Buying a home

[o1pickleboy]

Recently I have been thinking a lot of leaving the renters world and becoming a home owner. During this thought process I have done some minor research looked at property on-line nothing major but enough to confuse me. I worry the whole process once I begin it is going to confuse me into making some mistake that will hurt me. So I have decide to create this thread so people can talk about their experiences and get some insight for myself.

I don't trust bankers or Real estate people so some outside non bias input would be great.


So what was your experience when buying your home? What mistakes did you make? What advice would you give someone who is looking to buy for the first time?

[Slam_Bradley]

I'm a home-owner, but my experience is extremely atypical. I bought my house from a friend who carried the paper herself. I drafted all paperwork myself and she had a friend review it (she's a court reporter so knows all the lawyers in the area).

[snarkbunny]

Recently I have been thinking a lot of leaving the renters world and becoming a home owner. During this thought process I have done some minor research looked at property on-line nothing major but enough to confuse me. I worry the whole process once I begin it is going to confuse me into making some mistake that will hurt me. So I have decide to create this thread so people can talk about their experiences and get some insight for myself.

I don't trust bankers or Real estate people so some outside non bias input would be great.


So what was your experience when buying your home? What mistakes did you make? What advice would you give someone who is looking to buy for the first time?

So I bought a house in Ottawa and now I am renting again in Vancouver.

I have no regrets about having owned but I am in no hurry to own again.

Mistakes I made? I should have looked around more, possibly waited longer, and I should have been way more realistic about what I was willing to do around the house. More on the last point later, but overall I did pretty good.

Advice
1) Do not underestimate the value of using professionals. A good real estate agent on your side will spot things and make the process so much easier and get you a better product in the end. Likewise, a good home inspector can save your ass and lots and lots of money. The key to finding good ones is research and recommendations. Get references and talk to the references. Check with the better business bureau and see if they have complaints, etc.

2) Be realistic with your abilities and desires and capabilities. One of the things that I finally had to accept is that I have no interest or desire in doing home improvements outside of the occasional painting of walls. A fixer-upper would be a total disaster for me.

3) Assume that you will need 5% of the purchase price in closing costs and that will be cash outlay so plan for it. You will also need an emergency fund for things like trees falling through roofs, and other unexpected purchases. You should also allocate about 2-5 thousand for buying necessities if you haven't owned/rented a house before like lawnmowers, shovels, hoses, etc.

4) Continuing the money advice, I would say if at all possible do NOT spend the maximum money the bank is willing to lend you. You will be way better off if you don't make yourself house-poor. It is not a fun way to live.

5) Likewise, if you can, take advantage of the prepayment options in your mortgage. A little extra goes a long way, especially in the early years of the mortgage.

[svp]

Get a pre approval number that way you know what your upper limit could be when buying.
You just sit down with an officer from your/any bank.

You don't need an agent right away. With searching the internet being the best way to look nowadays.
It will allow you to get familiar with terms and markets and neighborhoods.

Once you are up and running and you decide you want to buy it gets a bit stickier.
You need a downpayment
You need a loan
You need to know a little bit about the house.

Once you find house you can sign with an agent. You can sign earlier if you want but
the contract means you are attachted to them.
Ive gotten an agent the moment I decided to put a bid in once, it worked out fine.
This works against you if you are trying to get in certain area or the market
is moving fast.

It is a long process from the bank approval to the actual closing. (few months?)
expect closing to cost 1,2-2 grand. You can if you want, roll that cost into
your loan. (approx 30 year mortgage is normal)

After you sign and move in these are the things you will be responsible for (monthly payment)

PITI

Principle- that is the nut. that is the actual portion of the house.
Interest- the bank makes money off your loan. It is of course called "interest"
Taxes- Taxes, this is different from your annual taxes you do every year for your person.
the city comes by every few years and assessess the value and gives you some property tax to pay.
You can see what you pay for when you get the receipt.
Insurance- Since you do not own your house, the bank does , Insurance is mandatory. Once you own
your house you can do what you want. There is this thing called "hazard insurance"
or PMI (primary mortgage ins.?) or whatever they call it these days but it is an exta 50 to 100 dollars per year
until you own more than 20% of your house then it drops off automagically. Scam really.

but PITI is you monthly bills for owning a house and you can escroll it all into one bill and have the bank
and the city and the insurance company all set up so you don't really see it, I mean you see it but since it
is combined you look at it as a whole.

Insurance and taxes are expected to go up in small increments each year.



There is tonnes more. I hope I haven't bored you or anyone too much.

[svp]

Yeah you shouldn't be looking at castles. Look at the cheapest house on the block. That is my advice.
Practice negotiations.
I low ball. I don't know how to put it but
walking away is the best thing. Lotsa times other people bid high and then fall to the wayside making
your lower offer the next best thing.
Patients and austerity goes along way here, since it is a big ticket item and the process of buying and owning
and selling can take a long time and effort.

