1st Time Homebuyer Advice

[Cherokeekid88]

My girlfriend and I are renting an apartment right now and our lease will be up in Oct. and we don't want to renew...we want a house and I plan on Proposing to her this summer, so we will be engaged (just for all the people saying not to get a house with your gf) anyways....We have been looking around at houses that I believe to be in our price range....we are paying sort of on the high end for rent right now so we would like to stay around that price range maybe a little more to help towards the principal.....

Anyways....we have already started looking at houses that we like, I am gonna plan on getting a pre qualification letter soon so that we can start taking tours of houses we are intersted in....my questions are this:

Im sure credit unions will have better rates on mortgages than regular banks...I actually work for a bank, so I could go with them but there interest rates right now aren't the lowest we could get....better to go with a credit union for a mortgage?

Do we NEED to hire a realtor? what if the home is through a realty company? are there still any programs out there for first time home buyers? we are looking at newer built houses, to try and eliminate potential wear and tear of things....plus we both like the modern looks of houses.
Is it true that first time home buyers don't HAVE to put down a downpayment of 20%?
I know that it is optimal, but we don't have that much saved, we have a little, just not 20%.
I just need some guidance...my parents have never owned a home before...they own a condo, so I can't really speak to them for experience.

lay it on me.

 

[Cottontail]

Do we NEED to hire a realtor?

As far as I am concerned...YES!! I have bought 4 houses and sold 1 and I wouldn't even consider doing it without a realtor. There is so much to consider from termite letters to inspections to negotiations to proper protocal for sending and receiving offers/counteroffers to having access to the most comprehensive MLS history to determining if a home is priced appropriately to making sure that tax records are correct to making sure size assessments are correct..and a whole lot more. Having a realtor, in mind, is paramountly important.

 

[Darky]

And make sure that you hire the realtor and have him/her sign a contract that they are working for you. Otherwise, if the realtor is working for the seller, they will have no motivation to make a good deal for you.

 

[Cherokeekid88]

And make sure that you hire the realtor and have him/her sign a contract that they are working for you. Otherwise, if the realtor is working for the seller, they will have no motivation to make a good deal for you.

Noted!

 

[Cottontail]

And make sure that you hire the realtor and have him/her sign a contract that they are working for you. Otherwise, if the realtor is working for the seller, they will have no motivation to make a good deal for you.

You should find a realtor that you are comfortable with. Interview a bunch if you need to. Talk to friends that have purchased. Drive around the neighborhood you are intersted in and see what firm's signs seem to be prevelent there. That usually indicates that a specific firm specializes in that part of town.

There really shouldn't ever be a situation that Darky makes mention of. If you hire a realtor, he or she is working for you as a buyers agent, and yes, they should have paperwork that you both sign indicating their position as a buyer's agent. If he or she is the selling agent on a house that you are interested in, if he or she is ethical, they will refer you to another agent within their firm to handle your purchase. It is a conflict of interest. One agent can't work a home deal while representing both the buyer and the seller and do their clients any justice.

People don't necessarily understand this, but realtors in a particular firm are not employees but rather independant contractors working under that firm's name. So even if Realtor A for the buyer and Realtor B for the seller sit side by side in the office, they are still going to make the best deal that they can for their client, because it is in their best personal interest financially to do so.

 

[kastein]

I went with ziprealty and was quite happy with the realtor I got.

Stuff to do -
1. come up with a list of properties that look interesting (location, price, condition, lot size, all the usual stuff)
2. look them up in your state's registry of deeds database if possible. Follow the paper trail back as far as you can. This will give you a history of what it's been selling for, whether it's been foreclosed, what easements apply to it, if it's been auctioned (and for what price), who the current owner is, you can find title issues this way too - especially stuff relating to MERS, mortgage electronic registration systems. You can save yourself, your bank, and your realtor a lot of time by doing this before even looking at the property, once I got fairly ok at it, it took me about 15 minutes per property to do a basic check and see if the title was fouled up or something. If you go back far enough you can usually find out if the property is part of a HOA, as well. Often HOA covenants / existence is not listed in the real estate listing.
3. look at the house from the outside first, without them. I would come up with a list of properties I was possibly interested in based on location/price/condition/lot size (etc), do my cursory title/registry of deeds inspection, then if it passed, do a 5 minute drive by on each one on my way home from work. Any that passed my initial inspection I'd ask for a showing.
4. when you are at the showing, either note down or memorize any issues you see - damage, problems, etc. Make sure it's structurally sound (stomp hard on the floor, see if it bounces or anything shakes, etc - you'll get a feel for it pretty fast), make sure the roof and chimney are in OK shape, check for foundation cracks, if you see the ground too close to the bottom of the siding / woodwork anywhere, make sure it doesn't seem rotted, note if there is swampy ground anywhere near the foundation... in the basement, check for water stains on the walls, cracks, mold on insulation, mickey moused plumbing/electrical.
5. if it passes and seems like something you might be interested in, get a mortgage preapproval and make an offer - MAKE SURE IT IS CONTINGENT ON A FAVORABLE HOME INSPECTION!!!!!
6. if they accept your offer, get that home inspection! A good inspector is well worth the fee. Don't be afraid to ask questions and watch while he inspects the property - I learned a lot, didn't even end up buying the property I had inspected because the title was cursed and the owning bank (BoA) was a nightmare to deal with. I started doing basically what amounted to my own home inspection on every property I looked at, and didn't actually have the place I ended up buying inspected, I only missed one issue which almost any inspector would have missed too.

