Very OT: First time homebuying advice
Apologies for the non-sports OT, but the board has been a bit dead of late and this could be helpful to more people than just myself:
I am in the process of buying a new home (first time for both myself and my wife). I've read up on how the process "should" go, but I'm curious about any problems that could arise or things to watch out for that might seem trivial/minor now but later becomes a headache.
Any advice the board can offer (general or specific) or stories/anecdotes of use are appreciated.
Thanks!
Put as much down as you possibly can. Try to have at least 20% down, even if it means pinching every last penny. Obviously, make sure you stay in your budget, so you can afford the monthly payments.
March 20th, 2019 at 12:51 PM ^
I don't disagree about putting a lot down, but in a lot of markets that can be tough. In both Boston and NY (markets where I've lived) having $200k+ in liquid assets to put down isn't really in the cards for a lot of people who are otherwise capable of buying.
Buy something older and well built. Renovations will cost more than you expect, even if you do some of the work yourself. Ask the sellers for a home warranty. Came in handy for me when the AC needed to be repaired the second time I turned it on.
Also, make sure you have a basement. You're getting a ton of square footage for not much more money.
Don't buy something that you want to move out of soon, because you may be stuck there much longer than you think.
School districts matter. A lot. Better to have a little house in a great school district than a huge house with crap schools.
Don't do it. Travel light.
Everybody is different.
But my parents bought a house is Ann Arbor, a decade later my mom did her post-doc in Raleigh, NC.
My parents love their work, and my dad loves wood-working (will do that when he retires), and they discovered that while they had made tons of improvements, gardened, and upgrades, the simplicity of paying someone else to take care of things (as they got older, is my guess) they liked much better, and felt they had more free time/less stress.
And in the end, that’s what it’s all about.
(As a millennial, home ownership/family+kids is a near financial impossibility so I’ll never know either way!)
If there is a basement, it's not enough to just check the walls for water stains... A fresh coat of paint can do wonders to hide cracks, bowing, etc. Make sure you walk the perimeter looking at the quality of the gutter system and slope of the yard. Allowing water to settle against the side of the house is trouble.
Depends on a lot on the market, in many of the hotter markets there are some risky practices due to bidding wars like waiving contingencies and inspections etc. Be wary of that. Agree with the comments on the importance of inspections.
If you can cash flow a shorter amortization, like 15 or 20 years, you will save a lot of money long-term over the 30 year. Make sure you have enough liquidity left over to buy furniture, tools, make any substantial changes etc. Don't want to be house rich and home poor. Make sure you have cash flow for things like extra RE taxes etc that will change your payments over time (if escrow).
Remember, most agents are grinding commissions from both parties. Your agent is on your side, but they want a quick clean easy deal for their own interest so just bear that in mind.
Find time, it's best to do deep cleaning, repairs etc before you move. A tight move on exiting your current space can be a nightmare.
Be wary of your lender's homeowner's insurance-- just shop around.
Location is a cliche, but it's true. You can pretty much fix anything about a house except it's location. So all of the things that go into that like neighbors, traffic, schools etc are locked in.
If you get something that is not new-ish or has a big lot make sure you recognize the time commitment. Owning and maintaining a house is time consuming, especially if you have a big yard. And also you want enough space to have a family etc but don't go much bigger than you need, not worth it. Good luck.
March 20th, 2019 at 11:35 AM ^
I got laid off 2 months after we bought our 1st house as part of the tech bubble bursting. We had taken a 30 year loan with the intention of paying it in 15 or 20. We were fortunate because the lower 30 payment could be met until we got up and running again.
Don't go to the bleeding edge with a 30. Banks want to loan you the maximum you can borrow not what you can safely afford. There is a big difference.
March 20th, 2019 at 12:11 PM ^
I'm a fan of the 30 year mortgage with making an extra mortgage principal payment each month to knock it down to the near equivalent of a 15 year mortgage as well. That flexibility to go back to the lower payment in case of job loss or other financial stressor is worth the fractionally higher payment over 15 years in my opinion. The key is to make sure you set up and make those extra principal payments.