[cactusmaac]

If possible, try to buy in an area you're already familiar with. Also don't consider buying unless you're quite sure you will be there for at least five years. Otherwise the ancillary costs of home-ownership are higher than what you would save by not renting.

[Pat Thomas]

Get a pre approval number that way you know what your upper limit could be when buying.
You just sit down with an officer from your/any bank.

You don't need an agent right away. With searching the internet being the best way to look nowadays.
It will allow you to get familiar with terms and markets and neighborhoods.

Once you are up and running and you decide you want to buy it gets a bit stickier.
You need a downpayment
You need a loan
You need to know a little bit about the house.

Once you find house you can sign with an agent. You can sign earlier if you want but
the contract means you are attachted to them.
Ive gotten an agent the moment I decided to put a bid in once, it worked out fine.
This works against you if you are trying to get in certain area or the market
is moving fast.

It is a long process from the bank approval to the actual closing. (few months?)
expect closing to cost 1,2-2 grand. You can if you want, roll that cost into
your loan. (approx 30 year mortgage is normal)

After you sign and move in these are the things you will be responsible for

PITI

Principle- that is the nut. that is the actual portion of the house.
Interest- the bank makes money off your loan. It is of course called "interest"
Taxes- Taxes, this is different from your annual taxes you do every year for your person.
the city comes by every few years and assessess the value and gives you some property tax to pay.
You can see what you pay for when you get the receipt.
Insurance- Since you do not own your house, the bank does , Insurance is mandatory. Once you own
your house you can do what you want. There is this thing called "hazard insurance"
or PMI (primary mortgage ins.?) or whatever they call it these days but it is an exta 50 to 100 dollars per year
until you own more than 20% of your house then it drops off automagically. Scam really.

but PITI is you monthly bills for owning a house and you can escroll it all into one bill and have the bank
and the city and the insurance company all set up so you don't really see it, I mean you see it but since it
is combined you look at it as a whole.

Insurance and taxes are expected to go up in small increments each year.



There is tonnes more. I hope I haven't bored you or anyone too much.

All this is good info. Just remember that you will probably need money for some of the appliances. Sometimes you can get a house with all of them included, but you should at least plan on buying a refrigerator, washer, and dryer. You will have to either set up services with the utilities, or just transfer them to your new address. That can include power, gas, water, cable or satellite, phone and internet service. And of course you will have to furnish it somehow. You will need a lawnmower too, probably. For most other needs, you will just find out as you go. Be prepared to spend time at Lowes, WalMart, Target, etc.

[snarkbunny]

Start going to open houses and look at a variety of houses and apartments etc. Specifically you are looking at house features to see what you like and dislike, and the best way to do that is in person. Do you like eat-in kitchens? Two-stories or bungalows? Carpet or hardwood or tile or don't care? Great room or separate living and family room? Bring your girlfriend with you to some, go alone to others.

Then you make a list of what you want in a home - # of bedrooms, # of bathrooms, layout, garage or not, backyard deck or not, etc. The you sort them out according to must haves, and nice to haves. This is where looking at a bunch of houses helps because you will see houses that will make you go WTF?!? who would actually like this? (and the answer is someone does and someone else will).

Think about your lifestyle. How long of a drive to work will you be willing to put up with? Will your girlfriend be moving in with you?

[Zero Hunter]

This is a good site I look at from time to time to see what is for sale in my area. It pretty much covers every county in Michigan.

www.swmric.com

You can look for houses in your price range and the area your looking for from all the different realators without having to get them involved until you find somethng you actually want to look at. Just hit the Find A Property button and type in what your looking for.

[o1pickleboy]

Been using my day looking over houses and trying to find things out like my interest rate and what property taxs would be. Namely just crushing numbers to finger out how much I would have to borrow to estimate my payment and for how long.

I want to thank everyone for there responses.

[Shellhead]

Another good website is zillow.com. Gives you a good idea of property values in an area, so when it comes time to make an offer, you have good basis for naming your price. It also gives an estimate for the monthly mortgage payment or rental cost.

I bought my first house 15 months ago. 2 years before I started looking, I read up on how to improve my credit score, and went to work on that. A year before I started househunting, I did a lot of reading online about the process. I read tips about what to look for while househunting, how to pick a real estate agent, what to expect of closing costs in my state, etc. I also spent a lot of time walking around my neighborhood, looking at houses and yards, thinking about what I did and didn't want. I also looked at a lot of floorplans online, read up on various common DIY projects, and put together a more detailed version of my usual budget spreadsheet, to get a realistic idea of how much I could save for downpayment, how much I could afford in terms of closing costs, and how much house I could afford. The old rule of thumb was to buy as much house as you could possibly afford, under the assumption that you will eventually be making more money and can more easily afford the house payments at time goes on. I decided to ignore that rule, because I'm older than the usual first-time homeowner, I'm probably near the limit of what I can earn in my line of work, and I expect that the American economy will never be as strong again as it was in the early 2000s.

