Total beginner's guide to buying a house
May 15, 2022 7:00 PM Subscribe
We are millennials who assumed we would never be able to afford to buy a house, so have no idea how to do these things. This weekend, a townhouse that is surprisingly reasonably priced has appeared on Zillow. I want it.
The problem is, I have no idea how to make this happen.
Help?
It's got downsides that explain the low price, but they are all things we could live with. If we borrowed against our retirement accounts for a deposit, we could conceivably pay less on the mortgage than we currently pay on rent, and have twice as much space, a garden, and no landlord. Now what?
I know exactly what to do and how to proceed when renting homes. From answering the first advert on craigslist, to wrangling the deposit back from the slumlord by calling his home twice a day for a month: I am an expert at the official and unofficial rules of being a tenant.
But despite all the "how to buy your first home" websites I've been reading today, I have no clue what our next steps should be if we seriously want to buy our own place.
Some, but not all, my questions:
1. We are going to look around the house tomorrow (Monday) morning. If we are being shown around by the seller's agent, are there things we should avoid telling them about ourselves? Do we have to impress them?
2. Do we need to get an agent? If so, will an agent be annoyed if we just want to look at this house and not others? Realistically it might be another 5+ years before we can afford normal prices where we live.
3. I assume a relatively decent & low-priced home in our particular neighborhood will be snapped up fast. Is this totally unlikely to work out (as spouse believes)? Or can two bitter old millennials dare to dream of a little wood-paneled, one-bathed, townhouse of their own?
4. How long would it take to figure out getting the money out of our IRA accounts for the deposit?
5. Does it really take a long time to get a mortgage, as all the websites say? We have good credit histories, no debt other than student debt, nothing scary in our histories, etc etc.
We are in the US btw.
It's got downsides that explain the low price, but they are all things we could live with. If we borrowed against our retirement accounts for a deposit, we could conceivably pay less on the mortgage than we currently pay on rent, and have twice as much space, a garden, and no landlord. Now what?
I know exactly what to do and how to proceed when renting homes. From answering the first advert on craigslist, to wrangling the deposit back from the slumlord by calling his home twice a day for a month: I am an expert at the official and unofficial rules of being a tenant.
But despite all the "how to buy your first home" websites I've been reading today, I have no clue what our next steps should be if we seriously want to buy our own place.
Some, but not all, my questions:
1. We are going to look around the house tomorrow (Monday) morning. If we are being shown around by the seller's agent, are there things we should avoid telling them about ourselves? Do we have to impress them?
2. Do we need to get an agent? If so, will an agent be annoyed if we just want to look at this house and not others? Realistically it might be another 5+ years before we can afford normal prices where we live.
3. I assume a relatively decent & low-priced home in our particular neighborhood will be snapped up fast. Is this totally unlikely to work out (as spouse believes)? Or can two bitter old millennials dare to dream of a little wood-paneled, one-bathed, townhouse of their own?
4. How long would it take to figure out getting the money out of our IRA accounts for the deposit?
5. Does it really take a long time to get a mortgage, as all the websites say? We have good credit histories, no debt other than student debt, nothing scary in our histories, etc etc.
We are in the US btw.
I don't know about IRAs, and you don't need to "impress" a selling agent.
posted by mhoye at 7:10 PM on May 15, 2022 [1 favorite]
posted by mhoye at 7:10 PM on May 15, 2022 [1 favorite]
Best answer: 1) Remember that the seller's agent works for the seller. As far as they're concerned, you're at best mildly interested; expressing enthusiasm for the house now may tell them that you're more willing to pay full price or more. Watch the scene in Ghostbusters where Egon coldly lists all the problems with the firehouse, and then Ray comes in bubbling with enthusiasm. Don't be Ray. Anything you say to them will go right back to the seller.
2) You might want to get an agent. Depending on your state, you may be able to have the seller's agent also be your agent, but again, that's only if you feel comfortable having one person represent both sides of the transaction. This may be cheaper. No agent is going to mind you coming to them and saying, "We already have a house we want to buy, we need you to represent us." They get to skip the whole showing-houses part of being a buyer's agent. If you have dual representation, the agent may be willing to accept something like a 4% commission instead of the usual 6%, leaving thousands of dollars for you and the seller to split up as you see fit.
3) That depends on your locality. In mine, you're right, you might only have a day or two to make an offer. But the seller may be holding off waiting for the best offer rather than the first.
4) You can probably get it out within a few days; far less time than it'll take you to get a mortgage. Once you make the request, you'll have to liquidate any securities in the account that you want to cash out - that takes 2-4 days - and then do the cash transfer to your bank account, which takes another day or two.
5) If you have good credit, a 20% down payment, and will end up with less than 30% of your income paying the mortgage plus the student loan debt, then the mortgage should take about 4-6 weeks to go through. People like to hate on them, but I got a mortgage from Wells Fargo in summer 2020 that was at the best rate on the market, and took 39 days from the initial application until closing.
posted by Hatashran at 7:19 PM on May 15, 2022 [4 favorites]
2) You might want to get an agent. Depending on your state, you may be able to have the seller's agent also be your agent, but again, that's only if you feel comfortable having one person represent both sides of the transaction. This may be cheaper. No agent is going to mind you coming to them and saying, "We already have a house we want to buy, we need you to represent us." They get to skip the whole showing-houses part of being a buyer's agent. If you have dual representation, the agent may be willing to accept something like a 4% commission instead of the usual 6%, leaving thousands of dollars for you and the seller to split up as you see fit.
3) That depends on your locality. In mine, you're right, you might only have a day or two to make an offer. But the seller may be holding off waiting for the best offer rather than the first.
4) You can probably get it out within a few days; far less time than it'll take you to get a mortgage. Once you make the request, you'll have to liquidate any securities in the account that you want to cash out - that takes 2-4 days - and then do the cash transfer to your bank account, which takes another day or two.
5) If you have good credit, a 20% down payment, and will end up with less than 30% of your income paying the mortgage plus the student loan debt, then the mortgage should take about 4-6 weeks to go through. People like to hate on them, but I got a mortgage from Wells Fargo in summer 2020 that was at the best rate on the market, and took 39 days from the initial application until closing.
posted by Hatashran at 7:19 PM on May 15, 2022 [4 favorites]
If you’re interested in buying, it’s good to have a relationship ship with a real estate agent you trust. You do not want to use the seller’s agent because their job is to get their best price for their client. Also, a buyer’s agent would be good because you don’t know anything about this process, as you’ve said. A buyer’s agent will look out for your interests.
I think your big mistake is assuming you know what’s up with this house based on the Zillow listing. You go to enough places and you start to realize how listings are manipulated to make the place look better. And there’s a lot you learn in the inspection.
Also, getting money out of your IRAs is, first, not necessarily a good idea, and two, probably not something you can do quickly enough to make an offer and get a mortgage in a competitive market. Some folks might already have preapprovals for mortgages. Also, prices are high right now. It might not be the best time to buy.
It sounds like you want to own a house but it’s felt out of reach so you haven’t been working towards it. I think one approach would be to go to a fee-based financial planner and have a conversation about your investments and goals and the possibility of a house purchase.
posted by bluedaisy at 7:25 PM on May 15, 2022 [16 favorites]
I think your big mistake is assuming you know what’s up with this house based on the Zillow listing. You go to enough places and you start to realize how listings are manipulated to make the place look better. And there’s a lot you learn in the inspection.
Also, getting money out of your IRAs is, first, not necessarily a good idea, and two, probably not something you can do quickly enough to make an offer and get a mortgage in a competitive market. Some folks might already have preapprovals for mortgages. Also, prices are high right now. It might not be the best time to buy.
It sounds like you want to own a house but it’s felt out of reach so you haven’t been working towards it. I think one approach would be to go to a fee-based financial planner and have a conversation about your investments and goals and the possibility of a house purchase.
posted by bluedaisy at 7:25 PM on May 15, 2022 [16 favorites]
Best answer: I don't know what area you're in, but if you're not paying cash for the place, your first move needs to be getting pre-approved for a mortgage. In super-hot markets, often realtors won't even show a place to a potential buyer who hasn't prequalified. Use a mortgage broker or a credit union to do this. They will require a LOT of documentation (bank statements, retirement fund statements, credit, etc), so spend some time pulling that together before you talk to someone, so you can be ready.
You do need to get an agent - you've never done this before. It's bewildering. Ask friends or coworkers if they have one they recommend. It is technically possible to buy your place without an agent, but that's a thicket of weeds you may not want to try to hack through.
If the place is desirable, in a good neighborhood, etc: yes, prepare to be outbid. Work with your mortgage person to figure out what your ceiling is, and negotiate with that in mind.
