Homebuying 101

[BTB]

Willing to share your homebuying experience? We're finally almost ready to be homeowners! We'll start looking in February 2006. I'm full of questions!

How did you learn about homebuying? I know nothing about inspections, closings, ARMs, etc. Did you read? Surf the web? Any good resources you can recommend - books, websites, magazines, etc?

Did you use a realtor? How did you choose one?

What kind of timeline did you have? When did you start looking, how long did it take to get a mortgage, did you get preapproval first, how long did you look, when did you get to move in? What did you do first?

Any others contemplating joining the ranks of the homeowners? Come share!

[notkk]

We bought our first place 2 years ago and we are closing on our 2nd home on Thursday - so I know a little bit about this process.

I learned about homebuying from a few sources:
A really good friend of mine had gone through the whole process in our area about a year before us - so when she was looking I lived through the whole process with her.
She also lent me this book:
http://www.amazon.com/exec/obidos/tg/detail/-/0812932358/qid=1119928408/sr=8-1/ref=sr_8_xs_ap_i1_xgl14/002-8837785-0422451?v=glance&s=books&n=507846
Which was a good starting point, though in the end I don't remember using a lot of the information in there.
I also read the Buying & Selling Your Home board on the HGTV website: boards.hgtv.com
I also read the "Homes" section in our local paper every Saturday.

Finding a realtor was easy for us. I had a good friend/colleague who had just lost a tough re-election bid (I work in politics) and was going back into her family's real estate/construction business which was based in the town we were looking to buy in. We used her and we were very happy with her negotiating skills (she is, afterall, a veteran legislator), so we went back to her to sell/buy the 2nd time around. To find a realtor I would ask around, talk people that you know who have recently bought/sold homes. I believe that this is definitely a case where word-of-mouth is the best way to find someone.

We had the same timeline the first and 2nd time around. We wanted to close/move by the end of July. In both cases we started looking in April. The first time we started early because we were new to the real estate market and wanted to give ourselves some time to work through everything before our apartment lease was up. We ended up finding a place that we LOVED the first day out and made and offer. Fortunately, the people we were buying from were building a new house and wanted a late closing date. We made our offer on April 17th and closed on June 30th. 2.5 months is a relatively long escrow period.

This time we were more flexible about when we moved (wanted it to be after May 23rd and before July 20th for various reasons), so we started looking in April. We knew that in the market that we were planning to buy in, the good houses would go on the first or second day - frequently with multiple offers and that we would potentially make offers on several homes before we went under contract. Again we made the offer on April 17th and are closing on June 30th (apparently these are good days for us :P). This time the late closing is because when we made the offer we had not sold our current place (though our offer was not contigent upon this) and the seller had not yet found a new place, so it bought us both some time).

You definitely want to get pre-approved before you start looking at homes for a number of reasons. 1. To figure out what you can afford - your lender will be able to qualify you for a mortgage amount as well as give you an accurate idea of what your monthly payment would be (including taxes and insurance) at various price points based upon current interest rates in your area. This can help you figure out how much you want to spend on a new house (if you have decent credit, chances are you will be approved for far more than you want to spend. 2. Most sellers will not take your offer seriously unless it is accompanied by a pre-approval letter from a lender. If they don't know if you can afford the house, they're not going to be inclined to waste time negotiating with you.

Getting pre-approved for a mortgage does not take long - a week or so to contact a lender, get their application, submit your application (assuming you have the necessary financial documents - pay stubs, W-2, recent bank statements) and get a response. A lot of people experience a lot of anxiety about the mortgage (pre)approval process - I know that I did when we were first getting started - but I wish I had known then that it REALLY is not as scary as you're making it out to be in your head. I did a lot of needless stressing.

I was just recently talking to a friend who was considering buying her first condo and she asked me what earnest money is - so I will just explain that too.
When you submit an offer on a house, it is customary to submit a small sum of money as your "earnest money." This is generally around $1000 (at least in my neck of the woods). If you reach an agreement on a contract with the seller, the money will be held (deposited) by them/their real estate company until closing. If you back out of the contract before closing for any reason other than those stated in the contract (the "contingencies") - they get to keep the earnest money. When you close on the property, the earnest money will be applied toward the closing costs. The purpose of the money is basically just to show that you are serious about the offer and about the property. It is not a large sum of money, but enough that you wouldn't just nonchalantly walk away from it.

Oh, another question that I had when we first started was the amount to budget for closing costs - in general, closing costs run somewhere around 3% of the purchase price of the home (some of the closing costs are based off of the purchase price - example: 1% of the purchase price as a loan origination fee - so it is a valid estimate regardless of your price point).

Hope this helps!

[kam]

We were caught offguard. We gave ourselves 6 months to find the right house. On our first day of looking, we found it. Damn.

How did you learn about homebuying? I know nothing about inspections, closings, ARMs, etc. Did you read? Surf the web? Any good resources you can recommend - books, websites, magazines, etc?

We were thrown into the fire! Honestly, we asked my FIL who is very knowledgable not only in finance but bought three new homes recently. Closing will be more money than you'd anticipated. I've found some good online resources:

http://www.wfn.com/pages/articles.asp?pageID=169&SID=8&ArticleID=824
http://moneycentral.msn.com/content/Banking/Homefinancing/P107741.asp

New home inspections are a whole lot smoother than an older home. Remember - the state inspector needs to approve things throughout the build. We're lucky to get a new home in that sense.

ARMs are a great way to get your interest rate down but I'd only recommend it if you don't plan on staying in the home for long. Basically, you get a low rate for 2, 5, 10 years and then the rates go up after that. Since you don't know what the rates will be like in 2, 5, 10 years, it can be risky.

What kind of timeline did you have? When did you start looking, how long did it take to get a mortgage, did you get preapproval first, how long did you look, when did you get to move in? What did you do first?

In our perfect world, we would've been preapproved. We didn't have that luxury but I recommend going to at least 2 brokers for rates. This also allows you to compare good faith estimates (what they give you so you can anticipate closing costs).

You can do a ton of research on what you can afford before getting preapproved. Personally, I don't agree with them. They assume absolutely no wiggle room. According to most places, we could afford over $120k more than we're spending. Well, that's true. That said, we don't enjoy living paycheck to paycheck and like to live comfortably without stress. My brother believed that he could afford a more expensive house but cannot afford anything else. I'm sure you've heard stories of people buying houses but have no furniture in them. That's because they can't afford furniture. I'm not of the thinking that I will break my back to come up with a mortgage payment every month. In looking at monthly payments, there was no way we'd live a good life with spending that amount.

A few good sources for this:

http://mortgages.interest.com/content/calculators/index.asp
http://www.hsh.com/calc-amort.html
http://realestate.yahoo.com/re/calculators/rent.html

Other pieces you may not know about:

1) you cannot borrow your earnest money or deposits. It has to be yours. If your family plans on giving you gifts, that's okay, but I'd have them do it now (otherwise, you have to explain where it came from which could be a pain in the arse).

2) if you plan on doing 100% financing, be prepared to pay mortgage insurance (NOT good) or an 80/20 loan. 80/20 is 80% at a low interest rate (5%, for example) and 20% is at a higher rate (7%).

3) if you plan on putting down just a little (3%), don't bother. It should be at least 5% or do 100% financing. I strongly suggest saving enough to put something down.

[BethElena]

We just purchased our home in PA on 2/11/05.

Pick a realtor YOU TRUST. Ours convinced us we didn't need a home inspection!!! (We bought a small condo, but still, things like heat pump should have been checked!) BAD ADVICE to skip that step! Make sure you get a home inspection.

We did a conventional loan of 5% down, and 95% mortgaged, and my mom helped us with the down payment (she had to fill out a form stating it was a gift that didn't need to be paid back).

My bro is an insurance rep, so he gave us a quick quote on condo insurance, so that also helped with the decision, b/c we figured that into our budget to see if the condo was affordable. Sometimes people forget about this....

