Oh that's how you buy a house?
July 31, 2019 7:03 PM Subscribe
We are suddenly about to put an offer on a house. Woot! Walk me through the next steps like I'm the First-Time Homebuyer that I am.
Yeah so...general advice would be great! But here are my specific questions:
-Pre-qualification/pre-approval -- we were pre-qualified by the lender our agent recommended. Should we be reaching out to more lenders and why?
-My dad thinks we should be getting a mortgage directly from a bank to save $. I've seen the articles on going through a 3rd party lender for a home purchase (vs. going to a bank for to refinance). Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
-I have a family friend who works at a title search company and offered to do the closing, but my agent recommended going with the company they typically use (because the fees are regulated and he works with them a lot so knows they're very efficient). But if my friend's company handles the closing, what kind of discounted services can friend legally give to save on closing costs?
-What if the seller laughs down our offer? This is basically our dream home. Our offer is about 4% lower than the listing price, and apparently the seller just declined to counteroffer on one that was about 7% below the listing price. The market is hot in our area.
-When is the sale "official" enough to put notice in to my landlord? Note that our landlord is a mega-corp property management company, we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh).
-The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement? It's a small group with 11 owners.
Note that "suddenly" is because we've been getting MLS listing emails with our requirements for well over a year, and suddenly our dream home showed up for a price in our budget! We even got to meet the next-door neighbors and they're awesome
Yeah so...general advice would be great! But here are my specific questions:
-Pre-qualification/pre-approval -- we were pre-qualified by the lender our agent recommended. Should we be reaching out to more lenders and why?
-My dad thinks we should be getting a mortgage directly from a bank to save $. I've seen the articles on going through a 3rd party lender for a home purchase (vs. going to a bank for to refinance). Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
-I have a family friend who works at a title search company and offered to do the closing, but my agent recommended going with the company they typically use (because the fees are regulated and he works with them a lot so knows they're very efficient). But if my friend's company handles the closing, what kind of discounted services can friend legally give to save on closing costs?
-What if the seller laughs down our offer? This is basically our dream home. Our offer is about 4% lower than the listing price, and apparently the seller just declined to counteroffer on one that was about 7% below the listing price. The market is hot in our area.
-When is the sale "official" enough to put notice in to my landlord? Note that our landlord is a mega-corp property management company, we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh).
-The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement? It's a small group with 11 owners.
Note that "suddenly" is because we've been getting MLS listing emails with our requirements for well over a year, and suddenly our dream home showed up for a price in our budget! We even got to meet the next-door neighbors and they're awesome
If the seller laughs at your offer, you get your deposit back and try again the next time you see a house you love. They might also counter-offer and then you have to decide if you are willing to pay more to get this house. If they reject your offer, you could also consider making anew offer - probably at their asking price, if it hasn't sold to someone else already. (Careful with counteroffers - people can get in trouble by spending more than they can afford)
The way it usually works, once the seller accepts their offer, they are bound to go ahead but you have a couple places where you can opt out and get your downpayment back - usually once after you've had time to inspections and again if your mortgage falls through. (Sometimes in hot markets, people don't include any contingencies and if you back out at any point before closing, you lose your deposit.) So, it depends on how much risk you are willing to take that it won't close - I might wait until after the inspections before giving notice to the landlord so you don't fee pressure to close on a house if things get iffy.
You should know all the fees and costs upfront when you start to apply for mortgage. It depends on the market - sometimes going through a mortgage broker will get you a cheaper mortgage but you don't know who is going to end up holding your mortgage in the long run. We've never had a problem with that but other people will tell you to go through a credit union to avoid those headaches - but depending on the deal that can cost you $ too.
posted by metahawk at 8:14 PM on July 31, 2019 [1 favorite]
The way it usually works, once the seller accepts their offer, they are bound to go ahead but you have a couple places where you can opt out and get your downpayment back - usually once after you've had time to inspections and again if your mortgage falls through. (Sometimes in hot markets, people don't include any contingencies and if you back out at any point before closing, you lose your deposit.) So, it depends on how much risk you are willing to take that it won't close - I might wait until after the inspections before giving notice to the landlord so you don't fee pressure to close on a house if things get iffy.
You should know all the fees and costs upfront when you start to apply for mortgage. It depends on the market - sometimes going through a mortgage broker will get you a cheaper mortgage but you don't know who is going to end up holding your mortgage in the long run. We've never had a problem with that but other people will tell you to go through a credit union to avoid those headaches - but depending on the deal that can cost you $ too.
posted by metahawk at 8:14 PM on July 31, 2019 [1 favorite]
Assume all of these answers are prefixed with, "I am not a lawyer, nor a real estate agent, nor familiar with purchasing houses in Pennsylvania, but these are general notions about buying houses in the United States".
The one area of general advice I'd give is that an offer is an offer of a legally binding contract. This is somewhat obvious, but has implications that are non-obvious. It's pretty uncommon for a seller to accept your offer as-is, but it's not impossible. If the seller agrees to your offer, you are now contractually bound to purchase the seller's house (lest certain contingencies). Don't provide offers willy-nilly to see "what sticks". You should be prepared to execute the offer immediately, otherwise you may find yourself in breach of your offer very shortly after it is agreed to. This means, for instance, that you should be willing and able to deposit your earnest money into the seller's account immediately after the offer is agreed to. The flip side is, if the seller wants to provide a counter offer - even with the smallest detail is changed - they have declined your initial offer and you are no longer bound by it in any way. So, just as you should be able to execute the offer as-is, you should also not feel compelled to negotiate to an offer if it's not in your interest.
