As a soon-to-be first time buyer, I’d like any and all advice on what to look for when I’m looking. This includes mortgage shopping. I know little to nothing. I have to find out about APR, ARM, fixed rate vs variable, points…
Anything you can tell me will be much appreciated.
You might want to look into some books on this topic for specifics on your mortgage. I just bought my house last year and I have tried to scour this info from my brain until I want to refinance (I get ill whenever I spend lots of money… this process nearly killed me!).
However, on the practical side just a few things to consider are:
1. How old is the roof? And how many layers are currently up there?
Once you get a certain number of layers of roofing, the next time you need a roof, all the previous layers have to be stripped off too (more labor=more money).
2. How old is the house?
This can mean the possible presence of lead paint, absence of grounded plugs, drafty windows, worn pipes, irregular stud intervals, etc.
3. What is the local traffic like?
Will you have to live in fear that if your dog or cat (or, God forbid, your child) gets out they will become roadkill?
4. What is the resale market for that area?
Will you ever be able to sell this place if you want to move in the future?
5. What is the community like?
Does everyone watch everyone else’s kids? Or do people not even acknowledge your presence?
6. How close are you to the important things?
Where’s the closest hospital, fire department, police station, fire hydrant, grocery store, mall, park, etc.?
7. What do the neighbors’ houses/yards look like?
This is our biggest problem. Most houses in our neighborhood are very tidy and neat. But I sometimes feel like we live next door to Fred Sanford. I really like the family, but their yard is a dump by neighborhood standards (though not as bad as it could be).
These are just a few of the things I tried to keep in mind when Mr. SeGate and I were looking at houses. We saw some nice buildings, but they just weren’t home. I just knew when I saw the right one. And best of all, my daughter knew too. She ran from room to room giggling and dancing and I was sold (she was only 1.5 yrs. old and could only remember our teeny tiny apartment). We are close to a nice playground, can walk to a small grocery store, and are a block away from the parade route for the 4th of July. I love my home sigh. It needed work and a lot of paint, but it had what was important to us.
If you’re looking at older houses also ask about the electrical system. Has it been updated recently?
What kind of mortgage you want depends on how long you plan to keep the mortgage and/or the house.
Adjustable rate mortgages sound good at first but you have to be careful because if the interest rate spikes so does your payment! Some have limits to how much they will rise over certain intervals and some don’t … do your homework!
Fixed rates are just that. Your principle and interest payment stay the same over the life of the loan. Taxes and insurance can be rolled into your payment and some banks require this … this is your escrow money. This can change (but in my experience not by much)
As a first time home buyer there are a ton of programs out there for you that require little or no down payment and no points programs. If you need them they are great but be wary of points and PMI. Points are a percentage of the loan amount paid up front or rolled into the mortgage to lower your interest rate. If you don’t plan to live in the home forever or think you may refinance in a few years then points are a waste of money. Make sure the dollars saved over time is worth the dollars spent up front! PMI is insurance the bank takes out on you if you have less than 20% equity in the home. If you pay PMI keep track of your statements and make sure the bank cancels it when you reach 20%! Some will automatically but some need to be nagged.
Location of your home is important. You can do an awful lot to the house to make it what you like but you (usually) can’t move it somewhere else. We chose our current house more for the neighborhood than for the home itself and are working on making the house our home. We are two blocks from the supermarket, coffee shop, park/playground and a few decent take out places. We are also about 4 miles from the inlaws. The road is a side street and is quiet.
Make a list of needs over wants. Spend a lot of time window shopping. Try realtor.com for tips and ideas and just to look. Know what you can comfortably afford (not necessarily the same amount the bank is willing to lend) Know what kind of cosmetic things you are willing to take care of yourself. Get a home inspection before you buy!
Good luck and happy house hunting!
Now is a great time for getting a mortgage. The rates are rock-bottom.
When shopping for a mortgage, Google “mortgage rates”. Go to sites like this and look up going rates for your state. At the top of that page is a mortgage calculator. There are tons of them on the web. Mess around with them to see what effect points have (sometimes paying a point can reduce your overall outlay by 10s of thousands) , or the effect 15 vs 30 year terms have.