When you say "get" a mortgage, there's two sides to that. Qualifying for one, as I mentioned, can take a week or two. "Getting" the place you want (making an offer, having that offer accepted, etc) can take anywhere from 4-6 weeks once your offer is accepted. As annoying as that sounds, that's just how it works - there's a bazilliontytwelve moving pieces to buying a home, and several interested parties, and it takes a lot of coordination. During some of that 4-6 weeks, you may hear nothing from anyone; this is normal, if stressful. But that's where your broker comes in - they're essentially the project manager, so they're the one you turn to when you have questions.
It's not 100% unlikely to work out, but do prepare for the possibility that it will - the nice thing is, you qualify for a mortgage for a dollar amount, not a specific place, and prequalifications don't really "expire" (I mean, they do, but not for several months). So if this place doesn't work out, you're ready to pounce when the next one makes itself known to you.
posted by pdb at 7:26 PM on May 15, 2022 [15 favorites]
You do need to get an agent - you've never done this before. It's bewildering. Ask friends or coworkers if they have one they recommend. It is technically possible to buy your place without an agent, but that's a thicket of weeds you may not want to try to hack through.
If the place is desirable, in a good neighborhood, etc: yes, prepare to be outbid. Work with your mortgage person to figure out what your ceiling is, and negotiate with that in mind.
When you say "get" a mortgage, there's two sides to that. Qualifying for one, as I mentioned, can take a week or two. "Getting" the place you want (making an offer, having that offer accepted, etc) can take anywhere from 4-6 weeks once your offer is accepted. As annoying as that sounds, that's just how it works - there's a bazilliontytwelve moving pieces to buying a home, and several interested parties, and it takes a lot of coordination. During some of that 4-6 weeks, you may hear nothing from anyone; this is normal, if stressful. But that's where your broker comes in - they're essentially the project manager, so they're the one you turn to when you have questions.
It's not 100% unlikely to work out, but do prepare for the possibility that it will - the nice thing is, you qualify for a mortgage for a dollar amount, not a specific place, and prequalifications don't really "expire" (I mean, they do, but not for several months). So if this place doesn't work out, you're ready to pounce when the next one makes itself known to you.
posted by pdb at 7:26 PM on May 15, 2022 [15 favorites]
Best answer: Oh, and to this:
will an agent be annoyed if we just want to look at this house and not others?
No. This is what they do. You're starting a relationship with them that may take a long time to pay off, but that's their job, and they can also, once they know what your parameters are, help you find places you may have overlooked.
posted by pdb at 7:30 PM on May 15, 2022 [6 favorites]
will an agent be annoyed if we just want to look at this house and not others?
No. This is what they do. You're starting a relationship with them that may take a long time to pay off, but that's their job, and they can also, once they know what your parameters are, help you find places you may have overlooked.
posted by pdb at 7:30 PM on May 15, 2022 [6 favorites]
Even if this is the only townhouse you've seen, you should have your new buying agent at least show you 2-3 other properties within that price range. They should be able to do that ASAP. Realtors are all often the same. I'd just call the biggest company in your area and ask for a realtor who is free to do the above on the day you're ready.
Simultaneously, work with wells Fargo, your local credit union, and whoever you bank with. At the price point of the townhouse, compare APR with the same down payment. APR includes interest rates and all the fees.
posted by bbqturtle at 7:32 PM on May 15, 2022 [3 favorites]
Simultaneously, work with wells Fargo, your local credit union, and whoever you bank with. At the price point of the townhouse, compare APR with the same down payment. APR includes interest rates and all the fees.
posted by bbqturtle at 7:32 PM on May 15, 2022 [3 favorites]
I would not buy the first house you see. Which is not to say you shouldn’t buy this house, I mean you should be out looking at other houses in a similar price range to get an idea of what you get for your money so you know if this place is worth it or not before you put in an offer. For all you know, there’s a better place out there for you for the same amount. So just do some research.
If you love it, I hope you get it but if you don’t, remember that if this house came within your budget, others will too. It may be that the sole purpose of this house was simply to let you know that you can afford to be in the market and start you on the journey.
posted by Jubey at 7:41 PM on May 15, 2022 [13 favorites]
If you love it, I hope you get it but if you don’t, remember that if this house came within your budget, others will too. It may be that the sole purpose of this house was simply to let you know that you can afford to be in the market and start you on the journey.
posted by Jubey at 7:41 PM on May 15, 2022 [13 favorites]
Below, I've given thoughts on your actual question. But like others have mentioned above, I do think you would be well-served by looking at multiple places, which is what will let you know for sure when there is a great place you should jump at. (And, in many markets right now, it's necessary since getting outbid by cash offers and investors happens so much. Disregard this if you are in a place with a more slow-paced market.)
How long would it take to figure out getting the money out of our IRA accounts for the deposit?
Taking money out of IRAs to buy a house right now would make me nervous, personally. But I have a friend who did that and couldn't be happier, so what do I know? (Actually, I may be misreading your question -- are you withdrawing money from your accounts, or borrowing against it? Those are not the same.)
Do we need to get an agent?
I've bought by having our own agent, and also by just reaching out to the sellers agent and letting them work both sides of the deal. Personally I found the value added by having an agent to be really low (and perhaps negative), but that is a very "YMMV" kind of thing and the standard advice to get your own agent is correct in most situations. We bought our current house exactly like you are considering -- there was only the one place we were interested in, we didn't look at anything else, and I worked directly with the seller's agent instead of finding a buyer's agent. In our case it worked out well and I appreciated not having one more person in the process filtering information before it got to me, but I don't know how typical that scenario is.
(I also speculated that the sellers agent may have been more motivated by 6% of a slightly lower deal than 3% of a maximum price deal, whether or not that should play a role in their process, ethically.)
Does it really take a long time to get a mortgage, as all the websites say?
The last time I went through that process, it was very fast to get the letter from the bank saying we were approved. Getting the mortgage funded and in place took longer, and there kept being more requests for additional paperwork and financial records which was kind of maddening, but since only the letter was needed to make the offer, the later delays weren't an issue.
posted by Dip Flash at 7:51 PM on May 15, 2022 [4 favorites]
How long would it take to figure out getting the money out of our IRA accounts for the deposit?
Taking money out of IRAs to buy a house right now would make me nervous, personally. But I have a friend who did that and couldn't be happier, so what do I know? (Actually, I may be misreading your question -- are you withdrawing money from your accounts, or borrowing against it? Those are not the same.)
Do we need to get an agent?
I've bought by having our own agent, and also by just reaching out to the sellers agent and letting them work both sides of the deal. Personally I found the value added by having an agent to be really low (and perhaps negative), but that is a very "YMMV" kind of thing and the standard advice to get your own agent is correct in most situations. We bought our current house exactly like you are considering -- there was only the one place we were interested in, we didn't look at anything else, and I worked directly with the seller's agent instead of finding a buyer's agent. In our case it worked out well and I appreciated not having one more person in the process filtering information before it got to me, but I don't know how typical that scenario is.
(I also speculated that the sellers agent may have been more motivated by 6% of a slightly lower deal than 3% of a maximum price deal, whether or not that should play a role in their process, ethically.)
Does it really take a long time to get a mortgage, as all the websites say?
The last time I went through that process, it was very fast to get the letter from the bank saying we were approved. Getting the mortgage funded and in place took longer, and there kept being more requests for additional paperwork and financial records which was kind of maddening, but since only the letter was needed to make the offer, the later delays weren't an issue.
posted by Dip Flash at 7:51 PM on May 15, 2022 [4 favorites]
Please don't take money out of your retirement account to buy this house. Your IRA is probably in the toilet right now, you'll not only lose future growth earnings but you may even be losing on the actual money you've put in so far. PMI is probably not as bad as you think. Mine is the cost of Netflix and a pizza every month.
posted by phunniemee at 7:58 PM on May 15, 2022 [18 favorites]
posted by phunniemee at 7:58 PM on May 15, 2022 [18 favorites]
1) Be interested, but not TOO interested. You don't want them to know you're desperate, but at the same time there are currently probably several other interested parties so you don't want to fall off their radar either.
2) I'd lean towards getting your own realtor. They shouldn't be annoyed if you let them know you're just looking at this one house; they then know up front they won't need to spend any time showing you other options, though they may certainly offer to do so. They will also be looking out for your interests, whereas the seller's agent will not.
3) Likely it will be gone quickly, though there are signs of the market slowing down now that interest rates have nearly doubled in the last few months. Make sure your agent knows you are motivated to move quickly, which will probably involve you making a commitment sooner rather than later, so be sure you have your ducks in a row ahead of time (see unsolicited but important advice below from my own experience).