Should we be reaching out to more lenders and why?
The seller only cares that you can be approved for a single mortgage from a single bank. Being able to get a mortgage from multiple banks is somewhat irrelevant. However, being pre-approved for a mortgage makes your offer a bit stronger - it indicates that you are not likely to be declined for a mortgage (which is a risk for the seller).
Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
In my experience, banks or credit unions rarely offer the best mortgage rates. Third party mortgage brokers offer the best mortgage rates. However, banks and credit unions offer the best service and will generally push hardest to get you approved. So, you're trading service for money. If your credit is excellent and you don't have a problem with your mortgage being sold periodically, possibly to a lender with less-than-perfect service, you might as well save a (not insignificant) amount of money by going to a broker. Conversely, if your credit is less than excellent, and you want some hand-holding going through the process, a bank or credit union is the way to go. For what it's worth, I went with a credit union. In hindsight, I would not have done that. The service I got from a mortgage broker and my credit union was basically identical, but the mortgage broker was about $100/mo cheaper.
-I have a family friend who works at a title search company and offered to do the closing, but my agent recommended going with the company they typically use (because the fees are regulated and he works with them a lot so knows they're very efficient). But if my friend's company handles the closing, what kind of discounted services can friend legally give to save on closing costs?
I view closing services as effectively fungible- and standardized. Honestly, I don't know how title companies can distinguish themselves. They do paperwork, and you sign it. The biggest annoyance is when the closing company makes errors in the paperwork, which has happened to me.
What if the seller laughs down our offer?
Then you should be happy - honestly. In a well-performed negotiation, you should be equally happy with the deal not happening as you are with the deal happening. If you honestly believe the seller is charging too much, then paying more than your offer would not make you happy. However, if you can't tolerate the seller rejecting your offer, than you should either increase your amount, add an escalation clause, or somehow make your offer more compelling. Your happiness has a price. What is it? That should be your offer amount.
-When is the sale "official" enough to put notice in to my landlord?
That's somewhat up to you. In general, it is much easier for a buyer to back out of a purchase contract than the seller. The buyer generally has multiple contingencies - financing, appraisal, and inspection - that allow the buyer to back out. Your purchase contract will give a timeline for you to either exercise or waive your contingencies - usually something like 30 days after offer acceptance. When all contingencies are met or waived, then the purchase contract is still technically not "official" - either you or the seller could walk away, just that you'd be subject to the penalties in the contract (damages to the seller plus the earnest money if you walk away, damages to you if the seller walks away).
About 3.9% of home sales do fall through for one reason or another. It's up to you to evaluate the risk of that occurring and act accordingly.
There is a benefit to giving notice late. Making home repairs, alterations, or improvements is significantly easier when the house is empty and you haven't moved in. The biggest regret I have about my current (and first owned) house is that I didn't give myself time to do simple repairs like repainting the interior and replacing some carpet. I was trying to avoid a rent and mortgage payment, but instead I ended up making it a lot more painful to do the work down the road.
we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh).
At least in my state (not PA), and the states I've lived in (not PA), those terms would not be allowable by law.
-The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement? It's a small group with 11 owners.
The HOA agreement is important, but not nearly as important as the HOAs finances. Does the HOA have a current debt? If so, you're liable for it when you purchase the house. Does the HOA expect near term significant repairs? The HOA might now only do snow removal/garbage collection, but might have the ability to take on broader responsibility. Can the HOA make a significant special assessment? If so, are you able to pay it?
posted by saeculorum at 8:17 PM on July 31, 2019 [6 favorites]
The one area of general advice I'd give is that an offer is an offer of a legally binding contract. This is somewhat obvious, but has implications that are non-obvious. It's pretty uncommon for a seller to accept your offer as-is, but it's not impossible. If the seller agrees to your offer, you are now contractually bound to purchase the seller's house (lest certain contingencies). Don't provide offers willy-nilly to see "what sticks". You should be prepared to execute the offer immediately, otherwise you may find yourself in breach of your offer very shortly after it is agreed to. This means, for instance, that you should be willing and able to deposit your earnest money into the seller's account immediately after the offer is agreed to. The flip side is, if the seller wants to provide a counter offer - even with the smallest detail is changed - they have declined your initial offer and you are no longer bound by it in any way. So, just as you should be able to execute the offer as-is, you should also not feel compelled to negotiate to an offer if it's not in your interest.
Should we be reaching out to more lenders and why?
The seller only cares that you can be approved for a single mortgage from a single bank. Being able to get a mortgage from multiple banks is somewhat irrelevant. However, being pre-approved for a mortgage makes your offer a bit stronger - it indicates that you are not likely to be declined for a mortgage (which is a risk for the seller).
Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
In my experience, banks or credit unions rarely offer the best mortgage rates. Third party mortgage brokers offer the best mortgage rates. However, banks and credit unions offer the best service and will generally push hardest to get you approved. So, you're trading service for money. If your credit is excellent and you don't have a problem with your mortgage being sold periodically, possibly to a lender with less-than-perfect service, you might as well save a (not insignificant) amount of money by going to a broker. Conversely, if your credit is less than excellent, and you want some hand-holding going through the process, a bank or credit union is the way to go. For what it's worth, I went with a credit union. In hindsight, I would not have done that. The service I got from a mortgage broker and my credit union was basically identical, but the mortgage broker was about $100/mo cheaper.
-I have a family friend who works at a title search company and offered to do the closing, but my agent recommended going with the company they typically use (because the fees are regulated and he works with them a lot so knows they're very efficient). But if my friend's company handles the closing, what kind of discounted services can friend legally give to save on closing costs?
