First time home buying

[panteragstk]

So, wifey and I are looking to buy a house either later this year (hopefully) or very early next year. Starting to save now especially since I will hope to be getting a promotion soon.

For those with experience, what should be my first steps to take? I'd like to buy the house we are renting, but my landlord is taking her sweet time in letting me know if she wants to sell or not. Only rent house they have, they don't even live in the state. Irritating.

Anyway. I want to stay in my area because the schools here are supposed to be really good and I like the area. I've lived in Allen, TX for about 6 years now (rent house) and love it. If I had to move in the DFW area I don't know where I'd go from here.

Any advise would be very much appreciated.

EDIT: We are probably going to have to go the FHA route due to the baby eating all our money that we had saved. Wanted to add that as well.

 

[TheWarrior]

Mortgages are reasonable right now, go get yourself a 10-20 year old house that needs updating. Note the difference between 'updating' and 'renovating'; needing structural changes, electrical or plumbing work, NO! Just something that needs new cabinets, flooring and some bathroom fixtures is what you should be looking for. These are easy DIY projects that save you money, and greatly increase the homes value, and can be done at your convenience.

And when you have money in your account for the mortgage, add on a monthly cost of insurance and the property tax, so that when those annual bills are due, you have the cash ready to go.

If landlord wants to screw around, don't wait, we're coming up to home buying season. Go get em tiger! (and try to get a 'home theater' renovation added in to the mortgage, POST PICS!)

 

[ParadigmDawg]

I always start by having the money secured before I start dealing with Realtor's, owners, private sellers. It's still a heavy buyers market so get the money and then start working deals. Don't be married to the house you are in now if the owner won't deal.

I have a good Home Mortgage lady, I am sure she covers the whole Metro area. Let me know if you want her info.

 

[panteragstk]

I always start by having the money secured before I start dealing with Realtor's, owners, private sellers. It's still a heavy buyers market so get the money and then start working deals. Don't be married to the house you are in now if the owner won't deal.

I have a good Home Mortgage lady, I am sure she covers the whole Metro area. Let me know if you want her info.

Well, I've done a bit of work to the house, but I'm not the one that wants to stay. My wife does. In all honesty the house I'm in is exactly what we are looking for so it'd be nice and simple to just stay and pay my own mortgage instead of someone else's.

House is right at 11 years old and does need updating (which is what I'm looking for). If I could find one similar we'd be set.

I'll take you up on the broker when the time comes. Thanks.

 

[lsiberian]

There are a lot of drawbacks to home ownership so be sure to list them out.

1. You are tied down to where you live.
2. You maintain, pay taxes, and insurance.
3. You are tying up a lot of your finances. Getting a mortgage is a huge risk IMO especially when the market is a bit shaky ATM.

My finance guy tells me to pay at least 20 percent down(NO PMI) and get a 15 year note(it's cheaper, and really not a lot more). He advises you hire a professional who moves a lot of houses. Oh yeah. Zillow isn't accurate.

 

[panteragstk]

There are a lot of drawbacks to home ownership so be sure to list them out.

1. You are tied down to where you live.
2. You maintain, pay taxes, and insurance.
3. You are tying up a lot of your finances. Getting a mortgage is a huge risk IMO especially when the market is a bit shaky ATM.

My finance guy tells me to pay at least 20 percent down(NO PMI) and get a 15 year note(it's cheaper, and really not a lot more). He advises you hire a professional who moves a lot of houses. Oh yeah. Zillow isn't accurate.

1. Non issue, we've been here for 6 years already, don't plan on leaving
2. I already maintain and take it off the rent (not doing that anymore). I'd rather pay taxes and insurance and be able to do what I want to the house. I'm throwing money away right now.
3. I agree with this. It is risky, but I'd rather take a risk and actually be able to do what I want with my house than rely on someone else to fix problems that isn't in all that much of a hurry to. It's getting old. I've been renting houses since college (that'd be 12 years now) and I'm sick of it. That's the main reason. If this house didn't need so much work because it was built fast and cheap then I wouldn't be complaining.