4) This probably depends a lot on your financial institution. Most major ones can probably process things in a week. But know that you'll pretty much need that money in the bank before most banks will finalize your approval.
5) I'd say 30-45 days is probably average.
Keep in mind, financially, that if this is a townhome there's a decent chance it's part of an HOA / Townhome Association. Be VERY wary of these and make sure you include the cost of association fees in your budget (typically a few hundred per month but can vary widely depending on the association). Be sure you understand what that cost covers, what it doesn't, and what you can and can't do with your property / yard / garden. I'm only half joking that you want to be sure they allow all colors of flowers and varieties of herbs and veggies you plan to plant.
Also be aware that you need 20% of the purchase price down or else you'll end up paying a hundred or two per month for Mortgage insurance until the balance is paid down to somewhere around 78% of the original mortgage amount (usually about 5 years on a 30 year mortgage).
I'm not a financial expert, but at this very moment I don't know that borrowing against retirement accounts is the best idea, since yours and everyone else's has taken a significant hit in the last couple months. Taking money out right now means you'll have less in your account during the inevitable bouceback, losing out on those gains. But it's kind of a gamble to try to time when that will happen - could be a few months, could be several years. More knowledgeable folks can correct me if I'm wrong.
Also look for First Time Home Buyer programs in your state that may provide a better long term benefit for you than taking IRA loans.
posted by SquidLips at 7:59 PM on May 15, 2022 [1 favorite]
2) I'd lean towards getting your own realtor. They shouldn't be annoyed if you let them know you're just looking at this one house; they then know up front they won't need to spend any time showing you other options, though they may certainly offer to do so. They will also be looking out for your interests, whereas the seller's agent will not.
3) Likely it will be gone quickly, though there are signs of the market slowing down now that interest rates have nearly doubled in the last few months. Make sure your agent knows you are motivated to move quickly, which will probably involve you making a commitment sooner rather than later, so be sure you have your ducks in a row ahead of time (see unsolicited but important advice below from my own experience).
4) This probably depends a lot on your financial institution. Most major ones can probably process things in a week. But know that you'll pretty much need that money in the bank before most banks will finalize your approval.
5) I'd say 30-45 days is probably average.
Keep in mind, financially, that if this is a townhome there's a decent chance it's part of an HOA / Townhome Association. Be VERY wary of these and make sure you include the cost of association fees in your budget (typically a few hundred per month but can vary widely depending on the association). Be sure you understand what that cost covers, what it doesn't, and what you can and can't do with your property / yard / garden. I'm only half joking that you want to be sure they allow all colors of flowers and varieties of herbs and veggies you plan to plant.
Also be aware that you need 20% of the purchase price down or else you'll end up paying a hundred or two per month for Mortgage insurance until the balance is paid down to somewhere around 78% of the original mortgage amount (usually about 5 years on a 30 year mortgage).
I'm not a financial expert, but at this very moment I don't know that borrowing against retirement accounts is the best idea, since yours and everyone else's has taken a significant hit in the last couple months. Taking money out right now means you'll have less in your account during the inevitable bouceback, losing out on those gains. But it's kind of a gamble to try to time when that will happen - could be a few months, could be several years. More knowledgeable folks can correct me if I'm wrong.
Also look for First Time Home Buyer programs in your state that may provide a better long term benefit for you than taking IRA loans.
posted by SquidLips at 7:59 PM on May 15, 2022 [1 favorite]
Best answer: You need to get pre-approved for your mortgage before you can make an offer. This is the thing that will take the longest and so you need to get started ASAP: like, take Monday off work and find a mortgage broker. Banks/credit unions have been slower, in my experience, to get it together. You may not have the time. Do not move any money. This will delay the mortgage broker. Do exactly what they tell you to do to make the deal happen, if at all possible, within your time frame.
A buyer's agent will end up costing you money indirectly. However, you don't have time to faff around if this is truly the property for you.
When you get a buyer's agent, have them pull comps for the property. It may just be listed low and will be bid up out of your range. I'm sorry.
posted by flimflam at 8:02 PM on May 15, 2022 [14 favorites]
A buyer's agent will end up costing you money indirectly. However, you don't have time to faff around if this is truly the property for you.
When you get a buyer's agent, have them pull comps for the property. It may just be listed low and will be bid up out of your range. I'm sorry.
posted by flimflam at 8:02 PM on May 15, 2022 [14 favorites]
After buying my first home in April 2021, this is what I can tell you.
Get pre-qualified from multiple lenders. I think it took about 7-10 days after I provided all the documentation they required before receiving pre-qual letters with amounts. You can get pre-qualified with multiple lenders in about a week window of time without dinging your credit multiple times.
Seconding instructions above to follow the directions of the lender that you chose!
Your credit score will affect your interest rate. You can use free tools from your credit card companies to see your credit score. If you're not already above 780, discuss with your lender what is lowering your credit score.
Do not spend your max budget if at all possible. Spending your max budget will prevent you from saving and investing money for your future and maintaining your emergency savings should either of you ever experience a job loss of unexpected financial struggle.
Do not withdraw from your IRAs, unless, possibly, you have such a massive amount of money in there for your age, that pulling out $20-30,000 for a down payment is only a small portion of the total amount you have.
You don't need 20% or even 10% down to get started. 5% down is very common now. Do what you can afford, but don't drain your savings too much to afford the down payment. You should have 3-6 months of expenses still in savings after setting aside ~5% for the down payment.
Yes, you absolutely need an agent. Yes, they get a commission, but it's worth its weight in gold most of time, because they know what to look for and what questions to ask. If they are experienced, they will know the process like the back of their hand and can help you avoid landmines in the process.
Seconding the recommendation to get an inspection. Do not bypass the inspection. If there are any major issues with the house that need to be dealt with right away, you deserve to know about it. I think I paid $500 for my inspection (in SW Montana).
Closing in 30 days is relatively fast. I closed in 30 days, but I had a traditional mortgage and my loan officer was insanely on top of things. Closing in 40-60 days is more common unless everything happens without delay (inspection and appraisal).
You may think this is the home of your dreams, but it's worthwhile to tour several homes within your budget once you are pre-qualified to get an idea of what else is out there. It's totally normal for middle class Americans to tour several homes before putting in offers.
Don't get discouraged right away if you get outbid. During the rapid rise of home demand over the last 2 years, many buyers have bid on 10+ homes and still not gotten something. Don't give up. If you get discouraged, listen to this guy's story.
posted by mtphoto at 8:02 PM on May 15, 2022 [4 favorites]
Get pre-qualified from multiple lenders. I think it took about 7-10 days after I provided all the documentation they required before receiving pre-qual letters with amounts. You can get pre-qualified with multiple lenders in about a week window of time without dinging your credit multiple times.
Seconding instructions above to follow the directions of the lender that you chose!
Your credit score will affect your interest rate. You can use free tools from your credit card companies to see your credit score. If you're not already above 780, discuss with your lender what is lowering your credit score.
Do not spend your max budget if at all possible. Spending your max budget will prevent you from saving and investing money for your future and maintaining your emergency savings should either of you ever experience a job loss of unexpected financial struggle.
Do not withdraw from your IRAs, unless, possibly, you have such a massive amount of money in there for your age, that pulling out $20-30,000 for a down payment is only a small portion of the total amount you have.
You don't need 20% or even 10% down to get started. 5% down is very common now. Do what you can afford, but don't drain your savings too much to afford the down payment. You should have 3-6 months of expenses still in savings after setting aside ~5% for the down payment.
Yes, you absolutely need an agent. Yes, they get a commission, but it's worth its weight in gold most of time, because they know what to look for and what questions to ask. If they are experienced, they will know the process like the back of their hand and can help you avoid landmines in the process.
Seconding the recommendation to get an inspection. Do not bypass the inspection. If there are any major issues with the house that need to be dealt with right away, you deserve to know about it. I think I paid $500 for my inspection (in SW Montana).
Closing in 30 days is relatively fast. I closed in 30 days, but I had a traditional mortgage and my loan officer was insanely on top of things. Closing in 40-60 days is more common unless everything happens without delay (inspection and appraisal).
You may think this is the home of your dreams, but it's worthwhile to tour several homes within your budget once you are pre-qualified to get an idea of what else is out there. It's totally normal for middle class Americans to tour several homes before putting in offers.