I view closing services as effectively fungible- and standardized. Honestly, I don't know how title companies can distinguish themselves. They do paperwork, and you sign it. The biggest annoyance is when the closing company makes errors in the paperwork, which has happened to me.
What if the seller laughs down our offer?
Then you should be happy - honestly. In a well-performed negotiation, you should be equally happy with the deal not happening as you are with the deal happening. If you honestly believe the seller is charging too much, then paying more than your offer would not make you happy. However, if you can't tolerate the seller rejecting your offer, than you should either increase your amount, add an escalation clause, or somehow make your offer more compelling. Your happiness has a price. What is it? That should be your offer amount.
-When is the sale "official" enough to put notice in to my landlord?
That's somewhat up to you. In general, it is much easier for a buyer to back out of a purchase contract than the seller. The buyer generally has multiple contingencies - financing, appraisal, and inspection - that allow the buyer to back out. Your purchase contract will give a timeline for you to either exercise or waive your contingencies - usually something like 30 days after offer acceptance. When all contingencies are met or waived, then the purchase contract is still technically not "official" - either you or the seller could walk away, just that you'd be subject to the penalties in the contract (damages to the seller plus the earnest money if you walk away, damages to you if the seller walks away).
About 3.9% of home sales do fall through for one reason or another. It's up to you to evaluate the risk of that occurring and act accordingly.
There is a benefit to giving notice late. Making home repairs, alterations, or improvements is significantly easier when the house is empty and you haven't moved in. The biggest regret I have about my current (and first owned) house is that I didn't give myself time to do simple repairs like repainting the interior and replacing some carpet. I was trying to avoid a rent and mortgage payment, but instead I ended up making it a lot more painful to do the work down the road.
we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh).
At least in my state (not PA), and the states I've lived in (not PA), those terms would not be allowable by law.
-The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement? It's a small group with 11 owners.
The HOA agreement is important, but not nearly as important as the HOAs finances. Does the HOA have a current debt? If so, you're liable for it when you purchase the house. Does the HOA expect near term significant repairs? The HOA might now only do snow removal/garbage collection, but might have the ability to take on broader responsibility. Can the HOA make a significant special assessment? If so, are you able to pay it?
posted by saeculorum at 8:17 PM on July 31, 2019 [6 favorites]
we were pre-qualified by the lender our agent recommended. Should we be reaching out to more lenders and why?
Generally, you should find a rockstar agent and then work with all the people they recommend.
But rather than accepting their terms (interest rate and closing costs), I'd get a competing offer or two and try to get them to match it. Best of both worlds: your agent gets to work with someone s/he knows to be competent, and you avoid overpaying.
My dad thinks we should be getting a mortgage directly from a bank to save $.
Depends on how competitive the place is. In both markets I've been in, agents (more than one) have told me to work with a local mortgage broker, warning that our offer won't be accepted if it's from someone less reputable. That said, they were referring to internet mortgage factories, not local banks.
Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
Don't reach out to them until you're under contract, but get bids from whoever is cheapest on bankrate.com and then see if your broker can match it. (This may be kind of a jerk move, expecting internet prices from firms with brick and mortar offices? Maybe others can chime in. But I successfully knocked my interest rate down this way.) Do this asap after your offer gets accepted; doing it at the last minute will give your agent a heart attack, I discovered.
-What if the seller laughs down our offer? This is basically our dream home. Our offer is about 4% lower than the listing price, and apparently the seller just declined to counteroffer on one that was about 7% below the listing price. The market is hot in our area... Note that "suddenly" is because we've been getting MLS listing emails with our requirements for well over a year, and suddenly our dream home showed up for a price in our budget!
How competitive a market is this? Are prices rising or falling there? What does your agent think you should offer? If one rarely shows up in your price range, does that mean that this house is underpriced and likely to be subject to a bidding war? Then again, if someone else is offering 7 percent below asking, maybe it's overpriced.
My main advice is, don't lose a house you love over like, an extra $40/month. I still remember the house that got away from us. Hopefully you have a great agent who knows how much you should offer. But if it's your dream home, I'd try to stretch to offer the most you're willing to pay.
When is the sale "official" enough to put notice in to my landlord?
I'd personally put in notice after the inspection contingency gets waived, i.e., after you know there aren't any surprise problems with the house, unless you have any doubts about your financing situation.
we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh)
Agreed that these are kind of problematic terms. The landlord would be justified in charging you costs that they incur due to your early departure (they had to repaint it faster than expected, if they paint between tenants), but they should be trying to minimize their financial losses by working to fill the unit asap. If YOU managed to fill it, that should prevent them from experiencing financial loss due to your departure (aside from things like the paint I mentioned). They may well want to make sure the potential new tenant passes their credit and background check first.
The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement?
Anything that could lead to an increase in your costs, especially an assessment. Does the HOA cover any major capital improvements? If so, make sure their reserves are enough to cover whatever maintenance liabilities exist. For example, if the units jointly maintain a dirt road that needs regraded every 10 years, and 9 years have passed, is there an account that has accumulated 90 percent of the cost?
posted by slidell at 9:26 PM on July 31, 2019
Generally, you should find a rockstar agent and then work with all the people they recommend.
But rather than accepting their terms (interest rate and closing costs), I'd get a competing offer or two and try to get them to match it. Best of both worlds: your agent gets to work with someone s/he knows to be competent, and you avoid overpaying.
My dad thinks we should be getting a mortgage directly from a bank to save $.
Depends on how competitive the place is. In both markets I've been in, agents (more than one) have told me to work with a local mortgage broker, warning that our offer won't be accepted if it's from someone less reputable. That said, they were referring to internet mortgage factories, not local banks.
Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
Don't reach out to them until you're under contract, but get bids from whoever is cheapest on bankrate.com and then see if your broker can match it. (This may be kind of a jerk move, expecting internet prices from firms with brick and mortar offices? Maybe others can chime in. But I successfully knocked my interest rate down this way.) Do this asap after your offer gets accepted; doing it at the last minute will give your agent a heart attack, I discovered.
-What if the seller laughs down our offer? This is basically our dream home. Our offer is about 4% lower than the listing price, and apparently the seller just declined to counteroffer on one that was about 7% below the listing price. The market is hot in our area... Note that "suddenly" is because we've been getting MLS listing emails with our requirements for well over a year, and suddenly our dream home showed up for a price in our budget!
How competitive a market is this? Are prices rising or falling there? What does your agent think you should offer? If one rarely shows up in your price range, does that mean that this house is underpriced and likely to be subject to a bidding war? Then again, if someone else is offering 7 percent below asking, maybe it's overpriced.
My main advice is, don't lose a house you love over like, an extra $40/month. I still remember the house that got away from us. Hopefully you have a great agent who knows how much you should offer. But if it's your dream home, I'd try to stretch to offer the most you're willing to pay.
When is the sale "official" enough to put notice in to my landlord?
I'd personally put in notice after the inspection contingency gets waived, i.e., after you know there aren't any surprise problems with the house, unless you have any doubts about your financing situation.
we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh)
Agreed that these are kind of problematic terms. The landlord would be justified in charging you costs that they incur due to your early departure (they had to repaint it faster than expected, if they paint between tenants), but they should be trying to minimize their financial losses by working to fill the unit asap. If YOU managed to fill it, that should prevent them from experiencing financial loss due to your departure (aside from things like the paint I mentioned). They may well want to make sure the potential new tenant passes their credit and background check first.
The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement?
Anything that could lead to an increase in your costs, especially an assessment. Does the HOA cover any major capital improvements? If so, make sure their reserves are enough to cover whatever maintenance liabilities exist. For example, if the units jointly maintain a dirt road that needs regraded every 10 years, and 9 years have passed, is there an account that has accumulated 90 percent of the cost?
posted by slidell at 9:26 PM on July 31, 2019
I have a few minor recommendations:
Interest rates are about to go down. I'm guessing you're not locked in to a rate, but if you are, you should re-run to get the lower rate.
We found a home warranty very helpful when we bought our first house. Our refrigerator broke the first month we lived there and we got it replaced for free. We used it for other issues too, and it was nice because the repair people always showed as they didn't want to lose their contract with the home warranty company. We used AHS.
We walked away from a deal over a $1,000 difference. Honestly, the seller had just really pissed us off at that point by countering $1000 above our 2nd offer and we decided it wasn't worth it. Our realtor (who is now one of my best friends) really tried to save the deal and I told her we were just done. She found us another, much better house 3 blocks away for 5k less than the other house. Point is--don't be afraid to walk away. Try not to get emotionally attached.
I would not notify the landlord you're leaving until you know you are (post-inspection negotiations), and I would assume you're going to eat that month of rent. Both of the houses I have bought have not required the first mortgage payment for like 6 weeks or something, so that might help with your budgeting.
posted by fyrebelley at 9:28 PM on July 31, 2019
Interest rates are about to go down. I'm guessing you're not locked in to a rate, but if you are, you should re-run to get the lower rate.
We found a home warranty very helpful when we bought our first house. Our refrigerator broke the first month we lived there and we got it replaced for free. We used it for other issues too, and it was nice because the repair people always showed as they didn't want to lose their contract with the home warranty company. We used AHS.
We walked away from a deal over a $1,000 difference. Honestly, the seller had just really pissed us off at that point by countering $1000 above our 2nd offer and we decided it wasn't worth it. Our realtor (who is now one of my best friends) really tried to save the deal and I told her we were just done. She found us another, much better house 3 blocks away for 5k less than the other house. Point is--don't be afraid to walk away. Try not to get emotionally attached.
I would not notify the landlord you're leaving until you know you are (post-inspection negotiations), and I would assume you're going to eat that month of rent. Both of the houses I have bought have not required the first mortgage payment for like 6 weeks or something, so that might help with your budgeting.
posted by fyrebelley at 9:28 PM on July 31, 2019
I agree that one should be willing to walk away, BUT if the seller counters your offer, it’s a doable price, and you really want the house and would be delighted to live there for years to come....buy the house.
I offered a pretty low bid on my dream home, they refused to budge on the price, and I walked away...then came sprinting back the next day, because it really is my dream home and I genuinely got a deal, even if it wasn’t THE BEST deal I could conceivably have gotten. Ten years later, I’m still so happy to be living here. So glad I didn’t walk.
It is very good advice to try not to get emotionally attached, and buying a house is such an emotional rollercoaster even when you’re not super invested in a place. But this is your money and a huge commitment of decades of your time. Get the house you love and really want to live in. Yes, you might be able to strike a better deal on paper, and you certainly don’t want to get ripped off, but when you’re in the house every day, you are so not going to be thinking, “I sure am glad I didn’t pay that extra $5k in closing costs,” you’re going to be thinking about what you love (or hate!) about the house, and how you’ll make it your home.
posted by Autumnheart at 9:50 PM on July 31, 2019
I offered a pretty low bid on my dream home, they refused to budge on the price, and I walked away...then came sprinting back the next day, because it really is my dream home and I genuinely got a deal, even if it wasn’t THE BEST deal I could conceivably have gotten. Ten years later, I’m still so happy to be living here. So glad I didn’t walk.
