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I want to buy a house, but I need a "For Dummies" guide.Follow

#1 Jan 27 2014 at 5:50 PM Rating: Good
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I've never done this before, and Google keeps sending me to sites that want to sell me stuff right away or link me to specific agents or banks. Could anyone break it down for me Barney style? If we're looking at $250k max, how much should we have in the bank? I know that more is better, but what's a solid amount that won't take me 10 years to save up? Someone told me I should hire inspectors before purchasing, but how much is the right price to hire one? I guess I just want a step by step of how I should be doing this.
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#2 Jan 27 2014 at 6:36 PM Rating: Excellent
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#3 Jan 27 2014 at 8:11 PM Rating: Excellent
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#4 Jan 27 2014 at 9:02 PM Rating: Excellent
A lender will typically want you to put 20% down. You can get away with putting down less, but they'll make you get private mortgage insurance which you'll need to pay (~$100 monthly) until you have 20% equity. I don't have any experience with hiring inspectors because I bought my house brand new. Also not sure how things may have changed since the housing crash back in 2008.
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#5 Jan 27 2014 at 9:28 PM Rating: Good
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That helps immensely. Thanks.
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#6 Jan 27 2014 at 10:03 PM Rating: Excellent
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Look into the FHA "Rural Areas" loans. http://www.rurdev.usda.gov/hsf_sfh.html They have a first time homebuyer clause, and in many cases areas 10-15 miles outside main cities count for the program. They have a relitivly easy refinance program (ignore my prior experiances with it, that was a fluke) and you can make a fair amount of money and still qualify for the program on a single or dual income. They did change it to requiring mortgage insurance recently, but the loan fees and whatnot are fairly minor.

Also for planning purposes, be aware that you basically get your first month mortgage "free" when buying a house, so if you are in an appartment and you are worrying about paying rent that month and mortgage that same month, that should not be a concern. I actually ended up making money somehow on my refinance. You will need to have at least $1,000 in the bank for a few months before you consider buying a home, and you will end up writing, but not cashing that check as ernest money (other party gets the money if you walk away from the house after signing the papers but before the loan closes. I don't think anyone ever actually ends up paying it.

Process is, you get a real estate agent you like and trust (trust your instincts) and you go find a house you like. Real estate agent gets a commission based off the sale so you generally don't end up paying them anything. You put in your offer, if the other people accept, then you get the house inspected, you can then walk away at that point, or commit to the sale. Typically you have your loan lined up at the start of looking so you know how much you have to spend. Once they accept your offer, most of the loan programs and paperwork take 2-4 weeks to fully process, so you don't get to move in the day you sign.

Also, try to avoid flooding your house. I hear thats bad.

edit: home inspections typically run around $150 +/- depending on the square footage and will take about 2 hours for a decent one. If the guy walks out in less time than that, tell them to **** off and refuse to pay. You also, depending on the loan program, may be on the hook initially for the home appraisal fee, which is typically around $600. usually you get that back at closing, but it does come out of your account until then sometimes. There are also other fees that come out of closing (title insurance fee, loan origionation fees, etc.)

Edited, Jan 27th 2014 8:06pm by Kaolian
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#7 Jan 28 2014 at 2:00 AM Rating: Excellent
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Make sure to ask about ancient ritual burial grounds and mass murders and such. You can typically get a good deal taken off the price if there is anything newsworthy and macabre about the house.
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#8 Jan 28 2014 at 8:01 AM Rating: Good
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Also ask about sink holes.

Getting an FHA loan is probably easiest - specially for first time buyers as Kao mentioned. FHA also has pretty strict standards on the condition of the house. You'll have to pay for it, but they'll make sure it's inspected for all the major stuff.

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#10 Jan 28 2014 at 8:46 AM Rating: Good
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Edit: What Kao said. I'll add the caveat that you can often convince the seller to pay for the home inspection.

A real estate agent can often get you a scoop on a house before it's officially on the market. Ours found our house before it even got listened online.

Avoid the mortgage broker types. They're just going to turn around and sell your loan to a loan servicer anyway. We got our mortgage straight from a local banking agent at BoA and didn't have any problems, since we have her telephone number and can call and whine at her personally.



Edited, Jan 28th 2014 9:49am by Catwho
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#11 Jan 28 2014 at 9:35 AM Rating: Decent
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Catwho wrote:
Avoid the mortgage broker types. They're just going to turn around and sell your loan to a loan servicer anyway. We got our mortgage straight from a local banking agent at BoA and didn't have any problems, since we have her telephone number and can call and whine at her personally.


