House Buying Advice

[Charlotte Rowan]

Okay...my boyfriend and I were planning on buying a house, but not really for another year or so. BUT, when searching the web just to see what's out there, we cam across this http://tinyurl.com/4k9y2x house, which we both absolutely LOVE. So we went to see it Wednesday after work...and fell even more in love with it.

So. We're thinking about trying to do it. I have some money saved up, but only enough for about a 3% down payment, and that's assuming we can get the price down a little bit from what they are asking. We're planning to apply for an FHA loan and a down payment grant, so that we can use my savings to cover closing costs.

If this house doesn't work out, we probably won't look at others right now. We'll probably wait another year or so like we originally planned. Which is fine too, but we just figured, we both LOVE this house, we could conceivably afford it...and how often does that happen?

Has anyone used an FHA loan and/or down payment grant? What other, general home buying advice do you all have?

[Sorcha]

I'm not sure I have any house buying advice at the moment...  But isn't that just the CUTEST house ever!!  And a good price.  Yes, I would totally go for it if I were you too.
And we're almost still neighbors.
Good luck!!

[CatAshtrophy]

The general rule of thumb I have always been told is to have at least a 10% downpayment. However, since you are in love with the house, perhaps consider buying it and then using the money that you would have saved for a downpayment in the next year to pay down the difference between your downpayment and the 10% rule downpayment, with the addition of the amount you will have paid normally on the mortgage. If you pay a great deal more than the mortgage requires you to in the first few years, I'm not sure on this, but you may want to refinace. Your lower downpayment may get you a higher interest rate, but you could fix that with refinancing in a few years. Balance the benefits of refinacing with the fees you will pay to refinace because it's only sometimes a good decision.

With other investments (like stocks, etc.) returns being what they are lately, it's not that bad of an idea to use it to bring down what you owe by more than you have to, and it gives you a little bit more security on your home.

Most importantly, only get a fixed rate mortgage. You will not want an adjustable rate or other type of unpredictable loan. With a fixed rate mortgage your payments will always stay the same.

Good luck on getting a happy home!

[Rage]

There are several programs for people that can't come up with 10% down. I think I paid 3% when I built mine 6 years ago.

Its hard to give advice right now because they are changing the rules to try to fix the current mortgage crisis. All I can say is stay away from ARM's.

To bad your not looking now, mines up for sale....

[susannah]

I bought a house last year and didn't put a single penny down. I got my mortgage through a program with my bank for first time homebuyers, which agreed to cover all the closing costs and there were no additional fees I had to pay either. Our house was $179,000 and we got $5,000 back at closing from the sellers...who were really motivated to sell since they already had bought another home. It helped that my credit is really good. I pay $1,200 a month for my mortgage payments (and that is divided into 2 payments of $600 per month...which helps alot!) Of course, my monthly payments would be lower if I was able to put money down, but it's not necessary, I found out!

[susannah]

Sorry! Forgot to mention that the house is absolutely adorable! Make sure you get it inspected before making an offer!
The first house I fell in love with had issues that were not visible, and we ended up not making an offer because so much money would have to be put into it to fix the problems...before we even moved in.

[Synnovea]

Love the house, Charlotte.  Great price too.  Now, here's my two cents and you can take it or leave it.  I was an assistant for a mortgage banker last year (until I got laid off) and I learned quite a bit. 

1.  First off, if you want to consider adjustable rate mortgages, really get all the information on it.  I had an FHA adjustable on my very first house BUT it could only go up or down a maximum of 1% per year.  (I personally would really not consider anything but a fixed rate...the rate may be a little higher but no surprises down the road).   Take a look at all of the programs available to you and figure out what works best for you and Rob.  You may also qualify for some first-time homebuyer programs.

2.  Don't get hung up on putting money down (unless it is a requirement of the program you are looking at).  There are really very few people that I know of who have the up-front $$$ to do this unless you are selling a home and have equity to do this.  If you want you can also finance in your closing costs.  This is really up to you.  I would have them run numbers what your payment would be including closing costs financed in and if you paid out of pocket for them.  Your money in savings may come in handy for painting, decorating, etc. after you move in.

3.  One of the biggest things I learned is a lot of people would ask "what kind of rate can I get."  There is no easy answer to this question as there are many rates you can get...take a look at what you can afford for a house payment.  Sit down together and add up your budget (i.e., gas, electric, phone, garbage/utilities, cable, house payment AND any other debt you have like loan payments, car payments, etc.)  Take all that into account with what your income is and figure out what you would like your house payment to be at, what you absolutely can't go over for a house payment and where you would be comfortable (believe me...these are three different numbers).  This will help you and your mortgage banker/broker find the best rate and program for you and your situation.

