Mrs. DESK and I are finally taking the plunge; we’re considering buying a house. We’ve looked at the house and just got word we’ve been approved for a loan (No details re: rate, variable or fixed, etc. That’s why it’s not WE’RE BUYING A HOUSE!!!)
So, the question is,what advise would you give a first time buyer before they sign on the dotted line? (not looking for legal advise, just things you wish you would have been told)
Thanks in advance - DESK
Your question is very broad, but google is your friend:
http://www.google.com/search?q=first+time+homebuyer+advice&sourceid=ie7&rls=com.microsoft:en-US&ie=utf8&oe=utf8
I recommend you find a good financial counseling organization and get some pre-purchase counseling. I’m talking a one hour session just to sit down with someone and ask any questions that might be burning in your minds about the whole process. This would ensure that you don’t run into any surprises.
Hire a very good home inspector. Not one recommended by the buying or selling agent, someone independent. He should take at least 2 or three hours to inspect the house. Go there with him. Make sure he is a member of at least one professional inspection association.
Check out if there is a homeowners association and what it’s rules are. Talk to the neighbors, see if there are any pressing issues. Go to city hall and see if there is any planned future development or changes.
Don’t overextend yourself.
Home inspection - no question. People do dumb things to their homes, or they try to hide problems with paint or who knows what else. It is well worth the fee to have a professional give the property a once-over, either to assure you that all is well or to point out what is wrong so you can decide if you still want the house or if you want to renegotiate based on the inspection. And make sure any offer you make is contingent on a satisfactory home inspection.
Also, get every promise in writing. This is business, and no matter how nice and sincere someone seems, get it it writing. Especially things involving money. We had one realtor tell us “Oh you’ll only need about $50 at closing” then the day before, he called and informed us we needed something over $2K - thank goodness for parents with more savings than we had at the time…
Good luck - I hope you can work it all out!
Ask for 5% seller’s concessions to cover closing cost.
We got this in May, so we had no closing costs.
I’ll just take this opportunity to reiterate the necessity of a proper home inpsection. Furthermore, you must be honest with yourself about any home improvement required, your skills, and the amount of time you can spend on projects. Everyone loves to talk about getting a house and fixing it up but few seem to enjoy it or be able to readily accomplish it. Building materials are expensive, many repairs require specialized knowledge and/or permits, and contractors may require your firstborn as a downpayment. If you like relaxing and enjoying time with friends and dayfreaming, aim for a house that does not need repair and is not old.
If you are anything like me, I would suggest getting the biggest yard available because that’s where most of the fun stuff happens.
Just because you’ve been approved for a loan in the amount of X number of dollars doesn’t mean you’re obligated to buy a house that costs that much. This may seem like a no-brainer, but it isn’t always obvious to first-time home buyers in the grip of realtor flattery and the glow of successful adulthood (“Lookie me! I’m buying a HOUSE!!”)
When the Better Half and I started looking at houses to buy our first house, we were informed by the realtor that because of our combined incomes and our good credit history, we were eligible for a loan for eleventy-million intergalactic credits, which “of course!”, said the smiling realtor, “meant that we’d be looking at homes in the toney subdivisions like Fox Run Hill Lake Estates…”
When actually our personal commitment to the values of Simple Living, Good Stewardship Of Resources, and Overall Cheapness meant that we were more interested in homes in the Near-Northside Late Victorian Bungalow Oh-My-God-You-Don’t-Live-Down-THERE District.
I can still see, to this day, the way the realtor’s face fell. Actually fell.
Anyway, the moral is, sit down together, you and the Missus, and have a long talk before you start trudging around looking at houses, and be in agreement about how much you want to spend, and don’t get carried away by the glow of accomplishment at being told that you’re eligible for a humongous loan. 'Cause all that’ll do is saddle you with a humongous mortgage payment every month. We opted for the cheap yet acceptable older house in a perhaps less than optimal neighborhood (both times we’ve bought houses, actually), and were rewarded both times with miniscule house payments every month. And actually we paid off this house in less than 20 years. And our kids didn’t have to grow up with any more drug dealers as neighbors than any other kids in the toney subdivisions.
