Young couple getting our masters. I am 8 weeks pregnant and would like a home to raise our baby. Whats our first step? What do we need to watch out for? Who do we trust? How do we go about getting government grants? We don’t have bad credit…we probably don’t have any credit. We have 30,000 for a down payment and want to buy a house under 55,000 in the country (real estate is pretty low here in deep east Texas). Any advice from the well informed Teeming Millions would be great.
Wow, putting down $30,000 of a $55,000 house is a pretty good investment for a bank. Let’s assume you can get a 15-year fixed loan on $25,000: that’s a $210/month payment on the principle and interest, and is cheaper than most people’s car payments. If you can afford it, go 10 years ($277.55) or even 5 years ($483.32). Chances are your insurance (you’re not in a flood plain) and property taxes would be relatively cheap. Assuming they’re cheap you wouldn’t lose much by having the bank do an escrow for the taxes and insurance – they just add that to the monthly payment.
How’s your income? The payment plus all of your monthly credit obligations usually have to below a certain percentage, according to the bank. Sometimes you’ll see 41% and sometimes 29%.
However with interest rates so low, you may be better off just putting 20% down – $11,000. I say 20% because there’s no mortgage insurance if you start with 20% equity. If you can find a good investment that’ll return more than 6% per year, you could sink that other $19,000 in there and do something useful with it, or pay off higher-interest debts.
Are either of you veterans? Also do a Google search for FHA loans. You probably don’t need nor want either one since you have a good down payment and government loans cost 1/8% to 1% more.
Also talk to a real estate agent – they’ll be able to hold your hand through a lot of things. Lawyers specializing in residential property law is also a good idea.
As for government grants, that’d probably be a more local thing.
Hope that’s a good start for you.
Don’t be afraid to change realtors.
Our first realtor (when we bought our first house) paid almost no attention to what we told him. We gave him a list of locations - none of the houses he showed us were in any of those locations. We gave him a price range - every house he showed us was at least $20K over that. I got the feeling that he had several houses he couldn’t sell, and was banking on the fact that this was our first house to get us to take one of them off his hands.
We finally told him straight out that we didn’t care to do business with him. A week later, he called to apologize - and try to get us to look at a house that was out of our price range.
To be fair, the next realtor was much better at listening to what we said.
$30K for a down payment is a lot, so I doubt you will have troubles with financing. East Texas real estate is really under $55K? Wow. They are asking $100K for something one step up from a tarpaper shack in my area.
No doubt a realtor will along shortly to give you advice from that side of the table.
Congrats on the new baby.
Regards,
Shodan
In MN, there are county grants for first time home buyers and for home buyers in certain areas. You might want to see if there’s something similar in TX.
I don’t know if title insurance is a requirement but I’d highly recommend it; I’m working as a title examiner and there’s always a lender’s policy because a bank won’t loan money out without having insurance, but a lot of people don’t want to spend the extra money for the owner’s policy.
It helps if there was a problem with the title exam that nobody noticed, or if there were mistakes made in the previous owner’s documents. I’ve seen cases where there were 3 outstanding mortgages because of fraud or bank error and then the owner had a problem because he had no insurance.
Just do what I did: go from “Hmmm, I think I want to buy a house” to signing a contract in a week. Heh… It actually went off without a hitch, too. And I didn’t have a dime for a down payment, either - I got 103% financing. I actually got money back at my closing. I decided I wanted to buy at the beginning of May and closed in mid-June.
If you want to buy a $55K house and have $30K for a down payment there isn’t a bank on earth that would turn you down, even if you don’t have much of a credit history.
I just thought I’d jump in here with a success story before others chimed in with various horror stories about the home buying process. It’s not always a big, scary process. Aside from the writer’s cramp I got signing my name 842,671 times it was pretty painless.
Find a realtor who shows you houses that he is not himself listing. By law, a realtor is required to represent the best interests of any sellers he lists. That means that the realtor isn’t permitted to lie, but the realtor is expected to not be very thorough in looking after your interests. Likewise, there is an inherent conflict of interest.
If a realtor shows a house that he is not himself listing, then he is, by law, to represent YOUR best interests, not the seller’s. If your area has them, try to find a “buyers’ only” agent, who does not sell houses.
Hire an INDEPENDENT house inspector, one who does not acccept realtor referrals. If the inspector promises a complete inspection plus a report the same day, get a different inspector. We paid an extra $200.00 for a house inspection that got us an extra $5,000 in replacements and repairs before we bought the house–with no increase in the price.
More on an inspector: check to see if your state requires an inspector to be certified and licensed. Some states don’t require any qualifications other than a $50 business permit. Ask him/her for references and check them out. I would look for an inspector with ICBO (International Conference of Building Officials) certification. Make sure you accompany the inspector on his/her inspection tour. Look in the crawlspace, look in the attic, be alert for mold or damp. Climb up on the roof; any loose shingles? Check window frames for rot and leakage. Check to see if the window seals are blown (for thermal panes). If so, ask the seller to replace them or adjust the sell price. Make sure the drains drain. Make sure the panel is grounded and that the outlets are grounded (older houses may not be, particularly in the country), and that wiring is in good condition. Make sure there are GFI outlets throughout the kitchen and bathroom, or a GFI circuit breaker for those circuits. A good inspector will look at all these things and more. Good luck.
