After much deliberation about time and effort needed, the girlfriend and I have decided that buying an older house that has already been remodeled is a better choice for us, than buying the home we are currently in and dumping a bunch of money into it.
Just wanted to see if the more experienced GRM'ers had any words of wisdom.
z31maniac wrote: Just wanted to see if the more experienced GRM'ers had any words of wisdom.
Save enough for 25% of the purchase price. Put 20% down and have 5% in the bank for the inevitable expenses of a new house. Don't buy anything that you can't afford with a 15 year fixed rate loan.
As much as you want to buy a house that you like, also buy a house that someone else will like. You'll want to resell it before you know it. Two bedroom homes don't sell well, etc.
It's worth every penny to have an inspector go thru the house before you sign any papers. A good realtor (another piece of advice) will help you find a good inspector.
Before I bought my first house (now on my second), I bought the "Home Buying for Dummies" book. It was a good purchase--it didn't dumb anything down, and it went into good detail on the subject.
Take your time. On this house, my wife and I spent 11 months going thru every open house that was close to our price range (we probably went thru nearly 100 homes). We were able to discover a bargain when we found it.
Good luck.
DILYSI Dave wrote: Don't buy anything that you can't afford with a 15 year fixed rate loan.
But get a 30 year loan, and pay as if it were a 15 year loan (could be as little as $100 extra a month). If times get tough, you can lower your payment to the 30-year amount to save a few bucks.
+1 on all the above.
Know what you can afford before you start looking. Most can not afford the loan amount the mortgage company approves. (Perhaps not such a big problem as before)
Get a real-estate agent* if you are at all unsure what you are doing. In most states, Buyer's representation is free to you - paid by the seller at closing. Don't talk to the listing agent before you get your own - they represent the seller and will use anything you say against you for the seller's benefit.
*Disclaimer - my wife is a real-estate agent.
Any advice for finding good realtors or mortgage brokers? After all my experiences(2-homes, 2-refis, and one deal that fell through), I'd rather deal with the lowest of lowly used-car scumbags than deal with anyone in the housing industry. 
Kramer wrote: Take your time. On this house, my wife and I spent 11 months going thru every open house that was close to our price range (we probably went thru nearly 100 homes). We were able to discover a bargain when we found it.
My mother told me the same thing. Plan on looking at 100 homes. When you visit the right one, you will know instantly and can put an offer in that day. That is how I did house #1 and #2.
Mortgage? I am old school. Get a 30 year fixed and pay it off like a 15 year loan (or pay extra every month).
petegossett wrote: Any advice for finding good realtors or mortgage brokers? After all my experiences(2-homes, 2-refis, and one deal that fell through), I'd rather deal with the lowest of lowly used-car scumbags than deal with anyone in the housing industry.
Ask around. For my first house purchase, I used a friend-of-a-friend, and he was as useless as tits on a boar. I had a few problems, none of which he'd help me with. For the sale of that house, another friend recommended his previous realtor (who wasn't his friend). This woman was wonderful, and did much more work than I expected. The sale went without a hitch (I'd already moved, so I signed POA to her, and she completed the sale 100%).
For my current purchase, I got a good recommendation. I've stayed in touch with this realtor, and he's helped me consider my current options, three years after the purchase.
It doesn't cost anything to shop for a realtor. Talk to them, see what they do for you, and then keep/switch. Don't sign any papers until you feel comfortable. Home buying/selling usually takes a while, so there's a lot of work they can (or can't) do for you before things get serious.
Talk to the county and state govt people. Many times they've got special deals to sweeten the pot of a first time home buyer. Do not expect your agent to mention this, as it actually costs them a bit of money.
Good agents will make all the difference. They will know all programs that are available in your area. For instance in my city there was a program if you bought a house in the historical area, the city would give a grant for rehab. The longer you lived there, the more of the loan amount was forgiven. Your city/county/state may have something similar. Also don't forget about the governments $8000 tax credit for first time buyers.
My first agent told me that in WI, ALL agents work for the seller unless specifically hired as a Buyers Agent. Including the agent(s) that you bring to the party. Don't know about OK.
My last piece of advice works for me, but may.not for all. That is to not escrow for taxes and insurance if don't have too. This will be up to the lender if they allow it or not. On my first mortgage my taxes went up a $150 a year. This put my escrow account a negative and the mortgage co. took it upon themselves to raise my escrow payment $100 a MONTH to "cover" the additional amount. While the interest rate is fixed, often the escrow amounts can be raised and there is not much you can do. My second home I have no escrow and my monthly payments are lower. Of course I have to cover taxes in a lump sum every year.
One more thing IIRC my agent also told me that there are certain times of the month that are better to close on. Something to do with interest and mid month payments or what not. Maybe if somebody else knows what I'm talking about they will chime in.