I would also advise you the same thing I’d advise you when buying car: never buy the first one you see. You’re going to spend a lot more time living with your home-buying decision than you would with your car-buying decision, and a car that drives you crazy is much easier to unload than is a house that turns out to be the Wrong House. Unless the realty gods quixotically decide to drop the Perfect House in your lap, plan on spending weeks, if not months, looking at houses before finally choosing one.
Home inspection; home inspection; home inspection.
After that is done get a roofer to do a roof inspection and if there is a basement go back and have that checked a second time. A house I bought had a virtually worthless roof that passed muster from the home inspector I hired even though he appeared to be doing a close examination while he was up there. He was either incompetent or just pretending.
I like the cheaper house idea. We moved out to the country and got a wee house with a few acres that will be paid off in 10yrs. Now, I must admit that most of my friends’ houses are nicer and they can walk to food or entertainment, but my share of the mortgage is less than a weeks’ pay and it will be over soon. We can pay for it easily on one salary if necessary and neither of us gets paid a fortune.
However, jacking up a house and ouring new footers to place blocks on for the new sill that holds up the new floor joists that you put in because the termites ate the last ones was a piece of work.
I agree with buying less than the bank says they will lend you. Banks are notorious these days for lending amounts that overstretch the homeowner. Figure out for yourself how much you can afford to spend (keeping in mind utility and repair costs for the home) don’t rely on the bank’s numbers.
My wife and I went for the whole enchilada. Never even considered buying less than what we were approved for. My advice comes in three parts.
First, go back and re-read Duck Duck Goose’s advice. Then copy and paste it, print it out in a large black irritating typeface and put it on the fridge.
Read it every day. Discuss with spouse regularly. Your ideas will likey change with each property you look at. Note how many things your spouse hates that you thought was okay or even cool. Potentially bumpy road ahead …
Next, allow me to second, third, and fourth (to the tenth power) the tips on the home inspection. I thought I was good enough to catch anything major. I did, but only a few month’s after closing. Verryyy Expensive Mistake! I also thought that I was good enough to fix most of it … wrong again, but that’s another story …
Last, and certainly not least, DO NOT SIGN THE A. R. M.!!!
Read the news. Look at forclosure rates. There is a major crisis afoot. My wife and I got caught in the first wave four years ago. We were told that the rate could not go up more than one percent in one year. Lie. Mortgage was sold 38 days after closing. New rules hidden in fine print. Result:
Our first year payments were $479.90
Second year payments were: $756.30
Third year payments were 1189.12
Fourth year, payments went to $1821.12 Could not find a qualified buyer before the sheriff’s sale … yes, we lost the house. And ended up walking away from nearly $92,000 in equity.
What ever they tell you about the increases in the future, they’re either guessing (wrongly) or lying through their teeth.
My suspicion: they want your money bad enough to tell you whatever it is that you want to hear.
[Sidebar] Through a little good fortune on our part, and a little bad forturne of others, we are doing much better now. We own our land and home outright. As long as we keep paying the property taxes (less than $200/year) no one can take our home away ever again.
I never did learn that bit about the home inspection. When we bought this place I missed the fact that the entire plumbing system (supply & waste) had to be replaced due to freeze damage. And then there’s that problem with the roof. And the insulation … Oh well, live and learn. Sometimes.[/Sidebar]
Congrats. Good Luck. Take your time. Follow everyone elses’ advice to the best of your ability. Question Everything. If you feel pressured to make a decision, back away. Slowly. Then run for your lives and start anew.
Caveat Emptor
Lucy.
My previous post was made on the fly - Mama was in a rush to head into town until she remembered the store she wants to go to doesn’t open till noon on Saturdays. So, if I may, please allow me to clarify a few points …
Taking an attorney to the closing ain’t such a bad idea either. An aquaintance of ours offered to help us out for $150. Sure wish we’d taken that offer.
Going into the closing we believed that we were going to be signing a 30 year fixed rate mortgage for the $116,000 balance on the property after a $71,000 down payment with payments of $657.57.