Don't get discouraged right away if you get outbid. During the rapid rise of home demand over the last 2 years, many buyers have bid on 10+ homes and still not gotten something. Don't give up. If you get discouraged, listen to this guy's story.
posted by mtphoto at 8:02 PM on May 15, 2022 [4 favorites]
Best answer: How hot is your real estate market? In mine right, making an offer more than 12 hours after it gets listed can mean that you're too late. If yours is like that, you need to get prequalified tonight online or in-person at a bank first thing in the morning and then look at it as quickly as possible in the morning and then make an offer on it. In my market you have to offer more than the asking price most of the time.
In some markets people are waving inspections when making offers. Even if you love the idea of this place, I suggest that you not do that unless you can afford to drop 10s of thousands of dollars on repairs that an inspection might have revealed.
As others have noted, at least look at other places if you don't live in an insane market. This is one of the biggest purchases you will make in your life. I fell in love with the miracle house I found online and made an offer on it in under 48 hours but I did look at a few other places just to be sure. It took a few hours and confirmed that I really did want the first one I looked at.
When you get an agent, even if you miss out on this current opportunity, as long as your prequalified, they may be able to help you get a drop on similar properties.
Depending on where you live, there can be multiple parts of your offer. A due diligence fee is a non-refundable show of good faith that you really want the place. If the purchase doesn't go through for any reason, you lose that money. An earnest fee is putting cash in escrow to show that you're serious but if the purchase doesn't happen, you get it back. Then there's your actual offer. There's also closing costs. You can pay them, you can possibly get them added to your mortgage. In my case it was easiest to offer more than the asking price but say that the owner would pay the closing costs.
It is a very bad idea to completely drain your cash resources because expensive repairs to the house (or cars or health costs) can pop up in the first few months. Some sellers offer a home warranty that will cover the cost of repairing things like appliances for the first year. Check out the reputation of the company. Mine came with one but the reviews showed that they were very, very slow and difficult to work with. Can you live without AC for a month in the summer? If not, you might have to break down and pay for repairs out of pocket.
Does it really take a long time to get a mortgage, as all the websites say? We have good credit histories, no debt other than student debt, nothing scary in our histories, etc etc.
Getting prequalified, which is the only rush, can be fast - I did it in-person in maybe half an hour and I wasn't in a rush so there was chit-chatting. Getting the mortgage itself takes a while. This isn't a problem usually because there's other things that have to happen like inspections and assessments that take some time as well.
They will go through your credit history and available cash with a fine tooth comb. There are rules on where your down payment can come from; follow them scrupulously. Do not open any new lines of credit after getting prequalified. Do not miss any payments on existing ones. Answer any questions the underwriter asks you ASAP.
Do we have to impress them?
Nope, all they care about is money. Some sellers might care about your life story but most don't.
Do we need to get an agent?
Depends on your state laws. And in my case, they handled a lot of the headaches of haggling with the owners on repairs that they were obligated to cover.
If you don't have one, always keep in mind that the seller's agent is not on your side.
How long would it take to figure out getting the money out of our IRA accounts for the deposit?
It depends on your provider but I've wired money out of mine (TD) and had it in cash in minutes.
If we borrowed against our retirement accounts for a deposit
Are you borrowing from a retirement account or cashing out from an IRA? The rules are different and depends on what type of IRA you have.
If you are considering borrowing from a 401(k) plan, keep in mind that you are playing with fire unless you and the company are very stable. I am less vehemently against borrowing from a 401(k) in the right circumstance than some people are but if you should change jobs, keep in mind you would have to pay back the entire loan no later than the Oct. the year after you leave the current one (the link I posted above is actually incorrect about this - the extension on the payback was part of the Trump tax bill, one of the few decent things about it).
posted by Candleman at 8:15 PM on May 15, 2022 [8 favorites]
In some markets people are waving inspections when making offers. Even if you love the idea of this place, I suggest that you not do that unless you can afford to drop 10s of thousands of dollars on repairs that an inspection might have revealed.
As others have noted, at least look at other places if you don't live in an insane market. This is one of the biggest purchases you will make in your life. I fell in love with the miracle house I found online and made an offer on it in under 48 hours but I did look at a few other places just to be sure. It took a few hours and confirmed that I really did want the first one I looked at.
When you get an agent, even if you miss out on this current opportunity, as long as your prequalified, they may be able to help you get a drop on similar properties.
Depending on where you live, there can be multiple parts of your offer. A due diligence fee is a non-refundable show of good faith that you really want the place. If the purchase doesn't go through for any reason, you lose that money. An earnest fee is putting cash in escrow to show that you're serious but if the purchase doesn't happen, you get it back. Then there's your actual offer. There's also closing costs. You can pay them, you can possibly get them added to your mortgage. In my case it was easiest to offer more than the asking price but say that the owner would pay the closing costs.
It is a very bad idea to completely drain your cash resources because expensive repairs to the house (or cars or health costs) can pop up in the first few months. Some sellers offer a home warranty that will cover the cost of repairing things like appliances for the first year. Check out the reputation of the company. Mine came with one but the reviews showed that they were very, very slow and difficult to work with. Can you live without AC for a month in the summer? If not, you might have to break down and pay for repairs out of pocket.
Does it really take a long time to get a mortgage, as all the websites say? We have good credit histories, no debt other than student debt, nothing scary in our histories, etc etc.
Getting prequalified, which is the only rush, can be fast - I did it in-person in maybe half an hour and I wasn't in a rush so there was chit-chatting. Getting the mortgage itself takes a while. This isn't a problem usually because there's other things that have to happen like inspections and assessments that take some time as well.
They will go through your credit history and available cash with a fine tooth comb. There are rules on where your down payment can come from; follow them scrupulously. Do not open any new lines of credit after getting prequalified. Do not miss any payments on existing ones. Answer any questions the underwriter asks you ASAP.
Do we have to impress them?
Nope, all they care about is money. Some sellers might care about your life story but most don't.
Do we need to get an agent?
Depends on your state laws. And in my case, they handled a lot of the headaches of haggling with the owners on repairs that they were obligated to cover.
If you don't have one, always keep in mind that the seller's agent is not on your side.
How long would it take to figure out getting the money out of our IRA accounts for the deposit?
It depends on your provider but I've wired money out of mine (TD) and had it in cash in minutes.
If we borrowed against our retirement accounts for a deposit
Are you borrowing from a retirement account or cashing out from an IRA? The rules are different and depends on what type of IRA you have.
If you are considering borrowing from a 401(k) plan, keep in mind that you are playing with fire unless you and the company are very stable. I am less vehemently against borrowing from a 401(k) in the right circumstance than some people are but if you should change jobs, keep in mind you would have to pay back the entire loan no later than the Oct. the year after you leave the current one (the link I posted above is actually incorrect about this - the extension on the payback was part of the Trump tax bill, one of the few decent things about it).
posted by Candleman at 8:15 PM on May 15, 2022 [8 favorites]
You may have the type of retirement account that you can borrow money from. I did, it was a 403 b plan, and it was quite easy to borrow, and it never showed up on my credit report as a loan, which could be helpful when looking into mortgages. There was a limit on the amount I could borrow. Make sure you can borrow from your account and find out how much. Also, as others have mentioned, look into first time homebuyer programs. Check out FHA loans too, they require a much smaller down payment. Good luck!
posted by mareli at 8:25 PM on May 15, 2022
posted by mareli at 8:25 PM on May 15, 2022
Even if you love the house, do not let anyone convince you to waive the inspection. Get your own home inspector. Pick one that comes with good reviews/references. Listen to what they tell you. Do not go ahead with the purchase if they advise you of major problems with the house.
I know people who lost a lot of money they couldn’t afford because the seller sweet talked them into believing there was no need for a home inspection.
posted by hurdy gurdy girl at 8:42 PM on May 15, 2022 [5 favorites]
I know people who lost a lot of money they couldn’t afford because the seller sweet talked them into believing there was no need for a home inspection.
posted by hurdy gurdy girl at 8:42 PM on May 15, 2022 [5 favorites]
Best answer: 1. We are going to look around the house tomorrow (Monday) morning. If we are being shown around by the seller's agent, are there things we should avoid telling them about ourselves? Do we have to impress them?
No but keep your emotions in check, do not gush if you love the house. Poker face.
2. Do we need to get an agent?
If you can find a good buyer's agent I'd highly recommend that. The one I worked with had a good relationship with the lender, inspector, and the lawyer we selected to be there at closing.
3. can two bitter old millennials dare to dream?
Signs point to yes.
Can't help with 4 and 5.
posted by vrakatar at 9:04 PM on May 15, 2022 [2 favorites]
No but keep your emotions in check, do not gush if you love the house. Poker face.
