Author Topic: Advice for First-Time Homebuyers?  (Read 1804 times)

marble_faun

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Advice for First-Time Homebuyers?
« on: March 10, 2017, 01:07:05 PM »
Greetings, Mustachians!

In a previous thread I asked "where to live?" and received some very thoughtful advice. In the end we decided to move to a college town in the suburbs of a large East Coast city. Not the most Mustachian choice (the property taxes are just... ughh), but it could be worse, and this is the place we both felt happy about after a series of compromises.

Now we are on to the next stage: actually preparing to buy a house.

Do you all have any thoughts or advice for a first-time home-buyer? Things you learned during your first home purchase that you would want to share? I am all ears!

I honestly have no idea what I am doing, but I am trying to rapidly educate myself so that we don't get ripped off or end up wasting money.

A few issues that have come up already:

Getting Pre-Approved for a Mortgage

-- We don't have time to meet with a bunch of loan officers local to our Future Region. We started working through the online lender AimLoan, who seemed to have low rates. Will also look into Rocket Mortgage. Does anyone have experience with either of these loan sources? I'm okay with a stripped-down, no-frills experience, but are there pitfalls we should worry about?

-- My husband has absolutely no credit history and no credit score, because he is adverse to debt. But he has a ton of savings and a great job. I have an excellent credit score so am putting myself forward as the "primary" on this mortgage. I'm hoping they can see that between the two of us, we would be responsible borrowers, despite the fact that my husband is a credit non-entity.

Choosing a Mortgage

-- What's the Mustachian thought on 15-year fixed-rate vs. 30-year?  I like the idea of choosing the 30-year, then paying it off more quickly as we go along, putting in more money as we feel like it (avoiding penalties of course). We both hate debt and the fact that we owe money on the mortgage will bother both of us until it is gone. But I'm a little wary of locking into the higher monthly payment of the 15-year. Would prefer to have some flexibility in where we put our money each month.

Finding a Buyer's Agent

-- I identified a "buyer's agent" to work with via the National Association of Exclusive Buyer Agents and sent him a message. I read a bunch of web sites that recommended this step. Hoping this is the right thing to do. I just need someone who is informed about this process to be on our side through it.


What else should we be thinking about or doing as we move through this process? I welcome any and all tips, suggestions, thoughts, etc.

Thank you all!!
"Time flies pursue it Man. For why? thy days are but a Span."

waltworks

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Re: Advice for First-Time Homebuyers?
« Reply #1 on: March 10, 2017, 02:40:06 PM »
If your husband's credit is bad/nonexistent, getting a mortgage is going to be... interesting. Typically mortgage lenders look at the *lower* of the credit scores/histories/employment when dealing with a married couple. I would suggest putting a bunch of effort into figuring out what you need to do on that front first. Until you have yourselves specifically approved by a lender, there is no point in going any further.

As an aside, there is no need to be "averse to debt" to establish a credit history. Like it or not, not having good credit will trip you up in many cases. It is too late to do much about it for the purposes of the house purchase, but simply getting a credit card and paying it off every month is an easy way to establish credit.

There is infinite debate about paying mortages early (or getting a 15 year vs 30 year) here. The financially optimal choice is to get a very long term mortgage and pay it as slowly as possible, but if you guys are super debt-averse, you are not obliged to do that. Sit down with an amortization calculator and see what happens to a hypothetical balance in various scenarios.

It is probably worth interviewing a few buyer's agents over the phone, or alternately simply calling up the person on Zillow who has the most recent sales in the area you are looking at (this is usually a reasonable guarantee of basic competence).

Good luck!

-W

BabyShark

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Re: Advice for First-Time Homebuyers?
« Reply #2 on: March 10, 2017, 02:45:07 PM »
Posting to follow as we'll be in the same boat shortly.

marble_faun

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Re: Advice for First-Time Homebuyers?
« Reply #3 on: March 10, 2017, 03:10:17 PM »
If your husband's credit is bad/nonexistent, getting a mortgage is going to be... interesting. Typically mortgage lenders look at the *lower* of the credit scores/histories/employment when dealing with a married couple. I would suggest putting a bunch of effort into figuring out what you need to do on that front first. Until you have yourselves specifically approved by a lender, there is no point in going any further.