I disagree with this but it may be different where I live. Here the mortgage provider pays the mortgage broker but it's not a "sale" per se, the broker gets paid no matter which institution you end up with though the broker can choose who they work with so I guess there's still a bit of bias there. I got an outstanding rate on my mortgage using a broker, one the banks weren't offering me. Brokers have contacts at mortgage providers that aren't as obvious to the average person. My provider for example doesn't have walk in offices and isn't in the phone book (they are a large and very reputable company they just do all of their business through brokers.)

In any case, shop around just so you know what a good current rate is and can judge whether or not the rate offered by your broker/financial institution is a good deal or not. Don't forget to read the fine print, what are your rights for paying down early etc.
#12 Jan 28 2014 at 9:37 AM Rating: Good
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I know NJ has a first-time buyer program, depending on your income. Don't know its function, specifically, but it's probably worth checking if your state has one.
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#13 Jan 28 2014 at 11:10 AM Rating: Good
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Yodabunny wrote:
Catwho wrote:
Avoid the mortgage broker types. They're just going to turn around and sell your loan to a loan servicer anyway. We got our mortgage straight from a local banking agent at BoA and didn't have any problems, since we have her telephone number and can call and whine at her personally.


I disagree with this but it may be different where I live. Here the mortgage provider pays the mortgage broker but it's not a "sale" per se, the broker gets paid no matter which institution you end up with though the broker can choose who they work with so I guess there's still a bit of bias there. I got an outstanding rate on my mortgage using a broker, one the banks weren't offering me. Brokers have contacts at mortgage providers that aren't as obvious to the average person. My provider for example doesn't have walk in offices and isn't in the phone book (they are a large and very reputable company they just do all of their business through brokers.)

In any case, shop around just so you know what a good current rate is and can judge whether or not the rate offered by your broker/financial institution is a good deal or not. Don't forget to read the fine print, what are your rights for paying down early etc.


Maybe it's improved since 2008 then, but it was unqualified brokers who were at the heart of the financial meltdown. Many people lost their homes because the brokers they worked with didn't do due diligence and gave them mortgages for homes they really couldn't afford.

Yoda's right though. Do your homework.
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#14 Jan 28 2014 at 5:25 PM Rating: Good
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Dread Lörd Kaolian wrote:
Look into the FHA "Rural Areas" loans. http://www.rurdev.usda.gov/hsf_sfh.html They have a first time homebuyer clause, and in many cases areas 10-15 miles outside main cities count for the program. They have a relitivly easy refinance program (ignore my prior experiances with it, that was a fluke) and you can make a fair amount of money and still qualify for the program on a single or dual income. They did change it to requiring mortgage insurance recently, but the loan fees and whatnot are fairly minor.

Also for planning purposes, be aware that you basically get your first month mortgage "free" when buying a house, so if you are in an appartment and you are worrying about paying rent that month and mortgage that same month, that should not be a concern. I actually ended up making money somehow on my refinance. You will need to have at least $1,000 in the bank for a few months before you consider buying a home, and you will end up writing, but not cashing that check as ernest money (other party gets the money if you walk away from the house after signing the papers but before the loan closes. I don't think anyone ever actually ends up paying it.

Process is, you get a real estate agent you like and trust (trust your instincts) and you go find a house you like. Real estate agent gets a commission based off the sale so you generally don't end up paying them anything. You put in your offer, if the other people accept, then you get the house inspected, you can then walk away at that point, or commit to the sale. Typically you have your loan lined up at the start of looking so you know how much you have to spend. Once they accept your offer, most of the loan programs and paperwork take 2-4 weeks to fully process, so you don't get to move in the day you sign.

Also, try to avoid flooding your house. I hear thats bad.

edit: home inspections typically run around $150 +/- depending on the square footage and will take about 2 hours for a decent one. If the guy walks out in less time than that, tell them to @#%^ off and refuse to pay. You also, depending on the loan program, may be on the hook initially for the home appraisal fee, which is typically around $600. usually you get that back at closing, but it does come out of your account until then sometimes. There are also other fees that come out of closing (title insurance fee, loan origionation fees, etc.)

Edited, Jan 27th 2014 8:06pm by Kaolian


I already qualify for the VA Home Loan. I'll definitely keep that bit about the inspector in mind.

Quote:
A real estate agent can often get you a scoop on a house before it's officially on the market. Ours found our house before it even got listened online.


Unfortunately, I'm looking at moving to Colorado, and I can't jump all over something just based on a text or voice description. I need pictures before I'll consider driving up there to spend a few days looking in person. I also need to make sure I have everything I need to get started just in case I need to buy fast.

Edited, Jan 28th 2014 6:29pm by Doug
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#15 Jan 28 2014 at 7:44 PM Rating: Excellent
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Doug wrote:
Unfortunately, I'm looking at moving to Colorado, and I can't jump all over something just based on a text or voice description. I need pictures before I'll consider driving up there to spend a few days looking in person. I also need to make sure I have everything I need to get started just in case I need to buy fast.


