Buying a home advice

[JavaCat]

Anybody got advice on buying a home? I'm starting the process of buying my first home. I'd particularly be interested in advice on getting a loan. Anybody bought recently? What kind of rate did you get? Who'd you go through? According to Bankrate.com the national average on a 30-year fixed is 5.76%. I filled out information online for a pre-approval through the Credit Union, but I'm guessing I won't get the best rate through them. My bank is Commerce bank so I'll probably see what they give me as well. If it matters, I'm looking to buy in the KC area (Prairie Village, Fairway, Mission, etc.).

[steve dave]

Yeah, don't just go to one place and fill out an application.  You may have to shop around and it doesn't hurt your credit anymore by getting approved by 50 places vs. just one.  If you have credit above 720 you can get the rate quoted without paying much up front.  That is assuming, of course, that you have 20% up front.  If you don't you can still borrow what you need but won't get as low of a rate any may have to pay fees.  You also have the option of doing an 80/20 which I we did.  You can then get the 80% locked in at a low rate and the 20% at a higher rate.  This isn't that bad because you can pay off the 20% quickly with any additional funds you may have each month.  I would recomend against getting one large loan above 80% of your house's value given the housing market today as it may be a long time before you can stop paying the PMI and it isn't tax deductible like the whole 80/20 loan.  This is all advice you can get from a mortgage broker if you go that route.  My advice would be to NOT hire a buyers agent.  You can every single thing he can on your own and you will have much more negotiating power without one as their fees come from the seller.  Plus, you can easily find houses for sale in the neghborhood you like without some jerkass dragging you around and getting a cut.  When you find something you really like don't sit around and think about it or go to see a bunch more houses to be sure as it will prbably be gone before you get back to make an offer.  There is a reason you like the place and it is the same reason a lot of other people will like it too.  Start out offering about 10% less than asking price (depending on where you live) as a general rule of thumb.  The worst thing that can happen is they counter higher and you go from there. 

[jeffy]

Don't get in a hurry to buy a house.  If you have student loans or other debts, work on paying those off first.  Then save up so you can make a sizeable down payment on the house.  Remember, you can get much better rates on shorter term loans.  The more you can put down, the better off you will be.  No payment should be more than 25% of your take-home pay.

Don't buy into the hype that it's better to buy a house since the interest the loan accrues is tax deductible.  It does not make sense to spend $10,000 in interest just to get that $2,000 tax break.  You'd be a whole lot better off saving some big bucks for 3 or 4 years while renting and then looking for a house.

A house is a money sucker.  These are "fees" that don't get added in to the cost of a house.  Repairs, maintenance and improvements can and will put a huge dent in your budget.  There are things you will need to buy in order to do these things, like a lawn mower, tools, furniture, etc.  If you intend to keep a decent looking lawn, then things like fertilizer, seed, and any equipment rental (aerators, etc) will run quite a bit per year.  Utilities will also be much higher than in any apartment.

[michigancat]

rent unless you hate doing fun sh*t with your weekends.

[jeffy]

rent unless you hate doing fun sh*t with your weekends.

Yup... away games in the fall are a time to de-thatch and overseed the lawn.

And don't forget all those wonderful mornings that you have to call in to work because you have to have a plumber fix a busted pipe.

[steve dave]

Pay $100 a month to have someone care for your yard and shovel your snow.  SLTexpense imo. 

[cireksu]

find a good realitor you trust.  with the way the market is, just go around and lowball the crap out of people as long as you are not in a hurry.

[steve dave]

find a good realitor you trust.  with the way the market is, just go around and lowball the crap out of people as long as you are not in a hurry.

Why do you need the realtor if you aren't selling?  Buyer's agents are for chumps imo.

[dr00d]

rent unless you hate doing fun sh*t with your weekends.

Yup... away games in the fall are a time to de-thatch and overseed the lawn.

And don't forget all those wonderful mornings that you have to call in to work because you have to have a plumber fix a busted pipe.