More on what Balthisar said which is excellent advice: Like everyone else mentioned, a 55% down payment is something any bank in the world would gladly take. But it’s not necessarily in your best interests. A 20% down payment ($11,000) is perfectly adequate (many institutions will loan up to 100% or even with the help of different federal/state/local programs). And there are any number of better uses for the $19,000 you haven’t tied up in real estate: paying off high interest loans, investing in something with a better return on equity, and so on. Homes are a decent investment in and of themselves, but there’s a flip side to buying a home in an area where the land is cheap and there’s little demand for housing: your home isn’t very likely to appreciate in value too quickly, which is the reason why it’s so cheap in the first place. Think of it as the difference between keeping your money in a safe, low interest savings account versus a nice S&P index fund.
If you’re interested in various programs available, your first line of defense is your local Community Housing Development Organization (CHDO). Although many of their programs are geared towards low-to-moderate income families (which you may or may not be, I dunno) there are some programs they may have available for anyone. My local CHDO offers free home-buyer education courses for anyone that shows up. But many, if not most of their programs are intended for the situation you thankfully aren’t in: families that can’t scrape together money for down payments and closing costs.
Here’s a list of certified CHDOs in Texas (warning, PDF format)
http://www.tdhca.state.tx.us/pdf/03-chdolist-030305.pdf
Here’s another piece of advice I haven’t seen yet: get your loan from a nice, reputable financial institution. It seems like common sense, but a lot of folks get snookered in by what appear to be super low mortgage rates from guys operating out of a suite in a strip mall. The big boys have tons of experience in this sort of thing, and will hire good, reputable inspectors and appraisers as well as have tons of significantly better advice than I’ve got. You’ll be happier if you’ve got a loan officer that knows what the hell they’re talking about.
Oh yes, TITLE INSURANCE
Hi MDM. President, since you’re seeking advice this thread should be in the IMHO forum. I’ll move it for you.
Please read the forum descriptions carefully before you post your next question. Thank you and welcome to the boards.
-xash
General Questions Moderator
make sure you check with your bank about FIRST HOMEOWNERS GRANT MONEY there is Fannie Mae, Freddie Mac and others.
Don’t put all that money down on a house …stay liquid with your cash.
Taking a 15 or 25 year mortage would have your payments pretty low so don’t go much higher then that.
Make sure whatever house you want that you hire an inspector to inspect it. In Florida they cost $300 but they are well worth it.
They find every little nit picking thing wrong with the house and then you can negotiate from there.
Never put all of your eggs in one basket. Do not make your house selection the one all be all house and whatever you do don’t tell the sellers how much you want the house.
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Do NOT sign a buyer’s agreement. This locks you into paying a commission even if you do not get adequate service from the agent and have to switch agents. Agents try the “it’s standard practice now”, but just say no, and they’ll be more than happy to keep working with you.
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Find a realtor who knows the area and who is organized. My first realtor used to pick me up, hand me a map with little stickers on the locations of all the houses he was going to show me. I ended up buying the first house he showed – even though I made him take me out for 2 more weekends. I’ve never since found a realtor as good as he was, but now I generally do the research myself since I know what to look for.
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Tell the agent ahead of time that you will not pay Administrative fees on closing. Some Brokers are now charging $500 (for buyer AND seller) for copying files! People refuse all the time and they just say “okay”. But it’s best to get this figured out before you’re at the closing table.
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Before you go to closing, ask for a “good faith estimate”. Tell the agent that you want EVERYTHING included in the estimate. Normally, the estimate will only include the banks charges and escrow, etc. It doesn’t have to include any realtor charges.
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Get an independent, certified inspector. It’s worth the money. (see if your state requires certification or licensing)
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When you’re at the closing table, remember that the seller wants to sell just as much as you want to buy. When you’re at that table, you’re so excited and nervous that you don’t want anything to go wrong. The seller has exactly the same feelings, the only difference is seller has been through this process before. Relax and don’t feel pressured. Everyone at that table wants this to go through, and since you’re the one paying the money… anything you don’t feel comfortable with, ask. And any fees that they say are standard, either get a clear explanation, or just refuse to pay them. By the time you’re at that table, no one will let you walk out of the room.
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Don’t put all your money into the down payment. You can probably make more money on it somewhere else, and you want to have some cash available for emergencies. They don’t call it a “money pit” for nothing.
Good Luck!
Can’t say anything that hasn’t been said, but I will confirm some things. We bought a house last year, and the things I’m glad for:
The inspector was great. I recommend that if all certifications are the same and needed, then get one who’s been in construction for a while. If not, still get one who’s been in construction for a while.