March 20th, 2019 at 12:41 PM ^
This is GREAT ADVICE...you can turn a 30 yr mortgage into a 15 year mortgage (yes I know the rate is higher), but you cannot turn a 15 into a 30. If you have tremendous amount of job security, then 15 might be for you, but otherwise think long and hard about it.
Well as long as you're employed you can almost certainly refi from a 15 to a 30. But potentially there are fees or adverse rate changes. Or benefits if rates are lower. Everything's a situation, and yeah, if you don't have good job security there is risk.
This is good advice, but the technique is slightly dated.
Of course you can use the “coupon book” from your amortization schedule to make the extra principal payments, but with most mortgages, the recalculation is automatic so the amount of the extra payment is irrelevant. What helped me was having the discipline of a steady amount.
So if your required principal and interest amount is $908, rounding up to $1,000, especially if you start right away, has a huge impact. The upshots? At any time, you can see your balance and (as said before) if you need to, you can go back to $908. If each year you raise your payment the same percentage as your raise at work, you’ll do even better.
The big caveat: make sure there is no penalty for making extra payments on your mortgage. I can’t remember the last time I saw this, but it used to happen with some lenders.
If all this sounds like Greek to you, make sure you get a mortgage broker that can explain all of this to you.
Its easy. If you have to buy make sure you have a large enough downpayment to avoid pmi. Also, make sure its big enough to allow you to do a 10 or 15 yr mortgage. If you cant do that, dont buy. Massive debt load and extraneous expenses are not worth owning a home. I used to, I dont anymore. Of course, if your well off then have at it!
Lots of good advice here. I'll add three more (in addition to what I think is one of THE most important: get your own reputable inspector!).
- Have your own real estate agent
- Have your own real estate attorney (one that's willing to walk you through everything you'll be signing - and it's gonna be a LOT).
- Ask LOTS of questions - about everything/anything.
The only reason to purchase a home right now is for the tax advantages, but even those are less than they were just a few years ago. It's pretty clear that we are moving toward more of a renter society, which would be a better decision for most people anyways.
30 years from now you will be regretting this philosophy.
Bought our first house a few years back. Here's my advice:
- Don't buy the best or worst house on the street. Value of the best is weighed down by nearby comps and who wants the worst?
- Consider if you actually want to maintain all the stuff that comes with getting a particular house. Giant yard? You better love raking/gardening/mowing before Michigan games or paying someone else to do it.
- Be flexible. Life never takes the route you expect anyway so don't get too attached to certain ideas.
- Get a nice, but not amazing house. Amazing is expensive. Nice leaves room to re-do some things the way you want without feeling pressure to do so.
- Spend 20-30% less than what you pre-qualify for. Banks are estimating what you can possibly pay, not what you can comfortably pay. They do not care if you have any margin in your budget or life.
- The quicker you eliminate debt (including mortgage), the quicker you can live life however you want. Don't strap yourself to an enormous payment that has no breathing room.
- EDIT: Oh, and hire a cleaning service to clean the whole place as soon as it's yours. I think we paid like $150 for a top-to-bottom cleaning and it was well worth it.
This is great advice, but I'd disagree with one piece: eliminating mortgage debt quickly.
If you can comfortably do it, that's great, but I've chosen not to for a few reasons. The biggest is that you don't save money until the loan ends or your refinance (and remember that if the house value goes down or the interest rate goes up it may be impossible or just a bad idea to refinance). Let's say I put $500 extra per month away on the mortgage. My net worth is going up, and I'm saving money on my total mortgage payments. But it's not like my mortgage payments go down--they only end sooner. Even if I cut a 30-year-mortgage down to 20, that's a long wait to live the life I want. I get that for others it may make sense, but honestly my best life involves spending more time with my young kids and hopefully traveling with them--for me, the $500/month is better spent on things that free up time (lawn service, housekeeper) or things I do with them (museums, travel) than saved until after they're grown.