2. Do we need to get an agent?
If you can find a good buyer's agent I'd highly recommend that. The one I worked with had a good relationship with the lender, inspector, and the lawyer we selected to be there at closing.
3. can two bitter old millennials dare to dream?
Signs point to yes.
Can't help with 4 and 5.
posted by vrakatar at 9:04 PM on May 15, 2022 [2 favorites]
Best answer: I've bought and sold a number of houses and, in general, having a good agent is really helpful. Not just showing houses but also advising you on strategy for making an offer and, equally or more importantly, guiding you through the process of closing on the deal. There are so many details - inspections, title reports etc. A good agent that represents you will make sure that every thing gets done, recommend people that can do it, help you negotiate with the seller on anything that turns up in the process and so on. There was one purchase where the seller's agent wasn't very good at their job - we certainly wouldn't have closed on time without our (the buyer) agent taking over many things that were usually done by the seller's agent.
posted by metahawk at 9:13 PM on May 15, 2022 [3 favorites]
posted by metahawk at 9:13 PM on May 15, 2022 [3 favorites]
Best answer: I am in the process of buying my first house. It is a competitive market- we missed an offer where we bid 40K over the listing price. We won an offer when we bid 60K over the asking price and waived inspection. I still feel sick to my stomach knowing we could be totally screwed. The house seems great though and we bought towards the lower end of what we could potentially afford. Absolutely get prequalifued for a mortgage, ideally at two or more lenders. Once you see a few open houses you get a better sense of what us available in your price range.
Definitely get an agent, there's really no downside that I can see. Be wary of listings prices, I get the impression some houses are listed low to get people interested but it's not the 'real' price. I've also seen two different houses listed at the same price, where one was clearly worth about 100K more than the other.
posted by emd3737 at 9:32 PM on May 15, 2022 [1 favorite]
Definitely get an agent, there's really no downside that I can see. Be wary of listings prices, I get the impression some houses are listed low to get people interested but it's not the 'real' price. I've also seen two different houses listed at the same price, where one was clearly worth about 100K more than the other.
posted by emd3737 at 9:32 PM on May 15, 2022 [1 favorite]
There's a lot of great answers above - but the one thing I will add is the situation can depend significantly from region to region. For example, in the SF Bay Area, houses tend to sell for above asking. In the New York region, houses tend to sell for below asking - but not always.
It's best to do a ton of research on Redfin/Zillow etc to understand:
1. The spread between listing to closing prices
2. The number of days from listing (for sale) to pending. If you find a listing that's above the average number of days... that could be a red flag about the home or the seller. (Also, check out listing histories on redfin... sometimes people close the listing and reactivate them to reset the date.)
3. What the general price per square foot is
4. Understand what the norms are: are you allowed to do a home inspection? are you allowed to have any contingencies?
I'd also recommend touring a ton of houses - even the ones you have no interest or way to afford buying. See if you can get the disclosure packets. Try to understand them. Compare them.
Consider hiring a home inspector to go with you to tour a pretty junky house so he can teach you how to spot all the problems.
Finally, and I say this as someone with a lot of friends in real estate - so no offense to any of them - be prepared to be ripped off / bamboozled in some fashion or another. None of them have fiduciary responsibilities to you. And while you can always sue, you're not going to. Remember that you're basically buying a used car, except the car is a house. I've seen realtors make false statements. I've seen title companies make ridiculous math mistakes. Go in with your eyes open.
Oh, finally, if they're baking stuff in the kitchen during the open house, there's a good chance they're trying to hide the smell of mold or cat urine.
posted by Mushroom12345 at 9:52 PM on May 15, 2022 [3 favorites]
It's best to do a ton of research on Redfin/Zillow etc to understand:
1. The spread between listing to closing prices
2. The number of days from listing (for sale) to pending. If you find a listing that's above the average number of days... that could be a red flag about the home or the seller. (Also, check out listing histories on redfin... sometimes people close the listing and reactivate them to reset the date.)
3. What the general price per square foot is
4. Understand what the norms are: are you allowed to do a home inspection? are you allowed to have any contingencies?
I'd also recommend touring a ton of houses - even the ones you have no interest or way to afford buying. See if you can get the disclosure packets. Try to understand them. Compare them.
Consider hiring a home inspector to go with you to tour a pretty junky house so he can teach you how to spot all the problems.
Finally, and I say this as someone with a lot of friends in real estate - so no offense to any of them - be prepared to be ripped off / bamboozled in some fashion or another. None of them have fiduciary responsibilities to you. And while you can always sue, you're not going to. Remember that you're basically buying a used car, except the car is a house. I've seen realtors make false statements. I've seen title companies make ridiculous math mistakes. Go in with your eyes open.
Oh, finally, if they're baking stuff in the kitchen during the open house, there's a good chance they're trying to hide the smell of mold or cat urine.
posted by Mushroom12345 at 9:52 PM on May 15, 2022 [3 favorites]
Best answer: A really important warning: DON'T let the seller's agent make you sign a document to make them your buyer's agent, even for a short period.
I would also absolutely get a buyer's agent the first time I bought a house. It costs you nothing.
posted by yellowcandy at 10:03 PM on May 15, 2022 [6 favorites]
I would also absolutely get a buyer's agent the first time I bought a house. It costs you nothing.
posted by yellowcandy at 10:03 PM on May 15, 2022 [6 favorites]
Response by poster: Hi all, thanks for the great advice! I'm learning a lot here. Not to thread sit, but to clarify a few things and reassure you!
I've been following the market locally and regionally for a long time, have been involved in helping friends find places here and nearby over the years, and I have a good sense of what's overpriced/underpriced etc. I also come from a family of builders, so know to a) get professional surveyors in before exchanging any money, and b) that things like old wiring, damp, and working sump pumps are more important that granite top counters and ensuite bathrooms, and c) the particular hell of home renovations you can't afford.
This is by no means my dream house! Rather, I'm interested precisely because it's a sensible compromise house. I think there's a good chance it's priced low (for our market) for reasons I'm not worried about (i.e., it's ugly, unfashionable, and in an inconvenient location) but that other first-time buyers might get hung up on. I haven't gone to look at a lot of places or considered buying so far, because everything else on the market right now is either substantially more expensive than renting, or would require a lot of money and energy/time in repairs to be habitable.
Things that I am now realizing I didn't understand properly before, thanks to this thread, include: huh, mortgage brokers and agents are different things.
Also yes, we would be borrowing from the retirement fund rather than taking money from it. I'm not even sure how you do it though... I'm guessing the mortgage broker helps with that?
posted by EllaEm at 11:20 PM on May 15, 2022 [1 favorite]
I've been following the market locally and regionally for a long time, have been involved in helping friends find places here and nearby over the years, and I have a good sense of what's overpriced/underpriced etc. I also come from a family of builders, so know to a) get professional surveyors in before exchanging any money, and b) that things like old wiring, damp, and working sump pumps are more important that granite top counters and ensuite bathrooms, and c) the particular hell of home renovations you can't afford.
This is by no means my dream house! Rather, I'm interested precisely because it's a sensible compromise house. I think there's a good chance it's priced low (for our market) for reasons I'm not worried about (i.e., it's ugly, unfashionable, and in an inconvenient location) but that other first-time buyers might get hung up on. I haven't gone to look at a lot of places or considered buying so far, because everything else on the market right now is either substantially more expensive than renting, or would require a lot of money and energy/time in repairs to be habitable.
Things that I am now realizing I didn't understand properly before, thanks to this thread, include: huh, mortgage brokers and agents are different things.
Also yes, we would be borrowing from the retirement fund rather than taking money from it. I'm not even sure how you do it though... I'm guessing the mortgage broker helps with that?
posted by EllaEm at 11:20 PM on May 15, 2022 [1 favorite]
Best answer: Inspection, inspection, inspection. Use your own agent and they likely have an inspector they like. Do not sign to buy or put anything into escrow without contingencies around the inspection. Anything listed low - even with drawbacks that you think you know about - needs to be vetted. We got lucky and bought a house that was listed fairly low and the inspection came back basically fine - it can happen! But it was maybe the third or fourth house we had been in contract for. We pulled out of the rest when the inspections came back. We had contingency plans and the sellers paid for our inspectors. Even if they hadn’t, I still wouldn’t have wanted the house with the sinking foundation, the one secretly in a flood plain, the one with cracked pipes or the one with a rotting roof. Get your own realtor, tell them you are interested in this specific property and that if it doesn’t work out that you are interested in similar. They are all relationship based and if you know someone who has recently bought a house get a referral and tell the realtor who sent you. Don’t jump just because something is cheap - that’s often a tactic for selling an uninhabitable house.
posted by Bottlecap at 11:20 PM on May 15, 2022 [1 favorite]
posted by Bottlecap at 11:20 PM on May 15, 2022 [1 favorite]
On preview (ahem not preview) I see my comment is likely unnecessary! Fingers crossed for you!
posted by Bottlecap at 11:22 PM on May 15, 2022 [1 favorite]
posted by Bottlecap at 11:22 PM on May 15, 2022 [1 favorite]
Best answer: A couple of things:
-some of the logistics and customs of the process vary state-to-state, so don’t be surprised if it’s a little different than what might come up if you google. When I bought my first place, I got a recommendation from a friend for a buyers agent who would be good at explaining and handholding me through the process.
