OT: Homes - questions for the experts (aka anyone that owns their own)

[shuffar]

So my husband and I are hopeing to be financially ready to get our first home in the coming year. We just got married in October, we're young (23), but employeed and making money. Our lease on the apartment we are in, is up in 6 months so we either need to find a new one (long story involving "low-income" housing and now both of us having jobs that makes us well out of that income bracket).

Do you have any tips for us? What kind of stuff do we need to know and keep in mind?

My husband gives the impressions that he may know what he's doing in this search, but I kinda like to get a feel for it myself and who better to turn to than my friends at the American Girl HostBoard!

How can we really know if we're ready for owning a home?

Give me everything you've got. Even if it's just ramblings or stories about your quest and conquests in the land of home ownership. I need perspective!

[jenndon]

When I read "expert," I thought that wasn't me, but I always like to weigh in with MHO, and I have owned a few homes, and like you, dh and I bought our first home when we were about 23!

Now it's 11 years later or so (it's my 13th anniversary today!), and because of relocations, we are living in our 4th home.

So, maybe we are experts.

Dh is pretty financially conservative, and we have generally bought far below what the bank says our maximum loan potential was. I recommend this if possible. I always found houses that cost 40K more that I would have liked, but dh had his number and we stuck there. You will always have your house payment. It never goes away and paying $200 a month more each month, every single month, could make a difference in $$ available for extras.

That said, don't buy a house that you will be ready to move out of in 5 years. They say that in order to recoup closing/selling costs you should stay in a home at least 6 years, I think (of course, due to relocation, we've always moved after 3 to 4).

Also, if you plan not to work after you have kids, if you have kids, take that into consideration. We didn't have kids until we were married for 6 years, but we really tried to make purchse decisions on major items (cars, houses) based on his income alone so it wasn't hard when we had kids.

Think about what you really want in a home--location, # of bedrooms, new or a cheaper fixer upper, etc. Don't compromise because you find a "good deal" because you want to be happy there. But to speak to the other side, don't expect to find a perfect home, either.

Have fun looking!

[dianasmama]

Try to pay off any debt or have it consolidated into one payment. Then close or cancel any other open credit cards you might have, even if they don't have balances on them right now. Beause the banks will look at credit cards that you have "available" money and could charge it if you wanted to, know what I mean?

Go to a bank where you have your checking and savings accounts. They will tell you what you can "afford" in a house payment. But like the previous poster said, try to go below that. There's nothing worse than being "house" poor. All you can do is make house payments, but can't buy furniture or go to the movies once in a while either. Forget about the popcorn too [img]confused.gif[/img]

Don't buy a fixer-upper unless you and DH are handy or you know someone who is that is willing to help you for little money. Sometimes, costs of repairs are just astronomical and any savings you made in purchase price will be lost quickly.

There are lots and lots of extras that you have to consider though too. Will the house include the major appliances like refrigerator, stove or oven, dishwasher is a blessing!, washer and dryer, or will you then have to put out money to buy those as well? Sometimes they can be included in the financed cost of the house, but remember, paying for those items over 30 years will really add up. Outdoor equipment like lawn mowers or other cutting tools also need to be considered to keep the yard looking nice as well.

Talk to your loan officer about 30 year vs 15 year mortgages and see what you can afford to do payment wise. You'll save a lot of money with the 15 year or have them explain to you about the advantages of making one or two extra payments a year.

Congrats on your decision to buy a house though, it is a real challenge, but one that you will be very proud of!

Laurie

[Aunt Cornelia]

Try to save up as much as you possibly can for your down payment. That will bring your monthly payment down a lot, plus it will allow you to build up equity in your home quicker.

I agree with the other posters, don't buy at the very top of your range, or you will be sad (ie no AG...gasp! [img]rolleyes.gif[/img] )

Owning your own home is a wonderful investment for the whole rest of your life and as you make your monthly payments, you own more of it every year. Then, when you sell and move up to a bigger house, you usually make money if your first home has increased in value. Someday, when you're ready to retire, you may have a large home to sell, which will give you a nice little retirement account.

Congratulations on your new home to be! [img]graemlins/thumbs_up.gif[/img] [img]smile.gif[/img]

[mandasmom]

My DH and I are pretty conservative financially, and we bought our first house just before we got married. We actually had to make a couple of payments before we moved in, but it was nice because it gave us time to paint and get carpets cleaned. My family was upset that we didn't wait a few years, but we couldn't see any sense in paying every month on something that would never be ours. It ended up being one of the smartest things we've ever done. Besides the obvious advantages of home ownership, there also are some nice tax breaks.