Even if I want to save money long-term, my mortgage is at a really low rate and tax advantaged. Historically the stock market gets double digit returns on average, so if the loan is under 5-7% I'm almost certainly going to do better by investing that money than by paying off a loan faster. It's less safe, but quite safe long term (as long as you don't need the money at some specific point in the near future), and I could even use a chunk of it to pay off your loan 10-20 years in the future and probably be better than if I had paid it off along the way. Alternatively, I could use the investment growth as additional income.
Lastly, it's hard to get early payments back out. If you don't have a strong savings account that's ready to handle job loss, major home repairs, etc, the money should be going to a savings account. Once you spend money paying off a loan, that money is unavailable until the loan ends or you refinance/take another loan, which again may not always be possible or feasible.
I've been doing a lot of reading on this topic lately (pay off mortgage vs. invest). My wife and I have recently both become gainfully employed at the same time for the first time since we bought our house together. From what I've learned, here are the highlights:
1. If you have high interest rate debt (credit cards, student debt, etc) this should be first to go.
2. If you manage money badly and/or debt makes you uncomfortable, pay off your mortgage.
3. If you are a good saver and can handle the debt, leave the mortgage and invest your money. Long-term earnings in the stock market have historically out-paced even high interest mortgages (5-7%)
One part I can't quite wrap my brain around has to do with using real estate to "short" the currency. Something about 2019 dollars are worth more than 2049 dollars due to inflation, so paying an extra $1000 to the mortgage now costs more now than later. Do I have that right?
So a caveat that this is not my area of expertise, just one of interest, but I think those are three great points. For #3, I'd make sure there's already a good savings account--the stock market only beats a savings account in the long-term, but could do terribly in the short term. That said, paying a low-interest mortgage off early only benefits you in the long-term, too, so it's not an argument against #3, just that your priority should be to make sure you can handle job loss, large maintenance, etc.
I've never heard of it as "shorting" currency, which I would assume has pretty much always been a long-term losing bet with US dollars. I suppose it is, but I think that only makes a lot of sense if you were going to just hold the currency otherwise. If you would invest it, then you're really shorting the stock market. Either way, shorting may make sense short-term, but paying off a loan early is always a long-term plan (since you don't eliminate or reduce payments until you refinance or the loan ends), and shorting either currency or the stock market long-term is probably a very bad idea.
It's the same principle, but it might be easier to think of it only with inflation. If I had a a $1,000 PITI payment on a loan that started in 1999, that was the equivalent of paying $1500 today. So the pain of the payment has already decreased by 1/3rd, without needing to pay early. I could have paid early and maybe paid off the loan already, but that's using more expensive dollars to save myself less expensive future dollars.
Agree with what everyone has said as far as the inspector. Definitely be there when the inspector is there and ask questions. LOOK AT EVERY INCH OF CEILING LIKE A HAWK, look for evidence of patch repairs that are hiding bigger problems. Find out how old the roof is, and who put it on, if it's new see if the warranty transfers. Pay your own roofer to inspect it, a new roof doesn't mean the roofer did a great job
With an older home make sure every door opens/closes easily, if they don't you could be dealing with settling issues. Look for horizontal cracks in foundation walls, those are bad news.
Run all of the faucets for at least 15 min, make sure there aren't plumbing issues.
Find out how old the furnace/hot water tank, AC, appliances are. If you have a 15 year old hot water tank, odds are you will be on the hook for replacing it in the near future.
When you get a homeowner's quote, find out if any previous insurance claims have been made on the home, what the claim was for, and if it has been repaired. If you see multiple claims for water damage, buyer beware.