It is very good advice to try not to get emotionally attached, and buying a house is such an emotional rollercoaster even when you’re not super invested in a place. But this is your money and a huge commitment of decades of your time. Get the house you love and really want to live in. Yes, you might be able to strike a better deal on paper, and you certainly don’t want to get ripped off, but when you’re in the house every day, you are so not going to be thinking, “I sure am glad I didn’t pay that extra $5k in closing costs,” you’re going to be thinking about what you love (or hate!) about the house, and how you’ll make it your home.
posted by Autumnheart at 9:50 PM on July 31, 2019
In my market, I hear a lot of people talking about a possible correction. Keep in mind that worst case, it might be the top of the market.
posted by slidell at 9:58 PM on July 31, 2019
posted by slidell at 9:58 PM on July 31, 2019
Understand the property tax and homeowners insurance cost for the home. These usually get overlooked until it's in the closing phase of the purchase.
posted by JoeZydeco at 6:13 AM on August 1, 2019 [2 favorites]
posted by JoeZydeco at 6:13 AM on August 1, 2019 [2 favorites]
Nickggully noted to get an inspector. I'll expand that to get your own inspector. Maybe it's one recommended by your agent, maybe not. If it is, make sure there's no other relationship, like the inspector being the agent's husband. We didn't think much of it at the time, but in that case, he missed a bunch of things - not sure whether it was through incompetence or because he would indirectly benefit through the sale going through.
Think about the inspector's findings and implications. We have a french drain running the length of one side of our yard. The upside is our basement stays dry, but what we hadn't considered was what would happen in the winter... that side of the yard remained a giant sheet of ice out across the sidewalk and into the street all winter long.
Understand your financial situation, so you know how far you can go before it will start causing you problems. This is your dream home, but I bet that if this falls through, you'll be able to find another that matches or exceeds this one.
posted by neilbert at 7:11 AM on August 1, 2019 [1 favorite]
Think about the inspector's findings and implications. We have a french drain running the length of one side of our yard. The upside is our basement stays dry, but what we hadn't considered was what would happen in the winter... that side of the yard remained a giant sheet of ice out across the sidewalk and into the street all winter long.
Understand your financial situation, so you know how far you can go before it will start causing you problems. This is your dream home, but I bet that if this falls through, you'll be able to find another that matches or exceeds this one.
posted by neilbert at 7:11 AM on August 1, 2019 [1 favorite]
I've been through a dozen or so real estate transactions. EVERY ONE of them has been different, with different problems and different details. I've had deals fall through both as the seller and as the buyer. Point is, there's only so much you can predict. There are some things that are pretty standard, though, so I'll try to stick to things that are pretty much a given.
-Pre-qualification/pre-approval -- we were pre-qualified by the lender our agent recommended. Should we be reaching out to more lenders and why?
I would just check to make sure their interest rate is in line with national rate trends. You can look at what rates are doing at bankrate.com or on some larger banks' websites (Wells Fargo always has their rates listed, for instance). I have absolutely just gone with the lender recommended by my agent, because like everything with real estate transactions, the better the different people working on your file communicate, the more likely you are to close on time. It's free and relatively easy to rate quotes from different lenders so it wouldn't hurt to shop around a bit. Most of the time they'll just tell you what their rate is on a 30-year fixed loan for people with your general credit score without really taking a ton of info or running your credit report (unless you don't know what your score is) so it won't negatively impact your credit report.
-My dad thinks we should be getting a mortgage directly from a bank to save $. I've seen the articles on going through a 3rd party lender for a home purchase (vs. going to a bank for to refinance). Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
Mortgage brokers actually can usually get BETTER rates than just going directly to a bank. I've only used a mortgage broker once, for my first house, and through I've thought about doing it again, it really is much easier from a communication perspective to just work directly with a lender without a middleman. It just depends on what your priority is, I guess. I'd say you are slightly more likely to close on time if you don't have a middleman.
-I have a family friend who works at a title search company and offered to do the closing, but my agent recommended going with the company they typically use (because the fees are regulated and he works with them a lot so knows they're very efficient). But if my friend's company handles the closing, what kind of discounted services can friend legally give to save on closing costs?
Closings are mostly just paperwork and doing things required by law and/or your lender (such as title insurance) so it really don't matter too much who does it. It's not like there's really any good way of figuring out who is likely to not mess up your paperwork and who is just a superstar at getting closings done on time. Unless it'll really hurt your family friend to say no, I'd go with the real estate agent-recommended escrow person, because again, the better your people communicate the easier things will be for you.
-What if the seller laughs down our offer? This is basically our dream home. Our offer is about 4% lower than the listing price, and apparently the seller just declined to counteroffer on one that was about 7% below the listing price. The market is hot in our area.
Then you decide if you can afford to make an offer that they won't laugh at, or if you can't. It's also possible that they'll accept your offer and then you'll find out in the inspection period that there's some major problem with the house -- cracked foundation, major water damage, whatever -- that you'd have to walk away from anyway. Buying a house is just so unpredictable.
-When is the sale "official" enough to put notice in to my landlord? Note that our landlord is a mega-corp property management company, we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh).
The sale is official enough AFTER your lender gives final approval on your mortgage. So this is way past inspection, past appraisal, basically when your file is signed off on by your mortgage officer and handed to the underwriter and they've come back with any final contingencies and you've checked them off. Usually this is a week or two before actual closing (closing is when papers are signed, funds are transferred, keys are handed over). So if you need to give 60 days notice you'll probably have 45 days or so of overlap between old house and new, and like others have said, that's actually not a bad thing, gives you time to do any painting or flooring work before you move in.