You might think about renting a place in the area first. That way you can move there first, get to know the area, and make a better decision in terms of buying. There's a lot of little annoying things involved with buying a home, and trying to do that from out of state would be a major pain in the **** IMO.
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#16 Jan 28 2014 at 9:06 PM Rating: Excellent
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I agree, a 1 month short term rental would pay for itself if you run into house purchase quirks. Also, on the getting sellers to pay for inspection, only do that if you get to choose the inspection and set the time, etc. You want the inspector to be an advocate for you and be concerned with making sure you are happy with the report, not the seller. My inspector did a fairly good job. There were a couple things he missed that would have let me get the price reduced a bit, but overall I knew about the majority of issues before I bought. For example, the disposal housing was cracked, and the jerk that owned it before me tried siliconing it shut, which held for a few years then catastrophically failed. It was on the back of the housing, and the guy tried to hide it deliberately, but a really good inspector should have caught it. Things like that. Colorodo has lots of deep cold winters, so foundation integrity is more important there than it might be in Oregon, etc.
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#17 Jan 28 2014 at 9:20 PM Rating: Decent
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Catwho wrote:
Maybe it's improved since 2008 then, but it was unqualified brokers who were at the heart of the financial meltdown. Many people lost their homes because the brokers they worked with didn't do due diligence and gave them mortgages for homes they really couldn't afford.


Ah, we're much more regulated up here for that kind of thing. The broker here doesn't grant you a mortgage the institution does, the broker just negotiates terms for you. I also bought 3 years ago so post US meltdown when all of the banks were tightening their belts so it very well could have changed, even here.
#18 Jan 29 2014 at 1:08 PM Rating: Excellent
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If you use an attorney, meet with him/her and ask about closing costs. In New York these can add up. Also, the day of the month you close title on will make a difference, and this relates to something Kao said. The bank cannot charge you interest on the first day of the loan, which makes sense, right? But, it does want its interest at the end of the first 30 days (note that I did not say "month"). So, at the closing they will calculate your daily interest, and then calculate how many days are left in the month, and using those two numbers they will calculate an amount for the remainder of the month. You will be charged that amount at closing, and your first payment will not be due until the 1st of the following month. So, if you close on September 29, you will pay one day interest and your next payment is due on November 1. So, if you do not have a lot of cash on hand for the closing, you might want to close at the end of the month. But then your first payment is a lot closer than if you close earlier in the month.

Property taxes are also pro-rated. In New York it gets kind of crazy. On Long Island we pay a General Tax twice a year, and it is due on January 15 and July 15 (I'm going by memory and it has been a while, but my point will be the same even if I'm off by a month). We also pay School Tax twice a year and it is due on April 15 and October 15. But, the owner pays the tax, and they pay it for six months, so at closing you will have to pay them the balance of the six months remaining. Which on Long Island is different for the School Tax than for the General Tax (because of the way they're staggered). Also, they may get a Veteran's Benefit discount, and you may not, so that may have to be adjusted. There may also be a Water Tax if there is a local Water Authority, or a Village Tax if the property is within an Incorporated Village. Everything has to be adjusted at closing. I won't go into the fact that there is a grace period, and if you purchase within the grace period the sellers may not have paid yet, and then you get to pay the full six months. But, of course, you then get money back from the seller for the pro-rata tax to cover the amount of time they were in the house.

In addition to the above, there are loan fees and charges. These are what kill you. Death by nickel and dime. It is your responsibility to ask everyone, at every step of the process, about the charges. Make sure, **** sure, that your last questions always is, "and so this is everything?" If they say, "Oh, there is one other thing . . ." then you must say again, "and so this is everything?" like a broken record until they say, "Yeah, that's everything." Meanwhile, you write it all down and go back over it, showing them you wrote it all down, before saying "Thank You." I believe there is a Federal Law now that requires a mortgage company/mortgage bank to make a disclosure within a certain amount of time (I don't remember what triggers it, contact or an actual application) concerning closing costs. Make sure you know who is paying the bank's attorney at the closing (most likely you are, but it may be an application cost or it may be something you need to have on hand at closing).

As far as the inspection goes, keep in mind that the inspector is in the business of inspecting, and so his motivation is to find as many things as he can so that you think he did a great job and recommend him to others. For instance, every foundation has cracks. A crack is not the end of the world. It may be, if for instance it turns out the house is built on loose or wet soil, but you need to look closely at all the issues that are discovered. You are probably not going to find a house that has zero issues. But you need to be comfortable with the issues that turn up, just don't panic when you get the report. For instance, on Long Island we have soil that is perfect for termites. Termites is not a reason, without looking further, to break a deal. Get a look at the wood structure and if it is O.K., treat for the termites and go ahead with the deal. Charge the seller for the treatment, get a guarantee from the exterminator, and have an inspection every few years after that.