I would flush every toilet you see, turn showers on , let faucets run (that's how we realized the kitchen sink leaked). turn lights on, oven, etc. You'd be surprised the condition people live in on a day to day basis!

We saw the condo on a Wednesday before christmas, made an offer on Thursday, and it was accepted on Saturday prior to Christmas! We were willing to be flexible w/ settlement, b/c we both lived at home, so no rush to move..... They say that one of the reasons people win bids is b/c they are flexible with when settlement can be...

good luck! :)

[Sevilla]

Hi BTB! I'll do my best to answer your questions. :)

How did you learn about homebuying? I know nothing about inspections, closings, ARMs, etc. Did you read? Surf the web? Any good resources you can recommend - books, websites, magazines, etc?
Since you're used to message boards, i'd find a few dedicated to home buying and lurk there. That's how i learned the most and finally made sense of things (and a lot of stuff i didn't really understand until after we closed on our home).

Our situation was a bit unique b/c we didn't have many 'options'. We found a 1st time homebuyer program that paid a TON of stuff for us (7k towards downpayment, .25 reduction in interest rate, closing costs, and did 20k of work on the house before we moved in). But in return we had to use a specific bank and get a 30 year fixed mortgage.

If i were doing it over again without the first time homebuyer program the only things i would have changed is 1. shopped around to different banks (though we got a really low interest rate, 5.5% fixed) and gone with a 10 year ARM since we'll be moved out of our tiny home by then.

Did you use a realtor? How did you choose one?
Ugh, realtors annoyed me. Seriously--the only reason we had one was to handle the technical stuff. She sent us stupid homes to look at, we did our own searches online at www.realtor.com (this gives you access to the MLS listings that realtors use so you have the same info as them) and then gave her the homes we wanted to see. They are not *necessary* for buying a home, but almost all people use them from what i can tell. She did things like writing up the contract and stuff like that.

What kind of timeline did you have? When did you start looking, how long did it take to get a mortgage, did you get preapproval first, how long did you look, when did you get to move in? What did you do first?
See, here is where our situation was a bit crazy again b/c of that program. We saw a clip about it in the newspaper and called, only to be told that the government grant money expired in exactly 2 months (and the time from contract signed to closing took one month).

So we had to go REALLY fast through the process--we were told which bank we'd use, had to submit all our tax forms and financial info within a week, waited a week to get approved (and be sure to double-check the underwriting numbers since they messed ours up and we caught the mistake), and then had all of a week and a half to find a house and get a contract signed. It was a total God-thing that we found a house, much less one that fit our needs (we wanted hard-wood floors and there was just one house with them that fit our price guidelines and what we wanted in a layout).

Since you aren't in a time crunch, i'm not sure what order to do things. I know some people who looked around for houses over a year before submitting a contract and getting a mortgage approved. I have heard good things about the "Homebuying for Dummies" book and i probably would have bought it if we hadn't been through the process so fast.

Hope this helps!

[NewsGirl]

Hi, BTB,

Homebuying is one of those things that seems so secretive and scary until you go after it, and then it's a whole lot of fun to be in the "club," armed with all your new knowledge (and the fat equity you're building!). I started out knowing absolutely nothing about the process -- other than that homes are excruciatingly expensive where we live and that many people have mortgaged themselves to the hilt -- but I got up to speed really quickly, especially since I was taking care of everything myself because my DH was out of town most of that time for his job. The first thing to do is meet with either a mortgage broker or a mortgage banker at a bank. I met with one of each and personally preferred the banker because they were more forthright and spoke to me a lot more clearly about my options. In either case, you'll be absolutely shocked by the number of choices you'll have for financing. Tell them what you're interested in spending each month, and then they'll give you different financing options at different price points to look at (taxes and homeowner's insurance are generally escrowed into your payments each month and then paid annually by the bank, but until you have an actual proper under contract, the mortgage people will just be using rough estimates on those costs -- once you get a property, call homeowners insurance companies to compare rates ASAP so you can get a real number). I second what the previous poster said about downpayments -- unless you can throw a substantial chunk of money at it, it really won't save you any money on your monthly payments, and there are ways to finance the mortgage so you don't have to pay private mortgage insurance (which basically protects the lender if you default... can range from $50 to several hundred dollars a month), like 80/20 or 80/10 mortgages, depending on what you put down. Generally, the best interest rates are going to be with ARMS (we have a 5-year ARM since we knew we'd move out of state within 3 years because of DH's job), and interest-only loans are even better rates if you can put down a nice downpayment and don't expect to be in the house for all that long. Anyhow, once you see a mortgage person, they'll get you a pre-qualification letter to show to sellers (DO NOT have the letter written for the highest amount you can afford, because you won't have any wiggle room to negotiate -- keep it at a level you really feel comfortable with, even tho the banks will be more than willing to hand over ridiculous amounts of cash to you), but they usually won't actually take your documents and process your loan approval until after you have a property. This is kind of annoying, but it actually doesn't take that long -- just a few days, so long as you have all your paperwork in order (you may be asked for a few pay stubs, last year's tax returns, etc). I promise you that talking with mortgage people will put you at ease as you start your search.

Re: realtors, we plan to sell our house ourselves, but if you're a buyer, I think they're really valuable, especially in hot markets. Ours was recommended by a co-worker of mine who'd recently used her, and she worked for a mid-sized firm, which I think was good -- there are a lot of massive realty companies like Prudential that are just realtor mills where people don't really give you any personal attention, and they often get both sides of a commission if they sell a property they're listing -- that was something I wasn't comfortable. Don't know where you're looking to buy, but that has some impact on this -- We're in an area where houses are going under contract the same day they go on the market, so it's important to have a realtor who can get you in quick and then wheel and deal with the sellers (to me, that was important because I didn't have a clue about how to negotiate). The seller pays their commission, anyway, so it's not like it's costing you anything. I really liked our realtor, she was really patient with me and answered all kinds of dumb questions I had, and she also hooked us up with our closing attorney (they handle the mass of closing paperwork from the bank and the county) and an inspector. Some people might say that's kind of incestuous and dicey, but I personally felt good that these were people she had a raport with that she'd worked with before, so I knew they were reliable. And my realtor also talked the seller into fixing some stuff we found in the inspection that she originally said she wouldn't fix, so that was helpful, too.

As for timeline, I started looking seriously in late October, and then put in a bid in on our house in mid-Nov, the day it was listed. We asked for a closing date 60 days from then, which is a very long time, but we were under another lease that we had to wriggle out of, and we didn't want to move during the holidays. Thankfully the seller was fine with that, but you may find some people have more specific closing date needs than others. It's always good to do some drive-bys and search the classifieds and the MLS ahead of time to get a flavor for the market wherever you're looking, but I wouldn't start looking seriously until within two months of when you want to move, unless you want to pay your mortgage before you actually move in!

The inspection is no big deal; you basically just have to be there and hang around, and the inspector goes about his merry way looking for things as wide-ranging as major termite damage and sinking foundations to leaky faucets and broken toilet seats. Ours took digital pics of everything in the house and then at the end we got all those pics and his assessments in a three-ring binder to hang onto and approach the seller with. He was very thorough, right down to "this little strip of caulking needs to be redone in the master bath shower."

I didn't really use any specific Internet resources other than stuff like Lending Tree to look at different mortgage options, but I found them to be super unreliable, and they almost never take into account taxes and insurance costs. You can certainly search for houses online, tho.

I hope this didn't seem totally overwhelming, but I'd be glad to answer any other specific questions if you've got 'em! I'm a newspaper reporter and am the queen of gathering way more info than is ever actually needed, so ask away! Good luck!!

