So how does one go about buying a house?

[Philadisney]

Don't laugh. I know I am about to sound like a total idiot. But how, exactly, does one buy a home?

After years of throwing my money into the black hole of renting, and tired of trying to store 26 years worth of belongings in an apartment the size of most people's foyers, I've decided to look into purchasing a small home. DBF and possibly one other friend will come with me, but the home will be mine, in my name. So uh....now what?

I have an appointment next week with a realtor that my friend used and loved, but am I supposed to go to a bank first and talk to them about mortgages? How does that work exactly?

Thanks for any help. Boy do I feel dumb

 

[wickey's friend]

It would probably be a good idea to go to a mortgage lender at the bank to find out what dollar amount of a mortgage you would qualify for. That way, you know what price range of houses your realtor can take you to see. And, don't automatically assume you need to spend the highest amount for which you qualify. Be a smart shopper and don't automatically pay what the seller is asking either. And, depending on your state, the realtor may actually be working for the seller -- ask them. And, make sure you get an inspection -- even if it's a new home.

Good luck -- the first house is the scariest. I've bought and sold five now, and I still get a little funny in the tummy when I go to sign the papers!

 

[Philadisney]

It would probably be a good idea to go to a mortgage lender at the bank to find out what dollar amount of a mortgage you would qualify for. That way, you know what price range of houses your realtor can take you to see. And, don't automatically assume you need to spend the highest amount for which you qualify. Be a smart shopper and don't automatically pay what the seller is asking either. And, depending on your state, the realtor may actually be working for the seller -- ask them. And, make sure you get an inspection -- even if it's a new home.

Good luck -- the first house is the scariest. I've bought and sold five now, and I still get a little funny in the tummy when I go to sign the papers!

THANK YOU for the advice! My co-worker had said the same thing about going to the bank to ask about a mortgage but I didn't trust her because she has never bought a home either You brought up some great points.

 

[Liberty Belle]

Yep, the first thing you should do is write out a budget of what you spend money on and what you have available for housing. Then, go to a mortgage broker and tell them you're wanting to get pre-approved for buying a home. They'll take it from there. Good luck!

 

[Philadisney]

Yep, the first thing you should do is write out a budget of what you spend money on and what you have available for housing. Then, go to a mortgage broker and tell them you're wanting to get pre-approved for buying a home. They'll take it from there. Good luck!

Sounds easy enough! Thanks for the info. Has anyone used ING for mortgages before? I got a card in the mail from them talking about their mortgages recently. I have a savings account with them and love it, but they're all online, you apply for the mortgage online or call.

 

[barkley]

when you crunch the numbers to figure out how much you feel comfortable with as a mortgage payment remember to consider how much property taxes and homeowner's insurance will add to the monthly obligation. if you have a cpa who does your taxes ask them what kind of change having the homeowner related tax deductions will have on your taxes (you may end up seeing more net pay each month). also figure in realistic upkeep costs and the expenses to purchase items most homeowners need (yard stuff was a biggie for us-never had to have a mower, weed whacker, edger and such when i rented ). keep in mind the utilities you don't pay now-and check what the rates are in the areas you are looking at, they can vary greatly town to town or county to county (we lived just a little ways down from a town in another county-they paid TRIPLE what we paid for water/sewage as well as garbage). our first home was older and did'nt have the most energy efficient windows or appliances so as part of the negotiation process we had our realtor request from the buyer a print out from the power company to see what the average usage had run for the previous year (their household was about our size-both worked during the day, figured it would be roughly comparable to what we would use).

look at any affiliations you might have to see if they have tie-in's with better deals on financing than traditional lenders. with our current home the retirement system dh's former employer was under had a program through a major lender that capped our closing costs and gave a much better locked in rate vs. using the same lender outside the program.


if the house will be in your name only be very conservative and realistic in what you can afford-it's great that you will have roommates to help share expenses but if something happens and they can't/won't pay it's going to come down to you covering all of that monthly payment (i think in this situation it can be advisable to look into purchasing long term disability insurance-then if you get ill/injured and won't have a paycheck coming in you will have some source of income to keep paying that mortgage).

good luck-it's scary and exciting.

p.s. find a good realtor who will work strictly for you-it can get realy hinky if a realtor represents both buyer and seller.

 

[mrsv98]

You should take the down payment into consideration also. If you have less than 20% then you will have to pay PMI. This in addition to property tax and homeowner's insurance can increase your mortgage payment by a large margin. Not only will you have to have all these figured in but the mortgage company will also figure in a % over the amount to compensate for increases in property tax and insurance.

If you can manage 20% down, you will save yourself a ton of money. Also make sure your credit report and score are squeaky clean. I heard on the radio this morning that if you have 10% and a good credit score you will have no trouble getting a mortgage. Good luck!

 

[Chicago526]

It's not dumb at all, if you haven't done it before, how would you know!

