Buying a house later this year (hopefully)
02-14-2011, 07:47 PM
#1
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Buying a house later this year (hopefully)
As the title suggests my fiance and i will hopefully get approved for a FHA loan to buy a starter home. Now my question is what would you have done if you were buying a house again, what would you not do? I want to know what im walking into. Anything i should look for in a house?
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02-14-2011, 08:21 PM
#4
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If you are buying a fixer-upper, realize that all your little projects around the house will take 5 to 10 times longer to accomplish in reality than you think they will when you're all optimistic and **** while house-shopping with a new wife. "We'll just strip off the wallpaper and put on a new coat of paint." Simple, right? No. It's a pain in the ***. And for crying out loud, get as many of those projects done as possible before you get her knocked up, because then you will have no time for anything.
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02-14-2011, 09:02 PM
#6
Though that's about as honest as it gets. I'd shop in a neighborhood on the up, or next door to one that is. I'd shop for a house that won't haunt you, but needs work to keep the price down. Look for one that needs work you're capable of doing. IF that works out for you, you will have some equity down the road when you do knock her up. 
Or want to upgrade. Or when you want to build a big-*** garage.
Or want to upgrade. Or when you want to build a big-*** garage.
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02-14-2011, 09:17 PM
#7
Buy way less than you can afford. big bills suck, and its just not the morgatge, its the damn taxes, utilities, repairs and god damn taxes, and insurance.
if you get a good deal on a starter house, and pay the thing down, you can be a baller like me and rent the thing out when you move on to a real house. That way you can still make money when the market takes a dump.
if you get a good deal on a starter house, and pay the thing down, you can be a baller like me and rent the thing out when you move on to a real house. That way you can still make money when the market takes a dump.
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02-14-2011, 09:26 PM
#8
Buy as new as possible. We bought brand-spankin'-new sooooo...
However, we did rent an older house for a couple of years before buying a house. Living in that cute older home that would be called a "fixer-upper" taught me a lot of what to look for. It had a GREAT location, large corner lot, big 2-car garage with laundry, counter with sink in the garage...overall it was nice. BUT it was built in 1964...and was mostly original...down to all the wiring and the fuse box...like...looked like this-
and took these-
Now, if I were the kinda person that knew what I was doing, we could have fixed it up and had a nice inventment, but I'm not one of those kinda people. If you know home repair, have done quality home repair and have the money to get things done...go for it. I remember trying to take down some wallpaper in the bathroom...on the original drywall...it took DAYS to get it all down and was a total PITA...steam, chemicals, scrapers...tried all of it. There were cracks in some of the floors and walls indicating a possible foundation/support issue. Ask/check things like when the roof was last replaced and what the building code requires/allows for roof replacement. I know in GA that a roof is allowed to have a second layer of shingles added to it and can be called a "new" roof. This is a VERY costly repair/replacement. I mean, I can go on and on with all the stuff I learned to look out for when looking at preowned homes, but you'll learn what to look for and what to question as you start to look around. You'll learn a TON more when you start getting home inspections and following the inspector around.
Stealth and M2 are also VERY right.
Look at surrounding home sales, property taxes in the area (moving 1/4 mile doen the road can change property tax by 2%...and that's a lot. Seriously, start watching HGTV and all the home buying shows and the home improvemtn shows...esp Holmes on Homes.
However, we did rent an older house for a couple of years before buying a house. Living in that cute older home that would be called a "fixer-upper" taught me a lot of what to look for. It had a GREAT location, large corner lot, big 2-car garage with laundry, counter with sink in the garage...overall it was nice. BUT it was built in 1964...and was mostly original...down to all the wiring and the fuse box...like...looked like this-
and took these-
Now, if I were the kinda person that knew what I was doing, we could have fixed it up and had a nice inventment, but I'm not one of those kinda people. If you know home repair, have done quality home repair and have the money to get things done...go for it. I remember trying to take down some wallpaper in the bathroom...on the original drywall...it took DAYS to get it all down and was a total PITA...steam, chemicals, scrapers...tried all of it. There were cracks in some of the floors and walls indicating a possible foundation/support issue. Ask/check things like when the roof was last replaced and what the building code requires/allows for roof replacement. I know in GA that a roof is allowed to have a second layer of shingles added to it and can be called a "new" roof. This is a VERY costly repair/replacement. I mean, I can go on and on with all the stuff I learned to look out for when looking at preowned homes, but you'll learn what to look for and what to question as you start to look around. You'll learn a TON more when you start getting home inspections and following the inspector around.
