Steps to purchasing first home?

[Centauri]

So... I'm sick of renting, especially at the current rents in my market, so I'm looking to buy for the first time. Either a small house or a condo.

My credit score and personal finances are solid so I'm not too concerned with qualifying for a loan - I'm more just curious about the process and with having my ducks in a row in short order once I find a unit I like. My current lease finishes at the end of April.

What's the best path? Should I simply partner with my long standing bank (BoA)? What other considerations are there for me?

Thanks people!

 

[Denly]

Find a realtor, see some listing, talk to the bank, prequalified might be a good idea, make some offers.....and profit?

 

[herm0016]

Find a good realtor. Someone that knows the market and has been around a while. Find a good finance guy, generally associated with a smaller bank or is an independent. Your realtor probably has a person they like to work with. Get your application and loan stuff done before bidding on a house. Your offer will be stronger when your loan guy can say you are approved by their underwriters for the loan, instead of just saying "hey, they have good credit and I don't think there will be any problems getting the loan"

most of all, be ready to jump on a deal the moment you see it. be decisive, be firm and play the game with the seller, but make the deal happen. Nothing worse than a buyer being wishywashy and going back and forth on inspection items and such.

what market are you in?

 

[BoomerD]

Just...don't "fall in love" with the first one you see...take your time and look at several options before you decide. There's no returns for a house you later decide isn't right.
(oh, and also, don't EVER fall in love with something (like a house) that doesn't love you back...in the end, it's just a house)

 

[Exterous]

(oh, and also, don't EVER fall in love with something (like a house) that doesn't love you back...in the end, it's just a house)

This. Also realize what are small things vs big things. Paint and appliances are easy to replace. Walls are a bit harder. Foundations even more so. A good home inspector (and not necessarily one your RE agent recommends) can be incredibly useful. There's no chance they'll be able to catch everything but they could catch something very expensive that you would miss.

 

[highland145]

I hate BoA. 2 loans with them in years past and they were shady. Most, if not all, banks will sell your loan the same day you sign the papers. They just want the origination fee so look for the lowest rate. Now is a fantastic time. 20% down and you can skip the PMI payments.

 

[Ventanni]

When finding a lender, there lots of options, and not all of them are good. In my wife and I's recent experience, we dropped our first lender because they did not see the litigation on the HOA until the very day of signing, and we were out $1200 (from the inspections and such) because they would not give us the loan. I'm glad they didn't give us the loan, but it made me ask, why didn't the lender catch that right in the beginning? Make sure you do your research before you decide to go with one, and shop around. Also, lenders make their money based on the up front fees, "points" as they call them, and interest rates. Be sure to know exactly what the costs are before committing to a lender.

General advice I can give:

1. Make sure you finances are in order, which it sounds like you have. If you haven't already, eliminate all debt possible. Car debt, school debt, any debt. Knock it out. You can still get a loan with one, but it's going to come right off the top of what your lender will give you.
2. Do not buy the first home you see. Be picky, be choosy. Homes go on and off the market constantly, and there is no reason to be rushed in the process.
3. When realtors advise you on certain lenders, it's not always the best option.
4. Know the difference between a house, a townhouse, and a condo. Sadly, not all HOA's are very well lead. Do you homework to find out budget stances and litigation. One of the things I have found in my area is that HOA's were not saving enough for future cost of roof replacements and other make expenses. As a result, the monthly dues for the residents had to be raised to ridiculously high levels to compensate.
5. Make sure that when buying a home, you are not maxing out on your monthly capital. Realtors and lenders do not look out for you in this regard. In other words, it's best to live below you means.
6. And finally, buying a home is like getting married. Just like the saying goes with marriage, so true is it with buying a home. It's better to be out of a home and wishing you were in one, than in a home and wishing you were out.
7. Do not contact the home owners directly. Work through the realtor.
8. Watch out for investors who handle the realty themselves. I ran into this once. I viewed a town home once where the investor and bought it, cleaned it up, and replaced a few things inside. Did an okay job; not great, but okay. The alignment on his cabinetry wasn't very good. But I knew that compared to the other town homes in the strip that he was asking for too much, and we put a bid on it for what we thought it was worth. He then responded back to my realtor with this and that as to why I would need to increase my bid amount. Him doing that was immediately a red flag, because I could immediately tell that he didn't believe in his price; he was trying to bluff. I no longer found him trustworthy, and as a result, I no longer found his work trustworthy either. He rejected my bid, which I was happy to oblige. I continued watching it though, and ironically, that town home stayed on the market for a quite some time (way longer than other homes in the area), and ultimately sold for close to what I originally put a bid on it for.