As an aside, there is no need to be "averse to debt" to establish a credit history. Like it or not, not having good credit will trip you up in many cases. It is too late to do much about it for the purposes of the house purchase, but simply getting a credit card and paying it off every month is an easy way to establish credit.

Yes, I established a credit history that way -- got a card with good rewards, which I pay off every month. My husband has preferred not to do anything like that, on principle. I don't think he realized what a problem it could be until now.

We're going to be talking with the AimLoans folks soon. Will see what they say.

I wonder if it would be worth it for my husband to take out a credit card right now? Just so there's... something. Even if the score is mediocre for a little bit. Will have to look into this!
"Time flies pursue it Man. For why? thy days are but a Span."

oldmannickels

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Re: Advice for First-Time Homebuyers?
« Reply #4 on: March 10, 2017, 03:29:45 PM »
Have the mortgage broker run you by yourself for the pre-qual and see if you qualify for the house you want with just you signing the mortgage.

waltworks

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Re: Advice for First-Time Homebuyers?
« Reply #5 on: March 10, 2017, 03:31:55 PM »
Have the mortgage broker run you by yourself for the pre-qual and see if you qualify for the house you want with just you signing the mortgage.

Generally if you are married they won't let you do this. Just FYI. Don't ask how I know...

-W

south of 61

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Re: Advice for First-Time Homebuyers?
« Reply #6 on: March 10, 2017, 03:49:40 PM »
Have the mortgage broker run you by yourself for the pre-qual and see if you qualify for the house you want with just you signing the mortgage.

Generally if you are married they won't let you do this. Just FYI. Don't ask how I know...

-W

that's interesting, we did it in Canada (i have great credit, but in my home country) so when I moved to Canada with my husband we just got the mortgage in his name. Interesting the differences in the US.

Good luck OP - hope you can figure something out!

GizmoTX

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Re: Advice for First-Time Homebuyers?
« Reply #7 on: March 10, 2017, 06:07:34 PM »
Why wouldn't you add your husband as an authorized user on your credit cards -- wouldn't that jumpstart his credit history? He doesn't actually have to use them.

marble_faun

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Re: Advice for First-Time Homebuyers?
« Reply #8 on: March 10, 2017, 06:47:11 PM »
Well, y'all were right. Earlier today I had a conversation with a loan officer and learned the following:

(1) They will not loan to us jointly because my spouse has no credit history.

(2) Though married, I could be alone on the mortgage. However, my husband's income would not count for lending purposes, and my borrowing as a singleton would be much more limited. While I still could be pre-approved for a mortgage, we might not be able to get the kind of house we wanted.

(3) They suggested that my husband open a credit card and that we come back in six months.

Bummed that all the cute houses I bookmarked will be sold by the time we are ready to buy. Oh well -- I suppose there's always the next batch.

My husband asked me if I were annoyed at him for causing these problems. I said, "No, I'm mad at the SYSTEM!" (Seriously -- when did not having a credit card become "non-traditional," like you're some sort of irresponsible weirdo if you don't want one? It just seems sad.) We should have anticipated this issue, but I really thought they would let us through after reviewing our solid income and assets.

Why wouldn't you add your husband as an authorized user on your credit cards -- wouldn't that jumpstart his credit history? He doesn't actually have to use them.

This.... THIS is an excellent suggestion! Thank you!
« Last Edit: March 10, 2017, 07:03:18 PM by marble_faun »
"Time flies pursue it Man. For why? thy days are but a Span."

cchrissyy

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Re: Advice for First-Time Homebuyers?
« Reply #9 on: March 10, 2017, 09:15:22 PM »
do you have an american express card?  if so, adding him as an authorized user will give him the age of your oldest account. add him on all your accounts but AmEx is an especially good way to jump start his history.  and you don't have to ever actually hand him a card and he doesn't have to use it if he doesn't want to. Just add him and cut up the card when it comes.

