My husband and I have started the home buying process!
We've never done this before and even though we have no idea what we're doing and need to have our hands held... it's still really exciting.
My husband is in an apprenticeship program which he'll finish in a year and then his wage will increase substantially. I figured that instead of waiting until that year is up, why not start looking now? I just don't see the point in paying off someone else's house for another year when there's a possibility that we could start paying off our OWN house!
If we buy a house now... then things will be tight until his pay increase... but I'm already really frugal and I know we can do it (especially if we stop eating out as much on the weekends). That change right there will save us a few hundred dollars a month. I'll admit that even though I always buy things on sale and clip coupons, we are bad about eating out. That will definitely change starting next weekend. I hope that we'll be able to set the money aside that we would have spent at a restaurant. That will give us more money for a down payment or help us pay the monthly mortgage payment.
Wish us luck! Do you have any advice for me? Any experiences to share? Any help & tips would be greatly appreciated... my friends on Gather always help me out.
Love you all!
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Ask lots of questions, until you understand every thing. That is what we did. Do look for a program like Beth suggested.
We bought a house last summer. One thing I would suggest is looking in several different towns or at least areas of town if you can. My husband is in the Air Force and we do the majority of our shopping on base. When we looked at houses, we first looked at the closest town to base, which is about 10 miles south of base. That's the town that has all the shopping and restaurants around. We decided to look at some of the smaller towns around when we didn't find anything that we really loved that was in our price range. I'm glad we did! We bought a house about 20 miles north of base, but because our town is so small, and most of the drive is highway driving, it actually takes my husband less time to get there than it would from some of the houses we looked at in Minot. The best thing about it is that we got it for less than ONE THIRD of what we would have paid in Minot!! Yeah, we do use a little bit more gas (but not much more) and it does take us longer to go grocery shopping or what not, but the savings on our mortgage payment more than make up for it! Plus we live on a quiet street with a big yard where Elliott can play outside.
How exciting for you all. Owning a home is a wonderful feeling. I know the perfect place is waiting for you and your family.
huggs
When we bought our first home we found a realtor that worked for us. They did a bunch of the foot work and everything. They made sure we weren't ripped of by the sellers person. It was the best decision we could have made.
No money down
$500 only for earnest money
Write the contract for a home with the owner paying for repairs up to a certain dollar amount (depends on each home) - usually $1,000 - $1,500
In your contract say you want all window treatments, all appliances, etc. - that way you are not moving into a house with bare windows & no dryer or fridge.
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Your interest rate is 1% below prime and should you have cash reserves you can buy your interest rate down to zero, with one point taking off 1/4 of the interest rate as opposed to 1/8 at your normal mortgage company.
Additionally, regardless of who you choose to finance, get a home inspection - its like a test drive on a used car - you know the age of your roof, Ch/a unit, plumbing,etc.
And, as far as window treatments, etc., I don't know that I would finance those items for 30 years if it becomes a bargaining isssue. If the seller says no unless you "up" the sales price.............well, you are smart enough to figure that out.
Betcha can't guess what I do for a living, lol ~J
First and foremost, get preapproved. Many sellers won't entertain an offer if you aren't pre approved first. Most realtors won't work with you for long without it, either, because they want to make sure you are able to afford the houses they show you.
Don't neccessarily look at the highest range of house you can buy for your pre-approved amount. Instead, figure out what the monthly will be for various amounts, and look for an amount you are able to comfortably pay per month. If you wind up with a higher amount in a year, then you can pay the nhouse off sooner, but you won't get stuck scrimping and scraping to make ends meet if you buy a hough that's too expensive.
The bank can run slow at times. Keep on your lender, and find a lender at a bank, do not go to a mortgage company. Banks tend to keep the loan, while mortgage companies tend to sell them out- which can cause you to take on much higher interest rates than you might have signed up for.
Get a fixed rate mortgage. Do not get any type that will fluxuate or balloon over time. Right now, fixed rates are much easier to get, so that shouldn't be a problem.
Make sure your taxes and insurance are in the escrow. That way, come tax time, you aren't left floundering and trying to come up with $3000 to pay the taxes on your home. Your escrow will likely contain the house payment, your insurance payment, a tax payment, and depending on the down payment, a mortgage insurance.
Your house will be required to cover mortgage insurance until you have at least 20% of the loan paid off, then you can drop it.
Your lender should know state laws and state programs. Most states have some sort of a first time home buyers program, and a down payment assistance program. We got both programs. The state program is MSHDA for us, and it locked us in at a gaurenteed rate lower than the bank itself could offer us. The DPA (down payment assistance) program is covering 100% of the closing costs, and a 2% down payment. The only money we're due is a 1% downpayment. That is the ONLY closing cost we cover.
Typically, your closing costs will include interest to cover the month you are closing, from that date to the end of the month. It also includes a 2-4 month estimate for your yearly taxes, two months insurance, two months of mortgage insurance, appraisal fees, recording fees, title fees, inspection fees (this is NOT the same as an inspection you will want to get on the house- in my area, that was $275 out of pocket), etc. To put it into money terms, if you are paying your closing costs, you will need to be able to come up with anywhere from $5,000-15,000 cash.
