Tell me everything about buying a house May 10, 2004 12:43 PM Subscribe
I want to buy a house. I have no idea where to start. posted by pieoverdone to home & garden (19 comments total)
where are you? in the uk you need to talk to someone about a mortgage so you know how much you can spend. then you go to estate agents and get lists of houses, pick one, and get a lawyer to buy it for you. in chile it's similar, but we paid with cash (a fraction of a terrace house in leicester buys fancy flat in downtown santiago), so i don't know about mortgages. posted by andrew cooke at 12:49 PM on May 10, 2004
1. Figure out what you can afford. Talk to your bank/credit union about pre-approval for a loan. If it's your first, there are literally dozens of 1st time home buyer discounts and special loan options you can use.
2. Drive around your town, looking for styles of houses you like. Take pictures of them.
3. While looking at housing styles, check out neighborhoods. Think about transit times, local shopping, etc. Then check with your local police department about crime rates and your insurance company about their thoughts of a neighborhood you like.
4. Talk to a friends/co-workers/family about a realtor. Usually someone knows or has worked with one they like. Talk to them about what you can afford, show them pictures of houses you like, and what neighborhoods you want to live nearby. They should be able to put together a good list of what's available. But be sure to drive around the neighborhoods that you like looking for For Sale By Owner signs too.
In short, just get in the car and drive around on a weekend. Stop at a few open houses and see what strikes your fancy. It'll give you a good sense of what you want and don't want.
Owning a home for the first time is a wonderful feeling. Good luck. posted by karmaville at 12:56 PM on May 10, 2004
Here's a little more. I'm in the US. I'm 28. I've always been renting and instead of going through another round of apt hunting and landlords and leases, I'd really rather get a place of my own.
I want to stay in my immediate neighborhood. I have perfect credit, but I'm unfortunately a contract employee. I'm looking at a few properties between 125-150k and I'd like to know what I have to put down and the hoops I need to go through. Holding off for a couple years to put some bank away for it is completely doable. posted by pieoverdone at 1:01 PM on May 10, 2004
My partner and I are in roughly the same position. We plan to talk to a financial advisor who will help us to determine whether/when it's smart to buy, taking into account: interest rate trends, the 'hotness' of the real estate market, the amount of downpayment it takes to get various mortgage rates, etc.
Why a financial advisor? Because banks want to draw you into a mortgage, and real estate agents want your commission. You can't trust either for clear, well-rounded advice. posted by stonerose at 1:09 PM on May 10, 2004
Cool. I have a financial advisor already. posted by pieoverdone at 1:14 PM on May 10, 2004
The first step is to get your finances in order. Find out how much, if any, you have available for a down payment. Get all your bank statements, pay stubs, any other debt payment documentation handy. Make sure to pay off any and all claims against you, such as old parking tickets or especially anything that has gone to a collection agent. Then call 2 or 3 or even 4 mortgage brokers (I use Washington Mutual Bank) and have an idea of what price range you are looking at ergo how much money you want to borrow.
When I first started looking I was under the mistaken assumption that lenders were doing me a favor by talking to me. Not so. Lenders are in business to loan money, so you should make them compete against one another for your business. The house buying process begins with an honest evaluation of what you can afford. posted by vito90 at 1:16 PM on May 10, 2004
Talk to an exclusive buyers agent. You typically pay them yourself and they do not take any commission from the seller.
Your best source of realtors, advisors, lenders, etc is going to be people you know who are buying or have bought in the same market.
Realtor.com is an excellent website for house hunting.
A good rule of thumb is that you are going to need something like like 7 or 8% of the purchase price of the house on the day you sign. It can be higher in some cases. In many many cases it can be much lower by getting more money rolled into the loan (that is, if the house is 150K you can often get a house for almost nothing down by paying $160K for it)
Talk to lenders first and foremost. Find out how much you can get approved for. Make them print you out a sheet of for instances, like, let's say I bought a house for $150 at 6% interest, what would that cost me? They'll print out a sheet for you that has all the costs itemized. It's extremely confusing and they go out of their way to make it even more so. posted by RustyBrooks at 1:16 PM on May 10, 2004
pieoverdone - we are also looking into buying our first home soon. I would strongly recommend calling a mortgage broker to get the figures for you for buying now with less money down vs. buying later with a bigger down payment. The broker will be able to advise you re how much $ you're likely to be approved to borrow, s/he can run a tri-agency credit report for you for free, and s/he can tell you how to best deal with your contract employee status.