You can go look at houses with the agent just to get a feel for what's out there, but you really need to talk to a bank or mortgage broker to find out how big of a loan you qualify for. That said, what you qualify for and what actually can afford may be two different numbers (banks sometimes approve you for more than what you really can afford each month) so becareful that you feel comfortable with the payment before you buy that much house! And remember, house cost more to maintain. Things break, and there is no landlord to call to fix it! So leave some wiggle room in your budget for repairs and remodeling, especially if it's an older home.

Also, you just don't need a down payment, but money for closing costs as well, your real estate agent and/or bank can let you know about what to expect. But remember, you need money to move and possibly make needed repairs to your new house right away, so don't use every cent you have in the bank towards dowpayment and closing costs. I can't tell you how many trips to Target I made the few days before and after my move to my current house because i needed something or ran out of something (packing tape alone was three trips!).

Once you determine what you can borrow, you'll need to apply for the loan, they usually ask for your last few pay stubs, last few bank statements, and any info on other assets you have (401k, stocks, etc), so make sure you've got that kind of stuff together. Before you apply, check your three credit reports to make sure there aren't any surprises (wrong info gets added to reports ALL the time!). You can get a report from each bureau once a year for free (but not from that ad on tv, they charge you even though they claim it's free! I can't remember the website for the free ones, but other posters here should know it). that's just the report though, if you want your credit score too, you'd have to pay for that.

 

[funnygarcia]

Various community agencies have free first time home buyer workshops. They help you learn what you need to know , help you figure out your budget, some agencies have a support staff person that will go with you to check over paperwork when you make an offer. There are some programs, if you do the workshop, you qualify for down payment assistance.

 

[ess]

All of this is good advice but the number one step before you meet with anyone is to pull your credit report and your FICO.

 

[Liberty Belle]

All of this is good advice but the number one step before you meet with anyone is to pull your credit report and your FICO.

True, and if you have any issues with your credit reports, www.creditboards.com is a great place to get help (free- it's a message forum like the Dis).

 

[The Mystery Machine]

All of this is good advice but the number one step before you meet with anyone is to pull your credit report and your FICO.

Yep. You have to clean up your FICO. This is step one without a doubt.

Once you know your credit score then you will be able to go forward.

If you have a credit union go through them or look into them for your area. Sometimes they will do your credit scores and help you with the process, if you need to clean it up to boost your score.

 

[arminnie]

Great advice above.

Another thought - Philadelphia is big. Do you know the general area where you want to live?

I've found a good way to preview homes is to use realtor.com. You can put in a zip code to get current listings.

As a buyer in today's market please be VERY careful. Listing prices can just be meaningless. So many people say they "need" so much out of the property, and they list at a grossly over-inflated price. With prices going down you do not want to overpay.

You are not taking advantage of someone if you pay them fair market value for their home - even if they lose a mint. A good realtor should help - but I've found that in a shaky market even some of the best will push their own listings or those from their agency or from a friend first.

And remember - location, location, location. If there is a problem that causes the home to be hard to sell - remember someday you will probably be on the selling side and may have to deal with the same problem.

 

[barkley]

also-with any home you look at, ask if they are subject to any special bonds or fees.

the neighborhood i lived in payed a couple of thousand dollars per year because of bonds (lighting, neighborhood parks and such) that lasted for 15-20 years from the date of construction and passed on from homeowner to homeowner. the houses just a couple of blocks over did'nt. some sellers cut a deal to pay off the entire remaining obligation for a buyer as part of the sales deal-but our buyers never asked us to so we did'nt offer (they were'nt too bright, bought out of "i want it now" vs. what they could afford-very evident when they realized that they had a pre-payment penalty with their existing mortgage of around $15,000.00 that would have been waived if they timed their sale/purchase of our home out another month or so which everyone involved would have probably been fine with had they asked-but they wanted to be in the place so they could host a memorial day weekend bbq 'housewarming' and figured it was worth it same yahoos could'nt pay their water/sewage or garbage bills after the first month which i was notified of the impending lien on the home for because the city's internal software system had'nt updated the property owner change).


if you have a washington mutual bank account call them-free credit reports are one of the services.

 

[ksjayhawks]

1. Write down your budget and see where your money goes right now.

2. When you own a home, YOU are responsible for utilities, property taxes, house insurance and upkeep--repairs, new appliances, painting the outside, lawn care, painting the inside, carpet repairs/replacement, service calls, etc.

Be sure to add these amounts into your budget.
**You can call the utility companies and they should be able to give you an estimate--gas, electric, water/sewer, trash pickup
**Property taxes will--or should--be listed on the listing sheet, you can also call the county treasurer's office and get the tax rate--that would give you an estimate
**If you have an insurance agent for your car insurance and they also do homeowners insurance, call him/her and ask for an estimate on house insurance
**pmi insurance if you don't have a 20% down payment or a loan where you don't need the down payment--added to your loan payment
**homeowners dues/assessments (won't know till you are looking)
**special assessments on the property you might buy (won't know till you are looking)

Also, set aside money in your budget for an emergency fund. You don't want to put that new furnace or roof on a credit card if you can't pay it off when the bill comes. You want to have money to pay the mortgage and the bills if you lose your job, are will and can't work, etc.

