Buying a House

[airtwardo 6]

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But in the long run, if you do your homework and DO NOT BUY on emotion...you can't lose!

We've been living together for four years.. I think we're steady enough to break even.

By 'emotion' I mean the house!

You don't want to buy a home that you 'love' because of whatever reason, but is in fact a financially poor choice.

~ If you choke a Smurf, what color does it turn? ~

[karenmeal 0]

Yeah, I don't see decorating as an expense that will crop up for us. Everything in our home has either been bought at a thrift store, given to us, or made by us. We're definitely not the type to waste money on those sorts of things.

The only maintenance issues that we've dealt with as renters has been plumbing/septic problems. Those would be a headache to fix.. luckily though my boyfriend's best friend is a plumber and if we owned a house we would get great deals.

It sounds like with a really good home inspection we could prevent having to deal with a lot of major repair expenses.

"Life is a temporary victory over the causes which induce death." - Sylvester Graham

[karenmeal 0]

Heheh..

I gotcha.

"Life is a temporary victory over the causes which induce death." - Sylvester Graham

[JohnMitchell 14]

A little more about that PMI. Sometimes it is a lump sum payment rolled into the original loan amount instead of a month-by-month payment. Once you reach the threshold of only owing 80% of your house's value, either by paying down the principle on the original loan, or by the appreciation in value of the home, you are entitled to apply for a refund on the balance of your PMI premium. Here's the catch. They won't tell you when you reach that point and are eligible. You want to calculate that point and then get in touch with them and do the paperwork for the refund. Our first house we paid down quickly and it appreciated nicely. We got a nice early refund.
Many of the other things that happen are fixable by the homeowner. Minor repairs can easily be handled by you and Jeff. The biggest question is what are home values going to be doing in the next few years? Some of the country's real estate values have dropped up to 4-5% this year, not devastating, but not what you want for your largest investment. Our local economy is still strong, and fairly inexpensive compared to much of the rest of the coast, but down here in Pierce County the market has cooled off a bit. Don't be afraid to low ball the seller. It's supposedly a buyer's market right now.

[airtwardo 6]

It sounds like with a really good home inspection we could prevent having to deal with a lot of major repair expenses.

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Also...Here in Texas, if the home has been on the market for a while, it may have had offers and BEEN inspected a time or two...you have the right to not only know that but to get copies OF those prior inspections.

You have to ASK because the realtor usually won't volunteer that information since it may cancel the sale.

Prime example is the home we now occupy, 4000plus sqft on wooded acreage in the middle of town, 30 years old.

6 months prior to our looking at it, someone had hired an engineering company to inspect / survey the land and home.
we're talking a 2600.00 and 90 page report!

That person found enough wrong with the place to walk away, after reviewing that report, we offered WELL below that asking price...even though some of the things IN that report had been addresses the homeowner figured with that inspection available to anyone, he'd better take whatever he could and sold the place to us.

~ If you choke a Smurf, what color does it turn? ~

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[DrewEckhardt 0]

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. We have a large chunk of change to put into the down payment.. but how many years do you need to live in a house (or what percent of the mortgage do you need to pay down ) before you're not losing tons of money on all the extra fees and what not?

Depends on the local real estate market and taxes. Could be six months, could be six years. If Washington state didn't have a real estate transfer tax we'd have pretty much broken even on a property we bought last June and sold this February (7 months, FSBO).

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Am I better off keeping the money in a CD and bonds? We don't need to make money off of owning the home and selling it after a few years, but as long as we're not going to be losing as much money as paying $950 each month for rent, it would be an improvement.

Depends on the ratio between rents and purchase prices including property taxes, HOA fees, and the other things which would be rolled into rent. If I'd stuck to a 30 year loan when I refinanced my first place I'd have been paying less than it took to rent it and after five years I cashed out $80K more than the $10K I'd spent on down payment and $20K on mortgage principal. I also got all of my principal back which landlords don't do when you move out. Would have done better if we hadn't left town and could have sold it ourselves.

Depends on your personal tax situation. If you live in a state with state income tax or have other deductable expenses that get you above the standard deduction arround $5K for individuals and $10K for married couples, every dollar (over 80% of a conventional 30 year mortgage payment) you spend on interest and property taxes can be paid with pre-tax money. If your state and federal rates are 33% combined each dollar goes 50% farther that way.

Depends on your credit. Makes a big difference in interest rates.

You need to talk to a couple of banks with good rates, get an itemized list of closing costs, differentiate between transaction costs (title insurance, the appraisal, etc) and things you have to pre-pay (a couple months deposit on taxes), look at what's been happening with property values (you're gambling if it hasn't been slow-and-steady), etc.

[karenmeal 0]

If we were to buy before I graduate it would be in the Bellingham area.

What do you know about that John?

And this is all still way hypothetical. I haven't even heard from some of the programs I applied to.