-a buyer’s agent will know a mortgage broker who can turn around a preapproval for you quickly, if you can get them whatever documentation they request (could be pay stubs, W2 or tax records, bank statements, IRA statements, and then you’ll need to provide all of the same documentation and more to finalize the mortgage application if your offer is accepted.) In my experience you need to include proof of preapproval with your offer (not prequalification, there’s a difference); the broker will provide a letter saying that you’re approved for a certain amount - this may be customized to the amount of your offer rather than the max they’re willing to lend you, but the agent will tell you what’s expected in your market. You probably don’t need to end up using this broker, but you’ll need to do any shopping around for mortgages promptly if offer is accepted.
-ideally you want a home inspector who is recommended by friends or family, not by the realtor, because realtors like inspectors who don’t scare you away from the deal. In practice, you may not have a lot of options available - inspectors get booked up this time of year especially.
Good luck!
posted by songs about trains at 11:50 PM on May 15, 2022 [1 favorite]
-some of the logistics and customs of the process vary state-to-state, so don’t be surprised if it’s a little different than what might come up if you google. When I bought my first place, I got a recommendation from a friend for a buyers agent who would be good at explaining and handholding me through the process.
-a buyer’s agent will know a mortgage broker who can turn around a preapproval for you quickly, if you can get them whatever documentation they request (could be pay stubs, W2 or tax records, bank statements, IRA statements, and then you’ll need to provide all of the same documentation and more to finalize the mortgage application if your offer is accepted.) In my experience you need to include proof of preapproval with your offer (not prequalification, there’s a difference); the broker will provide a letter saying that you’re approved for a certain amount - this may be customized to the amount of your offer rather than the max they’re willing to lend you, but the agent will tell you what’s expected in your market. You probably don’t need to end up using this broker, but you’ll need to do any shopping around for mortgages promptly if offer is accepted.
-ideally you want a home inspector who is recommended by friends or family, not by the realtor, because realtors like inspectors who don’t scare you away from the deal. In practice, you may not have a lot of options available - inspectors get booked up this time of year especially.
Good luck!
posted by songs about trains at 11:50 PM on May 15, 2022 [1 favorite]
Best answer: Also yes, we would be borrowing from the retirement fund rather than taking money from it. I'm not even sure how you do it though... I'm guessing the mortgage broker helps with that?
Probably not. Borrowing from retirement funds is specific to each 401(k) plan so they aren't likely to be versed in your specific options and if I were involved in a large financial transaction that involved dealing with variable legal possibilities, I would decline to offer any kind of advice on it. People with anything resembling a fiduciary duty tend to be very shy about giving financial advice on anything out of their specific field. (And speaking of which, I am definitely not your financial advisor; this is educated advice but nothing more.)
To clarify, are you talking about an IRA or 401(k) (or other options like 457(b), 401(a), etc.)? Each option is going to have specific rules that has to be followed carefully.
If you're talking about an IRA, you can't borrow from them.
If you're talking about borrowing from a 401(k), the process will look something like this (but again, it will depend on your specific plan):
1. You make a request to take out the loan for an amount (usually online). You'll get information at that time what the interest rate is. Again, it will depend, but at the moment it's probably going to be around 8-9%.
2. (Hopefully) Some kind of validation occurs that you actually requested the loan (fraudulent withdrawals from retirement accounts can be very lucrative for criminals).
3. Somewhere between 1-2 business weeks, that amount is liquidated from your holdings. You generally can't specify what funds to liquidate to do so - if you have 20% bonds, 60% US stocks, 20% international stocks, it will be sold off in those same ratios. As others have noted, this may leave you underwater based on the money you paid in.
4. The funds will be sent to you as a paper check or made available as an electronic withdrawal.
4.(a) in the case of a paper check, there's likely to be an additional hold time placed on the availability of the funds when you cash it, as is standard with large dollar checks. ACH transfers (as compared to wires) will also have some kind of hold placed on the funds.
5. You spend the money on whatever (in this case, the down payment).
6. You begin to pay back the loan (plus the origination fee, if applicable - if I were to take a loan out against mine, the fee would be $100) via payroll deductions. You can't opt out of or skip the repayment. The money is reinvested in whatever your current ratio is.
7. Some plans may allow early partial payment on the loan but not all do. They will offer a lump payment to close out the loan if you come into a sudden windfall.
8. If you leave employment with the company the 401(k) is from, the clock starts ticking on paying off the entire balance by the next Oct. or you will face the early withdrawal penalty on the remaining balance plus taxes.
As noted above, a 401(k) loan won't show up on your credit report as a loan but an underwriter should consider your mandatory payments as far as what your maximum loan amount would be.
posted by Candleman at 12:18 AM on May 16, 2022 [3 favorites]
Probably not. Borrowing from retirement funds is specific to each 401(k) plan so they aren't likely to be versed in your specific options and if I were involved in a large financial transaction that involved dealing with variable legal possibilities, I would decline to offer any kind of advice on it. People with anything resembling a fiduciary duty tend to be very shy about giving financial advice on anything out of their specific field. (And speaking of which, I am definitely not your financial advisor; this is educated advice but nothing more.)
To clarify, are you talking about an IRA or 401(k) (or other options like 457(b), 401(a), etc.)? Each option is going to have specific rules that has to be followed carefully.
If you're talking about an IRA, you can't borrow from them.
If you're talking about borrowing from a 401(k), the process will look something like this (but again, it will depend on your specific plan):
1. You make a request to take out the loan for an amount (usually online). You'll get information at that time what the interest rate is. Again, it will depend, but at the moment it's probably going to be around 8-9%.
2. (Hopefully) Some kind of validation occurs that you actually requested the loan (fraudulent withdrawals from retirement accounts can be very lucrative for criminals).
3. Somewhere between 1-2 business weeks, that amount is liquidated from your holdings. You generally can't specify what funds to liquidate to do so - if you have 20% bonds, 60% US stocks, 20% international stocks, it will be sold off in those same ratios. As others have noted, this may leave you underwater based on the money you paid in.
4. The funds will be sent to you as a paper check or made available as an electronic withdrawal.
4.(a) in the case of a paper check, there's likely to be an additional hold time placed on the availability of the funds when you cash it, as is standard with large dollar checks. ACH transfers (as compared to wires) will also have some kind of hold placed on the funds.
5. You spend the money on whatever (in this case, the down payment).
6. You begin to pay back the loan (plus the origination fee, if applicable - if I were to take a loan out against mine, the fee would be $100) via payroll deductions. You can't opt out of or skip the repayment. The money is reinvested in whatever your current ratio is.
7. Some plans may allow early partial payment on the loan but not all do. They will offer a lump payment to close out the loan if you come into a sudden windfall.
8. If you leave employment with the company the 401(k) is from, the clock starts ticking on paying off the entire balance by the next Oct. or you will face the early withdrawal penalty on the remaining balance plus taxes.
As noted above, a 401(k) loan won't show up on your credit report as a loan but an underwriter should consider your mandatory payments as far as what your maximum loan amount would be.
posted by Candleman at 12:18 AM on May 16, 2022 [3 favorites]
Main things with an agent are poker face on viewings (we failed at this, but did manage to have a conversation out of earshot of the agent to check we wanted to buy it) and getting pre-approved for a mortgage. No one will take you seriously in buying a house unless they believe you're actually in a position to buy it.
In most markets, there's a set of (typically investor) buyers that are very economically rational and focused on the economics of the deal, and another set of buyers that are influenced by factors other than the strict finances. If this particular townhouse is underpriced given its flaws, then it will probably sell quickly and most likely to someone planning to flip it or rent it out. If it is priced fairly given it's flaws then it may well end up with you.
posted by plonkee at 3:05 AM on May 16, 2022 [1 favorite]
In most markets, there's a set of (typically investor) buyers that are very economically rational and focused on the economics of the deal, and another set of buyers that are influenced by factors other than the strict finances. If this particular townhouse is underpriced given its flaws, then it will probably sell quickly and most likely to someone planning to flip it or rent it out. If it is priced fairly given it's flaws then it may well end up with you.
posted by plonkee at 3:05 AM on May 16, 2022 [1 favorite]
Based on the questions your asking, you need a good real estate agent that ISNT the sellers agent (one that has 15+ years experience, not just a side gig), a good attorney, and a fee based financial advisor.