This is not legal advice as I know nothing about your situation, and you should hire an attorney since this is probably the most expensive investment of your life.

Good Luck.

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#19 Feb 07 2014 at 11:09 PM Rating: Good
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Once you choose the house you want, get an engineering or architecture firm that specializes in site inspections to do a full site survey, including an insect and pest survey. In Melbourne that runs you to $600-$900. Not sure about in the US. But if you are going to shell out $250k for a house, not paying $900 to check that the house isn't going to need $50k repairs in the near future would be stupid. If you are going to pay $750k for something overall (including the interest on a $200k loan) not being able to "afford" $900 for a survey before you offer to buy a house would also be stupid.
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#20 Feb 10 2014 at 11:34 AM Rating: Good
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We used Brickkicker for our inspection. In addition to the full report, they also gave us a nice "Care and feeding of your new home" type booklet that explained how to do periodic inspections and maintenance on your own. Very handy.

Our inspector discovered that our sprinkler system was non functional, the drains were a wreck, and that we had some electrical problems, but fortunately the seller (a bank) was willing to cover the drain repairs and electrical issues. And the lawn was so neglected we'd need a full resod and repair of the sprinklers anyway, so that was a wash.
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#21 Feb 12 2014 at 6:51 AM Rating: Good
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gbaji wrote:
Doug wrote:
Unfortunately, I'm looking at moving to Colorado, and I can't jump all over something just based on a text or voice description. I need pictures before I'll consider driving up there to spend a few days looking in person. I also need to make sure I have everything I need to get started just in case I need to buy fast.


You might think about renting a place in the area first. That way you can move there first, get to know the area, and make a better decision in terms of buying. There's a lot of little annoying things involved with buying a home, and trying to do that from out of state would be a major pain in the **** IMO.
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#22 Feb 12 2014 at 6:53 AM Rating: Good
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Catwho wrote:
Our inspector discovered that our sprinkler system was non functional
Mine's nonfunctional as well. Probably because the pipes don't exist.

Seriously? You have a sprinkler system in your house?
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#23 Feb 12 2014 at 9:24 AM Rating: Good
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Uglysasquatch wrote:
Catwho wrote:
Our inspector discovered that our sprinkler system was non functional
Mine's nonfunctional as well. Probably because the pipes don't exist.

Seriously? You have a sprinkler system in your house?

Sounds like Catwho was talking about an outside sprinkler system - as she clumped it in with yard repair.

Our house was brand new. I'm still enjoying the lack of 'issues'. I still don't have a toilet paper holder or towel bars installed in the second bathroom either.
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#24 Feb 12 2014 at 3:55 PM Rating: Good
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Uglysasquatch wrote:
Catwho wrote:
Our inspector discovered that our sprinkler system was non functional
Mine's nonfunctional as well. Probably because the pipes don't exist.

Seriously? You have a sprinkler system in your house?


My Parents built a house a couple of years back. Code based on their distance from a fire department required a sprinkler system.
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#25 Feb 12 2014 at 5:02 PM Rating: Decent
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Way back in the day, we lived in a house that was out in the east county area, where it can be dry and hot with tons of dry scrub (ie: wildfire territory). The house was way out on a dirt road, then up a steep hill to the very top. It was kinda nestled inside a diamond shaped flat area cut into the hillside. Two sides had steep embankments upwards, two went down.

The property had an interesting fire defense. It had about 30 feet of iceplant along all banks. It also had a row of sprinklers along the top of each bank. The top banks had like a dirt firebreak running up along each side, and a path running along where the sprinklers were so they could be maintained. Additionally, the house actually had a 360 degree sprinkler placed at the peak of the roof which could be activated to continually keep the roof wet and put out any embers that might land on top of the house. All one had to do was keep the area right around the house clear of errant shrubbery, and it was pretty much wildfire proof.

Apparently, this worked really really well. Just a few years before we moved in there, a massive wildfire had run up that very hill, burning everything around the house, but barely touching the property itself, and the house was completely undamaged. Whenever I think about houses and wildfires I remember that house. It was cool as hell.
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#26 Feb 16 2014 at 10:35 PM Rating: Decent
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Don't be idiots like my wife and I and trust the relator to recommend a house inspector. Thats what we did to save $100 and 2 years later we have a leaking basement, bad foundation, leaking roof, cracked walls, leaking pipes, mold. Its been an absolute nightmare.
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