-The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement? It's a small group with 11 owners.
This I can't really answer as I've always avoided HOAs, but I have heard that looking into the HOA's finances is useful.
So here's some general advice that I've learned along the way:
-Be at the inspection, and ask lots of questions about thing that you don't understand or that you're concerned about. Ask the inspector to show you, on the house not just in the pictures, exactly what the most serious problems are. EVERY house has issues. I've had 50-page-long inspection reports. Most of the time the issues aren't super-serious, but big things like foundation issues, mold problems, termite damage, water under the siding, and electrical problems can be red flags where you'll have to really think seriously about whether you have the time and money to take them on. Take the time to go over the report really thoroughly and make sure you understand everything on it. After the inspection, if there's anything that concerns you (that you didn't know about beforehand, so things that weren't in the disclosures), you can decide if you're willing to live with them AND you can decide to ask the seller to fix them, or to lower the price accordingly so you can fix them yourself. You don't have to tell the seller what you found. Sometimes it makes sense, strategically, to tell them, and sometimes it makes sense not to. Your agent should be able to guide you in this decision.
-If you end up in a contract where the seller is going to give you more closing credit than you can use (i.e. if your closing costs are less than the credit you're getting), use that extra money to buy down your mortgage rate (this is called "points" and is basically just money you pay up front to get a lower interest rate). Don't leave any money on the table.
-Ask for information on property taxes, homeowners insurance, and utility bills. You want to get as clear a picture as you can of what your costs are going to be to own this house and it's hard to do unless you can really nail down your fixed costs.
-Make sure you have enough money in reserve to do furnishing, painting, etc. after you move in. It really sucks to spend ALL of your money buying the house and then not have any money to do anything to it. (Though, it's pretty common to be "house poor" if you're a first-time buyer, no judgment here! I have been there!)
-Finally, I know it's almost impossible, but don't get emotionally invested in this house (until AFTER you're cleared to close). So many things can make a sale fall through. If it doesn't happen with this house, there WILL be another one that comes along that's just as good if not better. I know it might not feel that way, I know it's almost impossible not to fall in love especially if it's your dream home, but it really does help to be able to make clearheaded decisions if you're somewhat detached.
Good luck!
posted by rabbitrabbit at 8:04 AM on August 1, 2019 [2 favorites]
-Pre-qualification/pre-approval -- we were pre-qualified by the lender our agent recommended. Should we be reaching out to more lenders and why?
I would just check to make sure their interest rate is in line with national rate trends. You can look at what rates are doing at bankrate.com or on some larger banks' websites (Wells Fargo always has their rates listed, for instance). I have absolutely just gone with the lender recommended by my agent, because like everything with real estate transactions, the better the different people working on your file communicate, the more likely you are to close on time. It's free and relatively easy to rate quotes from different lenders so it wouldn't hurt to shop around a bit. Most of the time they'll just tell you what their rate is on a 30-year fixed loan for people with your general credit score without really taking a ton of info or running your credit report (unless you don't know what your score is) so it won't negatively impact your credit report.
-My dad thinks we should be getting a mortgage directly from a bank to save $. I've seen the articles on going through a 3rd party lender for a home purchase (vs. going to a bank for to refinance). Other than getting a pre-qualification or similar from the credit union I bank with, are there really other banks I should be reaching out to?
Mortgage brokers actually can usually get BETTER rates than just going directly to a bank. I've only used a mortgage broker once, for my first house, and through I've thought about doing it again, it really is much easier from a communication perspective to just work directly with a lender without a middleman. It just depends on what your priority is, I guess. I'd say you are slightly more likely to close on time if you don't have a middleman.
-I have a family friend who works at a title search company and offered to do the closing, but my agent recommended going with the company they typically use (because the fees are regulated and he works with them a lot so knows they're very efficient). But if my friend's company handles the closing, what kind of discounted services can friend legally give to save on closing costs?
Closings are mostly just paperwork and doing things required by law and/or your lender (such as title insurance) so it really don't matter too much who does it. It's not like there's really any good way of figuring out who is likely to not mess up your paperwork and who is just a superstar at getting closings done on time. Unless it'll really hurt your family friend to say no, I'd go with the real estate agent-recommended escrow person, because again, the better your people communicate the easier things will be for you.
-What if the seller laughs down our offer? This is basically our dream home. Our offer is about 4% lower than the listing price, and apparently the seller just declined to counteroffer on one that was about 7% below the listing price. The market is hot in our area.
Then you decide if you can afford to make an offer that they won't laugh at, or if you can't. It's also possible that they'll accept your offer and then you'll find out in the inspection period that there's some major problem with the house -- cracked foundation, major water damage, whatever -- that you'd have to walk away from anyway. Buying a house is just so unpredictable.
-When is the sale "official" enough to put notice in to my landlord? Note that our landlord is a mega-corp property management company, we have to give 60 days notice, and we are not allowed to sublet or transfer the remainder of our lease (ugh).
The sale is official enough AFTER your lender gives final approval on your mortgage. So this is way past inspection, past appraisal, basically when your file is signed off on by your mortgage officer and handed to the underwriter and they've come back with any final contingencies and you've checked them off. Usually this is a week or two before actual closing (closing is when papers are signed, funds are transferred, keys are handed over). So if you need to give 60 days notice you'll probably have 45 days or so of overlap between old house and new, and like others have said, that's actually not a bad thing, gives you time to do any painting or flooring work before you move in.
-The home has a small HOA fee responsible for snow removal and garbage collection. What should I be looking for when I read the HOA agreement? It's a small group with 11 owners.
