buying a house

[Elizabethdaisy]

We have been talking about once our lease is up here we want to try and find a bigger house and buy it. can you ladies who have bought your house give me any info on what to do first? our lease is up Dec.31

[cream_city]

You might want to talk to banks and see how much you can get pre-approved for. It helps to be pre-approved when you make an offer on a house, and given the real estate market, I think it would be helpful to know what sort of loans will be available to you.

Personally, I'd avoid any with a variable interest rate, balloon loans, etc. We bought a house this spring and just went with a standard fixed rate 30-year loan even though it meant paying PMI. It meant that we couldn't spend as much on a house as we could have with the other types of loans, but I think that the more conservative amount was a good choice for us.

I'd bet you'll be able to get a good deal on a house right now!

[Elizabethdaisy]

when should we start doing all this though its almost august and our lease is up Dec.31 I have a found a few houses just looking that I like here.

[cream_city]

It all depends. You could start looking and get pre-approved in August. But most people selling tend to want to close within 60 days of the offer being accepted. Given the market now, though, people are being more flexible. So it can't hurt to put in an offer and say you want to close in December.

A more typical timeline would be to put an offer in probably in late September through October. Plus, I think prices may drop in September...

[Babyblue]

like cream said...do not get the variable rate or ballon rate...get the steady solid loans. and also, dont buy far above your abilitys...think ahead to where you could be in a few years and where you are now. think about what would happen if one of you was to become a single parent...could you afford to still live there.

right now if you have the money you can get a great deal on a house, just be very carefull to spend within your means.

and yes now would be the time to start lookign and thinking about things.

[Elizabethdaisy]

well we cant move until our lease is up here.
prices drop in sept? never heard that.

[samiam]

like cream said...do not get the variable rate or ballon rate...get the steady solid loans. and also, dont buy far above your abilitys...think ahead to where you could be in a few years and where you are now. think about what would happen if one of you was to become a single parent...could you afford to still live there.

right now if you have the money you can get a great deal on a house, just be very carefull to spend within your means.

and yes now would be the time to start lookign and thinking about things.

This is SO very important. I have seen way too many people buy bigger and more expensive and then be struggling to make that payment. It is no way to live IMO. I had friends that has this beautiful new house back in the day, newly built for about $300,000 (a lot 10 years ago for a new couple IMO). They then had the landscaping and deck put in (another $15 and 25 grand). I was actually jealous of them for a bit. They had this gorgeous house and plenty of room and I had this little cape cod.

Jump forward a few years. They are having trouble getting pregnant. Insurance paid for most of what they needed to get pregnant and two years later she is finally with child. She couldn't take off more than 6 weeks of work as thier bills were just too much, taxes alone were $8,000 a year there! Needless to say, my jealousy went away really quickly.

They would both get up for work around 4am, drop the kids at daycare, and hop on the train to the city (an hour and a half each way), get home around 6:30pm, pick the kids up and put them to bed. By the time they got home they had enough time for a quick dinner and off to bed. That was a lot of money to be spending on a awesome house just to use it on the weekend IMO.

Since then, we have stayed within our means. Our little capcod has had an upstairs addition put on it, save our kitchen we now have plenty of room for a fraction of the cost. It will never be the beautiful new house but it is perfect for us. The only thing driving me mad these days is my kitchen. It is outdated beyond belief, waaay too small etc etc. Hopefully soon we can at least get approval to take down the wall between the kitchen and living room to open things up a bit and get more room. We can't all sit around the kitchen table and eat!

[still_me]

Prices can drop in the fall because people don't want to pay an extra heating bill over the winter.


We bought our house 2 yrs ago and we got a 30 yr fixed rate at 5.35%. IMO, fixed rate should be your only option you are looking at. Other "options" will only bite you in the butt later on. Variable rates are great in the beginning, but can almost double your payment when they go up. You have absolutely NO control with your amount if you go that way.

Look for a house that is 20% below your approved loan rate. For example: If you are approved 80,000 look for a house in the 74,000 range. That will guarantee you that you will be able to make your payment and some if you want, or be prepared for hikes in taxes, ect.

Talk to you neighbors. Find our what little things they know about the house and see who your neighbors are. You aren't only buying a house, you are going to be living next to those people for X amount a years. Drive by at night a couple of times on a weekend and see if they are partying a lot then. See if they have a dog and if it is kept outside. Those things can drive you nuts if they apply.

Do not jump at the first loan that seems great. See how long they will guarantee that price and then check other places.

Pay the extra money and get your own inspection done.

Get a realtor to help you. You won't pay their fees, the people selling the house do. It helps to have someone on your side who knows what they are doing. DO NOT go through the same realtor that is selling the house for the other people. They are going to want to make as much money as they can for the sellers and themselves.

Get a listing from your realtor and go drive around to check the houses out. It will save you time when you want to go to open houses because you won't be going to houses that you don't like or are too expensive.

Have fun, but be realistic. This might not be the time you get your dream house, but you will be doing something great for you and your family.