The only advice I would add to what you have already gotten from board members is to look around a lot, so you will recognize a good deal when you see one. Also, in terms of investment, you are always better off buying the cheapest house in a good neighborhood than the nicest house in a bad one, unless it seems like that neighborhood is on the verge of being renovated.

Try to save as much cash as you can now for a down payment-I don't know what your circumstances are, but if you can come up with a 20% down payment, you don't have to pay primary mortgage insurance. Also, if you are planning on having a family someday and would like to stay home full time with your baby, try to have your basic living expenses come from your husband's income. It doens't hurt so much then if you have to go down to one.

Don't forget to add in the propery taxes of the home you are buying into your house payment total.
You can call the utility companies to find out the monthly electric and gas bills for the house you are looking at, to help plan your budget.

When we were looking, we were told that it is always best for future resale to buy at least a 3 bedroom house-you might not need that many now, but 1 and 2 bedroom homes are hard to resell-so are houses with only 1 garage.

Shop around with different lending institutions for your mortgage-a small difference in rates can make for big money over the lifetime of the loan.
Also, even if you can't afford to take out a 15 year loan right away, I think they are a great idea if you are going to be living in the house for a long time. We refinanced and switched to a 15 year about 2 years after we bought the house we are in now-we couldnt' afford it when we first bought the house. Every time my husband got a raise, we added a little extra to our house payment to pay the house off sooner. We got it paid off in 13 years-just in time to use the money we would have been saving from no house payments and use it to make college tuition payments instead. [img]graemlins/cry.gif[/img] It's still a nice feeling to know that the house really is ours.

Good luck, and enjoy the search!

[jamtoday]

My husband and I have owned 2 homes in our 13 years of marriage (same as you, Jen!), so here's my advice. I agree with the other replies -- don't buy at the top of your range. Definitely get pre-approved for your loan before you go looking or you may fall in love with a home that's will be a stretch to pay for. Start asking around now for a very reliable inspector's name -- you'll want that when your begin the process of closing a deal. Word-of-mouth referrals are often the best ones. Trust your gut -- you'll most likely know when you've found the right house and/or neighborhood for you. Happy house hunting!

[rafferty]

As someone whos career was helping people relocate and buy/sell homes in all different areas of the US for 15 years, I would agree with what most of you are saying. I would however take a look at the housing market specifically in your area. There are many areas around Chicago, for instance, where the market is very hot. In that case, I would go for it and get the biggest mortgage you feel comfortable with. Obviously, not all areas have housing prices going through the roof, and it that case, you do need to look at it like a 3-5 year plan as far as when to move to another house, etc. I also think a fixer upper, with a well done home inspection would be a wise choice for you all at your age. You would need to know what you are "in for" before you bought it though, so an inspection is a must. If you all are able and like to do that type of work, it would be very rewarding. If you are interested in looking at fixer uppers, consider having an agent show you 3rd party homes and forclosures. These are usually sold as is, so you would have to make sure the everything was really checked out.

This is a big step, but well worth it. You are not throwing money out the window every month with rent, and you will have a nice write off at the end of the year. Do get rid of any debt you may have, don't buy anything big that requires payments...like a car! [img]wink.gif[/img] When I bought my first place right out of college, I didn't have very much furniture, etc because I was strapped to just get in. I did have to make some sacrifices, but I never regretted it. Since you all don't have a family yet, you can stretch things a little more, so now is the time to go for it. If you do plan to start a family soon, you may want to just use your husband's salary to qualify.

Best wishes on this big jump!

Shelly

[only1genevieve]

My 2 fast tips:
* Make your life easier, make it part of the agreement that the sellers HAVE to hire a professional cleaning service before you move in--otherwise you'll spend the first two weeks cleaning out their trash.
* Know how old the roof is - you don't want to have to get a new one a year or two after you move in, when you're still struggling with the payments. If the roof is old, some sellers will give you a credit with the house price.

From the way I was raised, I have a slightly different perspective on home owning than most people. My mom's family motto was: "Love and real estate--get lots while you're young!" Overall, you need to go with what you feel comfortable doing, but my outlook is more in terms of investing.

