Big goals, lots of time...
October 9, 2010 6:11 PM   Subscribe

Want to buy our first house... 1-2 years in the future. What do I do now?

(Anon due to financials.)

I've reached the point in my life where I have a stable job, stable relationship, and make enough money that we don't feel any real financial pressure. After talking it over, we're planning a move to NYC, where we used to live (we're out in the sticks now). We have the ambitious goal of buying a rowhouse in an OK neighborhood when we get there. A place where we could stay indefinitely, not an investment property. I would be keeping the same job with the same company.

The timetable is pretty long -- probably Summer 2012. The houses we're looking at are probably modest one-family houses in SW Brooklyn, priced around $575-600K now.

I've started socking away money to the tune of maybe $2700 a month, so as to have $120K (or more) saved by then. I have about $60K thus far. I make about $115K/year. I have no debt and about $10K in revolving credit (no balances) -- my FICO was 810 not too long ago. I spend very little money.

My SO makes a lot less (closer to $20K) and has bad credit and no savings. I get the feeling I'd be the only one on the mortgage, which is fine with both of us. (We're in our mid-20s.)

The question: Other than saving money, how should I prepare for this process? Is there any brilliant thing I need to do to keep my credit positive, or to make myself look better to lenders? How long does one wait to get preapproved for a loan?

(Advice on dealing with the anticipation and anxiety of long-range real estate planning is also welcome.)
posted by anonymous to Work & Money (16 answers total) 18 users marked this as a favorite
Preapprovals expire, usually in the 60-90 day range, but you could certainly start gathering recommendations for mortgage brokers and buyers' agents and researching the market where you want to buy. There's a LOT you can learn just by window shopping for houses right now - you'll get a feel for pricing and features and maybe you want to spend some time doing drive-bys on properties to gain some instincts about what you want/need/hate.

Maybe therapy for the anxiety? Your credit is lovely, mortgages are not a judgment of your character, having a purchase offer rejected is not the worst thing that ever happened to anybody. You're in really good shape financially - just don't do anything nuts like take up high-stakes gambling or embezzlement and you should be totally okay in a year or two.

If you really really really want to purchase with your partner and this is definitely a long-term relationship, you could help your SO with their debt so that they could participate in the purchase. There's no financial adviser on the planet who would agree with me on this - it's very much a relationship thing, not a financial thing.
posted by Lyn Never at 6:23 PM on October 9, 2010


Find a knowledgeable and trustworthy broker and home inspector team who really know what they're doing. (This is more challenging than you might think!)

Try to make friends with some people who know about plumbing, roofing, and electrical stuff. Undoubtedly you will need to get a clue about these things after you buy your home. Not necessarily that you want to do it yourself--but so you don't get rooked seven ways to Sunday.

It's a never ending challenge of fixing, replacing or recycling stuff.
posted by AuntieRuth at 6:25 PM on October 9, 2010

I'm no expert but we're looking to buy in the next few years, so I'm keeping tabs on the market we're looking to move to now, so that I'm familiar with the price per sq ft and issues in the market when we're ready to look (i.e. cut down the learning curve). You may also want to get in touch with a real estate broker in the area (I know a good one for that area of BK memail me if you want info) and ask who to discuss your financials with.

Keep in mind you need a lot more than just the down payment, such as broker fees (if you go that route) moving fees, closing fees, taxes etc. Depending on your current situation, you may also need to keep in mind that you'll be responsible for heat, water, taxes on a stand alone property.

You don't mention it, so I assume this is moot, but if you plan to have children around, you may also want to look at schools and childcare.

Sounds like you're in a good spot so far though, good luck.
posted by cestmoi15 at 6:27 PM on October 9, 2010

Ask a lawyer in your area about homestead law if you intend to buy a house as a joint property with only one of you on the mortgage, especially if you plan to get married eventually. Will you title the property in both your names? That can effect your mortgage eligibility.

Asking a lawyer about it will also explain what your SO's rights to the house will be if you die unexpectedly. You'll also know what you need to do if/when you get married to secure everyone rights to the property.

Some real estate agents may be able to answer those questions. Some will not. I'd call a real estate attorney and ask for a consultation for some issues you have related to buying property as an unmarried couple. It shouldn't cost much, but do expect to be charged for the time, since you're requesting legal advice, rather than consulting with an attorney prior to engagement or initiation of a law suit.
posted by crush-onastick at 6:37 PM on October 9, 2010

Start looking around and figuring out what neighborhoods you want to live in. Get to know the markets in those neighborhoods (zillow is good to look at housing prices).

As far as credit/money/financing side, it sounds like you are doing all the right things. It's hard to tell what the market is going to do right now, but I don't actually see interest rates going down much more (there's really nowhere for them to go). You may be looking at higher interest rates in 2 years (in fact, I'd bet on it).
posted by TheBones at 6:45 PM on October 9, 2010

You seem pretty well covered financially.