I am sure I am missing some things here, hopefully others will think of them because I can't.

 

[H8PVMT]

Always keep in mind that a realtor wants you to buy quick, they aren't getting paid to drive you around for months, make SURE you get one with excellent references

 

[bigalpha]

If you find a house you like, you should drive through the neighborhood during different parts of the day/night to get a more complete pictures of neighbors.

Leave from your prospective house to your job/school during your normal time and then drive 'home' during your normal time. It'll give you a feel for how drivetimes and traffic will be like.

Don't buy the best house in a bad neighborhood; buy the worst house in a good neighborhood. It'll help your property values.

Go onto your city's website and see if they have a digital copy of the master plan for your area. Does the city want to add a major throughfare close to your property in the next 10 years, etc. A lot of places also have traffic studies posted online.

Seriously think about what you want your life to be like in the next 5, 10 years. Are you going to want a dog? Kids? If you plan on staying in the house long term, buying a house with certain amenities can save you $ in the long run. Do you want a big garage? How easy will it be to add on to the house later?

Keep your monthly payments as low as possible - roll your insurance payments and tax payments into an escrow, too.

Check the zoning around you. Is there empty property zoned C? Or is it all R1?

HOAs suck.

Don't settle for something you don't want. Fixing/changing a house can become expensive in short order if you're not careful.

 

[kastein]

Another cool thing about buying the worst house in a good neighborhood is that when you start cleaning it up and making it look better, the neighbors love it. Nowhere to go but up.

 

[JeepFreak21]

My girlfriend and I are renting an apartment right now and our lease will be up in Oct. and we don't want to renew...we want a house and I plan on Proposing to her this summer, so we will be engaged (just for all the people saying not to get a house with your gf) anyways....

My advice is to have as few of people on the mortgage as possible! Even if you guys had been married 20yrs, put the mortgage in one of your names only if possible. It's not possible for everybody, so if you think this is an option for you, I'd be happy to explain why (I'm short on time now anyway).

Im sure credit unions will have better rates on mortgages than regular banks...

Not necessarily.

...I actually work for a bank, so I could go with them but there interest rates right now aren't the lowest we could get

That's not too surprising. I just represented a buyer who worked for Chase and she ended up going with Wells Fargo because it was a significantly better deal than her own employer offered.

....better to go with a credit union for a mortgage?

Shop around! Capitalism is your friend! =) I recommend you check rates and fees from the following:
USAA (if you're military or you have access through a family member)
a credit union
a big bank like Wells Fargo
a mortgage broker
the builder's preferred lender (if you're buying a brand new home)

Have the first one you go to give you a copy of your credit report and check it for errors/blemishes. Provide that credit report to the next institutions you get quotes from. Request the quotes all on the same day if possible, but at least in the same week (rates can change hourly, but certainly day to day). If you're buying a brand new home, the builder will probably bribe you to use their "preferred lender"... it's usually worth it.

Make sure you ask everyone how long it would take to close escrow for your particular situation! A 30 day offer will beat a 45 day offer every day of the week and you don't want to have to ask for an extension or risk your deposit!

Do we NEED to hire a realtor?

Absolutely! The seller pays them for you! You'd be crazy to say, "No thanks! I don't want an expert to watch out for me and take responsibility for potential problems."

what if the home is through a realty company?

The only exception would be if it's a brand new home, then you could skip the Realtor. Sometimes you'll have more room to negotiate if the builder isn't paying a buyer's agent, but not always. I would call (don't go in!) and feel them out on that. If they're not going to give you any additional discount, you might as well have representation.

are there still any programs out there for first time home buyers?

Yeah, there are, but they're usually community specific. Your credit union will probably have info on available programs, but you can also try your local HUD office, and of course, your Realtor can tell you about your options.

Is it true that first time home buyers don't HAVE to put down a downpayment of 20%? I know that it is optimal, but we don't have that much saved, we have a little, just not 20%.

There are goverment foreclosures out there that only require 3% down and FHA only requires 3.5% down. I think, if you can afford the monthly payment with a minimal down payment, do it, and keep your cash handy for emergencies. If you've got 20% you can put down, then it would be worth considering because you could go with a conventional loan (non-FHA) and skip the mortgage insurance. (Your offers will also look a little better.) If anybody wants to debate down payment size,

I'm happy to do it, I just don't have the time at this moment.

I'm happy to answer any other questions you might have. I'm a real estate broker. I worked in new homes for 5 or 6 years, and now I'm independent w/ my own brokerage.

Good luck!
Billy

 

[JeepFreak21]

HOAs suck.

BEST ADVICE IN THIS WHOLE THREAD!!

HOAs and Jeep lovers are natural born enemies. You can't fight nature. Don't even try!