Don't sink everything you have into the first home purchase. My wife and I are 7 months into our first home, and we have already spent thousands of dollars on things you can't even begin to anticipate. $1300 for a minor roof repair, had to have the main snaked out because of tree roots, had to buy a new lawnmower because my old one was way too small, a fucking woodpecker made Swiss cheese out of one of the cedar siding planks, had to hire a pest control inspector to make sure we didn't have a hidden problem the woodpecker was trying to get to etc.
Great words of advice here. I'm in real estate, and have a couple of others.
1. People lie. I am generally a trusting person, but people will hide things, mislead you, and generally work in their own best interest instead of yours. YOU must be your own best advocate, on everything.
2. Get recommendations and check references when hiring any professional (realtor, inspector, etc). There are some great ones and terrible ones in every field. Make sure you take the time to get the great ones. It is well worth the effort.
3. DO NOT overbuy. Look at what you think you could 'comfortably' afford within your current budget, and then aim for considerably lower than that (with your mortgage). I know people often use the 'buy the most house you can afford,' but this is terrible advice. Crap happens in life, and if you are scraping by and meeting your expenses every month without any reserves or excess income, you will get walloped at some point.
4. School districts are super important, and are crucial to your value.
5. Get a house with 'good bones.' A lot of newer houses are built with really crappy construction, and will be in bad shape in 10-15 years. You can't see it when the houses are new, but they fall apart fast. It's better to get a smaller, more solidly built house to save you headaches later.
I could go on with this for a long time. There's already enough advice here to make your head spin, so I'll leave it there. Good luck!
Definitely yes on the inspection, be there while it happens. Yes on having it cleaned. Change all locks immediately. Reprogram or replace garage door opener. Hire a painter if you can. Take advantage of the house being empty for painting, repairs, etc. if you can. GET RID OF JUNK BEFORE YOU MOVE. Have a storage system in place before bringing your stuff.
But a decent house that is well under your budget. This gives you flexibility to do a lot more with your money (pay extra mortgage principal, vacations, stocks, 401k).
Don’t be afraid to do some work to make the place yours, some work is easier to do than others. You want to make sure to keep some money aside so you can make some minor renovations to get the place the way that want it.
Agree....completely clean it before moving in.
Repainting is easy when it’s empty. Do it if you can.
Visit the area before buying and talk to to the neighbors. Go multiple times, different days of the week. Look for railroad lines and flight paths, you don’t want to have to get used to those sounds.
Fund out why they are really selling if you can. That being said, sellers lie so scrutinize the sellers disclosure.
March 20th, 2019 at 10:10 AM ^
Get the homeowners title insurance policy, not the owners. It covers a heck of a lot more. At least find out what you need to do to remove the first 6 standard policy exceptions, if you get the owners policy. While I have not owned a home, I did work as a claims counsel at a title insurance company for a couple years. The number of claims I had to deny because people were not willing to pay or take a little extra time to get those exceptions removed because their broker said it was unnecessary was staggering. This is the largest asset you will likely own; insuring that you actually own it with clean title is worth the extra few hundred dollars (especially considering the cost of a house).
March 20th, 2019 at 10:19 AM ^
lots of good stuff in these responses. home inspection is nice, get one. but remember they aren't the be all, end all, and the inspector will limit their liability if they miss something to whatever you paid them. you aren't going to sue them to get your $350 back. a quick list:
1. roof/water - pay super close attention. expensive to fix and can cause all manner of other problems.
2. foundation - critical that you examine closely, extremely difficult and expensive to fix most problems.
3. mold/water - much like foundations, folks will cover this stuff up and it can be a real problem. there is post toward the top where one of the mgobloggers is now litigating about failure to disclose and i have litigated a number of those cases.
be wise, but also be excited. a new home is almost always a really good thing.
March 20th, 2019 at 10:19 AM ^
I'm a real estate broker in NC so I can help you with any questions you have.