It depends on the total cost of the house, and the down payment, though. If you do not have a DPA, you likely will wind up with at least a 3% down payment required, but more likely 5%. It's hard to find programs willing to go with a 0% right now. The DPA programs roll all your closing costs into a 2nd mortgage, which is interest free, and not payable unless you sell the house before it's paid off. If you pay the house off, the DPA is forgiven and marked as paid in full.
The housing market what it is in most areas, you may run into a hard time getting perks out of the sellers. Many people are selling because they can't afford their homes, so they likely can't afford to pay for repairs on the home, or to cover the closing costs, etc.
Also due to the housing market and economy, here's some terms:
Foreclosed/Bank Owned- these houses might be cheaper, but if there's damage to the home, it's sold "As-Is". The banks are much less likely to take a low-ball offer (being much lower than the asking price), because the lower they go, the more they lose out on the house. These also require a higher "earnest offer payment", usually $1000.
Short-Sale: This means the house is still owned privately, but the owner needs to get rid of it because they can't afford it, and are heading towards foreclosure. It's where the bank and the owners both agree to take less on the house than what is still owed on it. For instance, if the owners still owe $116k on the house, they may only sell it for $100k.
One thing to keep in mind with a short sale. Just because the bank has agreed to take less, does not mean they've set the amount. The bank agrees to it without a number in mind. The owner doesn't know how much less they are willing to go until an offer has been made, and an appraisal has been done on the house.
So, when you go into a short sale, the bank has to approve the amount AND the owners have to approve the amount. It can take a while for that to happen. It's not a traditional offer, so the bank being involved slows it down. Once an offer is finally made, the house can be appraised, and the bank can decide whether or not the offer is close enough to what is owed, or if it's too low. Then, the owners either sell, or they have to raise their asking price.
In short sales, you may also be facing a foreclosure deadline. The house we're buying was listed as short-sale, but then when we placed an offer, the owners worked out a deal with lawyers to take it out of short sale. I don't know what they did, maybe they took on the overage as a seperate loan? I'm not sure. All I know, is that it took the house out of short sale, and we didn't have to deal with their bank at all. However, we're on a deadline. The house has to be closed on by the 13th of June. On June 14, the bank forecloses on it.
It's a great time to buy- but do your homework. Find out everything you can about buying a house, what type of programs you qualify for, and everything about the house you intend to buy.
Use your OWN realtor, NOT the realtor who has the house listed, because that realtor is working to sell the house, not working to find you a house. If there are flaws or defects, or repairs that are needed, that guy may not tell you.
Never take the owners word at face value.T hey may embellish dates, lie about dates, or just not know the answer, and make one up. If they say the roof was redone 10 years ago, it might be a few years older. Depending on the climate, the roof may only last 15-20 years, so that few years makes a difference.
We were told the house was built in 1950. It was built at the turn of the century. We were told there was 1 addition- there have been at least 3. We were told the hot water heater and the furnace were replaced in 2001-2002. The water heater was new, but the furnace was last replaced in 1994. This is all things our inspector found easily. Get a inspection done on your own. Don't trust the owners inspection. The bank inspection is different, and won't give you any of that kind of information.
I'm sure there is a LOT more I could tell you, but I'm sure this is already a vry long post. ;)
From the moment you put an offer in, your bank account is monitored very closely. You will have to show at ALL times that you have enough cash available to cover all the costs- the closing costs, the appraisal, the inspection, the down payment, and any repairs that may need to be made for the loan to approve.
That's typical with FHA loans. If they find things that are not up to code, they require that those things are repaired before the house can be closed on. You may be able to get the owners to cover those, or even half, but you may not, so you need to be able to show the ability to pay for those.
All of that money HAS to stay in your account, because if they do a random check and you don't have enough to cover the remaining costs, the bank won't approve the loan.
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Being a bit uncomfortable with your mortgage the first year or so is natural, so don't worry. If you're comfortable with the payment, you probably didn't buy enough house. Banks are really conservative, right now, so if they'll let you do it, you'll be okay.
I don't know where you're at in the process, but the first step is to talk to a good loan broker and get pre qualified for the loan. We have done many mortgages in the last 10 years, and really like Wells Fargo. Getting prequal'ed serves two purposes: 1) if you find a house, you're immediately ready to make an offer and will have the advantage if you're in competition with another buyer in a multi-offer situation; the seller will go with the "sure thing", even if it is a lower offer. 2) the broker may have some advice for you on steps you can make to improve your credit rating. For example, pay off this loan with this cash, or hold this cash in the bank, etc.
Also, you should be going to open houses as much as you can; that just seems to make the process happen faster.
I could write volumes on this subject, I'm a huge advocate of home-ownership; it's one of the best ways to build wealth, and has made us much richer than we would be, if we hadn't made a couple of the home purchases that we've made. But, I'll leave you one more piece of advice, the old standard: location, location, location. It's better to buy a smaller, junkier house in a great neighborhood, than a mansion in a junky neighborhood.
This is one of the best times for the first-time buyer in decades. It's a perfect storm, in your favor; prices are low, competition from other buyers is slight, and interest rates are great. Feel free to e-mail me any questions that you have (especially during escrow, so you don't get taken advantage of); my wife is a genius at this stuff.
GET A FIXED RATE!!!!
We got a fixed when we upgraded homes four years ago. I'm so glad we did.
Looks like you got some great advice~~~~~