I have never had any luck with the “Mortgage Finders”. Those sites that say they’ll research sites and have the 3 best call you. All I ever heard from were brokers. They charge a commission, which comes out of your pocket in the form of a slightly higher rate. Go to “first party lenders” only.
I would say the first step is to determine how much per month you can afford. Shop for houses in a few target locations (These will be in towns or neighborhoods you have researched as desirable), which fall into your monthly payment bracket when taxes are included.
You will see what kind of place you can afford. This may be the first compromise. Thought you could afford a 3 bedroom and stay there > 5years? But now realize you can only afford a 2br? This house won’t be adequate for too long, since you want to have a couple of kids within 5 years. So, you might investigate a 5-year ARM. The rates are better, so you can either afford a little more principle or you can sock the “savings” away for your next house.
But, suppose you believe intrerest rates will never be lower and you definitely intend to spend many years in this house. You might factor in a point or 2 which drops your monthly payment, making the 3br affordable.
My point here is that you will have to start the process with one set of premise, go down one path, and then have to rethink them, once you encounter reality.
There are a million more things to factor in (insurance for one) and I’ve only given you a bit of info, but you’ll learn as you go, and there are lots of helpful people here.
SeGate & tanookie-
Thanks for the advice. I’ve done quite a bit of research online re: different kinds of mortgages & have created a chart to keep track of the different offers I’m getting, and what each will actually cost me.
As for window shopping, I’m still at the very begining of a very long process. Thanks for all the pointers of what to look for. Lucky for me, it’s just me. No kids, pets or live-ins to consider. Also lucky that I’m very handy when it comes to cosmetic overhaul (patching walls, installing floors, wall papering & painting).
So far, the things I’m most looking closely at in a property are foundation, roof, plumbing & electrical. When was the waterheater last replaced? Furnace? Was the last roof repair a patch, partial tear-off, complete tear-off?..
I’m pretty sure I’m on the right track, I’m just looking for tips from those who have gone before.
Here are just a couple of things I wish I had paid more attention to when I was actually doing the house-shopping:
ROOF. Somebody already pointed out what to look for, but it can’t be stressed enough what an important point that is! CHECK THE ROOF!
How many outlets are in each room. Think of how many things you will want plugged-in in each room, and estimate if there are enough current plugs to do that.
Really pay attention to closet space. Our house has TINY, TINY closets, and I didn’t even notice until I had all my stuff moved in, and I was looking for places to put them in.
Also, (and some may argue with this point), try not to look at small things wrong with the house and say “Oh, we can fix that when we move in”. If the list of fix-its gets too long, it will take YEARS to actually get around to fixing them. Maybe I’m a bad example, but I’ve been remodeling my bathroom now for about two years. I’m supposed to get a walk-in closet after the bathroom is done, but I’m really not holding my breath on that one.
I guess if you are buying a nice, new house, my advice may not be too useful. We bought a pretty low-midpriced home that was an old farm house. I love my home, but it has really caused me to make mental notes of things to check for when I house-shop again.
Oh yeah, I almost forgot, check to make sure that the dishwasher is built in, or if it is a portable one.
AND, check to see how well the walls are insulated. Our house had almost NO insulation in it, and we didn’t discover THAT until winter.
Sorry for the after-thoughts. 
Anyway, happy home-buying!!!
Nut Magnet -
Thanks for the tip re: brokers vs. 1st party lenders. I didn’t even think about that until you said it. That explains a few things about the chart I’ve made.
Breezy -
I don’t think I’ll be buying new. I’m a single, 30 year old w/little savings and a moderate paying job. I found the storage issue in the duplex I’m currently renting, bun hadn’t thought about outlets.
Little*bit, this is just a thought, but have you considered buying a duplex, and renting out the other half?
I have a friend who did that for several years, and he was eventually able to buy a REALLY nice house with the money he had saved over the years. My town is pretty good as far as rentals go, though. I’m not sure what the market is like where you live.
Just a thought.
Our first house was a duplex but we discovered we didn’t care much for being landlords. Be honest with yourself about how hard you can be on your tenants. If you can’t evict the single mom with 3 kids despite the fact that she’s destroying your property and not paying rent then don’t buy a duplex.
If you do go the investment property route… do credit checks on prospective tenants!
Here’s a link to a recent thread that might be helpful to you:
Shopping for a new house
Home Buying for Dummies was very helpful when I bought my first house.