[andrew&shannah]

How did you learn about homebuying? I know nothing about inspections, closings, ARMs, etc. Did you read? Surf the web? Any good resources you can recommend - books, websites, magazines, etc?
I read Homebuying for dummies along with a TON of other online articles about homebuying. There are so many great resources out there that it is very difficult to pinpoint one. MSN money and Bankrate have really good resources.
I also talked to many of the people I work with (They are mostly older) to get their experiences and suggestions.

I partially agree with the person who recommended not getting an ARM if you plan to stay in the house for a really time period. The exception to that rule is if you live in a high growth area. And I don't mean high growth right now but an area that historically has ALWAYS been high growth. In the case of an area like that, you will most likely re-finance within the first 2 years anyways because your equity will have gained so fast. Then, an ARM works for you even if you want to be in your house for 30 years.
Our inspections were very different from the inspection you get for an existing home. We did 2...a pre-drywall and we'll do a final. Even though the county inspects the house, we still hired our own independent inspector too.


Did you use a realtor? How did you choose one?
No, we did not use a realtor because we purchased a new build home. We had spoken with a Long & Foster realtor and had plans to visit some current homes on the market when we stumbled upon our new community completely by accident.
As for how to choose one...recommendations! Ask people you know who have bought houses recently. A personal recommendation is the best way to go when choosing a realtor.

What kind of timeline did you have?
We originally did not plan on buying until September of this year but wanted to look early to get a feel for areas we liked. On a "scouting" trip during January, we stumbled into the community we ended up buying in. With the new build, we were given July timeframe. It worked out really well for us because we would have been priced out of our market had we stuck to our original timeline.

When did you start looking, how long did it take to get a mortgage, did you get preapproval first, how long did you look,
We had a good idea of what we wanted to spend when we first started looking. Once we were sure, we got a pre-approval before ever talking pointedly about buying. New builds are a little different in that they typically require pre-approval from the builder's mortgage people EVEN IF you have your own mortgage person so we could have easily gone in with nothing and proceeded.
If you are not doing new-build, get a pre-approval before seriously looking. There are few things worse than falling in love with a house and your offer not being taken seriously because you don't have a pre-approval.

when did you get to move in?
We put our contract down in January and we will move in at the end of July.

What did you do first?
First, find out what you can afford! You can get rough estimations on one of the thousands of online calculators. www.bankrate.com has an awesome one that helps you figure more than just fixed rate loans.

[Jazz]

If there is a heavy marble coffee table in the middle of a white-carpeted floor, just go ahead and assume there is a stain underneath. ;)

[jellybeany]

We are in the process of doing this right now. We started looking for houses in May right after our honeymoon. We were hoping to find something within the next year. We happened to find this cute small cape code that we loved and the price is ridiculously low becaue the owners need to get out to get their kids in the new school district. We did not work with a realtor. There is this company around here called America's Choice and what happens is the seller pays like $500 to advertise with them but then they do everything else themselves. The house that we are in the process of buying works with them. So we did all of our searching online and went to look at houses during open houses. We looked at this house twice and after the second time called the owners and worked out a price before we went to our lawyer. We've already signed the contract. We are having the home inspection next week and then we just have to wait for the mortgage paperwork to go through before the closing in August.

We did get preapproved but we did it for two reasons 1) to see how much we could spend on a house and 2) People take you more seriously when you have already been approved because they know that you can afford it.

We didn't know anything about the whole process until we started. We ask a lot of questions to people that have already gone through it and ask the lawyer and broker lots of questions.

Good luck with everything! :D

[Rancid13]

Willing to share your homebuying experience? Sure! I had been looking at new MLS listings for several months and showing 'potentials' to hubby. I was signed up to receive new active listings from the local MLS (ah, the joys of working in a real estate office!) and we drove a few neighborhoods we were unsure of. Then in December, a listing popped up that I'd seen several times. It was a condo in a great complex originally listed at $450K, then dropped to $425K, then to $399K, right into our price range. We looked at it that weekend and decided to make an offer, and the rest is history.

How did you learn about homebuying? I know nothing about inspections, closings, ARMs, etc. Did you read? Surf the web? Any good resources you can recommend - books, websites, magazines, etc? I learned a lot about homebuying thru my boss (an appraiser) and my dad (a broker), as well as checking out websites and the real estate section of the LA Times. I have a few books on my Amazon.com wishlist but I haven't bought or read any.

Did you use a realtor? How did you choose one? Easy. My dad was/is our broker. He's been in the business for 25+ years and is very knowledgeable about the area and real estate in general. He was also very thorough in explaining the process to us, as there was so much paperwork our heads were spinning! I would either ask for recommendations from friends or family that have recently worked with a Realtor or broker and had a good experience with them. There are a lot of salespersons and Realtors out there that advertise all over town and have huge #'s of sales, but you want to make sure you end up working with someone that has the time to devote to you and cares about your wants and needs. That is VERY important, to have someone that listens to you on all counts.

What kind of timeline did you have? When did you start looking, how long did it take to get a mortgage, did you get preapproval first, how long did you look, when did you get to move in? What did you do first? We started browsing in mid-2004, and almost put an offer on a duplex but decided against it at the 11th hour. It just didn't feel right. I looked seriously for a few months before we found *the* place, but we didn't actually go inside any of the 'potentials' we found on the multiple listings.

Once we found 'the place' and checked it out inside and out, we got preapproved by a lender friend, for the max. amount we were willing to pay, and made an offer on the place. The sellers counteroffered, we countered back with an acceptance and they accepted at $3K above what we originally offered and we closed escrow about 20 days later. It was VERY easy, we were lucky. I've heard horror stories about people trying to get into SoCal real estate. Ie: multiple offers from multiple buyers, bidding wars, sellers getting cold feet, etc.

We had everything going for us:
*The sellers had bought a new home a few months earlier and needed to get rid of this one, fast, to avoid holding 2 mortgages for very long
*It was reduced to the selling price in mid-December, when more people were focused on the holidays and less on real estate purchasing (except us!)
*We were the first ones to make an offer on the place, an at a higher amount than they were asking (not much, like $1K)
*We got them to agree to pay $5K toward closing costs, which helped us keep $ in the bank at the start
*We lucked out for 100% financing for first-time homebuying; an 80/20 loan at VERY low rates
*The place needed little to no work. Everything was cosmetic fixes: old kitchen cabinets, old chandelier, old light fixtures, old sink fixtures, etc.
*The sellers had a very BAD first agent who insisted they MUST (must!!) put in all new flooring (hardwood, berber carpet, and ceramic tile), new appliances (stove/range, dishwasher, washer/dryer) and repaint and professionally clean the place or else it wouldn't sell. Right. In this market? Lucky us though!
*It's a top floor, end unit condo in a smallish well-maintained complex (46 units) and has cathedral (sp?) ceilings in the living room and master bedroom and a fireplace in the living room and views of the city

Any others contemplating joining the ranks of the homeowners? Come share! Not now, but maybe next year when we start looking for investment property #2! Good luck! :)

[Rancid13]

I forgot to mention that you absolutely want to get the home inspected by a licensed home inspector before you close, especially if the house is a resale. We were at the property at the time the inspector was there, about 1 hour into his inspection. He was able to explain all the minor things we should look into (leaky faucet, advised to replace filter in heater, ripped screen, etc-just a bunch of tiny things). It was only $300 for the inspection, and it was definitely worth it for the peace of mind. We got our inspector on the recommendation of my dad/our broker, who had worked with the guy on previous properties and found that he did an extremely throrough job. He also showed us how to shut off the water main and tagged all the switches in the circuit box so we know what switches go to which outlets/rooms so no one gets electrocuted or we don't accidentally shut off electricity in the wrong room.

I heard a blurb recently about choosing a home inspection-something about how you don't want to ask a Realtor/salesperson who they recommend b/c they will likely advise you to hire a home inspector who might turn their heads to possible defects or needed repairs so that they can 'close the deal' without problem.