Most of the questions you are asking are specific to you, your location, your financial situation, your wants and needs, etc. People on the internet can’t tell you if a 401k loan is a good idea or not for you, but a financial advisor can.
posted by Geckwoistmeinauto at 3:21 AM on May 16, 2022 [2 favorites]
Most of the questions you are asking are specific to you, your location, your financial situation, your wants and needs, etc. People on the internet can’t tell you if a 401k loan is a good idea or not for you, but a financial advisor can.
posted by Geckwoistmeinauto at 3:21 AM on May 16, 2022 [2 favorites]
With a family background in building you probably know this already, but be sure to budget for upkeep and repairs. Being on my condo board has given me an interesting perspective on this, since where I live (and I expect elsewhere as well), condo corporations are required to have an engineer do a “reserve fund study” every so many years that is kind of like a much more detailed inspection that also maps out timing of major capital expenses over many years, including cost estimates. Some day I hope to own a home with an actual yard, but having that info and doing five year budget plans for the condo corporation has been so helpful that I would definitely want to do something similar for any stand-alone house I owned. (Exact amounts to set aside each year will vary largely based on the specific house and your location, and you may have the family background to do that budgeting yourself without needing outside advice.)
posted by eviemath at 5:13 AM on May 16, 2022 [1 favorite]
posted by eviemath at 5:13 AM on May 16, 2022 [1 favorite]
Assume every finance person you talk to is both an idiot and a liar. Distrust the seller's agents. Expect everyone to be incapable of even telling you how much the closing costs will be to within thousands of USD until minutes before signing; wire more than they tell you to do if you can. Get an agent you like and ask them to recommend a lawyer they like. (I've only done it three times. But, that's an accurate description of each one.)
posted by eotvos at 7:29 AM on May 16, 2022 [1 favorite]
posted by eotvos at 7:29 AM on May 16, 2022 [1 favorite]
If you work with a real estate agent, your agent also represents the seller unless you fine the rare buyer's representative.
Get it inspected by a fierce inspector; surprises suck.
How was the tour? Go to your bank/ credit union and start getting approved for a mortgage. If it's a good deal, speed of closing will matter.
posted by theora55 at 8:00 AM on May 16, 2022
Get it inspected by a fierce inspector; surprises suck.
How was the tour? Go to your bank/ credit union and start getting approved for a mortgage. If it's a good deal, speed of closing will matter.
posted by theora55 at 8:00 AM on May 16, 2022
1. Be as la-di-da and too-cool-for-you as you can with the seller's agent when you're shown around. They can smell desperation from a mile away.
2. Absolutely get a buyer's agent. There's no real advantage to not getting one, since the seller pays both. (Some sellers will discount you slightly if you don't have one, but it's not worth it, IMO.) You should not be interacting with the seller's agent AT ALL after the open house.
We worked with our agent for 4 years before buying, and he was nice and patient. It helped that he was extremely experienced and successful so he wasn't in any rush for his payout, and he in fact discouraged us from houses, even more expensive ones, that he felt were not a good fit. That said, he was by no means perfect. I suspect he did push us to offer more than we should have in the bidding war. Bidding wars are unavoidable where we bought, but it was annoying. I'm not sure what we could have done differently, though, since we'd have been much worse off without an agent.
3. Completely depends on where you are buying. Where I live, yes, anything worthwhile is snapped up in a week, but that's not the case in much of the country. A buyer's agent will help you set your expectations.
4. No idea.
5. We got approved for our mortgage in 2 hours. We were advised to get the approval early on so we had it ready to go when we made the offer, and there's no obligation to use the same lender or the same interest rate when you actually finance the purchase.
posted by redlines at 8:04 AM on May 16, 2022
2. Absolutely get a buyer's agent. There's no real advantage to not getting one, since the seller pays both. (Some sellers will discount you slightly if you don't have one, but it's not worth it, IMO.) You should not be interacting with the seller's agent AT ALL after the open house.
We worked with our agent for 4 years before buying, and he was nice and patient. It helped that he was extremely experienced and successful so he wasn't in any rush for his payout, and he in fact discouraged us from houses, even more expensive ones, that he felt were not a good fit. That said, he was by no means perfect. I suspect he did push us to offer more than we should have in the bidding war. Bidding wars are unavoidable where we bought, but it was annoying. I'm not sure what we could have done differently, though, since we'd have been much worse off without an agent.
3. Completely depends on where you are buying. Where I live, yes, anything worthwhile is snapped up in a week, but that's not the case in much of the country. A buyer's agent will help you set your expectations.
4. No idea.
5. We got approved for our mortgage in 2 hours. We were advised to get the approval early on so we had it ready to go when we made the offer, and there's no obligation to use the same lender or the same interest rate when you actually finance the purchase.
posted by redlines at 8:04 AM on May 16, 2022
I think there's a good chance it's priced low (for our market) for reasons I'm not worried about (i.e., it's ugly, unfashionable, and in an inconvenient location) but that other first-time buyers might get hung up on.
Sale-ability and resale value are absolutely things to consider. It's unlikely that you'll stay in this house forever, which means that at some point you will need to sell it. At that point, its merits or faults in other people's eyes matter a LOT, and they're a liability to you alone.
This is one aspect that is very different from renting. You might be ok with a dark apartment if you're a vampire like me, or an inconvenient location if you work from home, and whether other people like it doesn't matter a bit to you -- when you want to leave, it's 100% the landlord's problem. But here, it's 100% your problem, and it can be a huge barrier to whatever it is you want or need to do next. You might limit your possible buyers to 20% of the regular pool, and someone will be looking to leverage that against your desired price.
This is why I looked into school districts when we bought, despite not having children ourselves. Every town has a weird house that takes forever to sell ... you don't want to own that house.
posted by Dashy at 8:11 AM on May 16, 2022
Sale-ability and resale value are absolutely things to consider. It's unlikely that you'll stay in this house forever, which means that at some point you will need to sell it. At that point, its merits or faults in other people's eyes matter a LOT, and they're a liability to you alone.
This is one aspect that is very different from renting. You might be ok with a dark apartment if you're a vampire like me, or an inconvenient location if you work from home, and whether other people like it doesn't matter a bit to you -- when you want to leave, it's 100% the landlord's problem. But here, it's 100% your problem, and it can be a huge barrier to whatever it is you want or need to do next. You might limit your possible buyers to 20% of the regular pool, and someone will be looking to leverage that against your desired price.
This is why I looked into school districts when we bought, despite not having children ourselves. Every town has a weird house that takes forever to sell ... you don't want to own that house.
posted by Dashy at 8:11 AM on May 16, 2022
I think there's a good chance it's priced low (for our market) for reasons I'm not worried about (i.e., it's ugly, unfashionable, and in an inconvenient location) but that other first-time buyers might get hung up on.
As a buyer, i get excited any time I walk in and see orange shag carpet! Ugly is fine. Unfashionable is probably fine. These are things that you will change out over time anyway.
Difficult location is something that is not going to change. In general, the money you save buying a house in less desirable location is money that you are going to have to give to the next buyer when you sell. In my amateur experience, the different is less in a hot market and more burdensome in a slow market. In hot market, you might just get less money for it. In a slow market, you may not get any buyers and/or the price hit is proportionally much larger than it is a hot market.
If you are buying for investment, don't. If you are buying because this is your best chance to get into the housing market and expect to stay in the house for 10-20 years, then it is something to consider carefully but I would not find it an absolute deal breaker.
posted by metahawk at 10:48 AM on May 16, 2022
As a buyer, i get excited any time I walk in and see orange shag carpet! Ugly is fine. Unfashionable is probably fine. These are things that you will change out over time anyway.
Difficult location is something that is not going to change. In general, the money you save buying a house in less desirable location is money that you are going to have to give to the next buyer when you sell. In my amateur experience, the different is less in a hot market and more burdensome in a slow market. In hot market, you might just get less money for it. In a slow market, you may not get any buyers and/or the price hit is proportionally much larger than it is a hot market.