You guys are huge pessimistic fools.  There is a lot to be said for owning your own house and taking care of your own.  You won't have to call a plumber and you won't have to miss a bunch of work.  Even if you do, who cares...you shouldn't be living on no vacation and if your work doesn't understand, then frack them.

I enjoy being outside and taking care of my lawn.  One of my biggest pet peeves is HOA where you pay to let someone else shovel and mow.  Don't spend extra money on things you can do yourself.  Not only is it good exersize, you might feel like less of a bum.

Take that money and put it towards a big screen or remodeling the basement (or both).

[michigancat]

I wasn't referring to "taking care of the lawn".  I was referring to all the electrical, plumbing and HVAC type stuff that generally requires expertise that you lack.

Sure, most people can figure out how to get it done, but it ends up taking forever and usually sucks.

[chum1]

The best way not to get screwed on the interest is to make additional payments toward the principle each month.  As little as $25.00 a month will go a long, long way.  It can easily mean that you're only making payments for 20-25 years rather than for 30 years.

HOA fees suck ass and are to be avoided, IMO.

Overall, owning is way, way better than renting because you'll actually get money back when you decide to move.  In many cases, the property appreciates quite nicely.  There's a reason many people say that real estate is the best investment, you know.  When owning is an option, renting is nothing more than throwing money away.

[catdude33]

Generally speaking, how much of a down payment (%) do you need to make to get the best interest rates?

[steve dave]

Generally speaking, how much of a down payment (%) do you need to make to get the best interest rates?

20%

[steve dave]

I wasn't referring to "taking care of the lawn".  I was referring to all the electrical, plumbing and HVAC type stuff that generally requires expertise that you lack.

Sure, most people can figure out how to get it done, but it ends up taking forever and usually sucks.

Yeah, we built our house so we won't have to worry about that stuff.  Once stuff gets to the age it starts to break down we will be in our next house anyway.  Another thing I would add is that I will never own an old home unless the area I am moving has no new construction.  The cost to have one built is no more than buying an older home and I never plan on adding a roof/HVAC/insulation/etc. to a house I own for the rest of my life.  Makes it very easy to budget time and money.

[cireksu]

depends on credit, my sister in law has to pay 10%.  20% keeps you out of PMI.  


you aren't out anything if you have a realitor and are buying.  however realitors look out for eachother so you need one you trust.

you can also get a home warranty that covers all the electric/plumbing the first year.  Good for if the A/C and furnace are old.  I think my deductable the first year was 50 bucks.

Also shop around at banks for a loan.  Make sure you get the certificate that says how much they'll give you before you go to offer.

[AzCat]

Also relevant to this discussion is where, precisely, you're planning to buy.  KC?  No rush, it's not like prices are going to move fast there.  San Diego?  Silicon Valley?  There should be more urgency if you're in those markets as a rebound, when it happens, could be quick and sharp enough to price you back out of the market if you're young. 

+1 to Jeffy's thought on the financial end of it.  If you have student loans, credit card debt, a car loan or the like you have no business buying a home unless you have small children who need a place to grow up.  Pay off your higher interest-rate debt as quickly as possible, begin saving 20% of your gross income for retirement, and then once you've adapted to this new reality see if you can still afford a home. 

[Dirty Sanchez]

Also relevant to this discussion is where, precisely, you're planning to buy.  KC?  No rush, it's not like prices are going to move fast there.  San Diego?  Silicon Valley?  There should be more urgency if you're in those markets as a rebound, when it happens, could be quick and sharp enough to price you back out of the market if you're young. 

+1 to Jeffy's thought on the financial end of it.  If you have student loans, credit card debt, a car loan or the like you have no business buying a home unless you have small children who need a place to grow up.  Pay off your higher interest-rate debt as quickly as possible, begin saving 20% of your gross income for retirement, and then once you've adapted to this new reality see if you can still afford a home. 

Almost all right.  Start with the smallest debt, make minimum payments on the others.  When the smallest is paid off, snowball the payment into the next one and so on.  Little victories.