‘They’ shifted us into a A. R. M. at the closing table. We were told that it would save us almost $200/month, was tied to the prime rate and absoulutely could not increase more than 1% above prime in any year. Hell, that’s less that inflation, isn’t it? And, Hey! It could actually decrease if prime went down …
Oh, yeah, one other thing - not really important at all - what the mortgage actually said was .001 of the loan balance. In the fine print after mortgage was sold: Unless a payment is posted late - then minimum increase is .002 and max up to .005 of the loan balance.
We thought we were doing everything right. Really believed we had all the bases covered - but the infield players were on vacation in the Bahamas. And we didn’t hire a coach.
Home inspection: Think used cars. Only more expensive. There are some people who buy new cars ‘cause they’re moving up. Some jus’ ‘cause they’re tired of the car. Some think they’ve been lucky so far, but somethin’ expensive is bound to break soon. Others are dumping the lemon because it’s turned into a money hole and they just found one more very expensive thing that needs to be fixed so let’s unload it on some unsuspecting sucker for as much as we can get out of it and take the money and run …
Once you find a home you like, take the time to walk through the neighborhood. Meet and talk to some of your prospective neighbors. Ask them about the other neighbors. They’ll tell ya if the family next door is the family from hell.
Oh, yeah, one last thing. Watch out for ‘Restrictive Covenants’ and check to see if there is a Home Owner’s Association. My eldest daughter bought a home in an area governed by the HOA from hell. She has to have their permission to plant vegetation, and it must conform to their standards. They even tell her what height to cut the grass! And she can’t change the color of the house trim (must be white) and can only select one four shades of grey vinyl siding. And the fence has to be the same as everyone else’s. And Christmas decorations can not exceed 2000 lights (must be mini - no large bulbs!) nor have any [get this:] non-christian themes [as defined by the HOA holiday display commitee] and no outside diplays on any other holidays [such as Halloween]. :rolleyes:
After 3 years, of putting up with this, she has decided to sell. And now they’re telling her where the real estate agent can put the For Sale sign. [Hint: it’s not on the front lawn. Or visible from the street.] Sigh.
And she ain’t gonna bring up the Restrictive Covenants or the HOA unless the buyers ask very specific questions. They can find out about 'em just like she did. She tried to plant an nonconforming shrub near her front door. :smack:
Yep. One of the biggest investments you’ll ever make.
Please take the time to reduce or eliminate as many future headaches as you can. There are more than you can imagine.
Sorry to have made this so long, but you did ask …
Said my piece. I’ll go away now. 
Once again, Caveat Emptor!!!
Lucy
Post Script: Do not let any of this discourage you. Just use caution. Home ownership is truely a great adventure. Ain’t no way no how you could ever get me back in the rental game again …
Don’t buy everything you’re approved for–check. No point in being house-poor.
Get a home inspection–check.
Ask seller to cover closing costs–check.
As for the last one, it is actually easier to get the seller to chip in, say, $5000 toward closing costs than to come down on the price $5000, because what the seller pays in closing costs is tax deductible for the seller. So it’s actually cheaper for the seller to pay closing costs than to come down a comparable amount on the selling price. But either way, *you * save $5,000.
AMEN on the HOA advice. We’ve lived in 3 different neighborhoods that had 'em. First one was no biggie. Pretty much the only thing they did was hold a Halloween Carnival for the kids since the homes were all on fairly big lots set pretty far from the road. Dues were $25/year.
Second one was a bit more intrusive - they required us to get permission to fence our yard, and they only permitted one kind of fence. It was the most expensive one - around $500 annual dues, but that gave us access to the pool and the “beach” at the “lake”, plus snow removal, which wasn’t an issue for us because we lived at the edge of the neighborhood on a major county road.
Third one was a huge pain in the ass. There were only 49 houses on the street, priced in the low $100s, so it wasn’t a high end development. But the power-mad idiots who dominated the board did inspections of our yards. They got the sheriff to prohibit all street parking, and they’d nail you if you parked on your lawn, so your vehicles had to be in the garage or the driveway. So much for having a party of any size at your place. They prohibited yard sheds and clothes lines and non-wood fences. They tried to keep people from having satellite dishes that were visible from the street, but that didn’t fly. I was sooooooo glad to get out of there.
