First Time Home Buyer...some advice

[WeLoveLilo05]

We have begun looking at houses and getting some ideas now that we finally have some money in the savings. We haven't gotten pre-approved yet, so honestly we don't know how much we will be able to spend, but we do have good credit. And honestly we are a bit nervous about buying a home b/c we want to make sure we "are ready" as owning a home us a huge responsibility. We are just faced with the annoying fact that our rent is just as much as a mortgage payment.

Our problem is...people keep telling us to "go for it" while rates are so low. How long will the rates be this low? Will they go up anytime soon? Do you think it will be a buyers market still within the next 6-9 months still? We also feel that the money we have in our savings is just enough for the down payment and closing costs. We want to make sure we have some extra cash still in savings after wards for emergency, we don't want to fully wipe out our emergency fund as we feel this is dangerous. Another problem we are facing is finding a house in the area we currently live in. I really LOVE where we live now, my daughter is in a nice school, everything is so convenient but the houses are so expensive here, we could move over a few towns, but then she would no longer attend the school. Another amazing feature (for me lol) about living where I currently live is my parents are around the block.

I guess I have a few gripes/vents. But any advice you can give is GREATLY appreciated for us first time home buyers. I really feel lost and I don't know where to start and if we are honestly even "ready".

 

[Janepod]

Congratulations! It's a very exciting step.

I would start by checking your credit reports to make sure they are perfect, and taking any steps you can to clear them up if they are not.

If you have any kind of credit card debt, pay that down too.

Take a look around your town, start going to open houses, look on realtor.com to get a real idea of what a house would cost you. Keep in mind that on top of the mortgage payment you will also have property taxes, utility bills (if you're not already paying them), and possibly more costs in terms of upkeep. And you'll be amazed when you buy a house how much you have to spend on weekend trips to Lowes for paint and weatherstripping and god knows what else.

But to answer your question - you can't predict interest rates, but it will most likely still be a buyer's market 6 months from now, depending on your part of the country. You want to be in the best possible position when you do make the decision to buy, in terms of having a perfect credit report and money in the bank (and an emergency fund), and having done your research to determine what you think you'll pay for your house and what to expect for your money.

I do think you should stay in your present town. Location is everything!

Good luck!

 

[Abbeys_mom]

Have you looked at your county's first time home buyer's program? We got down payment assistance that is due when we sell or is forgiven after 30 years. My only caution is to read the fine print, we can't rent out our home while we are part of the program. If we pay that note back, then the rental restriction is removed. That may give you the breathing room you are looking for, assuming you qualify and that your objective is to remain in your home long term.

Best of luck to you!

 

[wtrmlnlabs]

Yeah, check the first time home owners for sure. As PP said you can't judge how interest rates will go, but last time I remember they were really good like I guess they are now, it was about a year like that. It's been a buyers marker for a very long time around here, a couple of years, I think it will continue to be that way for a few more year for sure.

You would think it goes without saying but do be sure to have any place you are wanting to put a contract on inspected!! I can't believe how many people do not do that and run into mold issues or something like that a couple years later. It's worth that small extra expense and it'll help keep down your worries!

I'd say you are being very smart not wanting to take out all your emergency funds and being cautious about buying. Personally renting was awful for me so never had any qualms about buying so I can't help you with pros and cons that way but if you aren't sure, take the extra time for sure. Also not knowing your area it's hard to say, but around here 15-20 min drive time to save on taxes or prices of the home is not a big deal and well worth it if you are saving a lot on the home.

Sending you some

 

[buckirj1]

Once you get pre-approved, cut that amount by at least a third when it comes to actually considering houses within that price range. What the lenders think you can afford, and what you can actually afford are two very different things. Lenders often estimate on the high side.

Be prepared for the first five years in the house to be the hardest, especially if you're a first time buyer buying new. If something doesn't break in the first five years, it's probably good for about 15-20 years, given proper care.

Take the shortest mortgage term you can manage (duh) unless you plan to live in that house the rest of your life.

 

[Darcy03231]

Once you get pre-approved, cut that amount by at least a third when it comes to actually considering houses within that price range. What the lenders think you can afford, and what you can actually afford are two very different things. Lenders often estimate on the high side.

Be prepared for the first five years in the house to be the hardest, especially if you're a first time buyer buying new. If something doesn't break in the first five years, it's probably good for about 15-20 years, given proper care.

Take the shortest mortgage term you can manage (duh) unless you plan to live in that house the rest of your life.

I agree!

We cut ours by half and things were still a bit tight for the first few years. We've been in our home for 15 years now and have managed to save a very healthy emergency fund, fully fund our retirements, save enough to help pay for four kids college, and still take a vacation each year. We refinanced to take advantage of lower rates and went from a 30 year mortgage to a 15 year. House will be paid for in 5 years now. Since we've been here we've finished off the basement and put in an interior french drain system, new furnace, new windows, siding, roof and deck, all paid for with cash.

Friends of ours bought around the same time we did and went right up to what they were pre-approved for. 15 years later they're still house poor. They also refinanced to take advantage of lower rates, but were unable to get to a 15 so they kept taking out 30 year mortgages. They still have 23 years left to go.

We decided how much we were comfortable spending (there are on-line calculators that will tell you how much your mortgage will be based on how much you borrow and at what interest rate). We refused to look at homes that were above what we wanted to spend, even though we were pre-approved. Our realtor wasn't real happy, but she wasn't the one that had to make the mortgage payments. We ended up finding the perfect house for us, within our budget. Sure there were cosmetic things that needed to be fixed (the lime green and yellow bathroom for one), but the house was fully functional and over time we re-did what we didn't like.

 

[mjkacmom]

Don't forget about property taxes - mine equal my monthly mortgage payment!

 

[powelweb]

I think you've already answered your own question- you need more savings if you only have enough saved to cover the down payment and closing costs right now.

Ideally, you should have your 6 month (or 8 month if you follow Suze Orman) emergency fund separate from your housing savings fund since you can easily have emergencies shortly after you close and move in.

Good for you for doing your homework, so keep at it- run your credit report and consider talking to a lender to see where you would be at today. Talk to a real estate agent to see what homes are going for where you currently live and how far you'd have to move in order to be able to afford a decent home.

Work your budget to see if you can save more to build up your savings, and keep your eye on your local housing market in case a great short sale or foreclosure comes on that might work for you.

good luck

 

[WDW Lover]

Going into the winter months is a good time to buy. Most people aren't looking in November/December/January. 1 because of the holidays and 2 usually because of the weather. Also, most people don't like to move in the middle of the school year. These couple of months are when the best bargains can be found. Waiting 9 months most likely will mean a little higher prices and more competition on the good houses. As far as interest rates go, they will likely be the same 6-9 months from now.