March 20th, 2019 at 10:20 AM ^
A GOOD home inspection...offer contingent that it is acceptable to you
Copy of utility bil past 12 months
Check township records...current taxes may jump substantially when you buy
Check local crime stats
Verify with township any current or upcoming special assessments like neighborhood road improvements etc
Verify high speed internet access
Basement leaks, evidence of past flooding, past insect damage, roof needs replacement etx are all hard passes for me
Check Zillow to see what houses have sold in the general vicinity...you don't want to buy the highest priced house in a neighborhood
Pools require special scrutiny
Cat or pet urine smells are difficult to get rid of and new pets may pee in the same areas
Buy a house with a payment you can do an extra principle payment each month without hurting your cash flow
Avoid mobile homes on property
Do the free research before spending for a home evaluation
Finally remember the basic axiom for negotiations...the person who wants the deal the most usually loses. Always be willing to walk away from a deal as the supply of houses is basically infinite for the patient buyer.
Good luck!
March 20th, 2019 at 12:16 PM ^
What's the matter with mobile homes?
Username checks out
March 20th, 2019 at 10:23 AM ^
in addition to what others said about the inspector (big mistake on our part, learned the hard way of things that needed to be upgraded within a year of closing) I would say:
1 - Budget in some work for the first year, I would say 2-3% of house price and be prepared. If you can't afford that look for a different house. Even if the house is perfect you will spend money somewhere
2 - read everything and I mean EVERYTHING during the application and loan process. Bank tried to charge me after my rate lock expired and their charge was in direct conflict of their disclosure. I kicked up a fuss and asked if we needed CFPB or lawyers involved and they waived the fee and reduced closing costs.
March 20th, 2019 at 10:23 AM ^
Google maps the house, check for neighbors with trampolines, trash or toys all over the yard, motorcycle tracks all over the open field near the house, cross all those houses off the list immediately. Drive by the house on a busy weekend time, any loud ass MF barking dogs left outside all day, kids shooting off fireworks, cross all those houses off the list.
Better yet, just buy a house on 10 acres with no neighbors anywhere, because there will be an asshole next door no matter where you buy. Did I mention I hate my neighbors? Oh yea and don’t buy next to a previous foreclosure, see above. You’re welcome.
March 20th, 2019 at 12:20 PM ^
Hey Greg, those weren't fireworks my kids were shooting.
March 20th, 2019 at 12:35 PM ^
hillbilly, you are en fuego today. i take back all the missing teeth jokes i ever made about your family tree.
I live by gun ranges, which I don’t mind, my man.
March 20th, 2019 at 10:24 AM ^
Financials: Make sure that your mortgage will be below 35% of your monthly income. Remember that bills that are sometimes covered when renting (Water, gas, electric, cable, sewer, etc.) will now fall on you.
Before making an offer, talk to the neighbors first, see if they have any stories or know of any issues with the home.
Have inspections include any remodeled area where corners may have been cut that could present an issue to you.
If you are going to remodel, make sure a full inspection is done with the plans in mind. I have seen it where the inspection is good, but because the remodeling requires new plumbing or electrical, the entire setup has to be redone starting with the circuit panel and including all wiring.
Insulation/Windows/Sound Proofing - Make sure that you are happy with the white noise of the house and that location does not create an uncomfortable situation. Common flight path for the airport, near railroad tracks, etc.
March 20th, 2019 at 10:28 AM ^
Literally heading to my home inspection right now, so I'm right there next to you, brother! At this point I'm basically just trying to enjoy the ride since I've already stressed about it way more than I should.
Having said that, I think the posted above who said "travel light" is on to something!
March 20th, 2019 at 10:38 AM ^
Certificate of Occupancy (CO) is a big deal, You can't move in unless you have one.
Recommend putting in language in your offer such as "Offer is contingent on CO and pending inspection"
Don't accept any situation where you are responsible for CO.
Don't be the most expensive house on the block, you'll never get good return.
Agree with location, location, location.
March 20th, 2019 at 10:42 AM ^
1st- Pick the neighborhood you like. (schools, proximity to work, etc)
2nd- Most property values are cyclical. Buy in a buyers market if at all possible. And buy what you can afford.