I don't know what truth there is to that, but it makes sense to me because in my experience, agents/Realtors typically don't want to work with others in the real estate field (appraisers and inspectors namely) that don't bring properties in at a specified value or inspects the house and finds major defects that cause buyers to back out of a deal, causing the agent to lose commission on that sale.

And one thing that we did that we are SO GLAD my dad suggested is signing up for a home warranty plan. We went with American Home Shield, and they had several packages of coverages to choose from. We chose the most inclusive one, and I believe it was ~$400? And we included it on the sales contract as something the seller would pay for, and they did! The weekend we moved in, there was mishap with getting the couch inside the doorway and part of it went thru the kitchen window. It was $40 to pay for the installation of a new window and disposal of the broken glass/bits, according to our deductible. Last month our 2-years new water heater started leaking into the condo units on the 2 floors below us. It cost $40 to get a brand new water heater installed, with a 7-year guarantee. We are SO going to renew our policy when the year is up, it was a great idea! If there's ever a plumbing problem/leak, electrical problem, or just about anything goes wrong, we're covered.

[MrsSmith]

We just closed on our 1st home June 15. We looked at houses all the time before then. I can honestly say that we'd gone to about 10 open houses and looked at the classifieds since we'd been married. That was how we really started to get familiar with the process and see what kind of places we liked and what kind of features we needed. However, the real search didn't start until we had our preapproval. That process took a meeting with the loan officer. That was it. Once the preapproval was in place, we felt confident to start looking. We started seriously looking in April. We found a place, made an offer, and didn't get it. Then we found the one that we own now. Our mortgage was already in place. We'd give all of the necessary info to the loan officer. So, when we got the purchase agreement, the mortgage was just about ready to go. We got an inspection. It was valuable and I would recommend it. We are still in the process of moving in, mainly because we have the time to take our time, KWIM? We plan to be moved in by next weekend. We too possession at closing. Since then, we've been painting, changing things to our liking, and stuff like that. So, we're just taking our time. But it's been great.

Oh yea, I used a realtor, but we found this house ourselves. However, she was a great help on helping us decide what to offer for the house.

Hope I helped!

[smiles33]

Our parents and a VERY good realtor walked us through when we purchased our first house 3 years ago. We used the mother of DH's best friend from high school, so she really looked out for us and made sure we knew about all the options. A good realtor makes a HUGE difference in a hot seller's market--she got us in to see houses right when they were listed, rather than waiting for the weekend open house, so we could be in prime position to make an attractive offer if we liked it. That's an advantage those just surfing realtor.com don't have, since I learned when we sold our house this past April, listings don't immediately appear on realtor.com (I kept looking for ours!).

We used her again this year when we upgraded houses. We started early, back in January/Februrary, but in a hot market, we had a lot of competition and made 2 other offers before getting this house in May. She advised us regarding offer prices (while it was in her best interest for us to bid high, she didn't want us to overpay so we still lost out on the 2 other homes when the successfull bidders paid on average more than $75,000 over list price).

We were pre-approved, offered a 21 day close of escrow (which is REALLY short but often in the sellers' best interest if they want to move right away as all our sellers did), placed no contingencies (1) no loan contingency--which means you can pull out if you don't get your loan, 2) no appraisal contigency--which means you can pull out if the house isn't appraised for the sale price, which can happen when things are way overbid, and 3) no inspection contingency--we looked at houses under 15 years old that were well-maintained and assumed that if there were any major problems we would have to pay for repairs) and we offered to buy the houses as-is so we even paid for the termite Section 1 repairs (typically sellers pay for this, as Section 1 items are things like rotting wood trim near an exterior door that could be susceptible to termites).

Given the very flexible/bend-over-backwards terms, it was surprising that we still lost the 2 other houses, especially when we bid $50,000 over list, which is quite good when the seller isn't intentionally listing low to attract more buyers. There was some drama with those first 2 houses that I won't go into detail here, but suffice to say, some realtors are unscrupulous (representing both buyers and sellers in 1 transaction and then NOT countering strong offers so he could get the full commission) and some sellers are ethnocentric (the Asian sellers wouldn't sell to us, even though we're fellow Asians--DH and I are Chinese-- because they wanted to sell to Filipinos even though we had a much more attractive offer than the Filipino bidders they chose---their realtor felt so badly that he apologized to our realtor).

Our realtor told us stories of sellers listing low and getting 30+ offers. For the houses we bid on, there were on average 5-10 bidders so our 3 houses were not unrealistically low.

In the end, I'm glad we lost the other 2 houses as this final house is everything I wanted in a dream house (located in a court, quiet neighborhood near a huge nature preserve, 3 car garage, big square footage, big yard, etc.) and located just minutes from DH's office and my park-and-ride lot.

Good luck with your house buying search!

[jude29]

What kind luck did anyone have getting the sellers to complete major repairs after the inspection?

What kind of repairs?

We just had a house inspected that we have an offer on. The inspector said the Chimney needs to be replaced and that there are rotting walls in the garage. YIKES :eek:

Any advice?? :confused:

[Smiley124]

There is nothing I want more in this world than to buy a house, but I feel so clueless about the whole process. What are the "musts" before buying a house? Obviously we have to have a down payment... What about debt? Can you have any CC deb at allt? Also I heard you must have a steady job for 2 years? That one really bites us because hubby is laid off. Does that really mean we have to wait 2+ years to buy? What else is out there that I need to know about?

Thanks!

[juliemag]

I would start getting several quotes from mortgage lenders on what you can afford. They will inform you, based on your debt to income ratio, how much you should be able to afford per month. DH and I purchased a condo last year, we had no down payment, and had several thousand dollars of debt. If you have established credit, that is reflected in your interest rate % and the amount of money they will pre-qualify you for. Once you find out how much you can afford, then you can start house hunting for something in your specific affordable price range.

About the job duration.... We've had to provide employment history for the last two years for both times we've purchased homes. It's not like they wont qualify you if DH isn't working --- rather they'll just pre-qual you on your salary alone.

Oh and there are 1,001 different mortgages out there to help first time home buyers be able to afford a home. Do your research!!! We got stuck with a really bad mortgage our first time around because we didn't ask questions!!! Read the fine print. :)

[Smiley124]

I know I am showing my cluelessness more and more here, but how do I find a mortage lender? Phonebook, online?

Also, I am the one with a decent job, but he is the one with great credit (mine stinks). Is there any hope for us?

Also, how soon is too soon to get prequalified. We just signed our lease for another year and would really like to buy around this time next year. Is it too soon to get started?

[juliemag]

There are no stupid questions!!! :D
For a mortgage lender, I usually asked around from friends/family to see if they were happy w/ a particular broker. I would avoid the large 'Bank of America' type mortgage companies, in my experience they weren't great at all.

About your job situation--- I'm not sure. You'll have to run an official credit report to see what your actual score is (which the mortgage broker will do).

If you are looking to buy a full year from now, you'll want to take this time to build up your credit and gain employment so that when you go to pre-qualify next year you'll have all your "ducks in a row" so to speak. Pre-qualification shouldn't take longer than 1 day. So there's really nothing you can do now but 'prepare' financially! I dont think it's ever too soon to get started in that regard.

[Chimichanga]

Another way to find a lender is to listen to the radio/ask neighbors. We new of a great local Credit Union - they have an awesome reputation - that we checked out when we considered buying a house.

They were great and really helped us a lot (we were green too!) We also checked out a bank friends of ours had used when they bought their house. Ultimately DH and I built a house so we didn't use any of them.

As for down payments; that can really vary. I know people who didn't have one, some who had 25% and everywhere in between. I think it depends on how much of a house (cost wise) you guys want.

Debt is okay, but obviously keep it in check. We had to pay off a few things before we could get more of a loan. It really gave us a kick in the right direction.

As for your credit rating - I don't think your DH not having a job would be that negative. I mean - I *think* they score you as a couple (since you're buying it together).

My credit score used to be lower - darn college years - but once we got married we paid everything off and I closed everything. My credit is now very good. Our lender took the better score (DH's) even though I make more money at my job.