This I can't really answer as I've always avoided HOAs, but I have heard that looking into the HOA's finances is useful.
So here's some general advice that I've learned along the way:
-Be at the inspection, and ask lots of questions about thing that you don't understand or that you're concerned about. Ask the inspector to show you, on the house not just in the pictures, exactly what the most serious problems are. EVERY house has issues. I've had 50-page-long inspection reports. Most of the time the issues aren't super-serious, but big things like foundation issues, mold problems, termite damage, water under the siding, and electrical problems can be red flags where you'll have to really think seriously about whether you have the time and money to take them on. Take the time to go over the report really thoroughly and make sure you understand everything on it. After the inspection, if there's anything that concerns you (that you didn't know about beforehand, so things that weren't in the disclosures), you can decide if you're willing to live with them AND you can decide to ask the seller to fix them, or to lower the price accordingly so you can fix them yourself. You don't have to tell the seller what you found. Sometimes it makes sense, strategically, to tell them, and sometimes it makes sense not to. Your agent should be able to guide you in this decision.
-If you end up in a contract where the seller is going to give you more closing credit than you can use (i.e. if your closing costs are less than the credit you're getting), use that extra money to buy down your mortgage rate (this is called "points" and is basically just money you pay up front to get a lower interest rate). Don't leave any money on the table.
-Ask for information on property taxes, homeowners insurance, and utility bills. You want to get as clear a picture as you can of what your costs are going to be to own this house and it's hard to do unless you can really nail down your fixed costs.
-Make sure you have enough money in reserve to do furnishing, painting, etc. after you move in. It really sucks to spend ALL of your money buying the house and then not have any money to do anything to it. (Though, it's pretty common to be "house poor" if you're a first-time buyer, no judgment here! I have been there!)
-Finally, I know it's almost impossible, but don't get emotionally invested in this house (until AFTER you're cleared to close). So many things can make a sale fall through. If it doesn't happen with this house, there WILL be another one that comes along that's just as good if not better. I know it might not feel that way, I know it's almost impossible not to fall in love especially if it's your dream home, but it really does help to be able to make clearheaded decisions if you're somewhat detached.
Good luck!
posted by rabbitrabbit at 8:04 AM on August 1, 2019 [2 favorites]
1) Yes, you should reach out to more lenders, because somebody might get you a better package. The best plan is to go through an independent mortgage broker because they can find you the best deal without being tied to one bank.
2) Get the loan with the best originating terms from … whoever. In most cases it will be sold off almost immediately after origination. Our first mortgage was sold to BB&T; our refinanced mortgage was sold to Suntrust. The terms you have are the terms you have, regardless of who buys your loan. There are a few instances where the originating lender will decide to keep the maintenance of your loan, but that's less common IME.
3) Use an independent title company. More generally, NEVER USE YOUR FRIENDS for any part of a home purchase. We got our house because the buyers previously under contract just didn't show up at closing, and we found out they didn't show up because they were getting their mortgage through a friend at a bank and the bank didn't issue the loan in time. You don't want to be the buyer who didn't get a house because a friend messed up, or the friend who caused it to happen.
4) You can make a second offer, or you can resubmit your original offer if the house sits on the market, or you can walk away. Don't get so attached you're unwilling to walk away if the house will cost you too much.
5) Give notice when you're under contract with no further contingencies. You may have inspection or appraisal contingencies (possibly required by your lender) so wait until all that stuff has gone one way or the other. In Realtor™ language you definitely should not give notice if your offer acceptance is "contingent," you may want to give notice if the status is "contingent no kick-out" and you're sure any remaining contingencies will be resolved, and you should feel free to give notice if your offer is accepted with sale pending and your lender says you're good to go.
We waited to give notice to our big corporate landlord for a little longer than might have been necessary because we'd already had a loan fall through while trying to make an offer on a different house and we were worried something would go wrong with our new lender. But then our big corporate landlord found new tenants for our place the first week they showed it (while we were still renting) and released us early so the new tenants could move in sooner. That part of it was fine, although it meant we no longer had the leisurely move we'd originally planned. Our lease was going to end in mid-August, we had closing scheduled on July 1, and we gave notice exactly two months out, assuming we'd have six weeks in which we were still paying rent to move out and clean up. At first they offered us release a month early (okay, we can still have a leisurely move in two weeks and change), but when the new tenants expressed interest they came back to us and said "can you be out by July 5?" Uh, no. There's kind of a holiday then.
posted by fedward at 9:28 AM on August 1, 2019 [1 favorite]
2) Get the loan with the best originating terms from … whoever. In most cases it will be sold off almost immediately after origination. Our first mortgage was sold to BB&T; our refinanced mortgage was sold to Suntrust. The terms you have are the terms you have, regardless of who buys your loan. There are a few instances where the originating lender will decide to keep the maintenance of your loan, but that's less common IME.
3) Use an independent title company. More generally, NEVER USE YOUR FRIENDS for any part of a home purchase. We got our house because the buyers previously under contract just didn't show up at closing, and we found out they didn't show up because they were getting their mortgage through a friend at a bank and the bank didn't issue the loan in time. You don't want to be the buyer who didn't get a house because a friend messed up, or the friend who caused it to happen.
4) You can make a second offer, or you can resubmit your original offer if the house sits on the market, or you can walk away. Don't get so attached you're unwilling to walk away if the house will cost you too much.