Unless your SO's financial situation gets better, keep them off the mortgage. You'll run into trouble with a loan that large due to the debt/income ratio. It's beneficial for them as well. If you two split, you both aren't stuck with the mortgage. And if you were gone for whatever reason, you aren't saddling them with insurmountable debt.

I could have done our mortgage myself, but my girlfriend is on it as well (it was important to her) and we both regret it. She makes a lot less than I do, so on paper she hardly makes anything considering her half of the mortgage. Getting a car loan for her was pretty tough.

And if you really do plan on living here a long time, think long term. Going to have pets? Kids? How close is work? Going to have a car? How many cars? Why is there no good wall for my 100" TV? Stuff like that. Just make sure you have room to grow, and figure out what "grow" means before you buy something.
posted by robotnixon at 6:51 PM on October 9, 2010 [1 favorite]

Have you lived in the neighborhood(s) that you're thinking about moving to, or do you have friends who have? If not, you might want to consider renting (just for a little bit!) to gain confidence that you're really buying where you want to buy. I know, I know, two moves! That would suck! But it would also suck to buy a house that you want to live in for a long time and then find out that you hate the neighborhood. This is me coming from a commitment-phobic, non-property-owning, hella-picky-about-neighborhoods perspective. Of course it also gets you out of the difficulty of buying property long-distance.
posted by mskyle at 7:19 PM on October 9, 2010 [1 favorite]

Learn the neighborhood's history? You could buy a house with some history and avoid buying a house built on [the former dump].

Learn about house rehab and construction.
posted by slidell at 8:07 PM on October 9, 2010

Oh, also start reading city plans and the transcripts of city council meetings. Figure out what the city's plans are for that neighborhood over the next 20 years or so.

Also, read up on the climate change / sea level predictions if applicable.
posted by slidell at 8:08 PM on October 9, 2010

As you have two years, polish up your credit, and your SO's, as much as you possibly can. Get your credit reports and go over them with a fine comb. Fix everything. It's crucial to getting the best rate for your mortgage.

slidell said read up on the climate change / sea level predictions if applicable.

You might also find it worthwhile to borrow from the library Kunstler's book The Long Emergency which reviews the longer range planning, including where NOT to buy property.
posted by anadem at 9:47 PM on October 9, 2010

Learn basic plumbing, electrical repair, carpentry for the u=inevitable upkeep. Check out neighborhoods. Subscribe to the local neighborhood newspaper or visit their website regularly. Be ready to move quickly if a great deal becomes available.
posted by theora55 at 9:54 PM on October 9, 2010

What do you mean by your SO has bad credit? - If they still have a balance due on one or more cards, they can consolidate with a reputable credit advice agency and develop a payment plan to pay everything down. This can really help their credit score.q
posted by carter at 7:49 AM on October 10, 2010

My husband and I considered buying recently, and learned a lot going through the process. I definitely agree with the advice to research now: sign up for a daily housing listing (I get one through a real estate agent and also signed up for on-line). This will let you see what's on the market, how long houses are sitting, what the going price is for a given neighborhood. You can also look on Zillow to see how much houses are actually selling for. Also check into the different taxes and closing costs; these will vary by city/county.

As to the mortgage, because I wasn't working at the time, we were going to use just my husband on the mortgage. To do so, our broker said we definitely needed 20% down, and also that his credit alone might not be expansive enough because he only ever used one credit card. He said they wanted to see activity on three different lines of credit. This ended up not being an issue but I would check with a bank or broker now to see what their requirements are for a single person on the mortgage.
posted by JenMarie at 10:38 AM on October 10, 2010

There's a lot of great financial advice above, so I'll mention something else: before my husband and I bought our condo, I wish that we had had the time to clean out and get rid of things that we actually didn't need to move - old clothes, books, etc. Unfortunately we didn't have time to pare our belongings down before the move and took a lot of unnecessary things with us.
posted by macska at 4:52 PM on October 10, 2010

You may want to reconsider the houses you're looking at, given your (and your SO's) financials. A $600K house on $115K (or even $135K, including your SO) salary is an enormous DTI, and the payment on the mortgage (assuming you make your full $120K down payment and are shouldering the remaining $455-480K as a 30-year mortgage) is going to be north of $2500 a month. And that's if you can find a bank who will approve you for such a high ratio. That can a tricky proposition these days--my wife and I make a little more together than you and your SO do, and are carrying a loan for just over two thirds that amount, and we had some trouble finding financing despite spotless credit and a totally reasonable down payment. And our monthly payment is a ton of money. You'd be going from a large monthly surplus to running slightly in the red, if I'm reading this properly, and that would be after zeroing your savings account. The old adage of "3x your yearly income" is sound advice.
posted by Mayor West at 5:46 AM on October 11, 2010

Do everything you can NOW to clear up the SO's credit. It could turn out to be a huge pain in the ass in the long run if you don't.
posted by drstein at 1:43 PM on October 13, 2010

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