SwordGuy

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Re: Advice for First-Time Homebuyers?
« Reply #10 on: March 10, 2017, 10:42:26 PM »

You've already gotten good advice on the credit score front so I won't say all that again.

Here are some things to remember:

1) There are lots of wonderfully cute houses that you will love living in.   

So don't give a damn about the first few you find.  There will be more.  If your emotions get involved in how cute it is, or how perfect it is, you'll be more easily manipulated into paying too much.

2) Is this house to live in?  Or is it an investment?   Or is it both?

(Hint: There is no "both" answer.  It is an investment or it isn't.  You just might happen to live in it for awhile before you decide to make money on it.  It's an important distinction.)   

If it's an investment there's a whole lot of stuff to learn to make sure it's a good investment before you buy it.   The normal "how to buy a house" articles on personal finance sites are generally worthless for this purpose.

3) Are you willing to work to save money?  Possibly a bundle of money?

If you are flexible on when you buy, and you are willing to do a lot of work to the house after you buy it (that's "you" as in you and your spouse, not "you" as in some hired hands), then you can save a lot.  You might save anywhere from 20% to 60%.    Learning that real estate investment stuff can pay real dividends if you go this route as there are ways to reduce the amount of cash you need to put a deal together plus it can help you learn how to find a good property. 

4) Look at the property with a very critical eye. 

Ignore what you like about it and focus on what you don't like.   It will help you see a truer picture of the house.

5) Transportation

How close are you to public transit?  Are you planning to age in place?  If so, being within the ADA distance of a bus route means you can get picked up and dropped off for a nominal fee if you can no longer get to the bus.   Can you reduce the number of cars you need or the number of miles they will need to be driven?

6) Don't trust the bank for the max loan amount

The bank will milk you for as much of a loan as they think you can pay back, not a smaller loan that will help you accumulate wealth by investing the difference.

7) Buyers agents still get paid more if you pay more for the house.   


Their heart may not be in telling you to walk away or how to get that price lower.

8) Use public data


Zillow.com will (often) give you last sale info (date and $ amount).   The county registrar of deeds can get you that same info.  It can also let you check for liens on the property like a mortgage, heloc, mechanics lien, etc.  Our county website will actually let us read the actual documents online!

For mortgages and helocs, you can google for the historic median mortgage interest rate.  See http://www.freddiemac.com/pmms/pmms30.htm for an example.  Use a mortgage calculator to figure out about how much they might still owe.  See https://www.drcalculator.com/mortgage/ for an example.  This will give you an idea of the lowest price they can go without losing money on the sale.  Don't forget about realtor commissions and closing costs in that calculation.   You might need some help getting the registrar info, a lot of counties don't use the street address.   They use things like book and plat number.   Zillow.com often has that info, and I think MLS does as well.

9)  Does the seller have a lot of equity?


Equity is the value left over after paying off all house-related debts and sales costs.   Let's say you're buying that house from an elderly person who is moving into a nursing home or into their kids house.  In that case, they don't need all the cash right away to purchase another house.    If they are just going to put the cash they get into the bank at 0.25% interest, maybe they would rather get 8 times as much interest from you. (How would you know that?  You ask what their plans are.)  They might be happy acting as the bank to get more money overall.  Of course, if they are 2 years into a 30 year mortgage, none of that is likely to work.

Sadly, I don't think many realtors know how to do this or are interested in learning.  In fact, the seller's agent can get in the way because, well, they can and will.   So if you can find someone who wants to sell before they have a realtor you're better off.  (Back to that real estate investment education I mentioned to learn how to do that.)

10) Hire a home inspector that you choose, not the one your realtor chooses.