"Life is a temporary victory over the causes which induce death." - Sylvester Graham

[JohnMitchell 14]

Bellingham is a desirable community, from what I hear. You can always check with the Real Estate agents in the area. Be aware they'll always paint a rosy picture, but they can give you hard numbers as to what the markets have been doing up there for the past few years to past few months.

My advice is to buy only as much house as you need and can afford, and you'll have money left over for fun and other investments. And a lot of fixup, new flooring, countertops, sheetrock work, and painting, is very simple.

[skymama 35]

My mortgage keeps going up every year because the property taxes in my area keep going up every year. I think I'm paying about $80/month more than I did when I closed on the house 3 years ago. You might not have to worry about that if you're not in a fast growing area like FL.

Kristi covered a lot of the stuff you just don't think about having to buy when you move in. I bought a new house, so I also had to get blinds and ceiling fans for every room. That added up to an extra few hundered dollars.

Don't forget that your utility bills will probably go up too.

She is Da Man, and you better not mess with Da Man,
because she will lay some keepdown on you faster than, well, really fast. ~Billvon

[skycat 0]

I'm not sure if it is the same everywhere, but here in CO you can go to the county tax assessors website and look at what property in the area sold for, how much tax is on each property things like that.

Fly it like you stole it!

[ACMESkydiver 0]

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Most of the "unexpected costs" that crop up are right there in the mortgage loan. Too often, people get themselves in over their heads due to loans that start off good, but are heavily loaded on the back end. They'll find out that their loans are resulting in negative amortization because they aren't making payments on time, or, because they ARE making the minimum payment under the agreement, but that doesn't even pay the interest.

I would advise ANYONE who buys a home to have their loan documents, etc., reviewed by either a lawyer or an accountant who can explain them.

Yeah, that's true to some extent...

The loan you described above is not typical; this does not occur on a fixed loan, or even on most ARMs. You're not going to walk into your local BofA and find one of these advertised. You're talking more of a COFI loan (cost of funds index) and though they are available, they are very easy to spot...basically, if your loan has payment options, i.e., pay either $2100, $1850, $1500, or $1254 per month'...yeah, you need to dig and really read the terms.

These loans will automatically reamortize themselves once you hit 115% LTV (loan to value) typically. Once your loan is reamortized into a 30 year fixed at the going rate, at 115% LTv, you are going to see an astronomical payment that may put you out of your house (it happened to us when we were young army kids and didn't know the first thing about mortgages ) There is always some new version of these loans floating around, but this is the gist of it...and YES, they are offered to unsuspecting people trying to start out (which I completely disagree with!) but as I said...with just a little heads up, you can spot one of these loans pretty quickly.

I also wouldn't bother with an attorney or accoutant if you have a

<---friend >HINT< that worked in the mortgage business for many, many years.
I've looked over loan docs for many friends and relatives...I am no longer a mortgage broker or banker, so I'm not selling mortgages, so I can give you a free, completely non-biased opinion.
I would be happy to look over your GFE's (Good Faith estimates) and let ya know what's what, Karen. PS...9 times out of 10, you're best bet is just to go straight to the bank if you have the 3 pieces to the mortgage loan puzzle:

Income -documentable, long-term, and enough to support your payments
Credit -established, and a good FICO score
LTV (or down payment, as it would be for a purchase) -Loan to value that will fit within a nice, easy, conforming loan package...if you want to put 10%-15% down, fabulous.

Also remember that government loan programs (FHA) will require PMI no matter WHAT your loan to value is...so the whole ''20% down to avoid PMI" thought will not work with these programs. -Another thing, you have to read your loan docs regarding PMI. Sometimes you CANNOT avoid PMI even if you hire an appraisal within the first year of the loan.

Here are some sites: http://www.hud.gov/buying/

Check a mortgage calculator to give you a very general estimate of what you should be shopping for (do NOT make the mistake of capping out your payment! Just because a lender says that you can afford $1850/month, doesn't mean that you should buy a house for $1850/month! -another mistake we made when we were newly married and had no mortgage experience...)

http://money.cnn.com/magazines/moneymag/money101/lesson8/index.htm This site has the basics and a mortgage payment calculator.

Sorry, I can't find the loan calculators I used to recommend when I was in mortgage...I don't have them bookmarked on this new laptop any more.

~Jaye
Do not believe that possibly you can escape the reward of your action.

[mikempb 0]

Biggest problem we had that we didnt count on was a water prob. We live on a hill( not really that steep) in the middle of the block, be wary of hills and houses that do not have retaining walls. Make sure termite damage isnt severe, chances are you have some like everyone else....etc..etc.. lists go on but it really is a great thing owning a home.

[BIGUN 1,053]

Here's a one-stop checklist for all your needs/questions/considerations:

http://www.ourfamilyplace.com/homebuyer/checklist.html

EDIT:
Often overlooked - Window coverings can get expensive. Count the number of windows/sizes and then price Plantation blinds, drapes, etc.

Nobody has time to listen; because they're desperately chasing the need of being heard.

