How to buy a house

[lilleah]

So, Brandon got a "promotion" type thing at work. And he has the oppurtunity to make a good amount of money now. The only thing that I want to come out of it, is being able to buy a house in the near future.
We would like to actually be able to buy a house next summer.
So I know I've got some learning, planning, thinking, and saving to do.
This is a huge step for me in the growing up process.

I never was able to think about actually having a family and house a few years ago. So I really would like to do this right the first time.
Now, I have absolutly no idea on the steps to take to buy a house. And I figure scince I've got a year to figure it out, I'd better start now scince I procratisnate.
How do I buy a house? What are the steps needed to take? What kind of credit do I need? I need to know all about mortgages, and intrest rates, and tips to help me.
I suppose I just need an entire crash course in house buying, and what I can do now to make it easier when the time comes when I want to say "ok, that's the one. Let's buy it."
Any ideas?

 

[lookingglass]

Step one: pull your credit report and pay off any thing that looks bad (medical collections, library fines, anything that was reported to a collection agency for you to pay)

Step two: Get your Debit to Income ratio in hand. To do this: total up all the credit card, loan, and student loan debit you have. Total both of your incomes together then divide. You want that to be less than 20%.

Step three: Look at your options. Are you or he a veteran, you can go to the VA to get a home loan. Look into getting a federal loan for first time home buyers. These types of loans are going to require that you do a lot more work to buy the house, but they can be worth while.

Step four: Look at your budget! Can you make a mortgage payment with what you are paying for rent right now?

That’s a good starting point. If you have any questions let me know.

 

[lilleah]

Originally Posted by lookingglass

Step one: pull your credit report and pay off any thing that looks bad (medical collections, library fines, anything that was reported to a collection agency for you to pay)

Step two: Get your Debit to Income ratio in hand. To do this: total up all the credit card, loan, and student loan debit you have. Total both of your incomes together then divide. You want that to be less than 20%.

Step three: Look at your options. Are you or he a veteran, you can go to the VA to get a home loan. Look into getting a federal loan for first time home buyers. These types of loans are going to require that you do a lot more work to buy the house, but they can be worth while.

Step four: Look at your budget! Can you make a mortgage payment with what you are paying for rent right now?

Thatâ€[emoji]8482[/emoji]s a good starting point. If you have any questions let me know.

Well we are paying 500 a month for rent right now. I figure for a mortgage in a year we could afford 700-800 a month. That is IF we get all these bills caught up. Which is hard to do for me. That's probably going to take the whole year to do.
How much are mortgages? And how much do they require you to put down for it? I'd say we're looking into the 120's to 130's range for a house.
For federal loans...How do I go about doing that? Is that something I should look into now so that in a year I'm ready to have all the info needed and such?

 

[alaynna]

Well my husband and I bought a house within the first month we were married. We pay 800 dollars a month for our house that is about 135,000 or so. Which is was actually appraised for 160,000-175,000...but since we locked in on the price we got a great deal!! We actually came into the house while it was being built, so we were able to choose everything. Since we bought our house when the market was really good we got the lowest interest rate you could get.

1st: We found a real estate agent to help us by being the middle man with the home sellers...

2nd: We went around to numerous mortgage companies to find the best rate...luckily we have family in the business sooo we were able to work with family and get all the details we needed

3rd: We found the house we wanted to put down "ernest" money while it was being built so it would be held for us.

4th: once the house was finish we met with our mortgage company rep (Jason's aunt), the builders, our realtor, and the realty company that was selling the house...and we had to sign A LOT of papers....and everything was final

 

[jlutgendorf]

Thanks for asking this Leah! I'm looking into the same thing myself, only I'd like to be able to buy a house by April (when our lease is up).
How does the timing of things work? I would love to be able to move into a house at least two weeks to a month before our lease is up. (gives us plenty of time to paint and organize as well as transition out HORDE of animals)

Is that something that's at all possible? I don't see our landlord being that helpful if we can't close on a house before April, and we don't really have the option to move into an apartment for a month or two (where would our 21 guinea pigs live?!?)

It's all so exciting yet scary at the same time!
Here's one link I found that was helpful: http://michaelbluejay.com/house/index.html

~Julia

 

[lunasmom]

It's a good time to buy right now since the rates are beginning to rise and its becoming a buyers market. One guy I work with said that when he sold his house he made $167 profit on it between the time he bought it and sold it.

The one thing I do know that will make a difference in the monthly payment is how much you can put down towards the house. You can buy a house without any down payments (may just cost you $5,000 in closing costs) but you will most likely have a PRI which can increase your monthly costs significantly. Typically you will want 20% down to help avoid the PRI. So if you are looking at a house for $100,000, 20% of that would be $20,000.

You can also always take the PRI if 20% isn't realistic and refinance after a couple of years. Just FYI.

 

[russian blue]

The best thing to do is to make an appointment at your bank. Sit down with the personal banker and they will give you everything you need in terms of what you can afford, your credit rating etc. Each bank usually has a new home buyers package that will explain all the basics.