3rd- Try to put at least 20% down...NO PMI (Insurance)
4th- Make sure you know what the property taxes will be AFTER you purchase this home
5th- Don’t fall in love with this home. Because after the divorce, this becomes HER house.
? just joking
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March 20th, 2019 at 10:42 AM ^
I second many of the comments here, having bought several places in several areas. I think of Donald Rumsfled's quote:
"...as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones. The absence of evidence is not evidence of absence, or vice versa."
My two cents is that "unknown unknowns" are what you are trying to avoid in the diligence process.
Look at roof and ask inspector how snow, etc., collects and runs off. Make sure that you know if you need more roof work to prevent ice dams, etc. Those kind of things are both hard to fix but also easy to let slide when you own a house. The problem accumulates over time. (I know this..its like, gee should I spend several thousand dollars to prevent those giant icicles this year or go to Vegas?)
1. If it is a flip or had reno, ask who did the work. If it is a self done renovation, be wary -- doesn't mean it wasn't done well, just be wary, My first house was a self reno, and a month after we bought it the AC condenser unit went out. Turns out the unit had been self repaired in a very crude way with a coat hangar. And the joists under the floor started to squeak. Why? The joists were both cheap and not installed properly.
2. Know your seller. My most recent house I purchased from a really good family. He had maintained the house in good condition. After I moved in, during the first big rain storm, I heard a storm drain system flush and discharge. I didn't even know the house had a storm drain system, much less that it had been installed just a couple years earlier. It was just part of the care the previous owner had taken for the house.
3. Everything about inspectors is true here. But, on the other hand, try to decipher big problems from little ones. Leaks are bad. They have a tendency to come up in difficult places and cause lots of damage before they are even noticed, much less fixed. A tell tale sign is patched wallboard. And ask your seller. They don't "have" to tell you. But, on the other hand, if they don't, that says something too. (It also depends on customs of where you live. In Northeast where I am, more or less, buyers cant ask sellers anything. Sellers provide a form disclosure that isn't terribly informative and that is it. But, even if that is the custom, doesn't hurt to ask.)
4. Look at AC and furnace. Usually an inspector won't extensively test the AC unit beyond seeing if it works. Ask the seller about it. If it is old, it will not only require more maintenance it may heat unevenly and inefficiently. And, here in Northeast, check to see if humidifer works. Mine is broken, and my house this winter was literally drier than a desert and peeled wallpaper off the walls. Again, nothing is perfect, but knowing is better.
5. In my experience, renovations generally never go to plan. All those shows on HG TV make it seem so easy. But it usually isn't, even if you are handy. Opening walls in an old house can raise new issues -- wiring, plumbing, crazy ways stuff was fixed before, etc. Plan on unknowns both in timing and cost. I am reasonably handy, and decided I was going to install dimmer switches in an old house I had bought. I opened up all the sockets, and the wiring was crazy; but I plowed ahead. I managed to short out a third of my circuits before I called an electrician to finish the job.
6. Pay attention to slope of yard and house. Houses settle, yards settle, landscaping changes slope too. Slope dictates where water goes. If water pools at foundation, then where does it go? My first house had a driveway that sloped from the front to the garage at back. I didn't think anything of it. But, when it rained, the slope produced a veritable river that ran down my driveway, through the garage and out the back, soaking anything on the garage floor and rotting out the base of the garage.
7. Look at windows. Do they seal? Are they new or old? Do they open and close easy? How are the sills -- do they show signs of leakage? Windows can be expensive, and a leaky window is drafty in winter and frustrating in summer. And if the windows are hard to open, the house may have settled which, in itself isn't bad, but just may be a sign to look at other things like straightness of walls and level of floors.