Billy

 

[bigalpha]

My advice is to have as few of people on the mortgage as possible! Even if you guys had been married 20yrs, put the mortgage in one of your names only if possible.

Plus, If something happens and you move again in a short time span, the other one of you qualifies as a 'new home buyer'.

 

[JeepFreak21]

Plus, If something happens and you move again in a short time span, the other one of you qualifies as a 'new home buyer'.

Well, if you're still not married.
Billy

 

[bigalpha]

Well, if you're still not married.
Billy

Is it not applied to the person? I didn't realize it stretched to cover the spouse, even if the spouse is not on the mortgage.

 

[JeepFreak21]

Is it not applied to the person? I didn't realize it stretched to cover the spouse, even if the spouse is not on the mortgage.

Actually, I hadn't thought that all the way through, IF the couple was not married at the time of the first purchase then the non-owning spouse should be able to take advantage of any Federal program on a subsequent purchase. If they WERE married at the time of the first purchase, they could would not be able to claim the benefits a second time.

Also, non-occupant co-borrowers are not supposed to be penalized; meaning, they could take advantage of any programs, even if they're on another mortgage. And everything resets after you've been renting (and not buying) your primary residence for 3 years. So, if you have to move out of the area, but you keep the house as a rental property, you can buy again as a "first time home buyer" 3 years later.

Those are the federal (IRS) rules... states and local jurisdictions may be different.

Billy

Disclaimer - I am not a tax professional and this is not tax advice. Consult your tax professional for information specific to you

 

[bigalpha]

Very interesting, thanks!

 

[xjwisconsin]

Alot of good info here. I purchased my first home several years ago and was able to take advantage of a state sponsered deal. They are out there, just need to search them out.
Do not even offer with out a home inspection, they can seriously save your ass. When taking a look at a home take a flashlight with you, look in every nook and cranny if your serious about the house. Take note of any signs of leaks. Poke at wood, take out kitchen drawers and look around. Pop the hatch to the attic and snoop about. Is there a recently sheetrocked or painted area? WHY?
Like others have said sit down a make a realistic (or as real as possible) future plan. The farther you can look down the road the more house you can get for the value. Is it going to be more important to have a garage for dad to hide in in the future or a pool to keep the kids away from those dirty hillbillies down the street.
Think of this as the most important used car you will ever purchase. When you buy a car do you just look at the picture and say well, its blue and thats whats important.
Also remember that sweat equity and time will be to your biggest advantage. The more you can do yourself (PROPERLY!!!) and on budget... The higher the return in the end.

 

[Cottontail]

Be prepared to do a lot of your own research on the homes that even the realtor suggests that you consider. There are a lot of things that legally realtors cannot comment on...those include crime rates, race and age demographics of a neighborhood, sex offender registries, school systems, religious demographics, and so on.

They are allowed to show you where to go to find answers to certain questions just not answer them themselves, due to governing regulations about "steering" potential buyers. They can answer questions based on factual published reports, but can't necessarily answer questions based on experience.

 

[Cherokeekid88]

I really appreciate everyones input. At the moment, we are looking online and honestly, we are trying to keep our budget at $120,000 or below...I know that is really not alot to work with, but for our first house...I don't want to go in over my head....as long as it has a good sized backyard, garage and fireplace...Ill be good to go fo 10+ years. as far as a downpayment goes....there is just no way would be able to come close to 20%. I know that my girls' credit is really good...she also just got done paying off a loan. I want to be able to have money saved for emergencies...I mean we all do own jeep right?

my only issue that I am stressing about it the time frame in which we find a house....like I said, our lease doesn't end till October, So trying to find a house during that transition is what worries me....I need to talk to the leasing manager and see what our penalty would be for breaking early.....

I will def look into hiring a realtor that I trust....we have a couple that bank with us and could talk to them as they come in the bank.
I will def pay to have the house inspected if everything visibly checks out and we are serious about it.

 

[JeepFreak21]

my only issue that I am stressing about it the time frame in which we find a house....like I said, our lease doesn't end till October, So trying to find a house during that transition is what worries me....I need to talk to the leasing manager and see what our penalty would be for breaking early.....

That wouldn't be "too much time" around here! I wouldn't stress about that until it comes up (if it does).

As far as penalties for breaking the lease... it would be the remainder of the lease. So, if your rent is $1,000/mo and there are 3 months left, you'd owe a maximum of $3,000, but the owner/property manager has to mitigate their damages (try to rent the place out), and they don't have to try all that hard.

Whether they find another renter before your lease is actually up usually depends on whether they think they can collect the $3,000 from you without a lot of work. It's usually easier to just find a new tenant, but that's not always an option.

If they find somebody to rent the place 2 months after you break your lease, you'd owe them $2k. If they find somebody immediately, but they have to reduce the rent by $100/mo, then you'd owe them between $300 ($100/mo for the remaining 3 months of the lease) and $1,200 ($100/mo for the year lease of the new tenant). Where your bill falls on that scale depends on the judge or how well you negotiate your position. Landlords will usually shoot for the high end of the scale and settle for the low end.

Good luck!
Billy