Also, you can start talking with a real estate rep as well. This will give you a good indication on what type of house and region that you will be able to purchase. It's good to start researching early and understand the mortgage/real estate process.

Also, be aware that when you approach a bank for a mortgage, they will calculate the maximum mortgage you will be able to afford. For most people, you do not want to max out at your highest price. The bank wants you to take a large mortgage but this may not be in your best interest. Always plan for the worst....what do you have in savings? Can you rent out part of the house for income? What happens if Brandon loses his job? Can you carry the house with your income until he finds another job?Just remember that this will be the largest purchase you will most likely ever make so you want to be prepared.

 

[captiva]

Congratulations to Brandon!

You can get free credit reports once a year by law from the major credit repositories. That is the first thing you should do. Make certain you have good credit. If you have outstanding credit blemishes, take care of them now. I strongly suggest that you deal with a bank or a mortgage company that has been in your area for several years. There are many companies out there who appear to offer a low rate but they have many excess charges to make up for offering the lower rate. There are so many programs out right now. It's very possible that if you have good credit and relatively low debt, you could get into a home with no money down and just have to pay closing costs. You also should check around to see if Wisconsin has a first time home buyer program. Most states do. Keep in mind that getting a mortgage can be paper intensive so know where your tax returns, bank statements, paystubs are. Feel free to message me if you have some specific questions. I'd be more than happy to help.

Here are nice websites:

htp://www.freddiemac.com/corporate/b...urce=dropdown"

http://www.fha.gov/

 

[zissou'smom]

I don't have a house, but I want to soon too.

My sister bought her first one a couple years ago, and they did it with no real estate people involved. It is totally possible, and it saves you money if you can manage it. You just have to be willing to do the realtor's job-- title agency dealings, etc. They did, and they both have full-time jobs, so it is possible. It might be a little bit riskier, I guess, but then again you take the risk of hiring a crooked realtor too.

Make sure you have the home inspected by someone you hire. And make sure they're for real. Usually they are retired contractors, which is what I would look for. Check them out-- I know one whose other job is a pizza delivery guy who steals pizzas and smokes pot all day.

Also, there are a whole lot of costs besides just the mortgage vs rent. You have to buy the fridge, stove, washer/dryer, etc. You also have to pay the taxes, which can be a whole lot of money.

One way to get better taxes is to look for towns that have no more space to build. Places with a lot of growth (old farms being turned into housing developments) have reallllly high taxes. Places thats do not have anywhere else to build a bunch of houses have much lower taxes, in general. Also look for neighborhoods without many rental houses. People who live in rental houses are, in my experience, no fun as neighbors. People who own their house take better care of it and care more whether they're making their neighbors mad (generalization I know, remember I rent too).

And good luck!!!!

 

[annasmom]

We probably went about it the wrong way, but we were tired of paying rent. We started looking, found the house we wanted, got the pre-approval, put down the earnest money and made an offer. We had the builder pay $4000 in closing costs, and put no money down. We paid right at $1200 out of our pocket for earnest money, extra closing costs, and the propane in the tank. We got a 30 year fixed rate of 6.375%. Our home cost $171,400 and our mortgage is $1302 a month. We probably should have saved for at least 5% down, but we were tired of throwing our money away and needed more space. It is not fun going from a $700/month rent to a $1300 mortgage, but my husband changed jobs and got a $20,000/year raise, so we can handle it.

I beleive the recommendation is your mortgage payment should be no more than 24% of your gross income. We fall within that, so are pretty comfortable.

Edited to add:
The $1300 isn't just the mortgage, but also our homeowner's insurance, property tax, and PMI (because of the 0 down thing.)

 

[lilleah]

Well arent you guys just a big ole' bunch of helpful people! This is all very good information. All of which I knew nothing about. The 20% down thing kind of shook me a little bit. I'm thinking it's going to take more than year to save that kind of money. Yikes.

You can also always take the PRI if 20% isn't realistic and refinance after a couple of years

What is a PRI and what does refinancing include? What happens when you refinance?

Our home cost $171,400 and our mortgage is $1302 a month. We probably should have saved for at least 5% down, but we were tired of throwing our money away and needed more space.

I've only talked to a couple of people about it so far, and you guys, and the couple people I talked to said at LEAST 10% down. If at all possible, 20% is what I should do. So if I did say...15% down, would that help with the monthly payment? If not..What does the money down help with?

Make sure you have the home inspected by someone you hire. And make sure they're for real.

So, what kind of things are these inspectors looking for? And do they inspect the home before or after buying it. Would they charge a massive amount of money to fix whatever the problem may be? And shouldnt homes be in move-in condition if on the market for sale?

Always plan for the worst....what do you have in savings? Can you rent out part of the house for income? What happens if Brandon loses his job? Can you carry the house with your income until he finds another job?Just remember that this will be the largest purchase you will most likely ever make so you want to be prepared.