List of things that need or will have to be done as of today:
1. New garbage disposal (the current one is dead)
2. New microwave (broken door)
3. Two new water heaters (electrical in one, possible bad T&P or worse in the other)
4. HVAC needs a good cleaning
5. Fence needs to be replaced
6. Carpet needs to be replaced
7. Needs paint inside and out
8. New windows (they leak like there is no tomorrow)
9. New roof (cheap when put on, 10 years old, wind, hail, all that)
10. Critters get in my attic and die (really annoying)
11. New toilets (my plumber brother in law says they are the cheapest you can get, parts break too easy) and half don't work
12. Shower in one bathroom (of 3) doesn't work (no hot water, never has worked)

I think that's it (it's enough). So, with all that I just don't want to mess with it anymore. I'd like to buy it because those things will either have to be fixed to sell, or I can (hopefully) get an allowance to fix them. Then everything else would be cosmetic stuff that needs updating. Sounds simple enough.

I've looked a what is available in my area and they are either not as nice as what I have, in a similar state, or are out of my price range.

 

[macddmac]

Don't make any other major purchases (cars etc.) on credit until after closing.Pay down any debt you have as much as possible.
The higher your credit score, the more favorable your interest rate.
If the place you're in has that many issues at 11 years, move on and find something that's in better shape and less likely to bleed you to death financially.
Cheers, Mac

 

[panteragstk]

Don't make any other major purchases (cars etc.) on credit until after closing.Pay down any debt you have as much as possible.
The higher your credit score, the more favorable your interest rate.
If the place you're in has that many issues at 11 years, move on and find something that's in better shape and less likely to bleed you to death financially.
Cheers, Mac

I agree, but it seems that houses built around the time this one was are just crap, or were put up so quick and cheap that once you replace the cheap you're good to go. It's a crapshoot really.

Only reason I'd even consider this house is if ALL of those issues were fixed or paid for. Even one missing is a deal breaker.

 

[ParadigmDawg]

I guess the huge tax break and the fact that you are building equity is better than throwing away all that money on rent for something that you will never own?

No offence but I would change finance guys if I were you...

Oh....and you can sell a home if you need to move, I have sold 4 of them and made money each time.

There are a lot of drawbacks to home ownership so be sure to list them out.

1. You are tied down to where you live.
2. You maintain, pay taxes, and insurance.
3. You are tying up a lot of your finances. Getting a mortgage is a huge risk IMO especially when the market is a bit shaky ATM.

My finance guy tells me to pay at least 20 percent down(NO PMI) and get a 15 year note(it's cheaper, and really not a lot more). He advises you hire a professional who moves a lot of houses. Oh yeah. Zillow isn't accurate.

 

[lsiberian]

1. Non issue, we've been here for 6 years already, don't plan on leaving
2. I already maintain and take it off the rent (not doing that anymore). I'd rather pay taxes and insurance and be able to do what I want to the house. I'm throwing money away right now.
3. I agree with this. It is risky, but I'd rather take a risk and actually be able to do what I want with my house than rely on someone else to fix problems that isn't in all that much of a hurry to. It's getting old. I've been renting houses since college (that'd be 12 years now) and I'm sick of it. That's the main reason. If this house didn't need so much work because it was built fast and cheap then I wouldn't be complaining.

List of things that need or will have to be done as of today:
1. New garbage disposal (the current one is dead)
2. New microwave (broken door)
3. Two new water heaters (electrical in one, possible bad T&P or worse in the other)
4. HVAC needs a good cleaning
5. Fence needs to be replaced
6. Carpet needs to be replaced
7. Needs paint inside and out
8. New windows (they leak like there is no tomorrow)
9. New roof (cheap when put on, 10 years old, wind, hail, all that)
10. Critters get in my attic and die (really annoying)
11. New toilets (my plumber brother in law says they are the cheapest you can get, parts break too easy) and half don't work
12. Shower in one bathroom (of 3) doesn't work (no hot water, never has worked)

I think that's it (it's enough). So, with all that I just don't want to mess with it anymore. I'd like to buy it because those things will either have to be fixed to sell, or I can (hopefully) get an allowance to fix them. Then everything else would be cosmetic stuff that needs updating. Sounds simple enough.

I've looked a what is available in my area and they are either not as nice as what I have, in a similar state, or are out of my price range.

Sounds like you have an idea of what you want. Just make sure you get a good Realtor and an inspection.

 

[ImcLoud]

I have bought a lot of houses over the years and built about twice that...