Good luck! I loved owning a house, and be prepared for surprises, joys and frustrations. Ask questions -- the worst that can happen is the seller wont answer. It is yours now, and you can do what you want with it. You will learn an awful lot in that first year. No house is perfect, and no matter what, you do you can't eliminate all risks and uncertainty. And all the little things in a house are usually just that -- little things. I remember when I was a seller and my proposed buyer got the inspection and said here is the 20 things you have to fix before closing. I said no, that is just the house, and if you don't like it too bad. Little things are just that -- little. (They closed.) Knowledge is power and prevents surprises. And the joy is in the journey.
March 20th, 2019 at 10:55 AM ^
The Philosophy is the Johari Window, developed by Luft and Ingham in 1955. Used an NASA, so that's where Rumsfeld heard it.
March 20th, 2019 at 10:46 AM ^
There are several things to consider.
*Strongly consider financing over 15 years instead of 30 or more. You can run an amortization schedule and you will be shocked on the difference in the interest you will pay. And try and avoid an ARM as a few years of interest rate increases will totally change your payment.
*Learn to do simple repairs. Be it electrical or plumbing, these skills will save you over the time spent at the house. YouTube and friends will be a great resource.
March 20th, 2019 at 10:50 AM ^
From a recent first-time homebuyer:
1) Read as much as you can about the process before diving in. When we tried going around the first time, we went in blind and just kind of winged it. Had no idea what questions to ask, and in the end, felt like I wasted our's and our agent's time. I later bought a book called Keep Calm, It's Just Real Estate, and it explained everything very simply. Probably 150-200 pages but you can fly through it. So glad I did it, because it helped prepare me for what questions to ask, what to look out for, and what to do every step of the way.
2) Don't get too caught up in the small things. Don't ditch a house just because a bathroom is too small or outdated, or the floors look old and worn. Those things can be updated, replaced, or renovated.
3) Do your research on the neighborhood. The neighborhood the house is in, the school district, the crime level, you can't do squat about that once you move in. You can't pick up the house and move it somewhere else. When you buy a house, you also need to think about whether or not you're going to be able to easily re-sell it. Odds are you're not staying in that house forever, and even if you don't plan on having kids and don't give a shit how good the school district is, the family that'll be looking to buy your house after you leave may really give a shit about school districts. We turned houses down because the school district sucked, and we knew that would make selling the place down the road that much harder.
4) When you find the house, be ready to move and move fast. I can't speak for all markets, but down here in Atlanta, any house worth a damn can come onto the market and be off the market within 24 hours. Have your finances in line, know what you're willing to offer, and be ready to move. Because if you aren't, there are 4-5 other families who will be and they'll beat you out.
5) Have a lawyer review the contract and closing documents on your house. A real estate lawyer, not just any lawyer. Seems like a lot, but paying a lawyer $700-$900 to review everything and tell you you're okay to sign is worth the price. You will regret not doing if you find any nasty surprises later. And find your own lawyer. Not who your realtor or lender recommend.
6) To go along with the above, find your own inspection company. Don't take the lender's or realtor's recommendation. Their job is to make the sale, and if you pick the inspector of their choosing, that makes things easier for them. This is all business. The realtor and lender are NOT your friend.
7) This isn't in the cards for a lot of people and that's okay, but if you can, put down 20% on the house. It's not required, but you will get hit hard on mortgage insurance if you don't. You end up saving money in the long-run by going up to 20%, and you look very attractive to lenders and sellers who know you can put down that kind of money. It shows you're serious. Don't bankrupt your family by doing it, of course. But if its financially within the cards for you to do it, I'd do it.
8) Have fun with it. Try not to get overwhelmed, and accept the fact that no matter what you do, something will go wrong with the house after you buy it. Won't necessarily be huge, but houses are an ongoing project that never end. Just embrace it. Once you finally get those keys, it all becomes worth it.
March 20th, 2019 at 10:51 AM ^
I’m a commercial banker so I’m not as familiar with all of the mortgage banking regs and the little ins and outs of the underwriting process but I can chip in a few tips that may save you some money:
1. Find out if you’re in an abstract state. If the home you are purchasing has an abstract rather than title insurance always opt to get a title policy at closing. It’ll probably cost you a couple hundred bucks in the short term but when you sell you’ll save a couple thousand on abstracting and attorney fees.
