House Buying - ELI5
August 13, 2023 1:48 PM Subscribe
Due to my asshole brother I now need to sell out childhood home. I'll move in with my other brother temporarily. I want to buy a house with the proceeds of the sale. How does that work?
The house will be listed in the next 45 (per our agreement approved by the magistrate in charge of the suit again good brother and me). I've taken a look at some houses online. I know I need to get preapproved for a mortgage and I'll start looking next week.
But I'm so overwhelmed right now. I'm a first time homebuyer and I don't know what I don't know.
The house will be listed in the next 45 (per our agreement approved by the magistrate in charge of the suit again good brother and me). I've taken a look at some houses online. I know I need to get preapproved for a mortgage and I'll start looking next week.
But I'm so overwhelmed right now. I'm a first time homebuyer and I don't know what I don't know.
You sell your house.
You get the proceeds.
You buy a new house.
Obviously probate and legal stuff will slow everything down. And someone has to want to buy.
Start looking. Talk to whomever will be loaning you money. Get some parameters figured out.
posted by Windopaene at 1:54 PM on August 13, 2023
You get the proceeds.
You buy a new house.
Obviously probate and legal stuff will slow everything down. And someone has to want to buy.
Start looking. Talk to whomever will be loaning you money. Get some parameters figured out.
posted by Windopaene at 1:54 PM on August 13, 2023
Yes, losing your home is overwhelming. I’d maybe suggest you rent for 6 months or a year, rather than getting into a long term, illiquid investment that is a mortgage.
posted by at at 2:03 PM on August 13, 2023 [14 favorites]
posted by at at 2:03 PM on August 13, 2023 [14 favorites]
Under the circumstances, you should probably wait until the family is sold (or at the very least under contract) before you consider making an offer on a new house for yourself. I've made an offer on a new home before selling the existing home and was able to get both the purchase and sale to close on the same day but (a) that only works in hot markets and (b) probably more nerve-wracking than you want to be involved with, especially since there is a chance that the sale of the family home can fall through at the last minute. Do not recommend for you!
There are things you can do in the meanwhile but if you can rent for a six months or a year, it will allow to the breathing room to make a good decision without feeling rushed or overwhelmed.
When you are ready, the first step is to get a sense of how much you can afford. There are on-line resources or you can talk to a mortgage broker. Remember there is a difference between how much you qualify for and what you feel like you can afford. Add in what you expect to contribute from the proceeds of the sale (you might want to hold out some money for home improvements or a personal safety net)
The next step is get a sense of what that money would buy. (Answer - not as much you might hope) You can look around on-line to see what is available in different neighborhoods but before you get serious you need to see at least a dozen homes in person. You need to see what is available before you can really know if you have found a good buy. Warning: be very clear about your budget - it can be tempting to let it slide up as you see that more money buys a nicer house.
I recommend using a real estate agent if you can find one that you trust. (Lots of advice about this on AskMeFi already) The agent makes it easy to see houses without waiting for an open house. They can also hold your hand through the process and let you know what to expect at each step.
Good luck - this is stressful but hopefully you will end up in a good long-term home for yourself.
posted by metahawk at 2:39 PM on August 13, 2023 [8 favorites]
There are things you can do in the meanwhile but if you can rent for a six months or a year, it will allow to the breathing room to make a good decision without feeling rushed or overwhelmed.
When you are ready, the first step is to get a sense of how much you can afford. There are on-line resources or you can talk to a mortgage broker. Remember there is a difference between how much you qualify for and what you feel like you can afford. Add in what you expect to contribute from the proceeds of the sale (you might want to hold out some money for home improvements or a personal safety net)
The next step is get a sense of what that money would buy. (Answer - not as much you might hope) You can look around on-line to see what is available in different neighborhoods but before you get serious you need to see at least a dozen homes in person. You need to see what is available before you can really know if you have found a good buy. Warning: be very clear about your budget - it can be tempting to let it slide up as you see that more money buys a nicer house.
I recommend using a real estate agent if you can find one that you trust. (Lots of advice about this on AskMeFi already) The agent makes it easy to see houses without waiting for an open house. They can also hold your hand through the process and let you know what to expect at each step.