You want the inspector to work for you, not be beholden to the realtor for the work.   
Go everywhere the inspector goes (including the yucky parts!) and listen to what they tell you.  Then, when you look at the next house, use that knowledge to figure out what's wrong.   Actually, just go look at a bunch of houses for the next 6 months even though you aren't ready to buy.  (Don't waste your realtor's time.  Just walk around the outside of the house and, if it's empty, look in the windows.)  Practice looking for problems on houses you aren't emotionally attached to.

11) Learn the neighborhoods.


A lot of people in my city have zero idea how many really nice neighborhoods there are.   The more houses you look at, the more you learn your city.  You'll get a much better idea of what the houses are really worth and which parts of town you would like to be in.  And, while you're looking around, talk to people in their yards.   Ask them if they know anyone who's thinking of selling their house.   If you see an empty house that's not for sale, check it out.  You might be the first one to talk to the person and you might get a better deal that way.


Hope that helps!









 

Lmoot

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Re: Advice for First-Time Homebuyers?
« Reply #11 on: March 11, 2017, 07:05:39 AM »
You got all really good advice.  To piggyback on someone else saying don't rely on the realtor, make sure you're doing your own research checking Zillow and other sites as well as just driving around the neighborhood you want to buy in and seeing if there are any for sale signs up. Sometimes they put the signs up before it it shows on line. I actually found my own house, which my realtor either didn't know about or didn't think I would like.

 Unless you have kids I would say don't be too afraid of a fixer-upper. Anything can be done a little bit at a time and you can get free financing for up to two years on credit cards from big box stores like Lowe's and Home Depot. The best part is  you will get to continue paying a lower mortgage on a house of less value even after you fix it up. Do not borrow more than two thirds what a lender tells you you can borrow. They don't take into account any other bills you have to pay. And they don't care if you end up house poor. Being able to pay a mortgage but not much else is not an affordable mortgage.

YttriumNitrate

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Re: Advice for First-Time Homebuyers?
« Reply #12 on: March 11, 2017, 08:28:44 AM »
Unless you are in a market where houses sell at warp speed, try to find two houses you like before putting in an offer. Having a plan already in place to walk away gives you a good deal of leverage in the negotiations and helps prevent getting emotionally invested in a house before you actually own it.

cchrissyy

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Re: Advice for First-Time Homebuyers?
« Reply #13 on: March 11, 2017, 09:05:01 AM »
good list, Swordguy

I especially echo number 1 - the world is full of good houses! The city you are looking at has thousands of houses that would meet your needs and that you would like/love very much. A large number of them are listed for sale every month of every year.

marble_faun

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Re: Advice for First-Time Homebuyers?
« Reply #14 on: March 11, 2017, 10:03:45 AM »
SwordGuy and others, thank you for the many sensible suggestions! This is all helpful.

Getting emotionally attached to a single house: This is a major foible of mine. I highly value historic architecture and quaintness. So I am prone to fixate on (for example) one particular wooden Victorian house with a wrap-around porch on a quiet, tree-lined street, and lose sight of everything else.  I like the idea of having multiple great houses in mind so that we don't get too emotional about it and retain critical awareness.

Finding a deal: To be honest, we don't primarily view this purchase as an investment. If we find a house where we would love to live for the next 30-odd years, we will buy it, and any increase in value will be a side-benefit.

But we would LOVE a fixer-upper. Mainly because I have seen so many home interiors ruined by house-flippers. Sometimes Zillow shows you photos from an older listing along with a new one for the same house, and you can see how the flippers tore out original historical details to put in recessed lighting, replaced wooden cabinets with what appears to be MDF, and gave the whole place a generic look. I hate the idea of paying extra for a flipped home when we would prefer a more run-down, less-trendy home with good bones that retained its older features.

Transportation: Oh yes, easy access to public transit is huge for us, as we want to avoid driving as much as possible. Most of the houses we've bookmarked are in first-wave suburban neighborhoods, built in proximity to rail lines in the late 19th/early 20th century before post-war auto sprawl set in. Being able to walk to a train or bus is key.