Get married first. Dave also says to wait a year after you're married to see how close to the MiL you want to live. Sure, that 8 large tax credit sounds good now, but that will be nothing if things go bad. Don't let a agent show you things outside your parameter list and certainly not outside your budget. You tell them "I want a 2 car garage, 3 bedroom, 2 bath for 150K" or whatever and don't even get out of the car if they stop in front of a 1 car garage place or at one with an asking price 25 large over. Start at your bank and have your loan set up before you find a place you want. TRY REALLY HARD not to find a place in a home owner's assocation of any type. They are teh devil. When you think you have found something you're interested in, go shopping at the nearest grocery store and convenience store. What are the people there like? Is this what you want to live next to? Maybe they're all snobs, total pricks, drive BMW's and that's not your thing. Maybe they're all meth-heads in 1983 Chevy's and that's not your thing. Maybe you don't care. Better to find out before you move in.
Dr. Hess wrote: Start at your local mortgage broker and have your loan set up before you find a place you want.
There I fixed that for you.
With the new Home Valuation Code of Conduct that went into effect at the first of May if you don't use a Mortgage Broker and your appraisal doesn't come in right (forget everything you thought you knew about appraisals and values the Code of Conduct changed the whole system for the worse) to get another appraiser you can't order a second one from the same lender so you have to change lenders and start all over again. The Mortgage Brokers are the only ones who can simply change sources and get you another appraisal without all the expense and time of a new loan.
That's the most bizarre spin on the HVCC I've heard. Not that I'm supporting the code, but one of the reasons it exists is to stop appraisal shopping - getting multiple appraisals until you hit the value target.
Carguy - you and I need to have a beer sometime. It might be a long night!
I agree with getting pre-approved before you start shopping for a home. I agree that you should shop within your means, not at the upper limit of your qualifying ability. Impounds for taxes and insurance aren't always a bad thing - but having a competent loan servicer is important (which may be different from the lender who funds your loan). Putting 20% down is great, if you have the means - but if saving that much cash postpones your purchase and keeps you renting for 10 years, then it might not be the best strategy for you.
If you are considering a lower down payment, look for a FHA approved lender. HUD insured loans are probably the best deal right now for borrowers of modest means.
Definitely get a home inspection, which is totally different from an appraisal.
Find some professionals you can trust - both the lender and the RE agent. Remember the agent doesn't work for you unless you are paying them. Ask your credit union if they offer home loans. Take your time, be careful, have a game plan and be patient.
I was a real estate agent for about 4 years.
Agents are a cross section of the community. Talk to friends and like minded folks and ask them what they thought of their agents. Seriously, I think it's very important to work with a good agent than you have something in common with. And you can find someone like that because, for the most part, RE agents are just regular folks. I was the greenie/car-guy agent. Weird combination, but I can honestly say that I am now friends with all the folks that I helped sell houses to/for.
I tell first time buyers not to hesitate to look at LOTS of houses. Even look at ones you know you probably won't want (if it otherwise fits your criteria well). Too many first time buyers (myself included) kick themselves for missing out on the first good house they see. They don't have confidence to 'pull the trigger' because they aren't familiar with the market. So look at houses...treat it like a project. Do your homework, take it seriously.
For financing. I always recommend a locally owned bank first. After banks come Mortgage lenders. This is like Wells Fargo or Countrywide. They actually fund the loan at closing and then sell it off immediately.
Who I would NOT work with is any sort of mortgage broker. I've personally been burned and seen it happen way too many times with clients. Mortgage brokers never fund the loan...they seek out a lender on your behalf and make a cut. This can work, and I don't mean to offend any mortgage brokers...but it's not for me and I don't recommend it for anyone else either.
Your agent will be a good resource for recommendations of good Lenders. They've worked with lenders before (and often) and know who is good and who to avoid. Lenders have specialties to, believe it or not...
Clem
Thanks for all the advice so far.
Dave, great advice, but saving up that kind of change just isn't in the cards right now.
Hess, no need to marry her first, I already know I'm going to and the MiL lives in Perkins, 1.25 hours away.
No we are not planning on buying above/beyond our means, and we have already been approved for an FHA loan from our local bank. It looks like we should qualify for a state program that takes care of our downpayment as well.
We are looking in the $80-105k price range. We do have a few houses we are going to look at this weekend.
Both are 3/1.5/1car, although one is close to 1800 sq ft, corner lot with a detached 2 car garage in the back, the other is around 1350-1400 sq ft, completely remolded with new everything basically, the neighborhood is overall nice but that particular street is a bit hit and miss.
Although from the research I've done and the previous selling price of the house, investors are scooping up properties in teh neighborhood to remodel and flip. The house is close to the street and not to much room between houses, but does seem to have a large backyard.