General process you should follow:

1. Find a lender. Compare prices, get to know them, feel things out. This will give you a general idea of what you will be approved of, and what you might be able to do to improve that situation before the rubber meets the road.
2. Once you have found a lender and know what you can be approved of, then you can search for homes within that price guideline.
3. You'll then want to find a realtor. That realtor can then show you any house you want to look at.
4. Look at houses you might find interesting. Price is absolutely important, but also take into consideration your community, local schools, your commute, realistic access to shopping and grocery stores (realtors love to greatly embellish this crap when a local grocery store might be like 10 miles away), local parks, etc. When in a home, look for things like work and repair jobs that aren't to code. Homes are rarely perfect, but nothing worse than buying a home where uncle-bob-didn't-know-what-he-was-doing did something, and now you have to pay to fix it.
5. Submit a bid on a home you like. And don't insult a home owner. It's a blind bid process and they do not have to accept your bid.

Last piece of advice. Do not immediately change your job after buying a home. Do not get married in the same year you buy a home. Do not start a new business in the same year as buying a home. I know a couple who is getting married, starting a new business together, and buying a new home all in the same year. We'll see if they survive to 2019

 

[DietDrThunder]

I don't know what City/State you live in, but before purchasing a home, besides finding a good realtor, do some research. First, determine what you'd like your monthly payment to be. Then look into the following:

1) Find out how much of a home/condo you qualify for (Never look at homes in the maximum of your range).
2) How much are the property taxes.
3) Depending upon the age of the home, find out what the utilities for the home was for at least the prior year.
4) Find out how much homeowner's insurance will cost.
5) Find out if there is a HOA and how much the annual dues would be.
6) Determine what the financing would be on the home/condo you want to purchase.
7) At this point, determine if you can still afford the house/condo you want to purchase.
8) If you can still afford the home/condo, never make a purchase, on either new or existing home without a professional inspection. Don't use ANYONE that a realtor suggests. There are too many agents that want the sale and don't care if you are the one that gets screwed.

 

[Exterous]

Oh and something else you may want to plan for is a lot of potential added expenses after buying a house\condo
For example when we bought our house we just wanted to paint some rooms. Then we realized we needed to buy drop cloths, painters tape, a ladder, brushes, rollers etc

20% down and you can skip the PMI payments.

Pft - why be a sucker? Median down payment is something like 5% for first time home buyers. You can always trade up or refi later right?

 

[BarkingGhostar]

I don't know what City/State you live in, but before purchasing a home, besides finding a good realtor, do some research. First, determine what you'd like your monthly payment to be. Then look into the following:

1) Find out how much of a home/condo you qualify for (Never look at homes in the maximum of your range).
2) How much are the property taxes.
3) Depending upon the age of the home, find out what the utilities for the home was for at least the prior year.
4) Find out how much homeowner's insurance will cost.
5) Find out if there is a HOA and how much the annual dues would be.
6) Determine what the financing would be on the home/condo you want to purchase.
7) At this point, determine if you can still afford the house/condo you want to purchase.
8) If you can still afford the home/condo, never make a purchase, on either new or existing home without a professional inspection. Don't use ANYONE that a realtor suggests. There are too many agents that want the sale and don't care if you are the one that gets screwed.