3. Costs of buying a house:
**sale price--negotiate, negotiate. Figure your top amount you are willing to pay for the house. Do not buy a house emotionally and get caught up in a bidding war. There are other houses out there, it may just take a little longer. Sale price and down payment will determine your monthly mortgage cost with pmi, insurance, property taxes also added to your monthly payment unless you work something out with the lender. Even then, they need to be in your budget so you have the money when they are due.

You will need money for these upfront expenses:
**insurance for the first year
**closing costs--some sellers might help pay them, but many won't, so don't count on that
**inspection costs--house insepctor, termites, radon, etc
**repairs to the house that seller will not do and you want/need to have done
**start up costs--lawn mower, yard and regular tools, appliances you may need (washer, dryer, refrigerator, etc,) carpet replacement, paint, etc
**moving costs
**deposit for utilities --this depends on your area and the companies you are dealing wtih

4. Go to a lender and get a pre-approval letter. They will give you the maximum that you are approved for. You do not have to spend that much; in fact you will be better off going below the amount. The phrase "house poor" comes to mind here. You can buy a house costing the maximum you are approved for but do you really want to be that tied cashwise to a house and have to watch the rest of your budget so closely.

5. Buy what you can afford by yourself!!! Do not count on money coming in from roommates or a future spouse. You want to be able to come home and enjoy your house, not have to worry about where the money to pay the mortgage is coming from or if you can buy groceries or the tires for your car that you desparately need.

6. Pick a realtor--ask who he/'she wiorks for--the buyer or the seller. Be careful of how much information that you share. In some states, realtors are obligated to share information with the sellers.

7. Gather your paperwork together--paystubs, proof of employment, tax returns, credit card numbers, chekcing/savings account numbers, car loan amount--so that it is ready to go when you need it.

You have gotten some great advice from PPs. The first house is the scariest to buy and you don't want to get so caught up in the excitement of it that you make some bad decisions. also, if you don't feel comfortable with the realtor you are working with, you can change.

Good luck!

 

[cherylp3]

Note: You can get a FHA loan you won't pay PMI and they have less of a down payment.

 

[Loverly]

There's a new show on HGTV that I love called "Propery Virgins"=where new homebuyers are shown homes in their price range to choose from-very interesting to see home buying from the eys of those who kmow very little-and most are shocked on what they have to 'settle on"

Every week night (i think) 8pm E/ 7 PM C

 

[Chicago526]

Oh, that was a point I forgot to mention in my previous post. If your boyfriend/roommate are going to pay you rent for living in the house, the bank will not consider that in the loan application. They will only consider your income, unless you put your boyfriend on the loan too (don't even think about it, it's a bad move on so many levels that it could be it's own thread!). You need to be able to show the bank you can afford the house on your own with no additional income from roommates. And really, you can't count on it anyway, if they lose their jobs or if they move out and you can't find others to move in, you're stuck with the whole house payment.

 

[redrosesix]

I think the pp's gave some great advice, so I'm just going to add to it:
*If ING is the bank that you've been doing business with, start there. Before you meet with them, check their website to see if they have a "what mortgage can you afford" type of calculation. They probably will, but if they don't, go to another bank's website. With this and your credit score, you will pretty much know what their answer will be before you meet with them - that's good.
* Go to as many open houses as you can to get a feel for how much different houses cost. You should probably start doing this before you meet with the realtor.
* Decide whether you want a place that you can fix up or one that needs no work at all - this is a huge decision.
* since you're going to have people helping you with the mortgage, consider getting a duplex or triplex (even something that can easily be converted to a single family home later). The bank will likely consider the potential rents from the other units as income, and you will not necessarily have to share your own space.
* no matter how nice the house you buy is, try to assume you will need another 10 percent in the first couple of years (to deal with anything you didn't know about when purchasing the home) With a new mortgage it may be hard to get additional financing. Having said that, if the house you purchase is 10 percent less than what you qualify for, you can probably ask for that amount as a line of credit.

Good luck!

 

[Rudegrle]

I bought my first home when I was 20 (big dream and goal of mine), and had a lot of questions when I first started. I went to my bank and got pre-aproved for a loan, then I talked with family and friends about other lenders. I found that my bank was offering the best terms and rates. I started to shop for my new home once I knew what I was aproved for, more importantly what I could afford. I was amazed at how easy the entire process was. The only advice I really have is to educate yourself on the dif loans available. I saw many friends get taken advantage of on loans they could not afford to pay in the long run.