I am not sure how the market there is, BUT I can promise you your landlord isn't going to sell while you are paying rent, that would be a terrible business move on their part. But if you told them you were looking and were shooting for a move out date in say August they would be more likely to show their true colors, either wanting to sell or wanting to re-rent after you vacate...

Now as far as buying goes, it doesn't hurt to look and get ideas, I like the idea of looking before you are ready since first time home buyers worse enemy is haste... They see a house, think they won't see another one and rush into it... big mistake...

Here is the 6 month plan I always tell people to start with,

first get pre approved, start with your bank or AAA if you are a member... This is going to show you what you will need for a down payment {I tell people don't even think about home purchase until you have 20% down, then look to buy a house 10% under its worth, you will start with 30% equity and bypass pmi, high rates, ect, ect}, they will give you a rate {normally lock in for 30 days at a time}, a preapproval letter {most realtors wont show you a home with out one}, and it will show you how it works, less surprises when the actual loan is needed...

Next start talking to realtors, the best way to do this is to first find a few properties you would consider buying {your area and price range} then call the people showing them houses, you will talk to a bunch of people in the business and before you know it you will find one you like... They will most likely make you sign a contract for them to represent you, only sign for 30 days at a time {in some states you need to sign for them to show you properties}.... Don't sign a 1 year or 6 mo contract, because you don't know what the future holds, you may run into someone that says "I have a house for sale" and that commision can end up in your pocket, vs if you are under contract you need to legally make sure your realtor gets paid... or your landlord may come around and say "yah I want to sell", but if you are under contract that commision has to come from somewhere... Some realtors will do a single day contract or a contract on a single property, that is best bet in most cases...

Now after looking at houses and knowing what your price range and financial responsibilities will be before and after purchase, you will build a relationship with a realtor, you will know what stuff sells for {you will look at houses for say $450K {or what ever your budget will be} and see how long it takes them to sell and you will get an idea of what stuff is worth and how long it lasts....

But anyway, I wouldn't wait, I would jump rite in, looking don't cost you anything and if your smart you will learn at the same time and get the best house for you and your family...

I went and looked at a house this morning, foreclosure and needs 2 banks to approve the sale price, its listed for $188K I offered $98K with a 15 day close and sure they are not going to sell it for that, BUT the first loan is for $98K so they are going to approve the sale the second bank is going to say no, but for those of you that know how the business works they are going to most likely settle in around $120K... I see this often the first bank is all that really matters they get paid first and can sell it for exactly what they are owed, they hold the deed, the second bank can buy the first mortgage and then own the entire property, but they don't like to do this... This house is different in the way that the first is less than the second but that is most likely because the company held the title to something else of the previous owners with equity, like more property, a boat, ect....

Now is a great time to buy and interest rates are going up, I think they will be 1-2% higher by the end 2014, doesn't sound like much but it can equal $400 a month and 10's of thousands added to your mortgage total....

 

[Ponzio]

If you can swing it, get a 15 year mortgage vs. 30. It might involve some belt tightening initially but the pain is worth it down the line. I know I felt a little better in 2008, when I was mortgage free 8 years earlier and everyone was scrambling. If you can't do it now, try to plan to re-mortgage as soon as it becomes financially feasible. You'll be glad you did.

 

[Irvrobinson]

I'm throwing money away right now.

No, you're not. You're getting a place to live without financial risk. That isn't throwing money away.

Nonetheless, I understand your sentiment. In the right market, combined with the mortgage interest and real estate tax deductions, home ownership can be a big financial benefit. Perhaps in Allen, TX prices are low enough, and the chances of being in the midst of a price bubble are low enough, that buying is really your best bet. In more expensive markets on the west coast I know several people who have lost *a lot* in residential real estate at various times, and that should be kept in mind. It also costs you 6% in real estate commissions to get out. Of course, perhaps I'm jaded. Here in Silicon Valley a nice 1600 sqft condo in the SJC take-off path will run about $1.2M, and I'm told many sellers don't like dealing with buyers who aren't coming in with all cash.

One other factor that perhaps should be considered about the real estate market... 42% of home sales in November across the entire country were all-cash deals. See:

All-cash home sales reach new high - MarketWatch

That's amazing. It was also high in December. It means investors are pumping up the market. Some people think that means homes are cheap. Some people think that means the other financial instruments are just over-priced compared to homes, and others think interest rates will rise, putting homeownership more out of reach, which will cause rents to rise. Maybe it's all of that or none of it. I'm only bringing it up because buying when the market is acting funny should always give one pause.