1. The housing bubble provides that no one followed that rule, except to apply a multiplier of 2-3 to it.
2. Property taxes will vary from city, county and state. Should be included in the monthly burden.
7. Include the cost of insurance.
9. For the love of God make sure it have high speed Internet and maybe even broadband competition.

 

[zinfamous]

Don't just go to BoA (I also don't like the idea of keeping something like a mortgage tied up with the same bank that I keep my checking or savings). You need to talk to several mortgage lenders and have them fight over you. Get several quotes. Ask for options on both Fixed-term and ARM loans, and consider your living habits, future payment schedule and where you will be in life, and then decide if something like an ARM makes sense to you or a Fixed-rate is better. Different strokes.

If you qualify for SECU, and/or you already have an account with one in your state, then make sure they are one of the lenders you talk to. Many can offer very competitive mortgages, but not always.

First time, I think it's fine to go with an agent. They are still tremendously helpful and while they are obviously helping their friends out, they will give good recs on mortgage lenders, home inspectors, contractors and all that. Good realtors like to work with good lenders because it's important for everyone involved in the process that there are no hangups--one issue with big banks like BoA is that your local broker at the branch is going to be tied up with "corporate" for some reason or another, no one knows how to talk to anyone, and you show up on closing and for some bs reason, they can't get your downpayment to you. It happens.

Private brokers are generally better, but at the same time they are more than likely going to sell off your mortgage to a big bank after closing...which doesn't change anything, really. The main thing is that they are organized and dependable during the stressful part of the deal.

start checking RedFin/Zillow and drive around to neighborhoods, get a feel of where you want to be, what you want to spend, calculate your 20% down/monthlies going forward at a range of interest rates and see what you think you can afford. Don't forget closing costs, too, which are roughly $6-$15k on top of your downpayment (depends on where you live and of course if you want to buy points on your interest).

Being able to put 20% down is going to make it vastly easier than having to get approved for 0-10% or whatever type of loans. Lenders will give you shittier rates and while you would likely get approved for those, it makes your offer weaker in the end.

 

[repoman0]

Paying the PMI is generally mathematically equivalent to about a 0.25% rate increase for the first 9 years of a typical 30 year mortgage. You should do the math yourself with your own preapproval to get your exact numbers.

I just bought my first house at the end of last year. They gave me the exact same rates and loans for anywhere between 5-20% down .. 3.75%, obviously with PMI until loan equity reaches 20%. I chose the 5% loan easily because there are a lot better things I can do with that 15% over the next nine years than using it to secure what amounts to a 0.25% rate drop.

zinfamous is right that it does make your offer weaker, so my girlfriend and I put a 20% down payment contingency on our offer despite intending to go with a 5% loan. Since there was a 0% chance of us not getting the loan we weren't worried about it.

First thing is speaking to a realtor, deciding what you want, how much you want to spend, etc. Open houses are a good place to start too. Then go get preapproved so you're ready to make an offer. You can put in multiple preapproval applications at the same time and your credit score will not take a hit for all those pulls, it will just be the equivalent of one pull.

 

[herm0016]

Last piece of advice. Do not immediately change your job after buying a home. Do not get married in the same year you buy a home. Do not start a new business in the same year as buying a home. I know a couple who is getting married, starting a new business together, and buying a new home all in the same year. We'll see if they survive to 2019

LOL. We closed on our 2nd house a week before our wedding and spent the day after pulling up all the carpet and the weekend after tearing out walls. moved in a few months later and started renting out the other house. People that wait because they think they can't do more than one thing at a time miss opportunities.