My real estate agent was great. I knew him well because I was already renting my apartment from him. He was in his late 50s, so he had a lot of experience but wasn't very energetic. But he had a young protege who was a quick learner and very energetic. He also put me in touch with a really good mortgage broker. I had very specific requirements: 3 BR, a garage, price under $160,000, plenty of storage space, a decent basement, a safe neighborhood, and in a certain school district that had a very good public school system. This left me with a fairly limited selection to choose from, because the banks were still keeping a lot of foreclosed properties off the market to keep the prices from tanking too badly.

Although I prepped like Batman for the whole experience, there was one nasty surprise: I got stuck on a jury for a complex civil case in August, the month when I wanted to narrow down my choices and make a serious offer on something. It made for a tough month, but I found a good house. Two stories plus finished basement, 3 bedrooms, plenty of storage space, a one-stall garage, a decent yard, and in a good location. So good, in fact, that I now live just 2 blocks from a grocery store and small shopping mall, and 3 blocks from the best comic book/game store in the whole metro area. The house was valued at $220,000 in 2007, but was selling for $150,000. I offered $139,000, and we settled on $145,000 plus they would pay $5,000 of the closing costs. There was a little bit of trouble because my agent noticed that there was a well that hadn't been sealed properly, but they took care of it without renegotiating the price. The closing went smoothly and then I spent a busy week buying and assembling some new Ikea furniture, and then moving into the house. On moving day, 8 friends showed up and we got it all done in just under 4 hours.

One disappointment about the whole experience was the cost. Yes, it's often true that rent is often higher than a house payment. That would be true in my case, except that property taxes, mortgage insurance, and interest push my monthly payment just over $1,000, even though I am locked in at 3.75% interest. Before I moved, I was paying $820 a month in rent, though admittedly that was for a half as much square footage. And since then, I have probably spent an average of $100 a month on tools and lawncare stuff. Still, I'm glad that I finally own a house.

[macul]

1. Get a loan approval before buying so you know what you can buy.

2. Be realistic about what you can afford and what you need. Just like cars, a lot of people go crazy when buying a house.

3. Consider if this is a "starter home" or the place you want to retire in. If this a starter home you should be more willing to settle for not getting everything you want. Our first home was a starter home. It wasn't what we really wanted, though it was still nice and more importantly, we could afford it. Our second house has (neary) everything we want and we have no plans on moving again.

4. Don't be put off by a used home that needs some work done. Most work you'll run in to in a used home is cosmetic in nature (paint, wall patching, etc) and easily done without hiring a professional.

5. Consider whether the area is good or bad. This ultimately affects whether your house will rise or fall in value.

6. Don't get sucked in to an adjustable rate loan unless you are certain you can refinance before the rate rises.

7. Get your credit in good shape long before you plan on buying. Fixing credit can take a while if you need to pay off outstanding items and try to have items removed.

8. Do not fall in love with a house. You don't want to be heart broken if you aren't able to buy it for whatever reason. We had a house we loved, though the deal fell through as the owner insisted on tacking on $15,000 to the price due to hedges around the house; hedges we didn't want and that didn't add value to the home so the bank wouldn't consider in the value of the home.

9. You'll need additional money every month for repair and maintenace. Since this will be your home you'll have to pay for all repairs and maintenance. It is best to have some sort of emergency fund set aside cause stuff will die at the worst time. I own a second home that we rent. In the past four months I've probably paid about $4,000 in repairs.

10. Decide on what you DON'T want in a house. Some people don't like bedrooms attached directly to living spaces. Some people want their walk in closet before the bathroom. Do you want a large open floor plan? Know what you want as that will help narrow down the many options.

11. Look at the yard and what you can do with it. Do you need space for a garden? Lots of room for dogs to run? Lots of room for kids to run and kid stuff (e.g. swingsets)?

12. Consider the area. Is it a good drive to work? Do you want to live in a rural area or the city? How accessible are schools? Shopping?

[weeks]

don't overextend yourself with something you can't afford. and if you don't trust bankers, and have the means to do so, do a cash deal. i just did and not being tied to a 30 year mortgage is fantastic.

now to replace the roof, kitchen, floors, and electric...man this is gonna be a project.

[o1pickleboy]

One of my big factors is I want to jump in before the market recovers I have seen a few homes for around 20,000 not perfect but not horrible either. I do have to do some more decision making as in what I want and how much I want to spend. My job isn't super stable ever few years we are under a threat of plant closure so If I do buy I need the payments low so I can manage if this happens.

[Shellhead]

One of my big factors is I want to jump in before the market recovers I have seen a few homes for around 20,000 not perfect but not horrible either. I do have to do some more decision making as in what I want and how much I want to spend. My job isn't super stable ever few years we are under a threat of plant closure so If I do buy I need the payments low so I can manage if this happens.

Location is extremely important. I've heard that there are houses in Detroit going for less than the price of a new car, but that wouldn't tempt me to buy there. Anyway, think hard about your tolerance level for crime and/or obnoxious neighbors. As Macul mentioned, a bad neighborhood will make the value of your house go down.