[houseblend]

This is definitely the time to start checking your credit reports. Make sure there are no errors on them. If there are - start getting them cleaned up now.

As far a broker, it is too early to shop rates. You don't need to shop rates until 2 to 3 months before you are planning to buy.

One thing to be cautious of with a broker - more likely than not, they will be willing to lend you more for a house than you can actually afford. It's best to figure out yourself how much you can spend towards a monthly payment. Don't forget to also factor in:
- mortgage payment
- monthly property taxes
- monthly home insurance costs
- monthly maintenance
- increased utility bills


I highly recomment the book Home Buying for Dummies. It does a great job of addressing all these issues and walking you through the entire process. It also helps you analyze how much of a home you can afford.

[MrsSmith]

I agree with reading and looking at info from respectable sites online also. But I'd add go into a bank and talk to a person in the mortgage department. Order copies of your credit reports. If you get pre-approved right now, it won't be valid for a purchase next year, but it will give you a good idea of what you're headed for next year.

There are so many different mortgage programs that you will certainly be approved for something, but you want to know the specifics of what you can get. Don't just jump at the first one you're approved for or the first number in the phone book. Also, ask around and see how people like their mortgage lenders. That's a great source of info.

[Atlanta_eBride]

Check out your home section in the paper. A lot of times there will be free classes on how to start home buying, getting a mortgage, repairing credit, etc. These are typically run by mortgage lenders and real estate companies. If you don't know where to start you might get a mortgage person and an agent all at once.

[kam]

I agree with everything that houseblend said, especially this:

One thing to be cautious of with a broker - more likely than not, they will be willing to lend you more for a house than you can actually afford.

Figure out first what you want to spend. Do not let a mortgage broker talk you into looking into a home that you know you can afford on paper but can't in real life.

[Smiley124]

Thanks everyone - all of this is SO helpful! The great thing about where we live now is that we can get a decent house for the same amount that would barely buy a shack where we used to live. I am definitely going to start getting our financial ducks in a row and see what else I can find as far as books or classes. Thanks so much for getting us headed in the right direction. Any other advice is always welcome!

[Cricket4]

Let me second Home Buying For Dummies, and add that Mortgages For Dummies really helped DH and I as well.

Please go get those books before getting started, it'll take a lot of the mystery out of the experience.

[BethElena]

Check with your local bank or credit union. I know ours did a "new homebuyers 101" class a few weeks ago, to introduce terms and have a Q&A session.

[PG-rated]

Bumping this thread because it's full of good information!

[PG-rated]

So now I have a question - how do you know when it's the "right" time to buy? We had planned to wait until next year some time so that we could work on paying down debts, but I'm worried that we'll be priced out of the market if we do. But if we try to buy this Fall, we'll have a much harder time making a mortgage payment. Those of you who live in "hot" markets, how did you deal with the pressure?

[smiles33]

I would wait so you can pay down some debt and hopefully put away a bigger down payment. IMHO, it's not worth rushing in now. Yes, interest rates probably will rise, but there are a number of indicators that already show the market slowing and some experts predicted today (see NY Times article) that the market will dramatically slow if not decline within the next 2 years because income and rental market rates are not matching these astronomical increases.

It's not as if the bubble will pop overnight, but it is already slowing and perhaps will drop more by next year. The reality is that A LOT of people can only afford to buy houses with interest-only, adjustable rate loans and with interest rates rising, things will be VERY difficult for many of them (especially if they don't get the raises they're hoping to get). I wouldn't be surprised if foreclosure rates go up in the next 5 years because more and more people default as their interest rates suddenly shoot up.

DH and I felt that 6 months ago was a good time for us to buy because we wanted to tap into the amazing equity our first home after the unbelievable increase in property values. But we were homeowners eager to take advantage of that huge pot of cash that let us put down 20% on the dream house we now have, as those insanely high prices undoubtedly will disappear during the next downturn because our old neighborhood was not a "high prestige" area and actually had mediocre/below average public schools. If not for that factor, we would not have jumped into the market this year.

[PG-rated]

You make a good point - there's so much new building in our area that prices have to level off sometime. I don't think we'll ever see a crash (or even a downturn), but by waiting a year we can get all of our finances in order instead of getting in over our heads now.

[julietchicago]

Ugh Sevilla!

"Ugh, realtors annoyed me. Seriously--the only reason we had one was to handle the technical stuff. She sent us stupid homes to look at, we did our own searches online at www.realtor.com (this gives you access to the MLS listings that realtors use so you have the same info as them) and then gave her the homes we wanted to see. They are not *necessary* for buying a home, but almost all people use them from what i can tell. She did things like writing up the contract and stuff like that."

I'm hurt :( LOL. No, not really, because I know I am a damn good Realtor. But i'm sure the Realtor you were working with, in fact i'm positive, she did not mean to send you stupid homes to look at. Realtors enter your criteria into the computer and all homes that match it will come up. Assuming she emailed you the listings?

Realtor.com is a great resource for home buyers! But...Realtor.com does not indicate whether or not the home is under contract or sold and closed already. Realtor.com lacks a lot of the important facts about a home. I would consider a Realtor very necessary whether you are buying or selling a home. Yes, some are in it for the money and they churn and burn their clients without giving them the "personal" service they deserve. But ones like me actually value their clients and hope to have our relationship last a lifetime. Sounds like you had a bad experience. Hopefully next time you will ask for a referral from someone...maybe you will have better luck.

[EmilyZA]

I'm going to subscribe... we won't be ready for another year or so, but I want to definitely have all my ducks in a row before that... so this looks like a good place to start!

[Little Angel '77]

Hi There
Your questions are really good, and I can try to help (first off, I have a GREAT mortgage lender. Lisa... She rocked. PM if you want her name.)

Second, you can get a pre apporoval, but that doesn't always mean you'll get final approval. They will run your credit history and if it all looks ok, they will send you a letter saying you can spend XXX. BUT!!!! BUT BUT BUT.... They always Pre approve you for MORE than you should actually spend. My DH and I wanted to get a 200K mortagage and got pre approved for 550K. There is NO way we could ever support a mortgage of that amount.

make sure you know what your monthly mortgage payment can be, and don't forget to include tax, water, electricity cable... Its really easy to think you can spend more than you actually can.

As for the no job thing, MY dh was without a job when we bought our home together, but he had enough of a savings and another house he was selling to make it all balence. You can do it, you just have to watch your numbers.

You also want to decide if you want an APR or a fixed percentage for your loan rate. If you are going to be there more than five years, get the fixed... less than 5 years get the APR, at least thats what my suggestion is (but I am not a finance person... we just ran the numbers and it made more sense to do one over the other.)

Please feel free to PM me... I have bought and sold 3 houses... so I know a thing or two :)

[Aletheia]

Bumping this up-- lots of good info here.

We're looking to buy in a very narrow window-- DH finds out where he will be doing his medical residency mid-March, and we have to move no later than June. I'm worried about the turn-around time, esp. since we'll be moving across country. Please tell me this is possible! If we get pre-approved and have researched the possible cities and their neighborhoods ahead of time, it should be, right??

[Ummm]

just want to sub this thread... not buying yet but want to be prepared :)

[PaisleySloan]

Subscribing also.

[lisariv]

Altheia - I havent read this whole post, but wanted to respond to you question. It's completely possibly, but a lot of things depend on the market you'll be looking in. I was lucky in that my DH matched at the same hospital he went to med school, so we didn't have to move. (We anticipated this and bought while in school.) But, I know that MANY families come into the hospital in June/July having just bought their homes. And we have many friends from med school that went on to find houses wherever they were going right after Match. You do have to be on the ball and ready to get looking as soon as Match Day comes. Be on the lookout for information that the hospital sends your way. I am a memeber of our auxiliary and every year we send out information to the new students, residents and fellows about the different areas around the hospital/city as well as any homes that other members are putting up for sale.