My main piece of advice would be - don't be scared of debt. For instance, a lot of people say don't go into a house that's a stretch. Why not? Well, because it's hard and scary and you don't have fun money. But think about it, a good house is more expensive, but its value will also probably increase at a higher rate as the neighborhood becomes more desirable. You may feel you have less "fun" money, but in the long run it will pay off for retirement because. A cheap house now is likely to be a cheap house later, despite inflation. Having a bad neighborhood turn into to a good one, or vice versa, is like winning the lottery--it could happen, but the odds aren't good. So you have to decide, do I want fun money now or lots of fun money later?

Not that there aren't pitfalls to stretching. The first is, the neighborhood might go from good to bad (you'll have to research and judge this risk for yourself) or you paid too much for the house despite it being in a better neighborhood (again, research). The trick is getting a house that might be a stretch for you, but, is still undervalued at least 15-20%. This way, if something horrible happens or you find you can't make the payments, you can turn around and sell the house at market value and still break even (including realator fees). Actually, I'd recommend this even if the house isn't a "stretch" - if you're buying a house that's undervalued to begin with, no matter how much debt you have, you'll always come out positive in terms of equity. The owners don't have to post the price at less than the market value either--you can always make that offer. The worst that could happen is they say "no," right? (Well, and you lose your deposit [img]wink.gif[/img] )

True story:
When my mom bought the house we live in, she was only 21 (!) and it cost $50,000--in the seventies! That was a huge amount back then. Everyone told her she'd made a huge mistake and it was a white elephant, being a huge Victorian home (back then, "old" was considered bad) and needing work. She was 21, my dad was unemployed, and they only had $5000 for a down payment. My mom talked to the owner and worked out a buyer's contract whereby she would pay the woman the down payment, X (I think it was one hundred) dollars each month, until the end of three years when she would pay her the $50,000 in one balloon payment. It was a HUGE reach for my parents, but in three years, Victorian homes were once more "in," they had fixed the house up, and it was now worth $150,000. Since my dad now had a job history, my parents could easily take out a mortgage to make the balloon payment. Now all of the people who warned my mom against "stretching" are eating crow, because they live in tiny houses and we have one of the best houses in town--and my dad was unemployed when we got it!

So it's all in the way you manage things - bottom line is, don't be afraid of debt when you're using it to grow! DO be afraid of debt that you can't break even on or use to invest, like car debt or credit card debt. Now THAT debt is scary.

Yikes, I hope that wasn't too long! Can you tell real estate is one of my favorite pasttimes?

*De-scandalized for young audiences [img]wink.gif[/img] .

[rolloverrover]

When my husband I purchased our home in 1991, we purchased what we could afford on my husband's salary alone. That was probably the wisest decision we made when it came to purchasing a home.

[jlogemann17]

I scanned the other posts and don't think anyone mentioned this so- If you are looking at having kids soon, don't forget to check out the schools in the areas you're looking at. One of the best ways to do that is to talk to people who have kids at the school, or just show up at the school's open house, look around, talk to the teachers.

The other thing is- don't be embarrassed to ask the obvious questions. When we were house hunting, we were looking in the paper, and this one house seemed great- it was just what we wanted, in our price range- even on the low side. So I talked to the relator on the phone- she assured me there was no water in the basement, etc. etc. Then I thought to ask the "simple" question. Well, then why is it $10,000 cheaper than comparable houses? She himmed and hawed. I asked, what does the house back up to? A railroad track. Thank you very much, goodbye [img]smile.gif[/img]

Also when you're looking at houses, don't let yourself be discouraged by bad paint. You can walk into a house, and think, oh my goodness this is hideous!! But really look- is it just the paint- paint is cheap!

Also, pay the money to have a professional inspection done before you buy (your lending company may require this anyway), and be there when the inspection takes place. It's a great way to learn more about your house.

Pick a number you're willing to pay. Then don't look at or let your relator show you anything more than about 5% over that. No matter WHAT! If you see something out of your price range and fall in love with it, it makes looking at the houses within your range even harder.

When you get your number- start going to open houses and just seeing what your money could get- even if you don't want to buy right now. When we were looking at houses the first one we saw seemed nice, but we weren't sure if it was a good deal (we were looking at a for sale by owner without a relator). After looking at about 10 more houses we realized what a deal the first one was, but by then (literally 2 days later) it was sold.

Good luck!
Jo