Frankly, I don't know anything about the Dallas metropolitan area real estate market, other than someone had the good sense to name a city Irving. And that property taxes in Texas tend to be exorbitant as a percentage of home prices. Nonetheless, I'd recommend some serious research before diving in.

 

[Rickster71]

I wouldn't go with a 15 vs 30 year mortgage.
The best approach that I find and have used on the two homes I've paid off.
Get the 30 year mortgage and pay it off like a 15.
If things go bad (financially) you won't be stuck with the higher monthly payment of the 15 yr.

 

[Adam]

I wouldn't go with a 15 vs 30 year mortgage.
The best approach that I find and have used on the two homes I've paid off.
Get the 30 year mortgage and pay it off like a 15.
If things go bad (financially) you won't be stuck with the higher monthly payment of the 15 yr.

I'd say work the numbers. Risk versus reward will depend on the difference in interest rates and closing costs between the two options. One can refinance if necessary later on if finances get too tight, but there are often closing costs associated with that.

 

[ImcLoud]

The mortgage term should be decided by you and your finance company, you get the two rates {15 yr is obviously lower} and you go over the numbers, depending how secure your income is you have to decide if you like the cushion of a low payment, paying a 30 off in 15 is fairly simple it normally equates to an extra payment or so per year.

As far as refinancing "if" things get bad, that is not always an option, if things getting bad means you lost an income or took a pay cut, you are not going to get another loan, and if you get a 30 yr today at 4% in 5 yrs, 4% may be unheard of, years ago 18% was the norm... Now if interest rates ever did that you can expect you $400K home to be worth $200K over night... because people can only afford so much per month, so if you can afford $2000 per month, it doesn't matter if $1500 of that is interest or $200 of it is, that is just what you can afford, so when you try to sell your $400 house that means someone will need to be able to afford $5200 per month and that is after putting 80K down!!!! More realistically your $400K house {at 4%} is now worth $150K {if they put 30K down and finance at 18%}....

Just something to think about, interest rates are low and rising as of now, if they go back up to mid teens or even just double to 8-9 home values will plummet.... UNless people start earning much much more money...

 

[Rickster71]

The mortgage term should be decided by you and your finance company, you get the two rates {15 yr is obviously lower} and you go over the numbers, depending how secure your income is you have to decide if you like the cushion of a low payment, paying a 30 off in 15 is fairly simple it normally equates to an extra payment or so per year.

As far as refinancing "if" things get bad, that is not always an option, if things getting bad means you lost an income or took a pay cut, you are not going to get another loan, and if you get a 30 yr today at 4% in 5 yrs, 4% may be unheard of, years ago 18% was the norm... .

Exactly

It's the wonders of compound interest.
When you look at the amortization tables of a 30yr mortgage, depending on the rate and adding up the interest, you could ultimately pay two or three times the home's asking price.

 

[lsiberian]

I wouldn't go with a 15 vs 30 year mortgage.
The best approach that I find and have used on the two homes I've paid off.
Get the 30 year mortgage and pay it off like a 15.
If things go bad (financially) you won't be stuck with the higher monthly payment of the 15 yr.

It takes 80 dollars more a month with current average interest rates to pay off a 30 in 15 so that should be considered when weighing the two options. Most people I know don't have the discipline to pay a 30 in 15, but will pay a 15 in 15.

 

[Adam]

Just something to think about, interest rates are low and rising as of now, if they go back up to mid teens or even just double to 8-9...

Unless I need a mortgage, though, I would LOVE that. Having any money in savings these past few years has been virtually useless because of the low rates.

 

[Rickster71]

It takes 80 dollars more a month with current average interest rates to pay off a 30 in 15 so that should be considered when weighing the two options. Most people I know don't have the discipline to pay a 30 in 15, but will pay a 15 in 15.

It's not always going to be only an $80 difference.
I think you're missing my point. Paying the 30 off in 15yrs is just an option and you can always fall back on paying it for what it is, a 30yr mortgage. There are no credit ramifications if money gets tight.
Two things are being missed: Compound interest makes that $80 per month big money over 30 years. Rates this low are a fluke. I wouldn't rely on them staying low.