2. Ask your banker if you can set up bi-weekly payments. Paying half your payment twice a month rather than a full payment once a month can cut 4-5 years off a 30 year mortgage. Some banks may not allow for this especially if they are selling your mortgage to the secondary market but it’s definitely worth asking about.
3. Do the math or ask your banker to quote you both a 15 & 30 year mortgage. In many cases you’d be surprised at how modest of an increase a 15 year mortgage is over a 30 year and it can save you tens, even hundreds of thousands of dollars over the long term.
4. Coupling a 15 year mortgage with bi-weekly (if available) could result in you being debt free against your home in 10-12 years. Might suck in the short term but if you’re young it’s a very good plan for building wealth in a hurry.
5. Buy a home with a 20% downstroke or you’ll get stuck with PMI payments until you reach the 20% equity threshold. PMI is a joke, may as well light your money on fire.
March 20th, 2019 at 10:53 AM ^
I've had what I felt were good inspectors over the years but none of them have ever checked air flow from HVAC ducts. One of the two vents in the MB of our current place basically has no air flow and the inspector didn't check for that. You could probably do that yourself by jacking up the heat during the inspection.
March 20th, 2019 at 11:05 AM ^
Really think about whether buying a home is actually a good idea for you. So many people just look at the mortgage payment and compare it to a rent payment. If you're "breaking even" and buying to get that equity, then you're likely going to be spending more money. On a 30-year loan, ~2/3 of the payment is going to be interest to start. You need to account for property taxes, higher utilities, and repairs and maintenance that were taken care of by your landlord before. Don't undervalue those repairs. They happen and they aren't evenly spread out. You also need to think about closing costs being ~10% of the value of the house and amortizing that into your payment for the time you live there to get the real cost of the house.
Assuming that you still think you you're going to come out ahead or that you're fine spending more to get more, now you need to think about lifestyle changes. People point out that you can do the work yourself, but if you're working a full-time job, are you the type of person who is going to come home after work most nights and put work into the house? Or give up your weekends? I enjoy doing work around the house. I just hated that it turned into a second job. Are you ok if things don't get done right away? Are you going to pay someone to come in and do it? If you pay someone, add that to your monthly budget for the house. Are you going to live in this area for some time? If you think you might be moving anytime in the near future, the costs of buying/selling the house probably don't make it worthwhile.
If you seriously go through all of this and still think that buying a house is right for you, then I think the next thing is to get a good real estate agent and an even better inspector. Listen to their advice and take it seriously. My inspector told us of several things that could have saved us some headache if we hadn't procrastinated.
I'll disagree with whomever said to put as much down as possible. Put as little down as possible while avoiding PMI. Even if you put 5% down and have to pay $10/month in PMI, 15% of a 200k house is 30k. 240/30k is 0.8% plus the interest rate on your mortgage. That money will probably earn you more if you invest it in the market or back into your home. Obviously, do the math, but the less money that you have sitting around at low interest rates, the better.
March 20th, 2019 at 11:15 AM ^
I've seen a lot of good stuff here. One thing I would add that I haven't seen is this: Don't be afraid to attach conditions. The seller isn't going to back out of a six-figure deal over a thousand dollars or two worth of conditions. Mine included a brand-new water heater at the advice of my agent. I also had them fix a crumbling piece of the driveway/back patio and a bunch of little things like finish installing the smoke detectors. (This was a flip, and overall a very well-done one, just needed a few things pointed out here and there. It might have been easier since the flipper was his own contractor and had easy access to all the work that was needed - but that's a question mainly of time and not money.)
March 20th, 2019 at 11:25 AM ^
If you are buying in California be prepared for there to be a lot wrong with the house. It will still get multiple offers.