[samiam]

well we cant move until our lease is up here.
prices drop in sept? never heard that.
Many people are looking to move by August, before the new school year starts. You have the pickings now though regardless. I would start looking, it is not like things are selling fast at this point anyways. At least if you start looking now you can figure out what you can and can't afford and really put the time into buying what you really need and want. I would also suggest making a list of what you really want in a house and what you could do without or fix up later. For example, if first floor of the kitchen laundry is a must, maybe the mud room would go on back burner. If the two car garage is a must but you can do without the extra bedroom, etc etc.

Remember, most places you can add on. Also if you get an older house that is out of date sometimes it is better as you can update how YOU would like versus how someone already has. Then again, if you are not up for the work or having people in the house, an up to date one would be better for you.

Definately get a fixed rate mortgage. I would also highly suggest having escrow and making sure your taxes and insurance are taken out monthly in mortgage payments. Most people have a very hard time saving that money monthly to pay it quarterly.

[Elizabethdaisy]

thanks ladies. I wrote down all that info. thanks. Its kinda scary but I am so excited.

[samiam]

I forgot about the neighbors. That is one of the most important parts! We got our house for a steal back in the day and not knowing who we were really moving in next to, on a court mind you, we lucked out beyond belief. Neighbors can make your day to day great or they can make it a living hell. You also have plenty of time to check out the schools in detail, the parks, and community services, the libraries etc etc.

We have great neighbors (one of which is an organic gardener like myself but much wiser and very generous with her plants and knowledge), a park with a pool and waterslide two blocks away, a great communtiy center, nice library, and grocery stores within walking distance. The school the kids go to from grades K-5 is in my backyard. My fence backs up right to the school.

[Elizabethdaisy]

I hear they have programs for first time home buyers. how do I find out if or about those?
neighbors good thinking thanks. we are trying to stay in the same school system so when we do move kyleigh doesnt have to move schools.

[kohlby]

We started looking before we were ready to buy, before we had a loan in place, and before our house was finished being upgraded. It will be much easier for you since you don't have to sell a house first! You have a date that you can move in already - if you find a house now, then you have a closing date in mind. Sellers will feel more comfortable with a buyer who doesn't have to sell their house first, so that's going for you.

For a loan, we did call around. Make sure you add in all the fees and get the bottom line of the true percentage. Our realtor also suggested someone. She said he was the lowest, but we wanted to call around anyways. He did end up being the lowest. We weren't able to bargain him down any lower. But we did do it so our taxes aren't paid out of our mortgage, which helped lower it. Also, we didn't want to have to pay PMI, so we made sure we had at least 20% down. We did do a fixed rate mortgage. When you call for a loan, also ask how long they'll guarantee the rate. Some will do 30 days, some will do 60 days. (My hunch is that the days is closer to 30 days right now). So, if you look too far in advance, it might not be the exact rate you end up getting, but looking in advance still gives you a ballpark figure.

[Elizabethdaisy]

what is PMI?

[Elizabethdaisy]

when buying a house how much is a good down payment? so we can start saving.

[cream_city]

PMI is mortgage insurance. If you can't pay 20% of the value of the house down, the bank charges you extra money until you have built up 20% equity in the house. It is supposed to protect them I think.

It can be quite a bit to add on to a monthly payment. We didn't do PMI on our two previous houses -- we took out a second loan for 20% (with a higher interest rate that was variable after 3 years) and then the rest in a fixed loan. We just didn't want to do that this time, because both of the times we did this before, we told ourselves we'd pay off the 20% soon -- but never paid a cent above our mortgage payments. And a lot of people are finding themselves in trouble now as the variable rates kick in.

PMI goes down within a certain number of years so that it's pretty negligible. Also, if your house goes up in value and you pay to have it reappraised, you can get that 20% equity quicker, if that makes sense. Of course, with the market what it is right now, that is unlikely to happen. But that worked for a lot of people a few years ago.

If you have 20% to put down, you should definitely do it. PMI sucks. But we've never had anything to put down -- we have always bought with zero down. I think you get better interest rates if you have more to put down, too, but I'm not positive about that.

Prices are generally highest in spring and early summer because that is when most people want to move because of the school year. In September, the market cools down. Also, many of those people have had their homes on the market since April or May, so they are more likely to be willing to take less than asking price. Every month they hold onto a house they don't want costs them money -- especially if they've already moved out.

[still_me]

I forgot one more thing. Make sure that your taxes and your insurance are in with your mortgage payment. It can be pretty stressful to come up with a thousand or so dollars every 6 months for your insurance and taxes. IME, it is much easier to just pay it in one lump sum every month.

If you are structured enough to set aside money no matter what for those two things, then good for you.

PMI usually goes down after you have 70% of your house paid off, IIRC.

FHA loans and first time home buyer loans are available. There is also a HUD program if you are eligible.

[Elizabethdaisy]

how do you make sure your taxes and insurance are covered under the monthly bill?

[still_me]

Some info on PMI

Why a Change in PMI Requirements?