One last thing is that I would suggest you both investigate the rate at the bank you do business with but also check in with a mortgage broker.  With your bank, you will just be getting a mortgage through them.  A mortgage broker, however, can look at various financial institutions and find where the best rate is for you. 

I know this is really long but I hope that helps a little.  If you have any questions, I'd be more than happy to try and help you find answers.  It is a very exciting process and I think the house you found is realllly cute.  Good luck to you both!



***Yes, yes - an inspection is a MUST!!!!! 

[Rage]

I got an inspection on my house and I had it built. You do want to know about any problems ahead of time.

[RumbaRue]

I think you would be smart to hold off on buying right now. The home prices are still falling.

The best time to buy a house is in the fall/winter. That way you can see if there are leaks from weather, and also houses are harder to sell at that time of year, so many bargins can be gotten.

Stay away from the adjustable rate, that's why the housing market has collapsed.

I don't know about other states, but here in California your credit score must be at least 300, and it's going to cost you around ten thousand for closing costs.
My other half has already been approved for a loan (something YOU MUST DO BEFORE BUYING ANY HOME), but without money upfront for a down, the realtors won't bother with you. Here you have to have at least 10 to 20% down.
You literally have to be making around four thousand a month to afford a house today.

We are hoping to buy a manufactured/mobile home where we can own the land too. Sometime the beginning of next year is when we will start looking.
We are staying away from condos because of the HOA monthly fees and to me condos are just glorified apartments. I don't want to share walls with anyone else anymore. I like quiet.

[Charlotte Rowan]

Thanks for all the advice, all. We will definitely have an inspection done, so far everyone we've mentioned this to has said that, including my parents, and I almost always take my parents' advice. We'll get pre-approved too. I just have to get Rob to get on the ball... he wants to "look into" buying the house, but we've already done research and looked at the house, so at this point "looking into" it means getting pre-approved for a loan!! I'm used to that though - we make a lot of plans, but nothing ever actually comes to fruition unless I push for it.  I hate to sit around and do nothing when we have an idea. I want to find out if we can do it and if we can, get going on it. That's the "Activator" part of my personality, I guess. Anyway, I digress!

As for credit and closing costs, my credit score is almost like 874, so that should be no problem, and I can get good deals through a program at my work with mortgage brokers to have a lot of the closing costs reduced or eliminated.

*Sigh* I just love the house so much! Sorcha, Synn, Rage - if we get it we'll have to have the MN contingent over for housewarming.

[Anna Iram]

One bit of advice passed to me was don't do anything to impact your credit score until you sign the papers and you're sure it's yours. My finacial advisor told a tale of a couple who were approved and won the house, so they gleefully went out and charged up a bunch of furniture.  I think they opened a new credit account to do so as well. The day they signed the lenders denied them the original offer as their credit score was much lower. They had to do some serious scrambling to get financed at or near the original rate they had planned on. In this market it doesn't take much to kick you out of the box.

[Lady Mikayla of Phoenicia]

Hi CW I think it's great you are looking to purchase a home!  I'm also a Real Estate Broker, have worked with FHA as well as having an FHA loan in the past.  I'd be happy to answer any questions you may have.  If you'd like, I can renmail you my number and we can chat.

Lady M

[Leyla]

Before we got into our first home Josh went through a FHA type class.  ACCAP "Home Stretch"  (www.accap.org) offers pre-purchase education, and at the end of the course he got a certificate that allowed us grant money, or some other sort of assistance with the closing costs or down payment assistance.

Along with the advice from others I'd also suggest getting a very experienced realtor.  The market is crappy right now and it helps to have a realtor who is more aggressive and knows how low you can go on the asking price.  Make sure you find a realtor that has made many sales in the past couple years.

With your fantastic credit score have you considered purchasing the house yourself?  I've seen, and heard of, people who purchase houses together who weren't married and ended up not staying together.  The results were less than pleasant when it came to splitting the house afterwards, additional complications that wouldn't happen with a legal divorce proceeding.  If you can get approved to purchase the home by yourself, and with your credit score that does seem likely, I'd highly recommend keeping the title and loan in your name only.  Not that anything would ever happen, but just to be safer.

The house is adorable.  I envy you living in St. Paul, there's so much to do around there. 

I look forward to the house warming!

[Baron Doune]

Get preapproved by a lender.  First step.  Then you'll know where you stand and the seller will know you're a qualified buyer.

From a warm side...
I love the place.  Really do.

From a logical side...
High traffic area.  Snelling and University.
On street parking?
Close to the proposed light rail line.  Might have some sound issues.
It's priced too high, I think.  Maybe not.  But my gut tells me it is.  It's a buyer's market. 

Take a few walks around the area at different times during the day. 

Continue to look, find two more that you love.

Then do a positive/negative on each house.