Needless to say, when we bought this place, we made sure there was no association before we even looked at it. I know there are some folks who swear by them, but I know more people who swear at them. Just be aware.
You should decide what you can afford to spend on a monthly basis, as an entirely different issue from how big a loan you qualify for. That number can eventually converted into the size loan you can afford, given other variables like interest rates and mortgage insurance.
Your realtors will likely be pushing you right up to the limit of what you’ve said you can afford, and beyond it if you let them. I got shown several homes that were “slightly” higher ($10-20K) than I told them I would spend, until I got smart and got the asking price over the phone before going to look at the property.
Realtors have no incentive at all to get you the best possible deal. They get a percentage of the sale, and the higher the sale price the more they get. So don’t look to them for unbiased help in price negotiations.
If I buy a home again, I will try to leave realtors out of it entirely. Though I’m reasonably satisfied with my condo, I found the buying experience so miserable that I don’t ever want to go through it again. I hope to be able to live here until I die, and I hope to die before I have to move again. 
Pay close attention to the financial aspects of the transaction. Read **LucyInDisguise’s **posts closely for what happens if you don’t. Make sure your budget will be comfortable.
The next piece of advice is get a damn good inspection. Have a good one do the inspection and set aside a good chunk of change for when something goes wrong. Because with a house, something will.
Once you’ve bought, if you have time before you move in, get whatever work you want done, done then. When we bought our house, we painted the the living room, dining room, and master bedroom before we moved in. I wish we had painted the other rooms as well, because moving the furniture around and out of the other rooms is a pain in the butt. We are somewhat odd in that we’ve already repainted the master bedroom in the two years we’ve lived here and will most likely repaint the kitchen and perhaps the other bedrooms.
When budgeting, make sure to factor in the cost of insurance and property taxes in addition to your mortgage payments.
True dat. Our payment on our loan is something like $1181/month, but when you factor in taxes, insurance, condo fees, etc., etc., our total mortgage payment is more like $1700+. Your lender is required, at some point, to give you a statement summarizing all of these items and giving you a total monthly mortgage payment.
All great advice.
Let me add a couple points:
- Expect your taxes to go up each year. If it’s not school taxes, it’s property taxes, if not property taxes, it’ll be fire and library taxes.
That means getting hit with a bill from the mortgage company to rebalance the escrow.
Let me explain and someone else can correct. We pay the mortgage company an amount over and above the mortgage to cover taxes and insurance. The amount needed is simple: total amount divided by 12.
But when your taxes go up, the fund can’t cover the bill. The mortgage company comes back each year, saying “we need to up the amount you pay per month, or you can pay us a lump sum to cover the difference.”
In my neighborhood (Hershey, Pa., somewhat expensive), it can mean a couple hundred bucks. I think some years we didn’t have to pay; others, more. We’re guerrilla savers, so we prefer sending them a check.
So that’s another good reason not to buy at the high end of what they say you can afford.
- Check your contract to see if it allows you to pay down the principal in advance. You’ll get some argument from some financial advisers, but I believe that homes are not meant to be investments, and that it’s a good thing to go into retirement not having to meet a mortgage. So we’re paying down the mortgage in advance.
I understand that some contracts may forebid or penalize you if you send in extra money. So check the contract anyway.
- Always be prepared to walk away from a deal (if you can legally do so, I mean). If there’s a bait-and-switch on signing day, walk away. If you found your dream house, but the owner’s dicking around with your offer, walk away.
We had one such house in mind. It needed work, but it was in a fine neighborhood and the price was within our means. But she was still asking too much. We made an offer, she lowered her price about a hundred bucks.
We could afford it, but the vibe we got was that she didn’t want to sell the house (her son was her agent). So we walked.
Turned out to be a good thing. She lost the house to foreclosure, and we found another house, much larger and nicer, for a little bit more.
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Before you buy, see as many houses as possible. Your reaction to different styles, designs, locations will help refine your taste so that you’ll know when the right house appears.
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Check the traffic around the house. Visit the lot during morning and evening rush hour. My wife got that advice when she was single, and it saved her from buying on a street that was peaceful most of the day, a madhouse at 9 a.m. and 5 p.m.