[jeffy]

Overall, owning is way, way better than renting because you'll actually get money back when you decide to move.  In many cases, the property appreciates quite nicely.  There's a reason many people say that real estate is the best investment, you know.  When owning is an option, renting is nothing more than throwing money away.

I think you need to rephrase what you said above.  Renting with no intent to ever buy is throwing money away.  If you rent cheaply and save a ton of money before you look at buying, you can do quite well on your real estate deal. 

For instance, a 150,000 mortgage on a 30 year term at 6% will cost you 175,000 in interest and cost you 900 in principal and interest payments.  Add to that the property taxes and insurance and PMI if you don't pay 20% down (PMI is throwing money away much more than rent ever is).

While most people don't pay cash straight up for a house, the more you pay up front, the better off you are - common sense.  If you were to throw $300 into a money market earning 3.2% every month for 5 years, you would save 18,000 + over 1500 in interest.  Then, by using that money as a down payment on the same 30 year loan, you will only pay 150,000 in interest (still way too much). 

If you do chose a 30 year loan, then remember that 1 extra mortgage payment every year will remove 7 years from a 30 year loan.  I paid extra on my 30 year loan over the past couple of years.  When I refinanced just a couple of months ago, I had already cut nearly 7 years off of my loan.  I refi'd from 6.7%/30 year to 4.9%/15 year and instantly cut another 3 years off of the loan and I have a lower payment.  Still, I'm paying a ton in interest.  If you can let the interest work for you while saving and renting with the intent of purchasing in the future, then renting is not a waste of money.

[dr00d]

I wasn't referring to "taking care of the lawn".  I was referring to all the electrical, plumbing and HVAC type stuff that generally requires expertise that you lack.

Sure, most people can figure out how to get it done, but it ends up taking forever and usually sucks.

I understand what you were saying.. I guess I didn't make my point when I said that these aren't a big deal and rarely are an issue.  Yes, you should probably know how to do the general stuff yourself, but it isn't like mr. intarwebs can't be there to assist you.

So far I have re-plumbed, re-wired a couple rooms for cable and power, and remodeled mostly everything in my house.  Don't be a helpless turd who can't figure out how to do things on your own.  Also- buy the correct tools for the job.  Nothing is worse than struggling to do something with the wrong tool.  That IMO is what takes the longest. Spend 40 dollars and get it done in thirty minutes or spend 150 and have someone do it.

Bottom line, yes you will have times you need to actually repair something in your house.  Don't let that tiny bit of maintenance scare you.  The key is finding a house that comes out pretty good inspection.

[michigancat]

Overall, owning is way, way better than renting because you'll actually get money back when you decide to move.

This is assuming you can sell your house when you decide to (are forced) to move.

Also- buy the correct tools for the job.  Nothing is worse than struggling to do something with the wrong tool.  That IMO is what takes the longest. Spend 40 dollars and get it done in thirty minutes or spend 150 and have someone do it.

Good point.  Be prepared to spend thousands on tools you will rarely use.

[JavaCat]

Thanks to everybody for the tips. I don't have any debt or else I wouldn't even be looking. I'm not really in a hurry to buy, but decided to at least start looking. This information will be helpful.

[catdude33]

You don't have to be completely debt free to consider buying a house.  That's retarded.

[Buddha_Cat]

Best thing you can do.  You algorithim freaks can figure this out.

http://www.unitedfirstfinancial.com/Portals/2/Flash/15_minute/

[jeffy]

You don't have to be completely debt free to consider buying a house.  That's retarded.

That opinion sounds full of expertise.

No, you don't have to be debt free to consider buying a house, but if you understand the philosophies in books such as "The Millionaire Next Door" then you will see that it can benefit you greatly in the long run and is definitely not "retarded."   Since interest on debts works against you, it can minimize or cancel out any benefit you could get otherwise.  With the economy supposedly as bad as many say it is, a solid comprehensive financial plan would benefit everyone.  Having no debt is a great part of a financial plan because it limits risk in most situations (especially if you've backed it with a good emergency fund).

[pwrcat1]

rich dad poor dad. i was skeptical at first but it truly has helped big time.

