own a home now you need to get in on it!" So we did...which is positive, and we didn't fall into some of the pits others did but you still have to be very careful.

Answers to your questions:

What do you regret? The town we live in was very competitive but housing prices were also pretty low compared with today (we paid 150,000 for our house in 03 and today even with the horrid market we could sell it for around 280,000-300,000) When we bought our house we went over what we wanted to pay by about $15,000 which doesn't sound like a big deal but things add up. I regret buying a big house, it's 2500 sq ft, that has to be maintained, heated, vacuumed etc, these are the things you don't think about. Utilities are really hardcore in the winter here so I regret the size of the house. We only bought it because at the time there were similar 2 bd 900 sw ft houses going for the same as ours. Anyway...

What do you wish you had done? Bought the smallest, and cheapest yet still nice house we could find. Off a busy street and ideally with more property, I want to grow food!
What did you do right?

For example, how did you decide how much house you could afford? Back when we bought our house mortgage companies liked to do this for you, and it is always WAY TOO MUCH to afford. Do not go with the mortgage brokers brackets. I would not go over 30% of your gross income. Seriously.

How did you decide how much to put down? We actually put nothing down, we had nothing. Back then everyone was doing this, it worked out luckily because home values exploded here (dropped a bit) but in the real world this is a terrible idea. Put as much down as possible!

And lastly seriously think about the size of the home. If you will be staying in it long term, think through the size of your family, will it continue growing? Is sharing bedrooms horrible or ok with you? Do you need a million bathrooms? If you plan on staying long term don't overbuy size wize, like I said the utilities will bite you. Also when the house is huge you will feel a burden to furnish all the rooms. KACHING $$$.

Anyway that's my advice. Be selective about size and cost and minimize both to the degree that you are comfortable. Also do not get emotionally invested in ANY house until you are moved in. Sales fall through all the time.