Don’t be afraid to search private adds. We bought ours privately, and we paid the asking price. It took a few months to close, and while we were waiting, housing prices went up $10,000. So they were more than willing to let us back out, while we were more than willing to pay the asking price.
If you get an agent, make sure they are working for you. Tell them what you want, and if they don’t provide it, you will look elsewhere.
Know all the hidden fees, and don’t be surprised if you forget some. We used a local notary for our final paperwork, which still cost a lot, but was worth it.
Make sure you understand any stipulations. For instance, the person we bought from wanted to stay in for an additional week. Looking back, we should have just made the closing date that additional time, as we then are responsible for the tax and utilities, as well as our mortgage.
If you have higher interest debt, don’t put it against a mortgage that only charges you <6%, pay off the higher debt.
And research the mortgages, as some are way better than others.
Don’t settle for something that isn’t “just right”. You are going to be there for a while.
Title Insurance!!
With interest rates at historic lows, go with as little down as possible. Keep some of that $30k in reserve for emergencys.
Swamp coolers suck.
Find a house that you think will be big enough, then buy one two or three times as big! It is amazing how big they look before you move all your shit in. You will end up needing more space, especially with a baby.
Mature landscaping is a real good thing. Nothing worse than looking at that 3 foot budding tree imagining sitting in its shade 5 years from now. Trust me.
Swimming pools suck worse than swamp coolers! They sound like fun, but in reality are a constant pain in the ass. Especially with kids. Kids are just as happy to run thru a sprinkler when its hot.
You can never have too big a garage.
Never even consider a property governed by a Homeowner’s Association.
That’s probably too much from me, so I’ll mosey along…
“Lets get them meek bastards NOW!”
You can add fireplaces to that list, in my book. Traditional fireplaces are generally just agents for heat loss. If you simply must have a wood-burning traditional fireplace, make sure you have a qualified someone check out the construction of the thing. Many fireplaces are installed incorrectly and not properly maintained and can cause house fires (my entire condo group has this problem). I would highly recommend that you have a direct vent gas insert installed, should you choose to have a fireplace.
Are you absolutely certain this is true everywhere? It has been drilled into my head that here in Massachusetts at least the realtor is ALWAYS representing the seller, regardless of who is listing the house, unless you and he/she have signed an agreement whereby he is specifically designated as acting as your (the buyer’s) agent.
BTW I never heard of a swamp cooler until gatopescado mentioned it.
I will add a hearty AMEN to this. I just put my house on the market yesterday. One of the main reasons I’m doing it so early is because I’m sick to death of the HOA here - bunch of power-mad morons… We knew before we bought the lot for our next home that there’s no association, nor does anyone in that neighborhood want onel
Avoid them like the plague!!
“Many fireplaces are installed incorrectly and not properly maintained”
Yep, in my old house the fireplace back was angled so that the smoke is sent into the room. Can’t do a thing about it.
I think some cities are not allowing any new wood type fireplaces because of the air pollution. You can get a gas one & they don’t require a chimney & can heat your whole house. Costs about $2000 for a nice one.
Our local store has an electric fireplace that looks like the real thing & heats your house too & is portable, but costs about $400+
Once you’ve decided on a house you think you want, go back to it several times with your agent. (A good agent should be willing to do this). Check:
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Different times of the day. If you looked when it was daytime and everyone is at work, that neighborhood may be different when everyone is at home. My aunt decided against a place because all the neighbors came home after work and held parties in the street.
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If possible, check the basement after it rains. During the month before closing, my mom checked out our house after every rainstorm to check for leakage.
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If you might add on in the future, check to see if your lot is buildable before you buy!
Be prepared for surprises. When we bought our house there was ugly paneling in the bathroom. No problem, we thought, we’ll just rip that stuff off. Yikes. Behind it the wall had been ceramic tile, except half the tiles had fallen off and they had used the paneling as a last-ditch measure. We had to remove it all and then put up new wallboard (not fun). Any ‘simple’ redecorating or remodelling job becomes a huge job if you buy an older house. The same thing happened when we took up the kitchen tile–there were 5 different layers of tile underneath it!
Good advice so far. You might want to check out test scores for the schools in your neighborhood, and maybe even hang out at the one your kid will be going to. Where I live house value is correlated with school quality rather heavily.
You might want to do some cash flow calculations. Putting a lot down hurts liquidity but does good things to your monthly payments. Putting a little down (like 20%) improves your leverage if the price goes up.
Going back in different conditions is also good advice. If you are seriously interested in a house, I’d arrange a long tour with your agent when the owners aren’t there. Check on how well the doors are hung. Check water pressure, and if the toilets flush okay. Check fit and finish. Check wear and tear on the carpets, and if any flaws are hidden. Turn on all the lights and fans. Go into the basement and attic. This is no substitute for an inspection, but you’ll get a good feel for the quality of the construction.
Pay a lot of attention to the neighborhood. In my experience the neighborhood is more important than the house itself.
If it’s important to you to live near a park or close to the mountains or far from a major street, than make that a priority.
You can renovate and change your house, but if you don’t love the neighborhood, there is nothing you can do.