buying first home, need advice

[Young Grasshopper]

im buying my first home and would appreciate any tips you guys could provide.

im a single male with no kids and plan on buying either a home or condo. I live in LA so a decent house here is expensive and i'm leaning towards a condo. my income is 92k(will be 100k or more this year), plan on putting down 20-25k and have a credit score of 725. iv'e already contacted a buyers agent to see what I'm qualified to get from the bank and plan on meeting with her soon although i did stop by the bank earlier today and the rough estimate I got based on my credit and income. they said ballpark estimate was 350-410 is what they could loan although i would only purchase something i could afford and wouldn't go anywhere near 400k. my range is 275-330k for a 2 BR house or condo.

any pointers? i live in a rented condo now and am sick of paying rent.

thanks

 

[MagnusTheBrewer]

Get an inspection from an NAHI certified inspector. Do not use the one the real estate agent suggests.

 

[jaedaliu]

I'll assume you work near the coast.

Buy something close to work in a nice enough neighborhood. 1 bedroom condos should be in your price range. You'll probably grow out of it some day, but it'll be a 1 bedroom condo in a nice enough neighborhood fairly close to the beach. So, it'll be easy to rent. Or, it'll have appreciated if you sell it when upgrading.

Alternatively, buy too much house. 1 that you will have to cut down to the bare essentials to afford to make your monthly payment, and rent out rooms to single male coworkers that don't need an entire place of their own.

 

[Vdubchaos]

Advice #1
Stay away from "buyers agents" or ANY mortgage brokers

Advice #2
Put down 20%. If you have 25k....you should be looking at houses that are 125k. % you put down is important (I know many people here and in the mortgage world will tell you "don't worry about it"). Thing is, it's your instant equity and a buffer zone. if things go south, you won't be upside down on your house. Usually, you will get that money back.

Also, most decent financial experts (ones that have no conflict of interest) will tell you, if you don't have 20% down.....you can't afford the house.

Don't forget that.

Advice #3
Never EVER allow your lender to define how much you should be borrowing. This is YOUR responsibility. Remember, they are NOT on your side. YOU are the only person that defines budget/what you can/can't afford. And you should know this number LONG before you walk into the bank.

Advice #4
Make sure it is a good neighborhood. Also be prepared to LEARN a lot and work on your house. Buying the cheapest house in the best neighborhood is probably your best bet. Make sure you have an expert to inspect the house (someone you can trust) and pay them well. In general I don't recommend houses 30+ years old (mostly based on what my close friend tells me that works in the industry, rebuilds/fixes and flips houses). Also, remember no inspector can see what's behind the walls (what they can't see). So there is ALWAYS an element of "risk" even if you buy the best inspector.

Advice #5
Start a spreadsheet and document all of the banks fees etc (this is NOT easy to get out of them). If they are not upfront....RUN and find another bank. Your best bet is a small local bank with good reputation or a good credit union. Stay away from BIG banks. Stay away from internet/places not local.

Shop around for loans and compare ALL the fees before selecting one.

Keep a close eye on APR. If this # is beyond .25% of the Interest % of the loan........RUN. This is a good indicator of high closing fees from the bank.

Advice #6
Do NOT think of a house, or buy one as an "investment". You are buying a house to have a nice roof over your head. Remember, $300k house will cost you good $550-600k when you add up all the payments (interest).

Advice #7
Consider and add up ALL of the house expenses. Taxes, Maintenance fees etc. The more you do yourself, the cheaper it will be. Read: be prepared to do things yourself/become a DIY. If not, pay a LOT for someone to do it for you.

Advice #8
DO NOT buy into the hype of "house ownership is the ultimate American dream"........YOU define your dreams/what you want. Buy a house because YOU want it, not because of our BS society pressure

Hope that helps, good luck

 

[Jimzz]

Get an inspection from an NAHI certified inspector. Do not use the one the real estate agent suggests.

This!!!

I do my own home inspections when buying but just reviewed a report from an inspector for a inlaws house they were looking at. He did a great job and took him 4hours to do.


I would also lean toward buying a house vs a condo. Houses are usually easier to sell and if it does not have a HOA then no extra monthly fees or busy bodies measuring your grass or the color of your house. Condo means paying a mortgage, shared walls, monthly "condo/HOA" fees, etc...

Of course if you plan to move out of that area in 5 years of less then do not buy at all.

 

[MagnusTheBrewer]

Shop areas not, houses. By far, the largest part of a homes utility is where it's located.