Learning about Neighborhoods: This has been one of the most fun and strange parts of this process so far. The city-data.com forums are hilarious (though also useful) as people who live in the area endlessly parse the class status and aesthetic differences of the various suburban neighborhoods. I'm not into the snobbery aspect, but it's been a crash course in the history of this region and how all these little towns that seem to blur together each have their distinct identity and reason for being.
« Last Edit: March 11, 2017, 05:19:02 PM by marble_faun »
"Time flies pursue it Man. For why? thy days are but a Span."

Joel

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Re: Advice for First-Time Homebuyers?
« Reply #15 on: March 11, 2017, 11:28:08 AM »
Adding your husband as an authorized user is a very quick and easy way to start building his credit.

Another thing to consider, use openlistings.com as your real estate agent instead of an actual agent. You can get refunded a good chunk of the commission that way. Especially valuable if you plan to do a lot of research before buying.

jkitiara

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Re: Advice for First-Time Homebuyers?
« Reply #16 on: March 11, 2017, 11:50:23 AM »
Following, as I'll be starting this VERY soon.

I'm surprised no one commented on WHERE to get a good mortgage. Are the original poster's ideas good ones, or are there better places to go for a great online mortgage? I'm going to check with my credit union, but I want something to compare it to.

Hotstreak

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Re: Advice for First-Time Homebuyers?
« Reply #17 on: March 11, 2017, 01:46:10 PM »
Look in to owner carry financing.  Essentially what this is, is the seller will give you a loan to purchase the home.  You will make payments to them (or an agreed upon servicing company).  It's your house, you live there, your name is on the title, etc., and their name is listed as the lender.  There's a formal contract in place spelling out all the details.  Generally you will need to make a down payment, then will make monthly payments for a few years, at which time the loan will "balloon" meaning you are required to pay it off in full.  That's when you refinance to a bank, assuming your husband has established credit (these owner carry notes can report as mortgage to credit, which would obviously help a lot).


In order for the sellers to do this they need to own the home free and clear, or be able to pay off their existing mortgage, and they also need a willingness to do it.. which means the number of properties you have to choose from will be smaller.  The advantage to the seller is that they are receiving a guaranteed rate of return equal to the interest rate on the loan.  This appeals to sellers who prefer an income stream to a large amount of cash.

marble_faun

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Re: Advice for First-Time Homebuyers?
« Reply #18 on: March 12, 2017, 03:19:02 PM »
Following, as I'll be starting this VERY soon.

I'm surprised no one commented on WHERE to get a good mortgage. Are the original poster's ideas good ones, or are there better places to go for a great online mortgage? I'm going to check with my credit union, but I want something to compare it to.

Since no one else posted, I'll give you a sense of what I have learned so far after researching Rocket Mortgage and AimLoans and going through the initial steps with both of them.

Basically, if you don't anticipate problems and all your paperwork is in perfect order, these services can give you a good deal. AimLoan seemed to have the best rates of anywhere that I saw.

However, you are dealing with a bargain-basement operation. They seem to operate on volume and may not pay a lot of attention to the individual. So, there's less hand-holding, and if any sort of hiccup emerges in the process, their loan officers might not deal with it well. I read negative reviews that suggested loan officers were inexperienced and could be slow to respond to various issues or problems. In some cases that could derail the whole purchase, leaving people to start over at an established bank where they got a worse deal.

It couldn't hurt to get quotes from these sources and compare them to what your credit union says. But the pre-approval seems to be the easy part, the part they do well -- after that, things could get more complicated.
"Time flies pursue it Man. For why? thy days are but a Span."

redbird

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Re: Advice for First-Time Homebuyers?
« Reply #19 on: March 13, 2017, 12:42:08 PM »
I'm working on getting through the house buying process now. This will be my second house owned, but it's been so long since I last owned a house that I'm having to re-learn things - especially because the mortgage approval process has changed a LOT post-2008-era housing collapse.