 

[Starbuck1975]

Step 1: save downpayment

Step 2: evaluate your budget and make sure you understand what mortgage + interest + escrow will be. Your monthly payment should not exceed 28% of your income before taxes

Step 3: start looking at neighborhoods and stability of pricing and comps

Step 4: make your must have and like to have list

 

[Belegost]

Plan for the closing costs correctly - you need down (whatever percent you agree on with your lender) + lender costs + interest for time between closing and first payment + 12 month insurance at minimum. I have heard (though not directly experienced) that some lenders/locations may also require the first estimated property tax payment be put in escrow at signing. Also, ensure you plan for your indirect costs - inspections are paid directly by you and could be a notable cost depending on the area (for hot markets inspectors can be in short supply, I have seen fees of 1k or more for a basic inspection)

A good agent helped a lot for my first time. I would recommend an agent that lives in the area you're wanting to buy in, they will be better connected, and can offer a lot of advice that someone not part of the community wouldn't. They can also help with the next point.

Know your market, as others said, check Zillow/Realtor/Redfin; walk through neighborhoods you want to be in and talk to folks if you can. (A huge factor in buying my current home was during a walk around the block where it was listed I ran into the current mayor of the city mowing his lawn - made me think that city services in the area are likely to be a little more timely =)

Find a good inspector, and be there for the inspection. Ask coworkers, friends, etc. about inspectors they used. During the inspection, watch what the inspector is looking at, and don't be afraid to ask questions, ultimately they are working for you, and if they are good they should be happy to help you.

 

[Red Squirrel]

Get a mortgage preapproval, then you know what the bank will give you. Shop in the range that is slightly lower than that. What the bank will give you is not accounting for all the bills etc. So you want breathing room. Once you know how much you can get, find a good realtor and start looking at houses.

Familiarize yourself with construction related stuff too, so you can kind of do your own "self inspection" at each house. Just things to look for real quick, like cracks in the ceiling that could indicate roof structural issues, look for signs of past water damage etc. Basically try to look for any red flags. If you really like the house don't let this stuff deter you, but at least if you saw it, it's something to bring up with the inspector if you do choose that house.

Oh and one thing I did not account for myself when buying: Find out what the taxes are going to be in that area vs other areas. Had I known this I probably would have bought in a "less desirable" part of town to avoid the high taxes. Taxes can be almost as high as the mortgage payment and go up every year. So it's something to account for.

 

[Six]

This is how I would do it, but I'm in a the SoCal market, where the real estate market is hot.

*Don't use a bank. Their retail side can be slow.
*Find a good agent (good ones aren't pushy and don't waste your time) and use the lender he or she recommends. Their teamwork is invaluable and can be a difference maker. Don't worry about the rates, PMI, etc. You can refinance to a much better rate later.
*Find a home away from the busy streets. Motorcycles, buses, garbage trucks are loud.
*Check the crime map.
*Use GoogleMaps to see how busy the streets are during certain times of day.
*Your home inspector will tell you a lot of stuff on the day of inspection that he won't write down on paper. His report is sanitized.

Good luck.

 

[RLGL]

Have a decent down payment , 20% in the US to avoid PMI

 

[Riverhound777]

Best advice I can offer, be suspicious. If something feels like it's too good to be true, it probably is. Whether that's a cheap house, oddly low interest rate, lender who doesn't asks the right questions, or something else that just doesn't feel right. This is probably the biggest purchase you'll ever make (second house will be much easier since you know the process already), so take your time and ask lots of questions.

 

[Thebobo]

I saw some 30 plus houses with the same realtor before I found one I am in now. Some along the way I had offers in but were taken by those fvcking flippers, I hate them.

 

[zinfamous]

Also, start gathering all of your financial records into a nice folder: 2-3 years taxes, all your checking and savings accounts, retirement, investment accounts. debt obligations. All your brokers are going to be requesting this to give you an accurate loan approval. This will take them ~2 days.

You don't want to bother with calling BoA to get that over-the-phone 10 minute loan approval letter. People will say that you can do this then head off to your own viewings and start showing it to seller's agents, but not many will accept that kind of letter as being legitimate. Now, I have seen that it works for people, but YMMV. Either way, it's a waste of time anyway because you would still have to get a real approval from a lender before you can make a real offer, from BoA or a smaller lender.