 

[edro]

My advice for the young grasshopper is to rent until you get settled or married.
The woman will not want to live in "your" house.
If you think you might find a serious gf or wife in the next 5 years, I would hold off on the house.

Remember, it costs 6-10% to sell a house (unless you sell it yourself).
So it will cost you around $30k when you sell it. (3% to your realtor, 3% to buyer's realtor, +closing costs)
It will take a long time to get $30k in equity unless you have a good housing market or do many improvements yourself.

Houses also cost a lot just to move in. You tend to buy furniture, fix up items, yard equipment, supplies, etc. It can add up pretty quickly.

 

[Vdubchaos]

My advice for the young grasshopper is to rent until you get settled or married.
The woman will not want to live in "your" house.
If you think you might find a serious gf or wife in the next 5 years, I would hold off on the house.

Agreed

Remember, it costs 6-10% to sell a house (unless you sell it yourself).
So it will cost you around $30k when you sell it. (3% to your realtor, 3% to buyer's realtor, +closing costs)
It will take a long time to get $30k in equity unless you have a good housing market or do many improvements yourself.

Houses also cost a lot just to move in. You tend to buy furniture, fix up items, yard equipment, supplies, etc. It can add up pretty quickly.

All good advice IMO

 

[Young Grasshopper]

My advice for the young grasshopper is to rent until you get settled or married.
The woman will not want to live in "your" house.
If you think you might find a serious gf or wife in the next 5 years, I would hold off on the house.

Remember, it costs 6-10% to sell a house (unless you sell it yourself).
So it will cost you around $30k when you sell it. (3% to your realtor, 3% to buyer's realtor, +closing costs)
It will take a long time to get $30k in equity unless you have a good housing market or do many improvements yourself.

Houses also cost a lot just to move in. You tend to buy furniture, fix up items, yard equipment, supplies, etc. It can add up pretty quickly.

thanks for the advice. here's the thing, iv'e been renting for a long long time now(maybe 8 years). it's basically money out the door that i will never get back. i really don't want to continue renting, it sucks. also with buying i can actually move into a nice place then i live in now. and i'm leaning toward a condo for those exact reasons, because i don't need alot of space and lower moving costs. and i would love get a serious GF or wife but i'm not desperate for one at the moment.

also for the other poster that mentioned not using a buyers agent, why not? i was listening to a podcase on itunes about buying your first home(granted, the host is a buyers agent) and he mentioned it's important to have someone represent you during the process and have someone look out for your best interests. it could all be BS for all i know but im curious to know the reasons against it and the alternatives to buying one without using one.

Thanks all!

 

[MagnusTheBrewer]

Here's a very simplified overview of buyer's agents.

Something to keep in mind when asking these types of questions on a tech forum is, when it comes to life choices, geek are some of the most conservative people on the planet.

 

[marvdmartian]

The best advice I can offer, that hasn't already been said, is to visit the neighborhood you're looking at making an offer in. Various times of the day, various days of the week, driving and walking through. Talk to any neighbors you might meet. Ask them about the house and owners. Did they take care of the house while they owned it, or just polish up a turd so it would sell. If possible, while walking the neighborhood, walk around the yard of the house you want to make an offer on. See if the neighbors have outside dogs, and are they friendly, obnoxious, or aggressive? I only found out that my idoiot neighbor has an aggressive German Sheppard (that she insists is only "protective") AFTER I bought my house....because I never was over there, looking at it, except when she was at work, and the dog was locked inside the house.

 

[Young Grasshopper]

thanks for everyones input so far.

thoughts on a bank loan vs a private lender? i spoke with an agent today and she mentioned large banks are not going to have the best rate or lowest closing cost unless im getting a jumbo loan. if she full of it or telling the truth? she also recommended 2 lenders to contact. using her lenders kinda feels similar to using her inspector which i wouldnt do. should i just go out and find my own lender?

 

[edro]

Lenders are a whole different story.
You can call around and get numerous quotes, each quote will check your credit (but those will all lump together as a single inquiry since it's all similar time frame and for same thing, mortgage).
They often times lie, hide fees or call fees by other names, quote based on you paying higher points, etc.

Also, APR changes every day (sometimes a few times a day) for every bank.
You can keep calling in to check for current rate and lock in with an application fee.

It's best to make a spreadsheet with all of the fees, points, monthly payment, etc to compare.

 

[Uppsala9496]

Shop around for your lender. I inquired with about 6 and had serious conversations with 3. I'm about 28 days from closing.