Some things I've learned:

- Credit unions seem to have really fantastic mortgage deals. Try looking into their rates if you are part of one.
- With the existence of Zillow, Trulia, etc, I find that realtors are not that useful for finding a house to buy. They are still useful to have around though. My realtor has been doing this for years and is super responsive and helpful. She's been giving me lots of useful advice (both in the buying process and on her opinion of a house's possible resale value if I sell later) and has been doing a lot of the logistics of setting up viewing appointments, asking the seller's agent questions on my behalf, and other things like that. She also knows the area I'm trying to buy in VERY well and has been able to provide advice about that too. This would be a harder process if she wasn't around. She's definitely doing tons of work and is more than earning her share of the commission that she's going to get at closing!
- Get a good home inspector. They can potentially save you money in the long term. I actually had a house under contract until recently that I gave up on. The house looked super good and I was so ready to buy it... but then the home inspector noticed some big problems that everyone, including the seller themselves, missed. These were problems that would've been incredibly expensive to fix and there is no way we could've negotiated with the seller to fix that. It seemed easier just to drop that contract (lender allowed it since it was due to home inspector finds) and not get myself into a money sink. The home inspector's fee was "lost" since I didn't buy that house, but in the process, I found myself an amazing home inspector. The home inspector also got himself a repeat customer. :)
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AMandM

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Re: Advice for First-Time Homebuyers?
« Reply #20 on: March 13, 2017, 06:07:46 PM »
The best piece of real estate advice we got was from my FIL:  Spend less than the bank says you can.
 
If you are a Costco member, they also have a mortgage broker service, but I don't have experience with it myself.

When you get to actually choosing a house, focus on the things you can't change, not the things you can.  You can repaint, you can tear out carpet and finish wood, you can add a storage shed, etc., but no amount of money will move the train tracks farther away or the bus stop nearer.

kandj

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Re: Advice for First-Time Homebuyers?
« Reply #21 on: March 17, 2017, 07:39:18 AM »
I'm not sure why some here commented that you are not allowed to get the mortgage in only your name...maybe it varies by area? We bought our first house in West Michigan in August 2016. Our local mortgage broker ENCOURAGED us to get the mortgage in my name only, as my husbands credit score was lower. This way we feel safer if there is an unexpected job loss or other accident, and since we kept the mortgage lower we can save more.
Again, this would only work if you don't need both incomes to qualify for the home you want.
Our experience with buying the house was that it was immensely helpful to meet with the mortgage broker we chose several times throughout the process. We were clear to close in 2 weeks even though we gave the buyers 6 weeks to close. We were fully prepared and weren't scrambling for paperwork as we had it already in place, which is a struggle we have heard from many of our friends who have bought recently. It certainly helped that we chose a mortgage broker and a realtor who worked well and quickly together, but the market might not be as hot where you are looking so that may not be important. I would be wary of using an online service for any of this, but that is perhaps more of a personal preference.
Hope your home buying experience goes well!

rtkaratekid

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Re: Advice for First-Time Homebuyers?
« Reply #22 on: September 23, 2017, 12:25:50 PM »
Follow! In case someone drops some more house wisdom

Chemistay

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Re: Advice for First-Time Homebuyers?
« Reply #23 on: September 24, 2017, 01:46:00 PM »
Following since we are planning to start this process sometime in the next 12-18 months.

I've repeatedly heard the advice to find a great realtor and home inspector.....but how? We will be buying after relocating back to an area that we lived in ~5 years ago. We have a decent understanding of the neighborhoods (as previous renters) but we don't have any family in the area and our friends are all renters. So, if you don't have anyone to give a solid recommendation, how do you find these amazing resources? Yelp? Somewhere else?

GreenQueen

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Re: Advice for First-Time Homebuyers?
« Reply #24 on: September 26, 2017, 07:42:31 PM »
Following. Also in Canada.