One last thing, you should be careful not to "settle" for something that you really don't like. As a resident's spouse, you'll probably be spending a lot of time home alone. So you better like where you're living! :) You can always get a short term lease on an apartment and continue house hunting once you move.

HTH and good luck getting a top choice w/ Match.

[greenbunny]

How did you learn about homebuying?

Surf, surf, surf. Also I read the entire Home Buying for Dummies book, cover to cover. Great read. Highly recommended.


Did you use a realtor? How did you choose one?

Yes, she was a godsend. She was recommended by a friend, and we loved her so much we send her Christmas cards. I kid you not.

She was the only realtor who didn't stop taking our calls due to our complete lack of pressure (we didn't care how long it took to buy, we were renting month-to-month and others realtors couldn't be bothered with us).

She helped us figure out several close-calls that could have screwed us (we almost bid on two places that turned out to be nightmares--one was tied up in legal difficulties due to divorce, the other had property line issues we couldn't really understand without help).

And in the end, when the owners of our house screwed us at the last minute and refused to give us the allowance for repairs we'd put in the contract, she wrote us a check for that amount out of her commission.


What kind of timeline did you have? When did you start looking, how long did it take to get a mortgage, did you get preapproval first, how long did you look, when did you get to move in? What did you do first?

We looked for two years, almost bid on two homes, and lost a bid on one before getting our current home. I know that is not normal. We were willing to wait forever because we could afford to be picky; we were renting from my dad.

We got preapproval from my credit union but didn't use them. We found a mortgage broker (on recommendation) that turned out to be totally incompetent, the guy never knew what we were asking and had to get someone else to talk to us. In the end, our loan was sold to Countrywide, and we lucked out because they've been great. But if I had a do-over, I'd never use a "mortgage" broker, I'd use a bank.

We had no trouble getting approved, but one thing I didn't realize at the time is that you should slow down on the credit card usage a few months before applying for a loan. We pay off our credit cards in full every month, but I had no idea they check the balance as of the date of the credit report. So we were in the middle of a cycle and it looked like we owed a LOT of money. The mortgage lender said it wasn't that tragic since we always paid on time, but we did get questioned about it.

We started looking around winter of 2003, found our house in November of 2004, closed in February of 2005. We had an unusually long wait for our closing date because the sellers had trouble with the house they were building (they ended up running out of time anyway and had to move to an apartment).

[Tanya]

But if I had a do-over, I'd never use a "mortgage" broker, I'd use a bank.

Keep in mind that a broker can (in a lot of instances) get you better deals than you as the customer just approaching the bank can. Our rate couldn't be touched by Chase when we were shopping around, but it did get sold to Chase in the end. In fact, they didn't even offer a 7-yr arm which is what we have. I had always read to go straight to the bank as brokers are taking a cut (the "middle man") and yes, they do get a cut (fees), but the banks will buy the loan for less than they would to prepare it, so it seems to all work out the same in the end. I've used a broker for both my home purchases--the first time I was a newbie, the second time I did my homework. Also, if you have some credit issues, the brokers can help pare down the banks to work with.

[greenbunny]

Tanya, all interesting points. I probably wouldn't be so adamant if the guy hadn't been so incompetent.

Then again, we did the run-of-the-mill 30 year fixed-rate loan, nothing fancy. Maybe that route works out best for those who want a more creative solution?

[flygirl]

Aletheia, we had even less time than that to make a move. DH interviewed for his job on Jan 19 & started Feb 2. I put in for a job transfer & they wanted me out here ASAP. DH started looking at real estate on the weekends with our relocation realtor, and I came out on Feb 14. We were very, very lucky that we found our house that weekend. We put down the contract a week later & closed 3 weeks after that.

I am thankful every day that we found the perfect house so quickly, and I wouldn't have settled. That said, we're in a buyers' market with new housing going up everywhere, so it wasn't difficult to find what we were looking for. I'm sure it would have taken much longer in a faster market.

[CindyLouWho]

We had a great exeperience. Actually, it all went a bit too well because we thought we were just looking but were 2 hours into it when we put in the bid to the house we own-- and LOVE-- now!

I was only on chapter 3 of Homebuying for Dummies but used it as a reference guide during the process.

The Key? Using a realtor we trusted ( she was our landlord) and who had lots of experience. She recommended the mortgage broker ( who preapproved us so fast I thought she was a kook at first but that's the way it is now. I also had my credit score in advance and was in good order debt-wise. Not so good on having assets liquidated to put down the money you need to right away, though.)
She also recommended the Inspector who we thought was great ( my husband used him again to help get a handle on what work his aunt's house might need.)

Ours was very smooth and it was still stressful!

I did alot of preliminary legwork on the internet and had an idea of what existed in our price range. Lucky for me most of it wasnt' great so that when we got to our house, we didnt' hesitate! We also did lots of drive bys on those places in our price range, just to get a sense of the whole picture because the internet left a lot out ( like that the backyard was overlooked by a high rise apt so the fenced yard, which sounded great, did nothing for your privacy.)

I think the MOST important thing I did was I read EVERY SINGLE piece of paper we got from the mortgage lender AND then I met with her and went over EVERY question. If I hadnt' done that, I know myself, and I would have worried constantly about what I might be unaware of. It was a major undertaking but a few hours and it was worth it.

Good luck! The process does have its fun moments and owning is just really a nice thing!

[EmilyZA]

This is such great info! Subscribing.

[pookiebear]

Well once you find a house you like it is best to have ma clause in any offer you make which states that the offer is dependent upon inspection and apprasal. Otherwise you will spend a lot of money apprasing houses that might turn out to be lemons

[Kanga]

So approximately how much does it cost for *everything.* Home inspection, warranty, appraisal, closing costs, legal fees, basically everything except the house itself.

Also, has anyone heard anything about Ditech? Supposedly they have a very low flat fee closing cost, but I haven't heard anything else about them, bad or good.

What exactly are the advantages for a first time home buyer? I hear companies and people talk all the time about the deals you get, but haven't heard exactly what those deals are.

[Kanga]

Anybody?

[Asha]

So approximately how much does it cost for *everything.* Home inspection, warranty, appraisal, closing costs, legal fees, basically everything except the house itself.

i think it all depends on the area in which you live. we spent approximately $13k in those "closing costs." it cost us a bit more bc we ended up getting two mortgages, so we had to pay separate fees/taxes for the two mortgages.

i don't know of any specific programs for first time homebuyers. sometimes city gov'ts offer special low income housing options for first time home buyers. here in nyc, the real deal is being able to get a house for below market value - at least that's how the programs here work.

[Asha]

Keep in mind that a broker can (in a lot of instances) get you better deals than you as the customer just approaching the bank can.

not true in all cases. if you read the current issue of money magazine, they explain just that it is actually not true. i called about 20 banks to find the best deal for us. then i called a friend's brother who is a mortgage broker to see what he could get. he insisted that he could get us the best rate, but in fact his best mortage interest rate was 1/2 percentage higher than the one i found on my own. it was so not worth shelling out the $3k to pay him when i easily did it on my own. the only real advantage to getting a mortgage broker is if you don't have the time to do the leg work yourself.

[Asha]

We're looking to buy in a very narrow window-- DH finds out where he will be doing his medical residency mid-March, and we have to move no later than June. I'm worried about the turn-around time, esp. since we'll be moving across country. Please tell me this is possible! If we get pre-approved and have researched the possible cities and their neighborhoods ahead of time, it should be, right??

i think that should be fine, but don't you have to sell your current house? that might take longer bc the market is slowing down.

[Tanya]

So approximately how much does it cost for *everything.* Home inspection, warranty, appraisal, closing costs, legal fees, basically everything except the house itself.

Also, has anyone heard anything about Ditech? Supposedly they have a very low flat fee closing cost, but I haven't heard anything else about them, bad or good.