Stealth and M2 are also VERY right.
Look at surrounding home sales, property taxes in the area (moving 1/4 mile doen the road can change property tax by 2%...and that's a lot. Seriously, start watching HGTV and all the home buying shows and the home improvemtn shows...esp Holmes on Homes.
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02-14-2011, 09:46 PM
#9
I see that you are 20 years old. This is a FANTASTIC chance to do something the right way that will positively affect you for the rest of your life.
What we did:
1) Bought a very cheap house ($40,000 - 900 sq/ft) at 22 years old.
2) Paid it off in 8 years.
3) Used the extra money that we did not spend on house payments to put 22% of my income in a 401K.
4) Became debt free
5) Set ourselves up to retire at 55.
Our friends did the opposite:
1) Bought too much house
2) Bought too much car
3) Bought too much everything
4) At 50 years old realize that they are in horrible debt, have no retirement savings, and will pretty much work the rest of their lives paying off things like $200 (after interest) for a Blu Ray DVD of Caddy Shack 2.
Don't screw up. This is a very pivotal time in your life and you only get one shot at this. FWIW, I would have a very deep discussion with your wife to be and see if she is on the same page as you are (if you follow my advice). Don't marry a woman who is going to put you in debt for life.
What we did:
1) Bought a very cheap house ($40,000 - 900 sq/ft) at 22 years old.
2) Paid it off in 8 years.
3) Used the extra money that we did not spend on house payments to put 22% of my income in a 401K.
4) Became debt free
5) Set ourselves up to retire at 55.
Our friends did the opposite:
1) Bought too much house
2) Bought too much car
3) Bought too much everything
4) At 50 years old realize that they are in horrible debt, have no retirement savings, and will pretty much work the rest of their lives paying off things like $200 (after interest) for a Blu Ray DVD of Caddy Shack 2.
Don't screw up. This is a very pivotal time in your life and you only get one shot at this. FWIW, I would have a very deep discussion with your wife to be and see if she is on the same page as you are (if you follow my advice). Don't marry a woman who is going to put you in debt for life.
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02-14-2011, 09:54 PM
#10
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The woman helped me pull myself out of debt and helped me stay that way. I do appreciate all the advice you guys have, and let it be known its not falling on deaf ears.
This is a big point in my life and rmcelwee is right, do **** the right way and retire at 55(most likely 60 for me).
This is a big point in my life and rmcelwee is right, do **** the right way and retire at 55(most likely 60 for me).
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02-14-2011, 09:55 PM
#11
That's about the best advice a man can have, no ****. If she needs goochy this and prada that, kick her straight to the curb.
My wife cooks diner and washes my stanky clothes, and all she wants is a nice dinner out every now and then and her car washed. She's a keeper.
My wife cooks diner and washes my stanky clothes, and all she wants is a nice dinner out every now and then and her car washed. She's a keeper.
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02-14-2011, 10:23 PM
#12
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Part of this is knowing that banks will "pre-qualify" you for much more house than you should be comfortable buying. They don't care if you're house poor, in fact until about 3-4 years ago they barely cared if you defaulted because in the bubble market they still wouldn't lose if they had to foreclose.
We bought in 2008. Even though the full extent of crappiness in the housing market hadn't been played out yet, it was still pretty bad and the banks knew it then. I ran the numbers on how much house we were prequalified to buy and the monthly note would have been about 50% of our income, which is an absurdly high figure. You want it closer to 30% to have some breathing room and not be house poor. I did my own analysis to figure out what we could afford, then told the mortgage broker the number they came up with was borderline insanity and I wouldn't be spending anywhere near that much.
So we wound up with a fixer-upper we got in short sale (a long process wherein banks drag their heels excessively before selling at a huge loss) when the rate on that enticing 3/1 ARM readjusted and the dozen or so illegal El Salvadorans couldn't afford the payments anymore, despite the fact that they were getting good money from renting out the basement to a single white mom and her kid and letting them stay in a "bedroom" that isn't legally a bedroom because it lacks a window and there is no fire escape down there. We're in a good neighborhood though, couldn't have afforded a house here that wasn't somewhat "distressed" so to speak, it has a garage, and the improvement projects are coming along. Hell, we might not even lose money if we had to sell it tomorrow- market went lower after we bought but is back up to about even or slightly better.