[DrewEckhardt 0]

If it's not a seller's market (with the first place I bought I made the second offer the first day it went on the market at listing price with no contingincies) the property will need to be in move-in condition to sell it soon.

Decent condition floors, carpets, paint, light fixtures, wall plates, towel racks, window coverings....

If a property you're considering isn't in that shape fix the big things (floors, carpets, paint) before you move in. You'll be fixing them anyways and might as well get to enjoy the results of the renovation. We neglected to do that on the last three properties.

Also note that there's a _huge_ variation in pricing there especially on paint. Paint quotes varied from $1200 labor and materials to over $5000. Some guys don't really want your business.

[loumeinhart 0]

Hello Karenmeal,
As a mtg broker my .02 is call someone local who advertises. Let them run credit, tell them what you can bring $$. Give them a monthly payment including an estimated figure for tax & insurance. PMI is not a big deal and is mostly lender-paid now anyway. Don't run your credit a lot and have a solid prequal letter when you visit a realtor. --Definately put money down if you can and a 3 or 5 yr ARM is not that bad if you're planning on selling. You'll get a better interest rate by about 1.5%
--Buy verses Rent? Even if you don't make a penny when you sell, your interest is tax deductible and your credit score will soar through 15,000ft





Lou

[doug925 0]

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It's surprising though how when in the new house the furniture doesn't seem to work any more, the artwork just isn't right, ect., ect.

Isn't that the truth.
Stuff we loved in our urban loft, now looks like crap in our burbs house.

I have never developed indigestion from eating my words.
Winston Churchill

[JohnMitchell 14]

Or the Danish Modern dinner table and chairs that were so cool in the trilevel dining room look odd in the big country house's kitchen. Best thing to do is cover it with food and surround it with friends and family.

[billvon 2,400]

>Am I better off keeping the money in a CD and bonds?

Depends on the area. Right now, in Socal, the stock market has a better return; there was a housing boom and now there's a glut. OTOH, your house is generally a "safer" investment.

[Nightingale 0]

You might want to consider a condo. The association, (under most circumstances) would be in charge of all the outside maintenance, like trees and roofs, and all you'd have to be concerned with is inside. You'll have to deal with stuff like unclogging toilets, changing lightbulbs, broken appliances, all the stuff you'd normally call maintenance for. Keep in mind that you'll probably get a pretty big tax deduction because of your mortgage interest. I'm closing escrow on my condo tomorrow, and even though I'll be paying out something like $2400 in taxes, mortgage and association fees, when you factor in the tax deduction and the extra money that will be in my paycheck because of it, the overall cost will be around $1600, which is less than I was paying to rent my apartment.

[karenmeal 0]

No condo.. no way!

I also want to avoid a HOA.

I would like to live someplace rural.

"Life is a temporary victory over the causes which induce death." - Sylvester Graham

[airtwardo 6]

I also want to avoid a HOA.

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But they're so much FUN to play with!

Had an 'illegal' jacuzzi once that was 'actually' our big dog's outdoor drinking bowl...

~ If you choke a Smurf, what color does it turn? ~

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[plowdirt 0]

I just bought my X out of the house I grew up inn.

She did nothing to it for 2 years, So check for mold!!!! first. if the house has it Run far run fast.

LOts of BS there.

Watch that guy his name is Mortgage Broker, and his buddy Realtor, and the other schmuck closer.

Read your concract and waych those %ages, they stick ya prewtty hard, and the best part about it there is so many of them, who arn't doing any ting these days, they are hungry.

Inspector, he's your angel tell the guy to go over it good.

Then alls you gotta do is, have enough money stashed to fix it up just how you like.

Good luck
E

[gkc1436 3]

do not allow the realitor to choose or find the home inspector

find one on your own.
no conflict that way.....

g

[DrewEckhardt 0]

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Keep in mind that you'll probably get a pretty big tax deduction because of your mortgage interest.

Note that you have to consider the standard deduction here and implications of being married - an unmarried couple that owns a property can have one partner take the itemized interest deduction while the other gets the standard deduction, while both halves of a married couple must take the same option.

Assuming 85% of your mortgage payment (30 year loan at 6% interest, about 30% down, King County Washington taxes) is going to mortgage interest and property taxes, a $1000 a month payment isn't going to get a married couple over their standard deduction. That's for a $150K loan.

As a single person making $100K+ with 5% state taxes, you're allready doing better by itemizing and every dollar is post tax.

Tax rates vary.

With a 33% combined state and federal marginal rate your money goes 50% farther, while in the 15% bracket you're only getting a 17% bonus.

The math and market conditions are going to be very personal.

[DrewEckhardt 0]

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He
--Buy verses Rent? Even if you don't make a penny when you sell, your interest is tax deductible

To the extent that your total deductable expenses exceed $5150 for single people and $10,300 for married couples.

Bellingham is in Washington (perhaps among other places) with no state income tax, and the sales tax deduction isn't that big.

And if you sell too soon, the capital loss on a personal home is non-deductable. Oops.