In the past, most lenders honored consumers' requests to drop PMI coverage if their loan balance was paid down to 80 percent of the property value and they had a good payment history. However, consumers were responsible for requesting cancellation and many consumers were not aware of this possibility. Consumers had to keep track of their loan balance to know if they had enough equity and they had to request that the lender discontinue requiring PMI coverage. In many cases, people failed to make this request even after they became eligible, and they paid unnecessary premiums ranging from $250 to $1,200 per year for several years. With the new law, both consumers and lenders share responsibility for how long PMI coverage is required.

The Homeowner's Protection Act (HPA) of 1998

What Loans Are Covered?

Generally, the HPA applies to residential mortgage transactions obtained on or after July 29, 1999, but it also has requirements for loans obtained before that date. This new law does not cover VA and FHA government-guaranteed loans. In addition, the new law has different requirements for loans classified as "high-risk." Although the HPA does not provide the standards for what constitutes a "high risk" loan, it permits Fannie Mae and Freddie Mac to issue guidance for mortgages that conform to secondary market loan limits. Fannie Mae and Freddie Mac are corporations chartered by Congress to create a continuous flow of funds to mortgage lenders in support of homeownership. As of January 1, 2000, mortgages in amounts of $252,700 or less are considered conforming loans. For non-conforming mortgages, the lender may designate mortgage loans as "high risk."

http://www.frbsf.org/publications/consumer/pmi.html#require

[still_me]

how do you make sure your taxes and insurance are covered under the monthly bill?


When we applied for our loan we talked to them and made sure that we would have it all included into the payment. I know that who we dealt with covers all of Ohio. Do you want me to get the information for you? They were upfront and honest in how to go about getting a home.

[Elizabethdaisy]

yes please thanks stillme.

[KerryS]

The very FIRST thing I would recommend doing before going through the homebuying process is pull a credit report and get a FICO score on both you and your husband. You can get a free credit report here: www.annualcreditreport.com and if you have a credit card, you can buy your FICO scores.

Then go talk to your local bank. THey will be able to walk you through the homebuying process, explain everything, help you find a first-time homebuyer program if you qualify.

Just a warning -with the mortgage industry the way it is right now, it can be VERY difficult to get into a mortgage without at least 5-10% down unless you have really good credit scores (over 700-750).

[daniela]

Great advice.

I would like to add, look at more than one house!! Even if the first is your dream home, be sure to look at a few more before you make a offer.

I jumped on the first house I saw. I'm starting to really regret it after only 2 years here.

[Elizabethdaisy]

we actually have 4 houses so far we want to go see and we like in our price range. good advice not to take the first house we like look around. thanks.

[kohlby]

PMI goes down within a certain number of years so that it's pretty negligible. Also, if your house goes up in value and you pay to have it reappraised, you can get that 20% equity quicker, if that makes sense. Of course, with the market what it is right now, that is unlikely to happen. But that worked for a lot of people a few years ago.



That's what we did with our first house. We didn't have 20% to put down. So, after a few years, we had it reappraised and were able to get that 20%. Definately put down as much as you can to get as close to that 20% as possible. Also, don't forget about closing costs as well.

[vulturemom]

All the mortgage places that we talked to wouldn't do loans without at least 5% down anymore. Plus there will be closing costs unless you can get the seller to pay those.

[samiam]

From here till the time of buying the house I would save every penny you can. Do without the extras for now and it will pay off in the long run. To give you an idea my dh and I saved about $5,000 to buy our house. It was $80,000 at the time, 10 years ago and a steal then (appraised at $105 then, and at 240 before the addition). That $5,000 covered our down payment, insurance and taxes for however long we needed to pay.

I would strongly advise having extra money come closing as well. We got stuck having to come up with at least an extra grand as they figured out our taxes on the previous owners (seniors with very low taxes) and they didn't realize we needed flood insurance as we are in a flood zone (another $700 for the year that needed to be paid upfront).

PMI sucks. We are dealing with it for the second time now. Even though we went down with little in the beginning and our house appraised at $25,000 more than what we paid we STILL had to pay it for a year. After re-mortgaging the house with the second addition until we get it appraised again or hit that 20-30% mark we have to pay an extra $118 a month.

[RaisingThemLeft]

I second the advice to see what your credit score is NOW. Ours wasn't all that great and we paid a lawyer and ended up bringing it up over 100 pts. That 100 pts was what was causing us not to be able to get a decent loan before. The next step was getting preapproved. We got 3 preapprovals by 3 separate banks. Then we got a realtor and started looking. We are in escrow on a foreclousure right now. We did a 30 year fixed.

[chickabiddy]

What kind of interest rate are you looking at with a recent bankruptcy and less than 20% down?

[QuiltyConscience]

I would suggest using a mortgage calculator to see what you can afford.

http://www.daveramsey.com/etc/realestatecenter/index.cfm?FuseAction=dspMortgageCalculator

Don't bank on the price that may get pre-approved for, go with what you know you can afford ( which is usually much less than people get "approved" for).

If you don't have anything to put down at all, I would just rent for a while until you have a good down payment saved up, and spend that time doing a lot of research into mortgages, houses, and neighborhoods.

Don't rush into buying a house because your lease is up. This is not a decision you want to make in a hurry. Take your time, save up some cash for closing costs, inspection fees, and most importantly, figure out exactly what you can afford to pay.