We bought in 2008. Even though the full extent of crappiness in the housing market hadn't been played out yet, it was still pretty bad and the banks knew it then. I ran the numbers on how much house we were prequalified to buy and the monthly note would have been about 50% of our income, which is an absurdly high figure. You want it closer to 30% to have some breathing room and not be house poor. I did my own analysis to figure out what we could afford, then told the mortgage broker the number they came up with was borderline insanity and I wouldn't be spending anywhere near that much.
So we wound up with a fixer-upper we got in short sale (a long process wherein banks drag their heels excessively before selling at a huge loss) when the rate on that enticing 3/1 ARM readjusted and the dozen or so illegal El Salvadorans couldn't afford the payments anymore, despite the fact that they were getting good money from renting out the basement to a single white mom and her kid and letting them stay in a "bedroom" that isn't legally a bedroom because it lacks a window and there is no fire escape down there. We're in a good neighborhood though, couldn't have afforded a house here that wasn't somewhat "distressed" so to speak, it has a garage, and the improvement projects are coming along. Hell, we might not even lose money if we had to sell it tomorrow- market went lower after we bought but is back up to about even or slightly better.
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02-14-2011, 10:54 PM
#13
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Don't put down too much tile (loud), walk away from foundation work (shoty work pops up years later), pay off higher interest debt before putting down a larger down payment, check out the neighbors closely (bad neighbors suck), double up your payments and pay it off in 7y, no 2 story houses (bad utility *****).
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02-15-2011, 11:43 AM
#16
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Listen to rmcelwee.
And now.
1) Buying a house to live in is NOT an investment. If you were to buy it to rent it out, THEN it IS one. The house you live in is a "durable consumer good". It costs money. It does not produce positive cash flow. Get this concept into your head. The idea that "it's an investment" and "it can't go down in value", is part of why we had this massive housing bubble.
Therefore, when you buy, look at your mortgage payments, plus insurance, plus maintenance, and compare against RENTING. But you must consider that rent goes up with inflation. You can make a spreadsheet to calculate how much rent might cost, if we have say, 4 years of 10% inflation. It's not a question of if, it's a question of when. If you don't know this, then you are like 95% of the American public that do not know the fiscal train wreck and the USD collapse on the horizon.
2) You MUST get a 30 year FIXED rate mortgage. The reason for this is we WILL get mass inflation in the years to come, and it will make fixed mortgages cheap in a few years. DO NOT, DO NOT, get a floating interest rate because you "can't afford the mortgage otherwise" or so "you can buy a bigger house".
3) Do not buy a big house you can barely afford - get a smaller house you can easily afford. In the future if you think you can then afford a bigger house, don't sell the smaller one, rent it out. THEN it's an "investment".
4) Because of the shitty economy, DO NOT PAY RETAIL. Look for bargains. Look for distressed sellers. They are out there. Do your research on this one. Hints: do not just go to the usual real estate broker, that's how 99% of the public do it, and get screwed. You don't get your miata fixed at the Mazda dealer, do you? The general public clips newspaper coupons to save a dollar on Campbell soup, yet pay retail when they make the biggest purchase of their life. Idiotic. Hint 2: Read up on John Schaub's method.
And now.
1) Buying a house to live in is NOT an investment. If you were to buy it to rent it out, THEN it IS one. The house you live in is a "durable consumer good". It costs money. It does not produce positive cash flow. Get this concept into your head. The idea that "it's an investment" and "it can't go down in value", is part of why we had this massive housing bubble.
Therefore, when you buy, look at your mortgage payments, plus insurance, plus maintenance, and compare against RENTING. But you must consider that rent goes up with inflation. You can make a spreadsheet to calculate how much rent might cost, if we have say, 4 years of 10% inflation. It's not a question of if, it's a question of when. If you don't know this, then you are like 95% of the American public that do not know the fiscal train wreck and the USD collapse on the horizon.
2) You MUST get a 30 year FIXED rate mortgage. The reason for this is we WILL get mass inflation in the years to come, and it will make fixed mortgages cheap in a few years. DO NOT, DO NOT, get a floating interest rate because you "can't afford the mortgage otherwise" or so "you can buy a bigger house".
3) Do not buy a big house you can barely afford - get a smaller house you can easily afford. In the future if you think you can then afford a bigger house, don't sell the smaller one, rent it out. THEN it's an "investment".