Oh and if you are thinking of using quicken, they just got sued for improper FHA loan underwriting/claims.
http://www.nytimes.com/2015/04/24/your-money/justice-department-sues-quicken-loans.html?_r=0

I ended up going with guaranteed rate as my loan originator as they had a competitive rate, 60 day rate lock that didn't cost me anything, and added some nice credits. Their good faith estimate has rather high title insurance, but again, that is something you can shop around for.


EDIT: And don't be too leery about the recommended lender. They may be able to give you some good lending credits since you are a referral. Worst case is you talk to them to see what they can do.

 

[purbeast0]

OP not sure if you are military or not, but navy fed has the best loans that i could find when we got our house. they are the only place i've ever seen that has absolutely no PMI even if you put 100% down.

also don't listen to the people saying "if you dont have 20% to put down you arent ready to buy a house" that is complete and utter bs. especially in the market you are looking at. as long as you can easily pay your monthly mortgage, it doesn't matter how much you put down.

many people on here (AT and the internet in general) are far too black/white.

 

[Vdubchaos]

also don't listen to the people saying "if you dont have 20% to put down you arent ready to buy a house" that is complete and utter bs. especially in the market you are looking at. as long as you can easily pay your monthly mortgage, it doesn't matter how much you put down. .

Not being able to afford a house, but still buy it......"cause bank said so" is exactly what got this entire country into the financial crisis we were in.

So go ahead OP, subprime lending is STILL all well and alive....I'm sure they will find a loan for you.

Add $100-200 a month for PMI cost......and good luck to you when and if you need to sell the house, you will be upside down on the loan by the time you pay the sellers fees etc.

 

[Vdubchaos]

thanks for everyones input so far.

thoughts on a bank loan vs a private lender? i spoke with an agent today and she mentioned large banks are not going to have the best rate or lowest closing cost unless im getting a jumbo loan. if she full of it or telling the truth? she also recommended 2 lenders to contact. using her lenders kinda feels similar to using her inspector which i wouldnt do. should i just go out and find my own lender?

Stay away from brokers/agents, they work for BANKS and not you.

Also finding a good agent is HARD.

Don't take your chances......do your own homework/research.

Think of them as salesmen. They will tell you ANYTHING. Remember they make money OFF YOU, so they are NOT to be trusted.

 

[purbeast0]

Not being able to afford a house, but still buy it......"cause bank said so" is exactly what got this entire country into the financial crisis we were in.

So go ahead OP, subprime lending is STILL all well and alive....I'm sure they will find a loan for you.

Add $100-200 a month for PMI cost......and good luck to you when and if you need to sell the house, you will be upside down on the loan by the time you pay the sellers fees etc.

putting less than 20% down on a house != not being able to afford said house.

learn2math

 

[Ban Bot]

We purchased our first home in October. We had used an agent referred by a friend and after 4 months switched to a Dave Ramsey ELP agent. There were 2 in the area we were interested in so we interviewed both. No pressure. The agent we selected did a good job and got us into the exact house we were looking for within our budget.

FWIW we are in our mid thirties and this is our first home. We always rented. We had a lot of friends thing they needed to stop throwing away money and bought houses. In many cases that did not work out. One doesn't have enough space for their 3 kids but they are so under water they cannot sell. So they are doing an $80k addition (probably $40k value to the home) as they are stuck. Others lost jobs or, worse, couldn't change to a better job as they couldn't sell. Our approach was to wait until we planned to be somewhere 5+ years, had enough margin for the monthly bills & living below our means, worse case scenario if I lost my job a worst case job scenario we could still pay the mortgage, and would meet not just our immediate needs but those for the next 5-10 years or longer. This is just our approach. We live in a high cost of living area (Seattle area). I am super glad we didn't buy in 2008 when we moved back as everyone suggested. We constantly heard how we were throwing away our money by renting.

We were prepared for this but home buying can have a lot of expenses. For example the house we bought had no appliances and needed some basics like medicine cabinets. Since October our fuel pump and transmission went out in our van ($4,000 in repairs). I also had to hunt down an 8th seat for our van as we had our sixth child in November. The sewer backed up (roots) in November and our waterline broke and are in the middle of fixing it ourselves. We had to replace the front and back door (new doors, latches, reciprocating saw). We needed a mower, trimmer, pruners, snips, etc. I am refurbishing the fence (power washer), benches (sander, scrapers), and will be replacing the gutters. Next spring I will be painting the house. We needed to buy a security system (Simplisafe). We have been tearing out all the dead or sick trees and bushes, trimming the remaining trees, and have killed all the moss in the yard while working on the weeds to plant new grass next month. So you end up buying a lot of stuff like pruners and spreaders and grass seed. I am in the middle of replacing some dry wall and laminate (with tile) as the former owner used the corner of a hall as a cat box. The laundry sink drain doesn't work and there is a small leak I have patched but must repair in the sink drain. It all adds up.