What exactly are the advantages for a first time home buyer? I hear companies and people talk all the time about the deals you get, but haven't heard exactly what those deals are.
Ditech has much higher rates than everyone else to make up for the "flat fee" closing costs. I think the rule of thumb for closing costs is 3% of the selling price. The first-time home buyer programs that I know of are FHA loans. You have to meet certain criteria (but income doesn't matter) and the house has to be under a certain price depending on the area.

not true in all cases. if you read the current issue of money magazine, they explain just that it is actually not true.
That's great that that's how it worked out for you. In a lot of cases, though, especially with creative loans, brokers are going to be your best bet. With typical 30-yr loans, I agree that usually the best way is just to call banks, which I'm sure is what Money is touching on. Like I said in my post, our mortgage got sold to Chase (7-yr ARM) who when I originally approached them, they couldn't touch our broker's rate. It wasn't because I wasn't willing to call around.

[Asha]

i didn't have a traditional loan, we were first time home buyers, and we still had a fair amount of debt. we were still able to get the best deal.

[Asha]

Ditech has much higher rates than everyone else to make up for the "flat fee" closing costs.

that's true. they are going to make up the money some how.

[Kanga]

Ditech has much higher rates than everyone else to make up for the "flat fee" closing costs.

I figured it was probably too good to be true.

[Aletheia]

Yay! We're pre-approved and the amount was well above what we want to spend. We put a budget together today, too (there is a great template at the microsoft site) and researched the costs of utilities and insurance in the area we are hoping to buy. I am getting very excited.

Thanks for the encouraging words!

[nektarine]

just an FYI for any military families:

USAA has FREE financial advising and competitive lender and insurance services for the homebuying process.

they also have a Movers Advantage program that provides additional relocation services for clients considering a long-distance move.

also, highly recommend this book:
The 106 Common Mistakes Homebuyers Make (and How to Avoid Them) (http://search.barnesandnoble.com/booksearch/isbnInquiry.asp?z=y&isbn=0471751235&itm=10)

it was recommended in BusinessWeek as one of the best guides for first-time homebuyers!

[Kimberland30]

We are in the process of getting a mortgage approval. The house we want to purchase is the one we are currently living in. My parents have owned it for 20 years, I've been renting it from them for the last 4.

We are going through LendingTree.com right now, waiting to hear back from them with offers. Our first go-around included 5 different offers, all between 6% and 6.25% with the mortgage price and closing fees listed. That of course doesn't include insurance or taxes. We are financing 100%, doing an 80-20 mortgage. We decided not to put anything down because we'll have a lot of equity built up when we purchase (parents are doing a 'gift of equity').

Once we figure out what mortgage lender we'll be using, my parents will schedule the inspection and appraisal. I'm worried about the appraisal because we've done cosmetic upgrades to the house in the last year and that could up the value of the home.

We also hope to borrow money on the 20% second mortgage because we'd like to pay off all of our back debt if possible. I'd rather pay $300 more on a mortgage than $700 on credit card bills, you know?

Has anyone gone with Lending Tree before? I just did so because it was convenient for me. I don't have time to shop for rates, and banks around here charge $50 per application. Plus it's more hard hits on our credit, and my friend's real estate agent said that could be a problem.

I just want to be done with it all.

[Tanya]

Once we figure out what mortgage lender we'll be using, my parents will schedule the inspection and appraisal. I'm worried about the appraisal because we've done cosmetic upgrades to the house in the last year and that could up the value of the home.
....
Has anyone gone with Lending Tree before? I just did so because it was convenient for me. I don't have time to shop for rates, and banks around here charge $50 per application. Plus it's more hard hits on our credit, and my friend's real estate agent said that could be a problem.

Why are you worried if the appraisal ups the value? This is never a bad thing, the only thing the mortgage company cares about is if the appraised value is equal to or higher than the total mortgage.

And if you are mortgage-shopping, the way I understand it is that if it's within 14 days, it looks to the credit agencies like only one hit. That's because they don't want to punish people for shopping around.

[flygirl]

If your parents are giving a "gift of equity," depending on the percentage of the total value, you may not need an 80/20. A second mortgage like that will carry a much higher % rate than the first, so you want to avoid it if you can. And if the amount of equity your parents are giving you is equal to 20% or more of the value of the home, you don't need the second to avoid PMI.

For example, if the home is worth $500k and your parents are gifting you $150k in equity, then your mortgage of $350k will be 70% of the value of the home & exempt from PMI (the only reason to get a second). If you want additional money to pay off debt, you can still get a first (and only) mortgage of $400k, which at 80% of the value of the home is the maximum before PMI is assessed. That will leave you with $50k for either cashing out or to use as a equity line of credit.

[eponymous]

i think that should be fine, but don't you have to sell your current house? that might take longer bc the market is slowing down.

I'm pretty sure that Aletheia and her DH don't currently own.

[Kimberland30]

Why are you worried if the appraisal ups the value? This is never a bad thing, the only thing the mortgage company cares about is if the appraised value is equal to or higher than the total mortgage.

The only reason I'm worried about it is because my parents are selling us the house minus a set amount of equity. So if they are going to gift us say $50,000, that's for the total of the appraisal. If the appraisal comes in higher, it's more money we have to finance. But the more I think about, I'm not that worried. There are many things "wrong" with the house that will need to be replaced, so that should balance out the things we've already done. Maybe.


And if you are mortgage-shopping, the way I understand it is that if it's within 14 days, it looks to the credit agencies like only one hit. That's because they don't want to punish people for shopping around.

That's good news! We financed a car a couple years ago, and those hits aren't even showing on our report.

If your parents are giving a "gift of equity," depending on the percentage of the total value, you may not need an 80/20. A second mortgage like that will carry a much higher % rate than the first, so you want to avoid it if you can. And if the amount of equity your parents are giving you is equal to 20% or more of the value of the home, you don't need the second to avoid PMI.

You know, I was thinking that but once I figured in teh 100% financing, I would get confused. So basically we can still finance 100%, but have it on one mortgage. I'd like to do that and not borrow on a 2nd mortgage. We'll have our bills paid off in a year (maybe 18 months at the most), so I'd rather pay that off with what income we have rather than tie up equity we have. If that makes any sense. :)

[lawyerlee]

I just thought I'd bump this up and add information about how to access the free credit report you are entitled to receive once a year from the three credit reporting agencies. :)

This link to the Federal Trade Commission site is very informative. It basically tells you everything you need to know.

Your Access to Free Credit Reports (http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm)
The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

annualcreditreport.com

There are lots of other sites out there that claim they will help you access your free credit reports. I'd be skeptical of any of them. There just isn't any reason not to use the link provided by the FTC, which I've also posted just above this text. Better safe than sorry! ;) :)

[BTB]

bump

[BTB]

Homebuying 101 (http://www.constantchatter.com/showthread.php?t=484)

Ask, and you shall receive. :) I bumped it for you.

THE book I think is a must-have for first-timers is "101 Questions Every First Time Homebuyer Should Ask" by Ilyce Glink. I originally purchased Homebuying for Dummies and Mortgages for Dummies but returned them - I felt they were too simplistic and didn't contain nearly enough actual info. Personally, I don't want cartoons or entertainment. Glink's one book was way more helpful than both "dummies" books combined, IMO.

[lawyerlee]

THE book I think is a must-have for first-timers is "101 Questions Every First Time Homebuyer Should Ask" by Ilyce Glink. I originally purchased Homebuying for Dummies and Mortgages for Dummies but returned them - I felt they were too simplistic and didn't contain nearly enough actual info. Personally, I don't want cartoons or entertainment. Glink's one book was way more helpful than both "dummies" books combined, IMO.
I just put that book in my Amazon shopping cart. I'm glad to hear another solid endorsement of it. :)

I have a question that I feel kind of stupid asking, but here goes. How soon after your closing did you have to make your first mortgage payment? I want to try as hard as possible to avoid having to make a rent payment and a mortgage payment at the same time because that might strap us really bad. Plus, I'm a big worrier, so I'm obsessing about every little thing like this. I just don't want to mess our lives up, KWIM? :(

[lawyergirl25]

We closed 3/31, first mortgage payment due 5/1. I would guess a month is pretty much standard, but it depends on the lender and your closing date.