If you are buying for investment, don't. If you are buying because this is your best chance to get into the housing market and expect to stay in the house for 10-20 years, then it is something to consider carefully but I would not find it an absolute deal breaker.
posted by metahawk at 10:48 AM on May 16, 2022
1. We are going to look around the house tomorrow (Monday) morning. If we are being shown around by the seller's agent, are there things we should avoid telling them about ourselves? Do we have to impress them?Impress the seller's agent? Nope, not at all. You don't need to tell them much of anything about yourself. Impress the seller? Maybe. Depending on the local market, occasionally buyers are able to win out over higher bids or all-cash offers by building a sense of connection with the seller via sharing about their personal story or family situation.
Yes, definitely get your own (buyer's) agent. I am currently in a (non-US) market where generally only sellers have agents and it sucks. A good realtor can do a few things for you: help you navigate logistics of the bidding and buying process, provide insight into the local market, and (most importantly) help you identify potential opportunities before, or at least very soon after, they hit the public listing aggregation sites.
2. Do we need to get an agent? If so, will an agent be annoyed if we just want to look at this house and not others? Realistically it might be another 5+ years before we can afford normal prices where we live.
The right agent will not be annoyed by your price range or interest in a specific property. However, it may take some work to find the right agent. Some only specialize in the high-end market, others will make wrong assumptions about your interests and guide you to unsuitable properties, some are just lazy and/or shady... getting a recommendation from a trusted friend/family member/coworker will help here.
3. I assume a relatively decent & low-priced home in our particular neighborhood will be snapped up fast.Probably, but not necessarily! Competition from all-cash buyers will be a challenge, as will artificially low asking prices designed as fishing expeditions or fodder for bidding wars, but individual buyers taking out regular mortgages can still hold their own. You may have to make a lot of offers—one guy I know who recently bought a place in a very competitive market made bids on twenty-five places (!)—but it can be done. Having all of your mortgage pre-approvals, legal documents, etc. in order before starting will be an advantage.
4. How long would it take to figure out getting the money out of our IRA accounts for the deposit?Depends on the investment vehicle(s) but assuming publicly traded securities, generally 2-3 business days to liquidate and settle to cash and then another day or two to transfer cash to the recipient account.
5. Does it really take a long time to get a mortgage, as all the websites say? We have good credit histories, no debt other than student debt, nothing scary in our histories, etc etc.YMMV a lot but plan for this to take at least a few weeks. Beyond your credit/debt history the lender will also want to trace the origin of your deposit funds, verify your employment situation, and so on. This can take a while and sometimes they are slow and/or really picky (personal example: lender wanted documentation about why I was a resident of State A and getting paid by a company headquartered in State B).
posted by 4rtemis at 12:43 PM on May 16, 2022 [2 favorites]
Does it really take a long time to get a mortgage, as all the websites say? We have good credit histories, no debt other than student debt, nothing scary in our histories, etc etc.
It can take a couple of weeks for pre-approval. You will need to scrounge up ~2yrs of employment history, rental history, tax returns, W2s, paystubs, etc. Brokers will look at your debt-to-income ratio, so it can matter if your student loan debt is high. Some brokers will move faster than others, and that goes for closing as well. If your offer is accepted, the entire process can take over 30 days.
It really depends on your market, but generally it seems most people will have a pre-approval letter in hand before viewing homes. If you go through the pre-approval process, you will have a much better idea of how much you can actually borrow and comfortably afford, and compare that figure to where the market currently is (take into account the prices the houses are actually selling for, as opposed to the list price). In addition, it makes your offer more attractive because it shows you are serious as a buyer and have your things in order.
If I were in your shoes, I'd get an agent. They can walk you through the whole process, as well as help decide whether or not to waive inspection and loan contingencies. In my area, both are commonly waived. If you waive inspection, it's better to have a decent amount of cash on hand for an appraisal gap and/or immediate repairs that might need to be addressed.
posted by extramundane at 3:12 PM on May 16, 2022
It can take a couple of weeks for pre-approval. You will need to scrounge up ~2yrs of employment history, rental history, tax returns, W2s, paystubs, etc. Brokers will look at your debt-to-income ratio, so it can matter if your student loan debt is high. Some brokers will move faster than others, and that goes for closing as well. If your offer is accepted, the entire process can take over 30 days.
It really depends on your market, but generally it seems most people will have a pre-approval letter in hand before viewing homes. If you go through the pre-approval process, you will have a much better idea of how much you can actually borrow and comfortably afford, and compare that figure to where the market currently is (take into account the prices the houses are actually selling for, as opposed to the list price). In addition, it makes your offer more attractive because it shows you are serious as a buyer and have your things in order.
If I were in your shoes, I'd get an agent. They can walk you through the whole process, as well as help decide whether or not to waive inspection and loan contingencies. In my area, both are commonly waived. If you waive inspection, it's better to have a decent amount of cash on hand for an appraisal gap and/or immediate repairs that might need to be addressed.
posted by extramundane at 3:12 PM on May 16, 2022
One other thing that others haven't mentioned yet. As you're getting all your bank/credit/pay documentation together to get prequalified, keep in mind that if your particular purchase process crosses the end of a month (which if you're starting today, it will), you may have to provide pay/bank statement or other monthly financial documentation for the new month to your mortgage broker/provider once it's available, even after you submitted the original set at the start of your process.
Not a major deal, just something to keep in mind when you're going through the process and think "wow, I finally got them everything they need!"
posted by pdb at 4:09 PM on May 16, 2022
Not a major deal, just something to keep in mind when you're going through the process and think "wow, I finally got them everything they need!"
posted by pdb at 4:09 PM on May 16, 2022
Best answer: Get a buyer's agent. When I first bought a house a few years back I had no idea what I was doing and she was super helpful and answered all of my dumb questions and kept me sane. She knew which seller's agents were shady and she knew the market intimately and helped me find a few places to consider. She also referred me to the best mortgage broker ever, she recommended home inspectors, she recommended a fantastic lawyer... honestly a good buyer's agent with more than 2+ years FT experience is valuable not just for their real estate knowledge but because of their network, which made the HALP I DON'T KNOW WHAT IM DOING panic considerably less and eased my anxiety completely.
(She is now also a really good friend of mine.)
posted by nayantara at 6:18 PM on May 16, 2022 [2 favorites]
(She is now also a really good friend of mine.)
posted by nayantara at 6:18 PM on May 16, 2022 [2 favorites]
I've bought two houses so far and here's what I can recommend:
Hot market? Shit sucks: either the low-end/fixers are getting all cash offers or the high-end/flips are crappy build and overpriced. But what I had luck with is the middle: dead grandma houses that were upkept. They're move-in ready, but dated, and if you're lucky remodeled but in the tastes of an old woman. This is the sweet spot that makes them too nice/expensive for all-cash offers and makes them too tacky/dated for the high-end. Both of my houses had some of the worst photography too, terrible curtains, and just generally were clean, but just ugly and whatever the opposite of 'staged' is.
Your offer got accepted? Congrats, Escrow will give you a surprise a minute. Don't be afraid to walk away. It took us 3 Escrows before we got our first house. Several had major sewer issues.
Cannot emphasize enough to get a sewer inspection. It's a huge potential money pit.
Cannot emphasize enough to get a distinct termite inspection. I'm in SoCal so unless a house was kept up with there's a good chance the frame is now swiss cheese.
posted by wcfields at 2:29 PM on May 20, 2022
Hot market? Shit sucks: either the low-end/fixers are getting all cash offers or the high-end/flips are crappy build and overpriced. But what I had luck with is the middle: dead grandma houses that were upkept. They're move-in ready, but dated, and if you're lucky remodeled but in the tastes of an old woman. This is the sweet spot that makes them too nice/expensive for all-cash offers and makes them too tacky/dated for the high-end. Both of my houses had some of the worst photography too, terrible curtains, and just generally were clean, but just ugly and whatever the opposite of 'staged' is.
Your offer got accepted? Congrats, Escrow will give you a surprise a minute. Don't be afraid to walk away. It took us 3 Escrows before we got our first house. Several had major sewer issues.
Cannot emphasize enough to get a sewer inspection. It's a huge potential money pit.
Cannot emphasize enough to get a distinct termite inspection. I'm in SoCal so unless a house was kept up with there's a good chance the frame is now swiss cheese.
posted by wcfields at 2:29 PM on May 20, 2022
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Use a mortgage broker, not a bank.
It does not actually take that long to get a mortgage if you've got good history, depends.
Figure out who the reputable home inspectors in your area are, and do not rely on the seller's inspection. The seller's inspector is in a contractual relationship with the seller, not you.
Manage your expectations as hard as you can; if there's a bidding war on the place, don't get sucked into that.
posted by mhoye at 7:09 PM on May 15, 2022 [7 favorites]