[AzCat]

Almost all right.  Start with the smallest debt, make minimum payments on the others.  When the smallest is paid off, snowball the payment into the next one and so on.  Little victories.

Sorry but no.  Pay off the highest cost debt first no matter if it is the largest, smallest or somewhere in between.  The only thing to consider when paying down debts is which is costing you the most to kick down the road. 

[AzCat]

While most people don't pay cash straight up for a house, the more you pay up front, the better off you are - common sense.

That depends on the opportunity cost of sinking those funds into a home versus keeping them invested.  If your income is low enough that you're not phased out of the mortgage interest deduction and your long-term portfolio ROI exceeds the cost of your mortgage you need to look more closely at the numbers.  Specifically you should then consider whether your portfolio's historic ROI net of taxes returns more than the cost of your mortgage adjusted for your mortgage interest deduction.  Small business owners get the bonus round of attempting to plan for unpredictable incomes & expenses, AMT issues, and the like.  But please at least consider your portfolio ROI net of taxes versus the cost of capital in your mortgage net of the relevant deduction. 

[cireksu]

You don't have to be completely debt free to consider buying a house.  That's retarded.

That opinion sounds full of expertise.

No, you don't have to be debt free to consider buying a house, but if you understand the philosophies in books such as "The Millionaire Next Door" then you will see that it can benefit you greatly in the long run and is definitely not "retarded."   Since interest on debts works against you, it can minimize or cancel out any benefit you could get otherwise.  With the economy supposedly as bad as many say it is, a solid comprehensive financial plan would benefit everyone.  Having no debt is a great part of a financial plan because it limits risk in most situations (especially if you've backed it with a good emergency fund).

you are right, however you'd have to be in a situation where you have roomates to keep the rent down, doesn't do much good to rent a place for 8/900 a month.

[ArchE_Cat]

Do not buy a home, build a home. Spend some time doing lots of research on homes and contractors (and the subcontractors they use). Most of the newer homes being built that are not completely custom are total crap. Most "flipped" homes are total crap. Building is the best bang for your buck, you get better more efficient technology. If you buy a home that is 5 years or older, you're going to need to redo everything withing 7 years anyway, unless the home was built with exceptional quality to begin with. So, basically your paying for some things twice because you're buying the home, then paying to replace things.

As a structural engineer I would really recommend looking at building a home from cold form steel. No bug problems, no shrinkage issues like you do with wood, and can be much more cost effective compared to wood. Don't be afraid to spend money on insulation and windows. Also, select a HVAC system that brings in a good deal of outside air. Systems that simply recirculate the air inside your home are terrible for air quality and your health.

The most important thing is to take time to plan, don't rush into anything, and don't let anyone rush you into anything. Some contractors will push, push, push, only to cause problems and delays that will end up costing you money.

[steve dave]

Do not buy a home, build a home. Spend some time doing lots of research on homes and contractors (and the subcontractors they use). Most of the newer homes being built that are not completely custom are total crap. Most "flipped" homes are total crap. Building is the best bang for your buck, you get better more efficient technology. If you buy a home that is 5 years or older, you're going to need to redo everything withing 7 years anyway, unless the home was built with exceptional quality to begin with. So, basically your paying for some things twice because you're buying the home, then paying to replace things.

As a structural engineer I would really recommend looking at building a home from cold form steel. No bug problems, no shrinkage issues like you do with wood, and can be much more cost effective compared to wood. Don't be afraid to spend money on insulation and windows. Also, select a HVAC system that brings in a good deal of outside air. Systems that simply recirculate the air inside your home are terrible for air quality and your health.

The most important thing is to take time to plan, don't rush into anything, and don't let anyone rush you into anything. Some contractors will push, push, push, only to cause problems and delays that will end up costing you money.

Great advice.  Saves a lot of money and, especially, time in maintenance and upkeep.  Utility costs much less than a drafty old pile you think you "saved" money on while you spend every weekend doing home improvement projects that don't, in the end, add value to your home.  Plus, everything looks exactly how you want it to so you don't have to so much as paint a room.