If we weren't limited to our suburb, we have more options properties at the moment, but we don't want to make her commute longer than it already it is.
Keep the advice coming.
z31maniac wrote: Dave, great advice, but saving up that kind of change just isn't in the cards right now. Hess, no need to marry her first, I already know I'm going to and the MiL lives in Perkins, 1.25 hours away. .... It looks like we should qualify for a state program that takes care of our downpayment as well. ... Keep the advice coming.
No offense intended, but the excerpts quoted above show that you're discarding what is hands-down the best advice you will ever receive on the subject.
billy3esq wrote:z31maniac wrote: Dave, great advice, but saving up that kind of change just isn't in the cards right now. Hess, no need to marry her first, I already know I'm going to and the MiL lives in Perkins, 1.25 hours away. .... It looks like we should qualify for a state program that takes care of our downpayment as well. ... Keep the advice coming.No offense intended, but the excerpts quoted above show that you're discarding what is hands-down the best advice you will ever receive on the subject.
None taken, if I couldn't take a differing opinion/advice/critcism I wouldn't be posting on a public forum.
Like someone else said, if saving up $25k is going to keep up from buying for a number of years until the markets recover, prices go back up and interest rates are higher, then I'm not sure I completely understand the advantage of waiting.
As far as the down payment assistance, there is a reason we put the note just in her name, my income alone excludes us from any freebie type programs.
I'm not trying to sound indignant/arrogant, but buying a $80-90k home on a combined gross income of just over $100k a year, doesn't seem all that irresponsible even if we aren't putting $20k down. Our payment will work out to be around 11-14% of our net income (yay cheap property taxes), FAR below the somewhat acceptable standard of 27-30% of your gross.
Could we put our own money down on the house? Yes. But if the state is going to GIVE it to us, why not take advantage of it, right?
Dr. Hess wrote: Don't let a agent show you things outside your parameter list and certainly not outside your budget. You tell them "I want a 2 car garage, 3 bedroom, 2 bath for 150K" or whatever and don't even get out of the car if they stop in front of a 1 car garage place or at one with an asking price 25 large over.
This is good advice. I told a realtor I had to have a basement (common in the Chicago area) and he shows me a 100 year old house that had a dirt crawlspace that the owner was digging out by hand.
The next house had an octopus furnace and I had to walk hunched over the entire basement.
STICK to your guns as stated above. I never thought I would find the first house as I wanted, but I watched the papers and bought the exact house for sale by owner.
^It's great advice.
I've spoken to one realtor, and told her in addition to the houses we want to look at this weekend, EXACTLY what we are looking for.
Minimum 3 bed 1.5 bath 1 car garage, minimum of 1350 sq ft.
See if some friends can recomend a home inspector. We used the one our realtor dealt with and he sucked. He missed many things that should have been obvious, that semi knowledgeable friends and family pointed out after the fact.
find out who teaches the inspector classes in your area. The guy that did mine wrote the book and inspector training classes. Also ask them how many a day they do, the thorough ones will do one in the morning through about lunchtime, then go to the office and write the report while it's all still fresh in his mind.
bludroptop wrote: That's the most bizarre spin on the HVCC I've heard. Not that I'm supporting the code, but one of the reasons it exists is to stop appraisal shopping - getting multiple appraisals until you hit the value target. Carguy - you and I need to have a beer sometime. It might be a long night!
I only wish it were a spin. And appraisal shopping wasn't the reason for the HVCC, it began life as an out of court settlement of an issue in NY. Because of all the election stuff going on they decided to be PC and thought a settlement was preferable to a long court case. Now they wish they'd have gone to court.
In our area appraisals went from $325 to $495 literally overnight. I work with many builders as well as do loans for Realtors and individuals and to date I've only heard of one appraisal that came in at a useable value. ALL the others required changing lenders and a 2nd appraisal. This adds lots of extra time, much more work on everyone's part not to mention the extra cost plus loss of sales in a high percentage of the time.
The issue is that somehow now the ONLY people that can do the appraisals are the companies that generated the lawsuit in the first place. They were never front line appraisers in the first place, they were the companies that generated multiple appraisals for relo companies and did the double checks for the lenders of the front line appraisers.
The whole process began life as a code of ethics, but after the new administration got involved the whole thing changed and it's not a code of ethics except in name, but a whole new way of doing things.
Neither the builder, the realtor, homeowner, nor the lender can give the appraiser any data or that is considered trying to "influence" the appraisal. There are loss of licenses, fines and possible jail time just for giving the appraiser information that isn't in MLS.