4) Because of the shitty economy, DO NOT PAY RETAIL. Look for bargains. Look for distressed sellers. They are out there. Do your research on this one. Hints: do not just go to the usual real estate broker, that's how 99% of the public do it, and get screwed. You don't get your miata fixed at the Mazda dealer, do you? The general public clips newspaper coupons to save a dollar on Campbell soup, yet pay retail when they make the biggest purchase of their life. Idiotic. Hint 2: Read up on John Schaub's method.
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02-15-2011, 11:53 AM
#17
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Why don't you put your money where your heads are then and get a vasectomy. I got mine 13 years ago and it cost me $15 (insurance copay), took half an hour, and I walked out.
I would not have bought any houses. A house is a liability and there is no glory in $xxx,xxx leash around your neck. Also, don't expect any type of "investment" appreciation because the market is probably only halfway through it's big ****.
There are other ways than mortgage interest to shelter income.
As the title suggests my fiance and i will hopefully get approved for a FHA loan to buy a starter home. Now my question is what would you have done if you were buying a house again, what would you not do? I want to know what im walking into. Anything i should look for in a house?
There are other ways than mortgage interest to shelter income.
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02-15-2011, 12:11 PM
#19
I've got an FHA loan and PMI does suck. I'm paying as much against the principle every month as I can afford so we can hit our 20% equity sooner.
I'm a little excited though...we bought a house next to an empty lot (house had burned down to the foundation). They were building a new house over the last few months. It went up for sale the other day for $20k more than we paid for our house (which, granted, isn't brand new, but is brick instead of wood siding, and is in great condition).
EDIT: Yes to all the people who say to ignore what the bank says you can afford, and do your own math.
Ask your lender to run a sample mortgage application so you can see the TOTAL monthly payment (mortgage, PMI, escrow for property taxes/homeowner's insurance, etc.), then work backward from that figure.
I'm a little excited though...we bought a house next to an empty lot (house had burned down to the foundation). They were building a new house over the last few months. It went up for sale the other day for $20k more than we paid for our house (which, granted, isn't brand new, but is brick instead of wood siding, and is in great condition).
EDIT: Yes to all the people who say to ignore what the bank says you can afford, and do your own math.
Ask your lender to run a sample mortgage application so you can see the TOTAL monthly payment (mortgage, PMI, escrow for property taxes/homeowner's insurance, etc.), then work backward from that figure.
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02-15-2011, 12:13 PM
#20
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While there is truth to faeflyper's post, the main thing about buying a home is that it is the ONLY way available to the PROLES like us, to leverage your money into an income-producing asset that is (for now) tax free when it appreciates. IOW you put up 20%, then you can rent it out, then if you sell at a profit later, the gains are tax free.
However, when you do your spreadsheet:
- look at what happens to your cashflow if the mortgage interest income tax reduction is gone (the gov't may take it back when the financial **** hits the fan)
- the capital gains tax exemption may also be removed
If it looks like renting is much cheaper than buying, DO NOT BUY. It makes no financial sense. You will be better off buying and renting out in another area, then renting where you are. Note that rentals do not give you the mortgage interest reduction.
If you can buy and the mortgage + insurance + maintenance is cheaper than renting, absolutetly go for it. Even if home prices tank some more, it doesn't matter because a renter would pay for the FIXED mortgage. Did I mention you must get a fixed 30 year mortgage?
If all this seems complicated, then DO NOT BUY. You are financially unsophisticated and the real estate agent, and the Banksters, will take you to the cleaners, you will be a debt slave the rest of your life, and you will suffer during the financial armageddon.
However, when you do your spreadsheet:
- look at what happens to your cashflow if the mortgage interest income tax reduction is gone (the gov't may take it back when the financial **** hits the fan)
- the capital gains tax exemption may also be removed
If it looks like renting is much cheaper than buying, DO NOT BUY. It makes no financial sense. You will be better off buying and renting out in another area, then renting where you are. Note that rentals do not give you the mortgage interest reduction.
If you can buy and the mortgage + insurance + maintenance is cheaper than renting, absolutetly go for it. Even if home prices tank some more, it doesn't matter because a renter would pay for the FIXED mortgage. Did I mention you must get a fixed 30 year mortgage?
If all this seems complicated, then DO NOT BUY. You are financially unsophisticated and the real estate agent, and the Banksters, will take you to the cleaners, you will be a debt slave the rest of your life, and you will suffer during the financial armageddon.
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