First house...advice

[markyj987]

After dcoing some checking of the market, talking to a few realtors and a mortgage broker, I'm very tempted to buy a house.

Does anyone have some advice for me?

I'm thinking this may be the time to do it...or maybe it'd be better to hold off a little bit.

With inflation on the rise, this would probably a good hedge against it. Property values continue to rise, but at the same time I'm wondering if I should wait--as people who bought houses using ARMs decide to get rid of them as their payments go up.

Is this the time to buy or should I hold off? Also, what are the questions I need to ask of the realtor/owner and mortgage lenders?

I didn't think I was ready to buy, but it looks like I'd qualify for loan of up to $200,000 at a rate of under 6%--and I don't think that's too bad. It won't buy much house out of the city---but I'll sacrifice that for low crime and more trees...lol

Anyway, any insight people could offer would be greatly appreciated.

I'll be out of town through Sunday, but will definitely look back at this.

[Tominator]

Re: First house...advice

Buy as much as you can afford.

You should have bought a few years ago. Interest rates are on the rise and will continue to do so IMHO. It's cyclical.

Make sure you get a good house inspector that YOU choose, not the realtor. You want the inspector to be your agent, not the realtor's.

Talk to the bank before you house hunt. Kevin could probably help you with some other hints.

[Swamphunter]

Re: First house...advice

Have the house inspected by a pro....my buddy bought one and found out after (even though they had signed a paper saying there was no fire damage) the house had been burnt. Along with fire damage comes water damage. He had to sue this people and lost thousands on the deal. It is worth every penny.

[Reloader]

Re: First house...advice

Get pre-aprooval for the loan from the bank you like then look into the houses...Makes people take you more seriously as you look. These guys have great advice about the Home Inspection. Chose your own general contractor to do the inspection so you are sure they check everything possible. Some surprises after you buy a house is normal, but a good inspection will limit how big those surprises can be.

Finaly buy something you will be happy living in. But if you have any building or remodeling skills, buying a house with slightly out of date kitchens and bathrooms will drop the price and allow you to remodel them the way you want and then get a greater return if/when you sell later.

My wife and I did that with our first house in Virginia Beach VA and turned arround and sold it 2 years later for over 43,000 more than we bought it for(we put 10,000 of material and a lot of our own labor into it in those 2 years). That bought me my truck(used) and got us moved to Nebraska and still had the down payment for our current house.

[jerdanmagic]

Re: First house...advice

I gotta agree with everyone else so far! Inspections are extremely important. I also agree with Reloader's comment about getting pre-approved. Theres nothing worse than finding the house of your dreams, and then getting hung up on some small details at the bank. Get the bank squared away first, then find the one thats perfect for you. Good luck!

[Newarcher]

Re: First house...advice

Do your homework before settling in on any home. Look at the schools as they generally will tell you whether an area is coming or going in values and demography. I prefer a home with covenants, especially one against renting.....renters make your property values drop and generally signal it is time to move. Campers in the driveway and front yard fences are avoided with covenants.

If you are handy, perhaps you should look at some foreclosure homes that might need a little work. Most bang for your buck and many upscale homes are for sale at bargain prices because people realized that they can't afford them. Generally, you can pay to get materials to fix minor issues and automatically gain the labor costs in equity.

Absolutely, positively, without a doubt hire an inspector. They know code and they know current issues with homes, i.e. polybutylene pipe and masonite siding, etc. You cannot do an adquate job yourself....I KNOW! Don't use any inspector suggested by your realtor as they can be buddy buddy problematic.

Still, double check behind the professional and here are some items that they may miss: painted over water damage on windows and trim so check each and every window and every piece of trim by pushing on it (windows are very expensive to fix), check for water damage around the trim of the front door (common and expensive to fix), water damage on outside house trim, problems with the roof, etc. Try to go at night and turn lights on so that there are shadows...will show nailpops and crappy drywall jobs.

If you find a home where the seller has priced the home low, given a few problems...i.e. windows that are in need of replacement...and the house is still a deal, negotiate to have the items replaced at your expense during the closing. This will add the known repairs into the loan instead of you having to come out of pocket after closing when money will fly away quickly.

Drive through the neighborhood a lot before putting an offer in. Nights, weekends, holidays if you can, etc. After you buy is a bad time to realize that you bought into a neighborhood with a neighbor that throws a loud party each Saturday or that you bought into one with a bunch of garage dwelling Hank Hills living there. Cars parked in the street is a WARNING SIGN. Check the condition of the houses around the target house for trim, window, and siding damage that indicates a declining neighborhood with trash moving in.

Talk to any neighbor you see out before you buy. If the next door neighbor tells you to bleep off, don't buy it. Neighbors can be invaluable tools to find out "oh yeah, he has a major termite problem" or blah blah.

NEVER fall in love with a house. Find three that you really like and put bids on them starting with the one you prefer. Don't make rediculous offers but low ball them a little. You never know what state owners are in...could be desperate.

If you are young and don't have a lot of money to lay down as a down payment, consider a first and second to avoid the PMI. PMI is insurance for the mortgage company that you have to pay in case you default. Instead of having to put down 20+ perecent to avoid it, you can sometimes do an 80% first, 10% second, and 10% downpayment.

Don't be too aggressive in your payment terms you request. 10 or 15 and the associated higher payment sounds pretty good until unforseen expenses crop up. Take the 30 at today's great rates and then divide your payment by 12. Pay your normal payment plus the 1/12 of a normal payment each month and you will be able to pay it off in 17 years or so. Plus you have the flexibility to go back to the normal payment amount if necessary.