 

[Scarpozzi]

In my area I pinged a bunch of local credit unions on my first purchase. I'm using the same CU now on my current home mortgage. They do the loans in-house and the rates are competitive. The advantage of the CU is that they're not for profit and being in-house, they offer various terms. Mine's a 15 year, but they also have 20 and 25 year loan packages. You typically get a better rate when you pay it off faster. Try to avoid paying for points on the loan...especially if this is a shorter-term loan (if you're planning on moving). I wrote a simple mortgage calculator in excel that has 6 boxes with various values. It estimates the payments on a particular home price in increments for a particular length of time and APR. I use it for all my loan shopping so I can figure out the best bang for my buck. My current mortgage of 15 years on my home is costing me under $30k in interest. I remember my first home cost 50% less, but the terms of the loan would have cost me over $100k in interest had I made payments on schedule. That's the difference between 30 year@6% interest and 15 years@2.5%. Calculate that stuff and see what the loans are actually costing you, including points.

For my first home, I bought a house that needed to be renovated somewhat that had an in-law suite in the back that needed to be gutted. It was 2 miles from the city center and in a college town. This gave me a rental and improvement potential. I was younger (24) and instantly found a college-aged roommate that was willing to chuck me $500/month for rent with all utilities included. I used that money to cover renovations and after about 5 years of living there had the apartment in the back renovated so I was making $1000/month. I got married and moved away, but ended up turning about a $80k profit on the place before taxes over 4.5 years. That's not too bad considering I sold it in the summer of 2009.

I recommend seeing if you can find a place with secondary rental potential and work toward getting a fixer-upper if you're handy.

 

[cyclistca]

1. Find a good mortgage broker. I've always been able to get better rate through my broker then from the banks.
2. Make a list of what is import for you in a house
3. Figure out what neighborhood or neighborhoods you want to live in but be flexible. We end up by a house in a different hood from were we first started looking. We wanted a move in ready house and everything hat we looked at in the first hood was to small, to run down, or in a bad location. We love the place we ended up buying.

 

[snoopy7548]

If Redfin serves your area, I'd suggest contacting a realtor using the site. I got a >$1k check after closing just for using a realtor (who ended up being awesome) I contacted through Redfin, and she didn't even work for them.

Besides finding a good realtor, working with a local bank (your mortgage will get sold to a big institution anyways, but at least the local bank will be easier to deal with) and saving as much as you can, not making any large purchases (i.e. a new car) between now and buying a house, the most important thing is to not rush it. If you only have a maximum of three months to find, close, and move into a house, it's gonna be tough unless you're in a buyer's market, especially if you haven't been pre-approved yet.

 

[kn51]

Look for the big things first:

1) Age of roof. Is it single or double layer? You should look for single in low years because that "generally" means the owner spent the the few extra bucks to have a tear off and cared enough to do it. A roof is big bucks.

2) Age of furnace and AC condenser. Furnaces definitely aren't cheap.

3) Water heater. Any more these are all basically junk and disposable after 7 years. They really don't might them like they used to.

4) Flooring, again not cheap. But usually if the carpet is crap the seller will toss in a carpet allowance.

5) Windows...you can't imagine how expensive these are if they are "shot".

And of course, there will be continual maintenance demands. Suddenly you need a lawn mower. Suddenly you need some tools and maybe a ladder, etc. etc. Unless of course you outsource the work.

As for inspection reports, don't be totally scared off by minor items on them. Every house has minor items. Buuuuutttttt....you there are some minor items that do mean a lot.

Another thing is if you find a house that suits your fancy, take a much closer look at your neighbors. Better if you can during different times of day with drive-by. Condition of the yard, does it look like it houses a daycare, meth lab, etc?

In a couple weeks we have closing on a house we owned for 23 years. Been renting it out for the past several. It is interesting from a sellers perspective because here the market is nuts and is definitely a seller's market.