I have a hard time planning for the worst. I think about the worst sometimes, but planning for it may be quite a challenge. I do want to be prepared. As prepared as possible.

You also have to pay the taxes, which can be a whole lot of money.

So when do I pay these taxes? Every tax time..or every month?
Well thank you all so very much for all of this very usefull information. And I will look into those links you all provided when I get a few more minutes and sleep in me. Thanks again!

 

[zissou'smom]

Answering the questions raised by what I said:

Inspectors make sure everything is up to code, check wiring, check for bugs, make sure the foundations are solid, there's no rot in the walls, that your zoning is all in order, if anything weird has happened to the house (like home-improvement projects done by amateurs that aren't safe) etc. They do not fix things themselves or charge you to fix them. They tell you what is wrong before you buy the house, and you can use minor things to haggle the price and major things to start looking at a different house. After you buy, a lot of times the city sends someone out too, but you don't pay them. They also tell you useful stuff, like this house will need a new roof in five years, or this basement floods often, etc. It's no guarantee that nothing is wrong or will go wrong.

Yes, houses should be in good condition at sell... but you cannot and should not trust anyone without evidence to back it up. Just like used-car dealers are sometimes really honest and sometimes put sawdust in the tank. Once that house is yours, its yours-- problems and all. Some people have enough things go wrong with a house and just sell it, same as with cars. Many things can be seriously wrong with a house that neither you nor I would be able to see ourselves. And inspectors don't cost nearly as much as they might end up saving you.

As for the taxes, around here the RITA is every year, but I don't know where you're moving to and how it works there. It's usually yearly although I think you might be able to do quarters or halves...

I'm sure anyone in town you know who owns a home could tell you that. It's not monthly though.

 

[captiva]

"PRI" is probably "PMI" in my neck of the woods. Private Mortgage Insurance. If you are going to get a regular conventional loan and didn't put 20% down, private mortgage insurance would be required. It basically protects the lender in case you default on the loan so they can get some reimbursement for their losses. It can be financed into the loan in some cases, but most often, it's an additional monthly fee. Here is a little something explaining it. http://www.mgic.com/education/mibasics.html

Also, if you don't put 20% down, your lender will probably require that your taxes and homeowner's insurance be included in your monthly payment. So, if your taxes on the house were $1200 /yr. There would be an additional $100 added to the payment. Same with your homeowner's insurance.

 

[gailc]

Well you know its Wisconsin so the property taxes will be at least $2000/yr if not more. Plus you will have homeowners insurance too. We have a higher deductible ($500) and get the highest liability limits you can afford (people are so sue happy). If you insure your house with the same company as your auto you may get a price break on both. Check out what areas you would like to live-when we went house hunting (back in 1986) we went through several realtors as no one could find "the house" for us. Determine how big of a house-how many bedrooms,bathrooms, garage size. Are you willing to get a "fixer-Up" type of house or do you want to move in and not have to change anything. Are you willing to live on a bsuy street?? Check traffic flow at busy times of the day.
Our house was for sale by owner we probably saved some money on the price of the house but had to hire an attorney for ppwk.
All the others suggestions are great!!
Do not go with an interest only loan, in fact variable rate loans-well if interest rates go up your mrtge pymts could increase quite a bit.

 

[lookingglass]

Originally Posted by lilleah

Well we are paying 500 a month for rent right now. I figure for a mortgage in a year we could afford 700-800 a month. That is IF we get all these bills caught up. Which is hard to do for me. That's probably going to take the whole year to do.
How much are mortgages? And how much do they require you to put down for it? I'd say we're looking into the 120's to 130's range for a house.
For federal loans...How do I go about doing that? Is that something I should look into now so that in a year I'm ready to have all the info needed and such?

If you are looking into a federal loan, you may want to ask about that now. The only reason that I say this, is you want to have all your credit ducks in a row before they tell you to payoff something that you don't have the money to do. As for paying off your bills, I know how hard that can be. DH and I are living in a tiny little apartment now, so we can pay off all of our debit. You may want to go to a financial planner and set up a really strict budget for yourself. That's what we had to do.

 

[lunasmom]

Originally Posted by captiva

"PRI" is probably "PMI" in my neck of the woods.

Oops...Thanks Captiva. Being in Computers I have too many acronyms to know.

Heres a good site to read up on terms, etc: http://www.mortgage101.com/Articles/Index.asp?p=mtg101

Someone else suggested it too...definitely sit down with a mortgage lender and find out information.

You don't have to put 20%...15% is OK too. Basically like with loaning ANY money, the more you put down, the less your payments will be per month.

The one thing you do have to remember too, and I'm not sure what you're apartment situation is like, but ALL bills need to be paid. This includes:
Heat/gas, electricity, water, trash pick up, and any repairs needed to the house.

I would so love to own my own home (looked into it many years ago, silly me, I thought i could afford one out of college), but I have to wait until I'm done with my Masters. I may not be in this area in 2 years.