I work at an international investment bank and the general consensus is that interest rates are going up, and soon. The educated guess is a tenth of a percent once or twice this summer, and then a larger increase after the election. We are getting married this summer (so our savings are mostly going to that) and were originally thinking of waiting till February (when I get a bonus) to get a home. However, in our situation, the difference between putting 0% down now (just paying closing) vs. 10% in February assuming a quarter point increase worked out to $8/mo. So I'd strongly recommend that you call a good insurance broker and get the numbers so you can compare and find out if it makes sense to you to wait.
Disclaimer: IANA economist and nobody other than Greenspan really knows when and by how much the rates will rise, so please take with grain of salt. posted by widdershins at 1:26 PM on May 10, 2004
I've been a contract worker since, well, a long time now, and that is actually not an obstacle to home ownership. Your lender will probably want to see your last two years of tax returns though, as a way to confirm your income.
The more money you can put up up-front, the better, but I believe you can get FHA loans with 5% down (last time I checked, anyhow).
There are a lot of hoops to jump through when buying a house, and in my case, I was glad to have a realtor for the hand-holding. If you can manage without, bully for you.
Decide on your tolerance and budget for repairs. I bought a house that was in excellent condition and still needed thousands of dollars of work in order for my insurer to cover it. If you buy a fixer-upper, know that you are going to be living in chaos for months or years.
As others have said, your first step is figuring out how much you'll be able to pay for a house. Your second is to look at a lot of houses. Look at houses you think are wrong for you--I wound up buying one that looked ugly from the outside but is really nice on the inside. posted by adamrice at 1:34 PM on May 10, 2004
All you really need is a down payment so you can get a loan. These used to be 20%, but now I've heard of downs as low as 5%. Obviously, the more you put down, the smaller your monthly payment will be.
When you should do it depends on where you are. But, it's my experience that the sooner you do it, the happier you'll be - no more rent, but all your money will be going toward *your* property.
If you're looking for a 100K house, and you have $10K for a down, then you'll be looking for a 90K loan. Loans can be either adjustable or fixed rate, and they can typically be for 15 or 30 years. Let's say you get a 15 year fixed rate loan at 6%, you would pay $759.47 (courtesy of this site). And remember, that about 450 or so of that will be interest, which is tax deductable! So you get money back on your income tax.
Now, you will have other expenses, like insurance and property tax, utilities, etc, in addition to being responsible for repairs. It's important to figure those in as well when you're trying to ascertain what you can manage. But remember, if housing prices stay stable or go up (which they have relentlessly where I live), you're likely to get back what you put in, or more when you sell the place. posted by jasper411 at 1:44 PM on May 10, 2004
A friend told me that she read one of those "self help" finance books (Suze whats-her-name?), who had an interesting strategy for figuring out how much you can pay:
Ballpark what you think you'd pay in a mortgage per month. Set aside that much each month, for six months, on top of what you currently pay for housing. Your current rent (I'm assuming) is not included because it's factored in as extra ongoing expenses you're going to have to deal with as a homeowner (taxes, repairs, and anything else).
So, you're left with a good idea of (a) if you can pay that much, (b) what you'll have to do to make that work, and (c) the beginnings of a downpayment.
I have no empirical evidence to back this up, but it sounds like a great idea to me. posted by mkultra at 1:49 PM on May 10, 2004
(reposted from the other double post, in case it gets deleted...)
A friend told me that she read one of those "self help" finance books (Suze whats-her-name?), who had an interesting strategy for figuring out how much you can pay:
Ballpark what you think you'd pay in a mortgage per month. Set aside that much each month, for six months, on top of what you currently pay for housing. Your current rent (I'm assuming) is not included because it's factored in as extra ongoing expenses you're going to have to deal with as a homeowner (taxes, repairs, and anything else).
So, you're left with a good idea of (a) if you can pay that much, (b) what you'll have to do to make that work, and (c) the beginnings of a downpayment.
