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I wanna buy a house. What do I need to know?

Discussion in 'Archived Threads 2001-2004' started by Erik_C, Mar 2, 2003.

  1. Erik_C

    Erik_C Stunt Coordinator

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    I have tired of renting an apartment, and would like to buy a house, my first. Should I get a realtor right away? How do I choose one? And how much of my gross income should I be willing to scarifice for the mortgage? I'm so new at this I don't even really know what to ask. From those who have done this before, any practical advice?
    Thanks,
    -Erik
     
  2. James Edward

    James Edward Supporting Actor

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    I would look at some open houses before working with a specific realtor. They will be at whatever open house you go to, and when you come across one that seems knowledgeable and trustworthy, consider seeing some houses with them.
    If you find that they are showing you homes within your budget and tastes, stick with them. Some will show you houses out of your price range, and nothing like what you want. Avoid them. Going with multiple brokers in a single area is a waste of your time and theirs. Most homes are on a multiple listing service, and all the agents have access to the same database of houses.
    Remember too, that they are contractually bound to get the best price for the seller, NOT the buyer. As much as they may seem like they are on your side, they are not.
    And don't be afraid to look at 'for sale by owner homes' on your own. After looking with a realtor for 3-4 months, I found one like this and knew that the price was right.
    Good Luck.
     
  3. Tim Morton

    Tim Morton Stunt Coordinator

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    I think it depends on you, and what you are looking for a realtor to do for you. You can certainly find a house without one, but it will require alot of time and energy on your part. What type of home are you looking for? Part of a community development? IN an exsisting neighborhood? Condo or townhome?
     
  4. John Watson

    John Watson Screenwriter

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    Look up How To Buy a House on Google, you'll be overwhelmed with info.

    Personally, I used to say that I'd need the experience of 5 lifetimes not to be ahead of all the tricks of car salespeople. With realtors, maybe that would be 100 lifetimes?

    Actually, just had my first experience buying a house, and one thing that never came up in all the preparation we did, was the tax history of the seller. Turned out the seller owed about 5 years of taxes, and we should have been able to get a much better deal, but did the real estate agent have a clue about that? NO!!!

    Another thing was, we had a house inspection done, cost about $300, no warranty of course, but should have had that inspector estimate what the repairs to deficiencies would cost. Did our real estate agent bring that up? NO!!!

    Your agent is just as interested as the seller's agent in having a sale, as they all get a cut of it.

    Buyer beware...

    And home ownership? Don't overlook all the maintenance, property taxes, etc., you're going to be responsible for. Good luck!
     
  5. Mike Hutman

    Mike Hutman Supporting Actor

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    Erik, I feel your pain buddy. I am going through this myself right now. I have saved a good amount for a down payment. I am also going to the bank in a few days to talk about getting pre-approved for a loan.
    The only houses I have looked at so far are the ones I find on the computer. If I like them, I'll drive by them to see what they look like. If I like it, I'll write it down for when I do get a realtor so I can walk through them later.

    Good Luck Erik, and happy house hunting.
     
  6. Keith Mickunas

    Keith Mickunas Cinematographer

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    Sometimes you can fine buyer's agents. These would be more likely to work for your interests. Also, ask people locally who they recommend. My bank had a referral plan that hooked me up with mine. If you are interested in new houses, that can alleviate some of your potential problems also.

    As for budget, I believe the recommended the amount is that your total payment shouldn't be more than 35% of your gross monthly income. But if you got other debts you have to consider that. For me, that's well beyond my comfort zone.

    Depending on insurance costs, taxes, and down payment most monthly payments tend to be around 1/100 of the price. i.e. a $100,000 will cost you about $1000 a month. With current interest rates that will probably be lower. But I see you're in DC, I'm in Texas, those are vastly different places.

    Do a search in this forum about home buying. The subject has come up before, in fact once by me. A year ago I started the process and got lots of helpful info here. Although my thread was more towards building rather than just buying.
     