Not just in money but time.

Don't get me wrong it has been fun. We knew we were getting a fixer upper (FNMA foreclosure) and opted for a house what was structurally good and fit out needs but needed work over a turnkey house that had less "house." But it takes time to learn how to do things, review your options, and make the time to do it and do it right. I have a 9 and 11 year old I am involving in all the stuff I am doing so it is a great learning opportunity not just for me but them as well. But expect to spend a lot of money in little stuff.

 

[NoCreativity]

Do not use an FHA loan. If any lender tries to push in that direction don't work with them.

purbeast is right, you don't need 20% down. You just need to make sure you have the money for the mortgage and all of the other expenses (utilities, maintenance, taxes, emergency fund, etc.). It's better to put less down and have a good cash reserve than to put 20% and run your bank account dry just to say you put 20% down. However, I personally wouldn't put less than 10% down just because that is what I'm comfortable with. You need to run the numbers to see where your comfort zone is.

Also, don't buy if you might move in the next few years. Buying isn't for the short term.

edit: I wouldn't say you are throwing money away renting. Hell, I'd be up $100K had I "thrown away" money renting instead of buying.

 

[DrPizza]

thanks for the advice. here's the thing, iv'e been renting for a long long time now(maybe 8 years). it's basically money out the door that i will never get back. i really don't want to continue renting, it sucks. also with buying i can actually move into a nice place then i live in now. and i'm leaning toward a condo for those exact reasons, because i don't need alot of space and lower moving costs. and i would love get a serious GF or wife but i'm not desperate for one at the moment.

also for the other poster that mentioned not using a buyers agent, why not? i was listening to a podcase on itunes about buying your first home(granted, the host is a buyers agent) and he mentioned it's important to have someone represent you during the process and have someone look out for your best interests. it could all be BS for all i know but im curious to know the reasons against it and the alternatives to buying one without using one.

Thanks all!

I think it generally depends on the situation. I've attempted to purchase 3 homes. First home, went to the realtor, got a list of everything in my price range within 30 miles. Looked at them all, scheduled a visit of one, made a purchase offer, then paperwork time. My agent did nearly nothing for her commission. 2nd house: I really, really needed someone looking out for me who knew the ins and outs. My agent sucked. Didn't get the house. 3rd house: my agent really went the extra mile for me and went to bat for me - wouldn't have gotten the house without him; worth the money.

 

[Vdubchaos]

putting less than 20% down on a house != not being able to afford said house.

learn2math

There is a GOOD reason why that # was standard for MANY years BEFORE they deregulated and enabled the industry to do shady shit.....and crash.

It has NOTHING to do with math.

There is MANY reasons for this %. The biggest one is RISK. With 20% down you minimize risk of being upside down if things go south (lose a job, house value goes down etc).

Besides, you are putting money into EQUITY of your home. it's no different than "saving that money".

And any decent financial adviser still recommends it, only the ones that have interest in your money (conflict of interest) doesn't.

You sound like a lender/bank/broker or a real-state agent. NONE of these people work FOR YOU and are ALL in it to make money OFF you.

Of course MOST people in the industry will tell you "no need for 20%". They care 0 about your risk and just want your money.

20% also enables people to be FINANCIALLY RESPONSIBLE and learn good financial habits BEFORE getting THE MOST EXPENSIVE PURCHASE OF THEIR LIFE.

So you take your math and keep adding......

 

[Vdubchaos]

It's better to put less down and have a good cash reserve than to put 20% and run your bank account dry just to say you put 20% down.

As if putting 20% down is any different than putting it in the bank or "reserve".

It's money going into equity......no different than savings.

 

[edro]

As if putting 20% down is any different than putting it in the bank or "reserve".
It's money going into equity......no different than savings.

CASH is VERY different THAN equity. EQUITY is tied UP and CANNOT be USED.

WHY are you SO hung up ON THE 20%? Why do YOU CARE?

IF a purchaser is WILLING to pay PMI and the banks are WILLING to LEND, everyone IS happy.

GET off you HIGH horse.

 

[Pens1566]

As if putting 20% down is any different than putting it in the bank or "reserve".

It's money going into equity......no different than savings.

This is ridiculous. There is one HUGE difference. You don't have immediate access to equity like you do cash.