I have no empirical evidence to back this up, but it sounds like a great idea to me. posted by mkultra at 1:50 PM on May 10, 2004
mkultra--
As a counter-example, there's no way I could rent this house for the amount I pay in PITI (principle, interest, taxes, insurance). I would guesstimate that your monthly nut on a house will be at least 25% less than it would cost to rent the same house (and the quality of rent-housing is usually lower, anyhow). At least, that's the case where I live (Austin).
Admittedly, that leaves out repairs, which are rare, somewhat unpredictable, and usually really expensive. posted by adamrice at 2:40 PM on May 10, 2004
I just bought a house using an 80/10/10 loan. In fact, I asked about it here on ask.mefi!
What we did was a whole lot of research online, a whole lot of saving money, and a whole lot of settling on a fixer-upper so we could get into a very nice neighborhood. We're tickled pink with the results. posted by jragon at 3:15 PM on May 10, 2004
In short, just get in the car and drive around on a weekend. Stop at a few open houses and see what strikes your fancy. It'll give you a good sense of what you want and don't want.
Good advice, but multiply that by 30-50 weekends, starting your net very wide until you decide on a general, then more specific area and narrow your search as you go. When we built our first home a couple of years ago, we spent over 12 months driving around at least one day every weekend looking at all the options until we were comfortable with our decision.
Also, talk to a mortgage broker rather than a single or multiple lenders directly. Again, based on personal experience, the mortgage broker was invaluable in that he was able to look at not only our finances but also the amount and type of documentation we had (some of our income is, well, loosely documented) and made a recommendation of three different lenders that would suit us, outlined the pros and cons of each one and generally made us comfortable with our choice of lender.
In short, research is the key and there is really no alternative to getting out there yourself. You can find out a lot on-line, but it is not enough. posted by dg at 3:38 PM on May 10, 2004
1. Second the mortgage broker. Be sure to check whether or not you qualify for any special first-time buyer mortgages (these often require you to make under X$ per year).
2. I bought a semi-fixer. In the past two years, I've had to redo the upstairs bedroom from scratch (as in tear down to the studs, rewire, the works), update the kitchen, replace a ceiling, and replace the hot water heater. Right now, I'm replacing the roof, the soffits, and all the gutters (literally right now: there's hammering going on overhead as I type). The entire interior had to be repainted. There's still a bathroom and a lot of hardwood floors to go.
This was just a semi-fixer, remember. Ask yourself how much work you really, really want to do on your house, and remember, in effect, to tack on another $20,000-$30,000 to the purchase price. If you're genuinely handy, that's a different matter.
If the house is OK overall but needs work in isolated areas, either ask for repairs to be done as part of the contract or request that the seller give back some $ to cover expenses.
3. Don't get into bidding wars.
4. How good are the local schools? Even if you don't have kids, living in a well-regarded school district will up the value of your house.
5. Buy a house as though you were expecting to sell it (even if you aren't). Location, location, location. I've seen gorgeous houses in my area sit on the market for years because the location was just awful--e.g., sitting on an interstate highway... posted by thomas j wise at 4:21 PM on May 10, 2004
If you're totally green on the subject, you might want to attend one of the local bank's "homebuying seminars." Most banks give these fairly regularly, once a month or so. Of course they're trying to get you to get a mortgage with them, but the events are usually in the evening after work, have coffee and snacks, very low to no pressure group environments and they give a lot of information about what buying a house is all about [like what you've gotten here, but with fancy graphs etc]. Even if you're not even sure that homebuying is for you, this is a good way to get used to the idea of mortgages, learn all the terminology and get to know a friendly face at a local bank. posted by jessamyn at 5:08 PM on May 10, 2004
You don't have to pay for a buyer's agent. Here in North Carolina, if you want to buy a house, simply find a good agent, interview him or her, and sign a buyer's agency agreement. They will help you find financing, talk you thru the process, etc etc. They get their money as a percentage of the sale, just like the seller's agent. What happens is that the buyers agent and the sellers agent will split the commission. Meanwhile, the buyers agent is legally required under penalty of law to represent your interests and your interests alone. The seller's agent is required to represent his or her client alone. There are things that sellers agents are not required to disclose to buyers, and vice versa. posted by konolia at 8:26 PM on May 10, 2004
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posted by andrew cooke at 12:49 PM on May 10, 2004