Good luck - this is stressful but hopefully you will end up in a good long-term home for yourself.
posted by metahawk at 2:39 PM on August 13, 2023 [8 favorites]
When I was looking to buy my first home, I first bought a book called "Buying and Selling Homes for Dummies" Having it in book form was more reassuring and more comprehensive than looking at a zillion lists on the internet. There are other similar guides, so I don't think that one is particularly better, I just think having a book was really nice.
posted by jacquilynne at 2:53 PM on August 13, 2023 [8 favorites]
posted by jacquilynne at 2:53 PM on August 13, 2023 [8 favorites]
You want the proceeds from this house sale before you put an offer on a new house. What does that mean? You'll get X dollars from the sale of this house. Some portion of the money from the sale proceeds will be your down payment. You can sometimes get a mortgage with as little as a 3% down payment, but not in a tight market where buyers are competing against each other. It would be better if you have 20% of the house price to offer as a down payment; this is what's typically expected (and it also frees you from something called private mortgage insurance that a mortgage lender will add to your monthly payment when your down payment is less than 20%). Unless you have other funds to draw from other than the expected house sale proceeds, you are unlikely in most circumstances to get approved for a mortgage. Therefore, don't start looking for a house until you have that money in hand.
Why not? Because, depending on where you live (I assume US because you didn't say otherwise), you may live in a seller's market. What does that mean? That you'd need to be prepared to potentially make an offer on a house the day you see it for the first time. Why? Because if your local market is as competitive as it is where I live, someone else will make an offer and get it before you.
Do you have a realtor? If not, get recommendations from your friends and other trusted folks. A good realtor will help you understand this, and will counsel you on timing based on the current house sale.
posted by ImproviseOrDie at 3:15 PM on August 13, 2023
Why not? Because, depending on where you live (I assume US because you didn't say otherwise), you may live in a seller's market. What does that mean? That you'd need to be prepared to potentially make an offer on a house the day you see it for the first time. Why? Because if your local market is as competitive as it is where I live, someone else will make an offer and get it before you.
Do you have a realtor? If not, get recommendations from your friends and other trusted folks. A good realtor will help you understand this, and will counsel you on timing based on the current house sale.
posted by ImproviseOrDie at 3:15 PM on August 13, 2023
Be aware that in the USA there is a nice tax advantage to reinvesting the proceeds of the sale into another home if you do it right. I don't know if you lived in the house or inherited it or what but it's probably worth a consult with a tax expert to make sure you're getting all the benefit you can from this.
posted by fingersandtoes at 3:34 PM on August 13, 2023 [1 favorite]
posted by fingersandtoes at 3:34 PM on August 13, 2023 [1 favorite]
Be aware that in the USA there is a nice tax advantage to reinvesting the proceeds of the sale into another home if you do it right.
This is probably both irrelevant and false. It's likely irrelevant because there should be minimal capital gains on the sale of the house - it'll get a step up in cost basis at the time of inheritance, if this is indeed an inheritance. If there are capital gains, Section 121 exclusions allow you to exclude the first $250K-$500K of capital gains in some situations, but none of those situations are dependent on reinvesting the proceeds into another house. Section 1031 exchanges allows avoiding incurring capital gains, but only applies to rental/business properties.
posted by saeculorum at 4:47 PM on August 13, 2023 [2 favorites]
This is probably both irrelevant and false. It's likely irrelevant because there should be minimal capital gains on the sale of the house - it'll get a step up in cost basis at the time of inheritance, if this is indeed an inheritance. If there are capital gains, Section 121 exclusions allow you to exclude the first $250K-$500K of capital gains in some situations, but none of those situations are dependent on reinvesting the proceeds into another house. Section 1031 exchanges allows avoiding incurring capital gains, but only applies to rental/business properties.
posted by saeculorum at 4:47 PM on August 13, 2023 [2 favorites]
Take a first-time homebuyer course offered by a local nonprofit. In my city (San Diego), several credit unions, the Urban League, the Housing Commission, local colleges, and other organizations offer homebuyer education. At the US Dept. of Housing and Urban Development (HUD), the list of San Diego County area non-profit agencies with homebuyer ed classes looks like this. (If you think you'd qualify for HUD, you'd want to make sure the course is HUD-approved.) If you're in the US, find your state/county/city resources here.