  7. Carl Miller

    Carl Miller Screenwriter

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    All good advice so far. Also highly recommended is that if you're going to buy a house, it's wise to make sure that even after your down payment you still have enough money in the bank to cover all your expenses for 6-9 months...Including mortgage, taxes, food, utilities etc.

    This is an often overlooked but intelligent way to plan and prepare for life under a mortgage committment should you lose your job or suffer major unexpected expenses like for health care, new car etc, etc.

    Good way to shop for a mortgage is to check out the Wall Street Journal which lists interest rates once a week for most major lending banks.

    Get a copy of your credit report if there is even a question in your mind about what is on it. My wife and I tried to buy a house a couple of years ago and were turned down for a mortgage due to a couple of inactive credit cards in our names with high credit limits but zero balances. We had forgotten about them, the bank viewed them as potential liabilities we could incurr and turned us down. By the time we got those accounts closed, the house we originally wanted was sold.

    And, since I've had a neighbor nightmare since I bought my first house, let me be the first to advise you to visit the house you're intersted in buying during the day, at night and on the weekend. Get an idea of who will be living next to you before you buy.

    The general formula, I think, is that your mortgage and taxes shouldn't cost you more than 2 weeks of your monthly net pay, leaving a weeks net pay for monthly utilities cost and food, and a weeks net pay to save and draw from when necessary.
     
  8. BrianB

    BrianB Producer

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  9. James Edward

    James Edward Supporting Actor

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    Unless you EXPRESSLY have a buyer's agent contract, the real estate agent showing you the homes is obligated to sell the house for the owner, at the best possible price for them. It does not matter whether or not they are the listing agent or not.
    The agent would not bring up either of the above things(and many more, as you'll find out) because in the first case, it could or would have resulted in a lower price to the seller, and in the second, it could have ditched the sale altogether.
    The only people on your side as a buyer are your lawyer, and the home inspector. Make sure recommendations for both do not come from an agent involved in the sale.
    I used to work in a real estate office and left because I was not the type of person that could knowingly mislead, obfuscate, and stab in the back.

    Just go in with your eyes open. As someone else said, you'd need several lifetimes to keep up with the chicanery that goes on.
     
  10. SteveA

    SteveA Supporting Actor

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    The rule of thumb for how much house you can reasonably afford is 2-3 times your annual income. The key phrase here is "reasonably afford". Most banks would happily lend you up to 4x your gross income, but the large payments might force you to live paycheck-to-paycheck.
     
  11. Leo Hinze

    Leo Hinze Stunt Coordinator

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    The maximum amount a mortgage company will approve you for is 28% of your income. That means that your PITI - principal, interest, taxes, and insurance - can not be more than 28% of your annual gross income. Additionally, most mortgage companies cap your maximum debt at 36% of your annual gross. So, for example, if your car payment is 10% of your annual gross, then you might only be approved for PITI at 26% of your annual income.

    When putting 20% or more down on a home, some of these numbers are relaxed a bit.

    Avoid paying private mortgage insurance, or PMI - it is wasted money. PMI is required if you have any single mortgage for more than 80% of the home's appraised value. Do whatever you can to put 20% down, or get creative with your mortgages. You can put 10% down and get a 30 year mortgage for 80% of the home's value, and a 15 year mortgage for 10% of the home's value. Yes, your monthly payment would be 'higher', but the same numerical amount as if you had to pay PMI.

    Check with a local credit union or community college. There are many places that offer seminars for first-time home buyers. I would not recommend trying to buy a home without taking one.

    Good luck!
     
  12. Jeff Ulmer

    Jeff Ulmer Producer

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    The first thing you should do is talk to your bank and get a preapproved mortgage. This way, you won't be guessing how much home you can afford, and should you find something that fits your budget when looking, you have an additional advantage of knowing you can put an offer on it right there. Good deals don't last for long. Don't tell your agent what you are approved for, just suggest a range of prices you would consider.