[greenbunny]

We closed the second week of February and our first mortgage payment was due April 1st. The first month's payment was included in the closing (not free, I mean, we just had to include that amount of $ as part of what we owed).

[lawyerlee]

Thanks! It helps to know what your experiences have been like. :)

[Tanya]

I agree, your first mortgage payment should not be due until the 2nd full month you own the house. So if you close on June 1st, you should not owe a payment til Aug. 1, because you have already paid up until then at closing.

[Makena]

subscribing :)

[lawyerlee]

Thanks, Tanya. :)

[thelittlebabu]

I have a question that I feel kind of stupid asking, but here goes. How soon after your closing did you have to make your first mortgage payment? I want to try as hard as possible to avoid having to make a rent payment and a mortgage payment at the same time because that might strap us really bad. Plus, I'm a big worrier, so I'm obsessing about every little thing like this. I just don't want to mess our lives up, KWIM? :(
Included in your closing costs will be the interest on the loan that gets you to the first of the following month. Then you have the entire following month before you make that first mortgage payment. Here's an example:

You close a $100K loan at 6% on April 20th. Included in your closing costs will be 10 days of that 6% interest to get you to May 1st. This will be:

$100K x 6% x 10 days / 365 days = $164.38.

Now on May 1st is when your 360 months of mortage payments kick in. However, you get to live in the house for a month before making that mortgage payment (which makes sense...the interest has to accrue for the month before the payment is made) so your 1st mortgage payment won't be due until the 1st of the *next* month...June 1st.

So, you get a month and 10 days from closing until your 1st mortgage payment. Oh, that $164.38 will be part of your tax-deductible interest, too!

On a related note, the best resource IMO for everything mortgages is www.mtgprofessor.com (if someone didn't already mention this). The info can make your head spin, but it's worth checking out.

[lawyerlee]

Included in your closing costs will be the interest on the loan that gets you to the first of the following month. Then you have the entire following month before you make that first mortgage payment. Here's an example:

You close a $100K loan at 6% on April 20th. Included in your closing costs will be 10 days of that 6% interest to get you to May 1st. This will be:

$100K x 6% x 10 days / 365 days = $164.38.

Now on May 1st is when your 360 months of mortage payments kick in. However, you get to live in the house for a month before making that mortgage payment (which makes sense...the interest has to accrue for the month before the payment is made) so your 1st mortgage payment won't be due until the 1st of the *next* month...June 1st.

So, you get a month and 10 days from closing until your 1st mortgage payment. Oh, that $164.38 will be part of your tax-deductible interest, too!

On a related note, the best resource IMO for everything mortgages is www.mtgprofessor.com (if someone didn't already mention this). The info can make your head spin, but it's worth checking out.
That site seems great. Thank you for mentioning it and explaining the rest. I feel like such a twit, but this is all so new to me. I had no idea what is included in the closing costs, so that helps me a lot. :)

[lawyerlee]

Oh, and on an unrelated note, does anyone have a preference as to which of the two "Homebuyer 101" threads to post in? I just realized I've been posting in two different threads! Aren't I observant?! :o :D

Or maybe I'll just ask for them to be merged, if that is okay.

[thelittlebabu]

That site seems great. Thank you for mentioning it and explaining the rest. I feel like such a twit, but this is all so new to me. I had no idea what is included in the closing costs, so that helps me a lot. :)
You'll be an expert, too, after your house purchase and then a couple of refinances ;)

[lawyerlee]

Does anyone have a preference as to which of the two "Homebuyer 101" threads to post in? I just realized I've been posting in two different threads! Aren't I observant?! :o :D

Or maybe I'll just ask for them to be merged, if that is okay.

[lawyerlee]

You'll be an expert, too, after your house purchase and then a couple of refinances ;)
I hope so! :D

[flygirl]

I love you, Di :p. Threads merged.

[lawyerlee]

I love you, Di :p. Threads merged.
Awesome! Thanks. :D

[lawyerlee]

Okay, another question. How many places did you check with while shopping for a mortgage? Did you actually apply / seek pre-approval at more than one place? Or just talk to someone at each option, then narrow down your choices to one place and apply there? Thanks. :)

[villanelle75]

IIIRC, we only applied for one pre-approval. That's all we needed to shop and make offers, I think. They jsut want to know you can get the money that you are offering to; pay them.

DH gets obsessive about researching certina thigns, and mortgages was one of them. He worked with a broker that was recommended ot us, and also talked seriously with 4 other sources, as well as haveing brief conversations with probably half a dozen more. It ended up beign really helpful because USAA, our primary bank, ended up doing rate matching, so we found a lower rate than they were offering, which they matched while still maintaining their very very low fees.

Another thing to note, if you find someone who says they will match, it might be worhtwhile to fib, if you are comfortbale. USAA never asked us for proof that we were offered the low rate was ended up getting. We told them the number and they agreed to match it. In our case, we really were offered that rate, but we coudl just as easily been fibbing to bring them down another eigth of a point.

Do be careful though, on rate matches. Make sure the fees and/or points are the comparable or a lower rate could end up costing you more overall.

I know it feels overwhelming, but the process sort of happens and while it feels scary and like you dont' knwo what you are doing, the system sort of carries you along. At least, that was my experience.

[BTB]

How many places did you check with while shopping for a mortgage?

We only got pre-approved at one bank, but would've shopped around if my soon-to-be employer didn't have a very nice relationship with them - they hook all new employees of this company up really well. I did pre-qualify at one other bank, just out of curiosity, but the deal wasn't even close. Under different circumstances, I'd probably have sought at least three or four "bids" or whatever you call them. :)

A tidbit for you, Di, or other mortgage hunters... multiple credit inquiries for the same type of loan performed within a 14-day period are considered one inquiry for FICO scoring purposes. So, make sure you end your mortgage shopping within 14 days of starting it if you seek pre-approval, since that counts as a credit inquiry. (Pre-qualification doesn't involve the credit inquiry and so doesn't matter under this rule).

[lawyerlee]

We only got pre-approved at one bank, but would've shopped around if my soon-to-be employer didn't have a very nice relationship with them - they hook all new employees of this company up really well. I did pre-qualify at one other bank, just out of curiosity, but the deal wasn't even close. Under different circumstances, I'd probably have sought at least three or four "bids" or whatever you call them. :)

A tidbit for you, Di, or other mortgage hunters... multiple credit inquiries for the same type of loan performed within a 14-day period are considered one inquiry for FICO scoring purposes. So, make sure you end your mortgage shopping within 14 days of starting it if you seek pre-approval, since that counts as a credit inquiry. (Pre-qualification doesn't involve the credit inquiry and so doesn't matter under this rule).
Thanks for sharing your experience and this information. :) Once I got started with the applications for pre-approval, it didn't seem so intimidating. I ended up applying at three banks and one place that is in between a mortgage broker and a bank. It was exciting to get the ball rolling! :)

[lawyerlee]

I was curious how many of you chose to purchase title insurance for yourselves, in addition to your lender. I'm thinking we'll probably do this, based on the reading I've done, but reading other people's experiences is always so helpful to me. Thanks! :)

[amorey]

I’m pretty sure our title insurance covered us. I thought it was important because our house has had a lot of owners and some judgments against it in the past. I don’t remember if anyone even gave us the option to only cover the lender.

[lawyerlee]

Thanks, Ann. :)

I received my copy of 100 Questions Every First Time Home Buyer Should Ask today. I'm only about 50 pages in, but thanks to everyone who recommended it. I've already had a number of my questions answered!