Home buying thread

Rise from your grave, oh thread...


So yeah, now it"s me in the market for a house. Prices and interest rates are low as hell in Atlanta, and the new stimulus package created an $8000 tax credit for first time buyers. Unlike last year"s measure, it doesn"t have to be paid back. I"d planned to wait a year or two, but with the government literally giving away free money to home buyers, I"d be crazy not to push my timetable forward.

So, in the interest of keeping my ignorant ass from the poor house, I"m gonna try to do what Tuco did and post the process here as I go through it. Any insight from veteran home owners or REAs would be greatly appreciated.

Step the First:

I spoke with a lender yesterday and received a prequalification for my price range (150-160k). He said I could afford more. I told him that"s nice but I"d prefer to keep to the range stated, as I don"t want my bills to increase. So, got my range set.

The lender was very helpful, and broke down exactly what my payment would be, assuming a certain property tax rate. In general, I should be looking at a monthly payment right in line with my current apartment rent. I"ll be going with an FHA loan, so the insurance isn"t much at all.

Question: Would I benefit from talking to another lender and seeing if I can get better terms? What I was provided seemed pretty damn competitive already, certainly better than what some of my friends have gotten in the last year.

Step the Second:

I"ve started looking around at home listings. Started online before talking with an agent, and registered at ZipRealty since it had a nice search engine. One of their agents called me yesterday evening and asked me to highlight some properties I was interested in to get started. Found a few so far, mostly a touch further from the interstate than I would prefer, but it"s looking good. Found one very promising home in foreclosure for 125k that"s a strong possibility, going to take a look this weekend at the property in person.

So that"s where I"m at so far. The big thing I need to learn now is what I"m looking at specifically when I visit a property. How much can I snoop around, what questions do I ask, and most importantly what documentation can I expect the home owner to provide regarding repairs, defects etc.

Dunno if anyone"ll see this or not, but if so, any help would be appreciated.

How long is the 8000 credit available?

December 1, 2009. To qualify you cannot have owned property in the last 3 years, so it"s mostly a first time buyer thing.

It comes as a credit on your taxes, so next April you would get a refundable credit of 8k. So if you owed 1000 in taxes, you"d get 7k back, etc.

Time to find an $8,000 abode.

GrobbeeTrull2.0 said:

Time to find an $8,000 abode.

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Well, 8k or 10% of the purchase price, whatever is lower. So you"d need to spend at least 80,000 to get the full rebate. Of course, that"s not hard...

Cad said:

Make sure you underbuy. Take your annual salary and multiply it by 2, and thats the most your mortgage should be, especially if it is your first house. Similarly, take your annual salary and divide it by 2, and thats about how much you could spend on a car. So if you made $100k, you should live in a $200k house and have a $50k car. (If you finance it). If you have some cash for a down payment, you can add that on to the multiplied-by-2 price.

This will allow you to pay off your purchase quickly and not end up paying the purchase price of the house in interest to the bank, and instead use this money for your own enjoyment.

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The nature of the housing market in Atlanta fudges this somewhat. I"m unlikely to find a house in a decent part of town for precisely double my income, but it should be possible for about 2.5x. On the other hand, my vehicle is paid off. So it evens out in the end.

Cad said:

2.5 should be okay, it"s all guesswork anyway. The point is, make sure you get something you can pay off in under 5 years through careful budgeting. If your payment is 50% of your gross salary for example, there"s no fucking way. When I bought my house, my payment was something like $1300/mo on a 15-year mortgage and I was earning like 12k/mo net. Obviously I made a few extra payments and..

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12,000/month? Heh, that"s considerably beyond my means.

I"m in my mid-20s at the start of my career. I make about 3k a month. I"m planning to keep my house note to between 900-1000, and rent out a room or two.

Oh, Cad. You just lost all of your middle-class clout.

GrobbeeTrull2.0 said:

Oh, Cad. You just lost all of your middle-class clout.

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Well, I guess 12,000 a month is technically still middle class. Upper UPPER middle, but it should still qualify. A net like that puts his gross salary at what, 180-200k a year? That"d doctor/lawyer range, which is basically upper middle.

Honestly, the terms need to change. It"s far too broad a range.

Cad said:

I"d find a smaller place or rent for a little longer until you can save a considerable down payment.. I"d shoot for your house payment being 20% of your bring-home, that way you can make substantial extra payments and get it paid off quickly..

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Why throw money away on rent when I can spend the same amount on a mortgage and be building equity? That seems to counteract all advice I"ve ever heard. I already pay 1050 a month split with a single roommate. A house note on a 3 bedroom house would cost me slightly less, I can rent two rooms out andsaveeach month while not having to share walls.

I sense you"re of the "pay everything off as quickly as possible" camp. While in a general sense I agree with you, there are circumstances that make buying rather than renting an attractive option even without a substantial down payment (it"s why the FHA loan even exists). Take, for instance, the tax credit available this year. Even in fantasy land where I can squirrel away 500 a month towards a higher down payment, it would still take me 16 months to equal the value that the government is willing to give me free of charge now. It also gives the market more time to rebound and interest rates to rise.

That"s one thing I never really considered, is the extra utilities that come along with ownership. Now I"m paying for water, trash, sewage, security system, I"m commuting farther. It adds up.

I managed to get a place in NOVA for just over twice my annual salary. Also, the work the house needs should be added in. I could probably have it entirely fixed up for like 20k-30k so it"s not so bad.

I just got raped pretty much overnight. First time home buyer here, when I bought my home in "07 they based the assessed value on $130,000 from an assessment back in 2005, so I was paying my taxes based on $130k which was around $1,184.00 per month including PMI, homeowners and my principal + interest.

Come to find out the county comes out a year after the purchase and re-asses...bam it got assessed at $180,000. Up went my monthly mortgage payment from $1,184 to $1,440 fucking overnight. Needless to say...I"m in search for a roommate as we speak. I guess it"s one of those "life lessons" you have to learn the hard way, because I for one had no idea

It"s a pretty fucked up racket out there how my home is losing value and my property taxes STILL go up. Death and taxes

Yeah, your taxes are going to be based on the county assessment, which doesn"t update nearly often enough to keep pace with home value. I"m having to be very careful to note the taxes on each home I"m looking at, and they definitely vary widely. Sometimes on the order of a thousand dollars right in the same neighborhood.

I"ll just add that my current mortgage is about 40% of of my monthly paycheck. That"s is pretty damn high I know but my fiancee is still in school for 4 more months and hasn"t started working. Once she starts working it will be less then 20% or OUR net income which is much much better but as a piece of advice don"t hedge your bets on the income of two people.

It doesn"t always work and it is a gamble. If she left I could still afford it but it wouldn"t be the most pleasant experience until I could add another 10grand or so to my yearly gross.

While I"m generally in the "live debt-free camp" it"s important to take inflation into account when considering the merits of borrowing money over the long term. Interest rates are retardedly low right now if you have cash/equity and good credit. I refinanced my mortgage last week at 4.5% on a 30-year fixed. That"s going to look damn good in a few years when we"re seeing the 10+% inflationary backlash from the monetary policy of recent months. Yeah, I"m paying nominal interest for a long time but the real value of that will be closer and closer to zero the more the Fed keeps increasing the money supply and the government keeps engaging in massive panic-driven deficit spending. Worst case, as the economy recovers investments will start yielding > 4.5% returns again and there"s money to be made by investing vs paying off cheap debt.