If you or anyone you know has paid more for an appraisal, waited too long for an appraisal, lost a sale/refi/purchase, had a value problem or even an attitude problem from appraisers who no longer have any checks and balances (yes all of those disappeared too) except for the admonishment of not to commit a legal act please, please, please email that info to HVCC@NAMB.org
z31maniac wrote: Like someone else said, if saving up $25k is going to keep up from buying for a number of years until the markets recover, prices go back up and interest rates are higher, then I'm not sure I completely understand the advantage of waiting.
The advantage is that you will own the house, rather than the house owning you.
For starters, if it will take you more than two years to save up $25k on a $100k income, you're not living a lifestyle that is conducive to home ownership. What are you going to do when your A/C goes out and costs $X,000 to repair or replace, or you need a new roof at $Y,000, etc.? If you're used to saving 10-15% of your income, these expenses are mere blips. If you're used to spending all of your income, these are serious PITAs.
Second, how much more interest will you pay over the life of the loan by financing 100% today vs. 80% in two years. Keep in mind that your interest rate will be higher and/or you'll be paying significant PMI premiums on a 100% loan that you won't have with a conventional 80% loan.
Third, there's no guarantee that prices and/or interest rates will be significantly higher in two years. You're in OKC, right? OKC didn't see anywhere near the bubble that other markets did, and thus didn't see anywhere near the drop. Moreover, interest rates have been at "historic lows" for years now. Sure they go up and down a little, but I really doubt you're going to see late 70s/early 80s mortgage rates any time soon.
The world won't end if you don't own a home today or tomorrow. The best money advice I've ever heard is "never be in a hurry to spend a lot of money."
z31maniac wrote: As far as the down payment assistance, there is a reason we put the note just in her name, my income alone excludes us from any freebie type programs.
There are only two things in home ownership that are dumber than buying a house with someone you're not married to. The first is being the only one on the note, which it appears she's doing. The second is paying on someone else's note, which it appears you're doing.
This has nothing to do with my views on unmarried cohabitation and everything to do with being a lawyer and, therefore, knowing what happens when such an arrangement goes pear-shaped. "Clusterberkeley" is the most succinct legal term.
z31maniac wrote: I'm not trying to sound indignant/arrogant, but buying a $80-90k home on a combined gross income of just over $100k a year, doesn't seem all that irresponsible even if we aren't putting $20k down. Our payment will work out to be around 11-14% of our net income (yay cheap property taxes), FAR below the somewhat acceptable standard of 27-30% of your gross.
If this were accurate, it's the smartest thing you've said so far. Unfortunately, not being married, you don't have a combined gross income. You have an income, and she has an income. I don't know what they are individually, but if yours is too high to qualify for various low-income buyer programs, hers is probably too small to buy a $80-90k house. Given that she's going to be the only one on the note, that's effectively what she's doing, and the word for that is "stupid."
Moreover, a much better rule of thumb is not to buy any more than you can afford on 25% of your net (not gross). Anything more than that starts to affect other parts of your life. You start having to either give up your discretionary spending or saving for future things like retirement, etc. One is no fun; the other is just dumb.
z31maniac wrote: Could we put our own money down on the house? Yes. But if the state is going to GIVE it to us, why not take advantage of it, right?
I'll leave the commentary on the moral and macroeconomic aspects of this to others. As a practical matter, there's nothing wrong with it except that I've never seen such a program that gets you a 20% down payment. Typically, they're on the order of 3%.
In that situation, you've got no equity to start with. Thus, if you needed to sell, you're forced with coming up with not insubstantial amounts of money for commissions, closing costs, etc. Most people who can't or don't want to come up with a substantial down payment can't come up with that kind of money when they sell. Worse yet, if property values decline (a distinct possibility) you've got to come up with even more money or get the bank to agree to a short sale, dinging your credit in the process.
The bottom line is this, you are ready to buy a house if all of the following are true (with apologies to Dave Ramsey):
You have at least 3, preferably 6 month's living expenses set aside in addition to your down payment.
You have a 20% down payment (10% absolute minimum).
Your payment on a 15yr fixed rate note will be no more than 25% of your take home pay.
You are married to anyone you're buying with and have been for at least a year.
If any of those conditions aren't met, buying a house is asking for trouble. Just because people get away with it, doesn't make it a good idea.
And the number one reason not to do the downpayment assistance program is the inability to resell. It's not the "it's wrong" argument.
You simply don't have enough equity to be able to get out of the house without owing money unless you have been unable to buy way below the market now and what the market might drop to before you want to sell or you are going to live in the house a long time.
Any money you might lose of the downpayment you put up if you had to sell for less than you paid is a lot less than the money you'd lose if you let the house go back because it would cost you money to sell it.
Thanks for all the great advice gentleman!
billy, close we're in Tulsa. One of the few markets that has continued to appreciate (well according to the last article I read a few months ago.)
Thanks for the insight!
You'll need to log in to post.