Shop lenders. Don't take the advice of a realtor as they usually get kickbacks from mortgage companies to place you with the mortgage company. Google 'compare mortgage rates and closing costs' to find out how to properly compare them. Closing costs can vary widely.

Avoid 'now' errors. I once bought a home that was a great deal when I was 21 because it was on a big hill. Who cares, I thought? I can mow it. It hurt me big on resale now that the general population has become very lazy. Avoid buying next to high tension power lines, retention ponds, major roads, on a hill, etc. because that will haunt you later. Problems that don't bother you tend to bother other people.

Avoid buying the most expensive house in the subdivision. If your target amount is $200K, buy in a subdivision with say $175 to $400 homes. Buying the most expensive home will cause problems when you try to sell because all the comparable homes in the neighborhood will be much less.

Avoid the dreaded upgraditis that a lot of people get. They buy a home with an unfinished basement and then propmtly finish it with pool rooms, home theatres, bars, etc. Unnecessary upgrades can take you from building a little equity with each payment on top of appreciation in values to where you might not ever get all your money back from the deal. Finishing that basement might be a great idea and might not be. Be very careful.

Make the seller provide a home warranty as part of the deal...costs the seller about $350 and will help you with hidden problems. Make the seller pay closing costs.

Lastly, if you can afford it and don't move around a lot, GO FOR IT. The best investment you can buy.

Good luck,

New

[Reloader]

Re: First house...advice

New has some great advice there!

I would caution on a few things though.

I don't like covenants because they often get abused. My inlaws lived in a neighborhood where you could get fined for repainting your front door without pre aproval from the board. (Ever hear of "Reston Brown" as a paint color? That was created by a paint company for their specific covenant board and then became a standard paint in the company's palate) If you do pick a house with covenants make sure you read them carefully. Rentals may hurt your property values in some areas but especialy in Military towns they can actualy help your values since the military often rents and can't mess up their rental house without encuring the wrath of their CO (including paycheck garnishing to pay any damages). Most towns have laws that will cover the things New mentioned (loud parties via noise ordinances, dead cars via some form of littering ordinance or vehicle registration laws, campers via housing ordinances, etc.) without needing covenants. That said if the covenants fit your lifestyle then they may not be a bad thing for you. Always good to drive throgh the area to check those kinds of things covenants or not though.

Cars on the street are only a problem if they get left there. If the cars are there at night but gone during the day then there is no problem IMO. If they sit there 24-7 then there may be an issue.

Kitchen and Bathrooms are the best places to improve...other areas, like New cautioned, offten do not get the increase in values that you need to reimburse your costs.

I, personaly, will pay the PMI rather than a second mortgage like New mentioned. A second mortgage can look bad on your credit report and may not save you any money as they are often higher percentage rates than primary mortgages. Lastly the PMI is refundable by most lenders (another thing to ask the bank about when getting pre-aproval) once you pay down the 20% requirement or sell the house. Second mortgage costs are not.

[ QUOTE ]

NEVER fall in love with a house. Find three that you really like and put bids on them starting with the one you prefer. Don't make rediculous offers but low ball them a little. You never know what state owners are in...could be desperate.

[/ QUOTE ]

Excelent advice for an investment property. However, depending on the market that may not be a good idea. In a market where houses go fast you may cost yourself a house that way. Match your offer to the market. (The family who bought my VA house worded their offer "$1,000 more than other highest bidder up to $X, had they just listed their max amout as their bid they would have gotten the house but paid 7 grand more for it, if they had offered asking price but not had the +$1000 provision they would have lost the house with no time to re-offer because we had 5 offers on the first day it was on the market. All 5 were above asking price and 3 had the +1000 proviso, we picked the specific winner from those 3 based on who offered the most in closing costs.) If you are buying a house to live in it, you can fall in love with it, as long as you don't get blinded by that and ignore problems it may have (this is where an objective home inspection comes in) or overpay based on market and apraised value.

[Orion_70]

Re: First house...advice

It's still a good time to buy a house. I'm a mortgage broker and Realtor. In Fl, the prices are going crazy, but then again, we have over 1000 people a month moving here. Supply/demand... Let me know if you have any questions on the mortgages or loans, just pm me.. Get Realtor in the area you want to live, if you already know the area even better.

[Newarcher]

Re: First house...advice

Reloader does have some good points.

The offer thing definitely depends on how tight the inventory in your area is. If houses are flying off the market in days and selling for more than the asking price, forget my advice. If there is a lot of competition, play that for all its worth.

As for cars, I disagree wholeheartedly. Unless it is where everyone parks on the street, avoid it. It looks bad to potential buyers who have to dodge them while driving through and decrease selling prices.

As for the mortgage, PMI is not deductible whereas interest on a second mortgage is....for now. But to each their own. I would, however, get a home equity loan as opposed to a home equity line of credit. Most equity lines of credit are tied to prime rate which is pretty low right now with nowhere to go but up. A home equity loan has a definite term with a fixed interest rate. A line of credit is variable.

One last thing and probably the most important......get your loans from a credit union somewhere. The rates are generally cheaper than big banks as are the closing costs. LISTEN TO THIS ADVICE IF YOU LISTEN TO NOTHING ELSE. Compare and you will see.

New

[bfletch7441]

Re: First house...advice

[ QUOTE ]

Buy as much as you can afford.

[/ QUOTE ]

I don't agree with this, because your payment is bound to go up from what it originally starts at. Property taxes and insurance are a killer! My .02

Ben