5) Give notice when you're under contract with no further contingencies. You may have inspection or appraisal contingencies (possibly required by your lender) so wait until all that stuff has gone one way or the other. In Realtor™ language you definitely should not give notice if your offer acceptance is "contingent," you may want to give notice if the status is "contingent no kick-out" and you're sure any remaining contingencies will be resolved, and you should feel free to give notice if your offer is accepted with sale pending and your lender says you're good to go.
We waited to give notice to our big corporate landlord for a little longer than might have been necessary because we'd already had a loan fall through while trying to make an offer on a different house and we were worried something would go wrong with our new lender. But then our big corporate landlord found new tenants for our place the first week they showed it (while we were still renting) and released us early so the new tenants could move in sooner. That part of it was fine, although it meant we no longer had the leisurely move we'd originally planned. Our lease was going to end in mid-August, we had closing scheduled on July 1, and we gave notice exactly two months out, assuming we'd have six weeks in which we were still paying rent to move out and clean up. At first they offered us release a month early (okay, we can still have a leisurely move in two weeks and change), but when the new tenants expressed interest they came back to us and said "can you be out by July 5?" Uh, no. There's kind of a holiday then.
posted by fedward at 9:28 AM on August 1, 2019 [1 favorite]
Joining the advice to get a home inspection, done by someone not associated with any of the principals or agents involved. If possible, do your own inspection too, as a check. We bought a new house, and the inspector missed some pretty obvious problems. Fortunately, the builder was conscientious, and fixed them.
I'd also ask a lawyer whether the 60-day notice requirement is legally enforceable, if it looks like it could be a problem.
posted by Kirth Gerson at 9:40 AM on August 1, 2019
I'd also ask a lawyer whether the 60-day notice requirement is legally enforceable, if it looks like it could be a problem.
posted by Kirth Gerson at 9:40 AM on August 1, 2019
Is this an older home? Get the sewer lines inspected.
Home inspectors won't go this far, and I've seen a lot of cases where the home goes from being occupied by a little old lady (that flushes the toilet once a day) to a large family using way more water. It happened to me as well.
The clogged/broken/collapsing lines could handle the trickle from one occupant but completely clog up when the flow increases.
Having a plumber run a camera down the line is way cheaper than the thousands it will cost you to dig up your yard while everything plumbing related is shut off during the repair.
posted by JoeZydeco at 10:04 AM on August 1, 2019 [1 favorite]
Home inspectors won't go this far, and I've seen a lot of cases where the home goes from being occupied by a little old lady (that flushes the toilet once a day) to a large family using way more water. It happened to me as well.
The clogged/broken/collapsing lines could handle the trickle from one occupant but completely clog up when the flow increases.
Having a plumber run a camera down the line is way cheaper than the thousands it will cost you to dig up your yard while everything plumbing related is shut off during the repair.
posted by JoeZydeco at 10:04 AM on August 1, 2019 [1 favorite]
Banks are banks, shop around to get the lowest payment for your given timeperiod (15,20,30 years).
2nding a home inspection + a legit plumbing inspection, with cameras down the main lines.
posted by The_Vegetables at 10:58 AM on August 1, 2019
2nding a home inspection + a legit plumbing inspection, with cameras down the main lines.
posted by The_Vegetables at 10:58 AM on August 1, 2019
Also, you can read your total mortgage, but unless you are dealing with some seriously shady lenders or mortgage company, there is nothing you can do with any of the text. You can't line by line negotiate anything, so beyond verifying the basic information is correct, you shouldn't spend your time reading it in my opinion. Once you purchase you will go to a meeting where you sign your name on practically every page, and your title co will explain it all to you.
Same with your HOA. You can read those documents, but just know that most HOAs are able to exert a large amount of control, and that joining one means you have to accept that. Again, you can't strike the lines you disagree with like it's a negotiation. It's take it or leave it.
posted by The_Vegetables at 11:03 AM on August 1, 2019 [1 favorite]
Same with your HOA. You can read those documents, but just know that most HOAs are able to exert a large amount of control, and that joining one means you have to accept that. Again, you can't strike the lines you disagree with like it's a negotiation. It's take it or leave it.
posted by The_Vegetables at 11:03 AM on August 1, 2019 [1 favorite]
Final thing I'd add is banks ask for tons of financial info, years of income statements, proof of employment, former tax forms, etc, so spend your time pulling all that junk into a folder. In my experience you will have to give the same stuff to them many times, so don't let them keep any originals and keep it all together until you walk into your new home.
posted by The_Vegetables at 11:05 AM on August 1, 2019
posted by The_Vegetables at 11:05 AM on August 1, 2019
Oh yeah, when we first started talking to our lender they asked for three years worth of tax filings and two or three months worth of paystubs, and pretty much every time we talked to them after that we had to send them any newer stubs just to keep the paperwork up to date. I had a folder on my computer of all the various scanned and/or downloaded PDFs so I could just pull that whole folder at once if somebody needed it.
FWIW if you work for a company that uses a payroll processing service (ADP is common around here; even my one employer that switched to Oracle for everything HR still used ADP for the paper trail) then you can download all your paystubs as PDFs without having to keep track of the paper.
posted by fedward at 1:41 PM on August 1, 2019 [1 favorite]
FWIW if you work for a company that uses a payroll processing service (ADP is common around here; even my one employer that switched to Oracle for everything HR still used ADP for the paper trail) then you can download all your paystubs as PDFs without having to keep track of the paper.
posted by fedward at 1:41 PM on August 1, 2019 [1 favorite]
This thread is closed to new comments.
-Read all the paperwork and make sure it makes sense to you. I was given papers at closing for the wrong house once.
-Get several quotes from different banks and credit unions. Some are hungrier than others.
posted by nickggully at 7:35 PM on July 31, 2019