    I would also tend to look on the conservative side of what the bank will approve. Try to put as big a down payment as possible, especially one that will eliminate the need for special financing arrangements - 10% is a good start. Get a home inspection done if you are serious about a place, and don't get too attached to anything until you own it. Do as much research on the market you are looking at as possible, so you know what is and isn't a good deal.
     
  13. MikeAlletto

    MikeAlletto Cinematographer

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  14. Scott Merryfield

    Scott Merryfield Executive Producer

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  15. Timon Russo

    Timon Russo Stunt Coordinator

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    We bought ours 2 years ago WITHOUT a realtor. I don't know what the market is like these days, but around here, it wasn't hard for a seller to get what they were asking, and then some. So no realtor was necessary. I had such a good experience doing it this way (working with a local mortgage company), that I would recommend it with no reservations, if its an option for you. I might also add that the realtors we did talk to initially really turned us off. They wanted us to sign exlusive agreements, etc. BEFORE really explaining all the ins and outs of the process. We are so glad we walked away and did it on our own! So were the sellers. Good luck.
     
  16. MikeAlletto

    MikeAlletto Cinematographer

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  17. Jason Pancake

    Jason Pancake Stunt Coordinator

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    My wife is a loan officer/processor and her father is a real estate agent. We just put my best friend in a house on Thursday using her for the loan and her father as his buying agent.

    Don't dismiss the buyers agent right off. They can be a LOT of help. For my friend he was able to use the "Builder Pays $2000 Towards Closing with Approved Lender" and change it to use my wife for the loan instead. Bam! $2000 less to bring to closing.

    Some things to keep in mind:
    - How is your credit? This will affect the type of loan you can get, PMI in a big way, and your rate. The better (higher) the score the better.
    - As someone else mentioned, debt-to-income ratio is very important.
    - There are programs out there that will loan >80% of the appraised value with NO PMI (at least in Georgia there are). You just have to find a broker that knows her stuff.
    - To be on the safe side, figure out how much you need for blinds, appliances and what you need to bring to closing and then save TWICE that. Oh the surprises...

    It's a stressful experience but it is very much worth it in the end when you finally own your own home.
     
  18. DaveF

    DaveF Moderator
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    I recommend looking for a Homebuyer's seminar, probably sponsored by a local bank or credit union. My credit union just hosted one last week and it was helpful, providing a lot of info about how the process typically works and state-specific details.
     
  19. Angelo.M

    Angelo.M Producer

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    Having purchased a home twice, and sold a home once, within the last 5 years, I offer just a few things, some related to what has been said before.

    1. Before you look at anything, decide what you can reasonably afford. And always consider taxes as part of your overall payment burden.

    2. I purchased both of my homes without a realtor, but sold my first one with a realtor. They have advantages and disadvantages, many of which have already been discussed here. Before you select one, ask for references and then talk directly with people who have used the realtor you're interested in. This is, in my opinion, essential.

    3. When you close on your home, always use your own attorney. Do not agree to use the seller's or a builder's attorney. This may sound like paranoia--it is. The extra few hundred dollars will buy you something very important in the closing process: an advocate.

    4. Avoid PMI like the plague. I have heard arguments that suggest that PMI can be a good thing, but I don't agree with them. It's a penalty for not being able to make an adequate down-payment, and it was designed to get people into homes that they otherwise would not be able to afford. It's wasted money. Either do a split mortgage (10-90, 20-80 or something else), borrow from a family member, or don't buy the home. But paying PMI is, in my opinion, a monumental waste.
     
  20. ken thompson

    ken thompson Second Unit

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    DO NOT go to your bank and ask them how much you can afford. Choose the payment you will be comfortable ith and stick to it. Whatever tat works out to be as far as mortgage amount is what you'll want to spend plus your down payment.

    PMI is a waste. Never pay this. Any bank will allow you to simultaneously open a line of credit and use that as your down payment. This is cearly a better wary to go.
     

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