If you're a first-time homebuyer, there are usually grants and lower-interest mortgages open to you. Don't tie up all of your proceeds from this sale in your new home, if you can avoid it.
posted by Iris Gambol at 7:03 PM on August 13, 2023 [4 favorites]
If you're a first-time homebuyer, there are usually grants and lower-interest mortgages open to you. Don't tie up all of your proceeds from this sale in your new home, if you can avoid it.
posted by Iris Gambol at 7:03 PM on August 13, 2023 [4 favorites]
Just because the house will be listed in the next 45 days does not necessarily mean it will sell very soon after that. Sometimes offers fall through because the buyer doesn't get approved for a mortgage or bails and then you have to find another buyer and start the vetting process over.
Also during the listing period you may be asked to do repairs or you could specify you are selling as is.
Keep track of all your expenses. If you buy a single thing for the house from now on you should keep the receipt and get reimbursed from the sale. Hopefully all that is in your agreement. If not don't spend any money on the house.
Get your free credit reports and see if there are any dings on there that you can get cleaned up before you start applying for mortgages.
Figure out how much you can spend on housing a month. If you were renting how much could you pay? You want any monthly mortgage you get to be lower than that rental amount because you will have property taxes, home maintenance and repair, and insurance to budget for in addition to your mortgage.
Spend the next few weekends going to open houses. Ask the selling broker what the property taxes are as well as any hoa fees. Some brokers cant be bothered to tell you so might have to ask the owners or look things up online.
Useful things to ask owners ( if they're there) is how much their electric, water, and garbage pickup costs are and what internet provider they have. I know I've lived in places where one neighborhood was serviced by a cheap electricity provider but the next door neighborhood wasn't. Some cheaper houses may have shockingly high water and garbage fees or high property taxes whereas one town over that's all much less.
posted by jello at 7:12 PM on August 13, 2023 [2 favorites]
Also during the listing period you may be asked to do repairs or you could specify you are selling as is.
Keep track of all your expenses. If you buy a single thing for the house from now on you should keep the receipt and get reimbursed from the sale. Hopefully all that is in your agreement. If not don't spend any money on the house.
Get your free credit reports and see if there are any dings on there that you can get cleaned up before you start applying for mortgages.
Figure out how much you can spend on housing a month. If you were renting how much could you pay? You want any monthly mortgage you get to be lower than that rental amount because you will have property taxes, home maintenance and repair, and insurance to budget for in addition to your mortgage.
Spend the next few weekends going to open houses. Ask the selling broker what the property taxes are as well as any hoa fees. Some brokers cant be bothered to tell you so might have to ask the owners or look things up online.
Useful things to ask owners ( if they're there) is how much their electric, water, and garbage pickup costs are and what internet provider they have. I know I've lived in places where one neighborhood was serviced by a cheap electricity provider but the next door neighborhood wasn't. Some cheaper houses may have shockingly high water and garbage fees or high property taxes whereas one town over that's all much less.
posted by jello at 7:12 PM on August 13, 2023 [2 favorites]
Much good information on process above, and I do agree with jello about viewing houses and getting a general feel for what you want in a house. You can also use this time to think about where you want to be located. What are your priorities? Close to work? Near downtown with shopping areas? Need a yard for a pet? Older house in a treed area? Newer house with minimal yard care? Condo or duplex? Sometimes there are trade offs that you can make. A house with no yard work if there's a park nearby. Further from work can be acceptable if there's direct and easy to access transport. Answer some of these questions while you're casually looking now, and you'll have a better feel for how much you're willing to pay to be in your ideal location.
posted by BlueHorse at 11:59 AM on August 14, 2023 [1 favorite]
posted by BlueHorse at 11:59 AM on August 14, 2023 [1 favorite]
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posted by theora55 at 1:54 PM on August 13, 2023