Author Topic: Buying a house in the Boston Area  (Read 1720 times)

zeruel

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Buying a house in the Boston Area
« on: April 19, 2017, 09:39:24 AM »
I'm considering the purchase of a home in the Boston area (looking at Medford or Arlington specifically). I realize these questions are kind of basic, but I'm not sure how to find answers, so thank you in advance for putting up with me.

Here is my situation:

  • Married, no children, planning one in the next year.
  • Combined income of 227k (not including bonuses, which typically add another 20k/year)
  • Current rent is 1,800/month; probably will go up in September
  • Excluding rent, expenses are $2,000 / month.
  • Currently I have 93k available as a down payment. Should be ~105k sometime this summer.

I'd like to buy a house in the $500k-$600k range (this is nothing fancy for the area). But I'm totally confused about like.. how to actually do this. Some questions:

  • I understand I should get pre-approved, and get offers from multiple places. But how do I do that? Call them all at once? Who should I even consider? And, if I want to close in say, July, when?
  • Essentially everything on the market here goes for 10-20% above asking price. So, if I want to buy a house with a asking price of 500k, how much money do I actually need for a down payment? How does this effect the pre-approval process?
  • As a buyer, do I need a real estate agent? What exactly do they do?
  • Also, do I need a lawyer?

« Last Edit: April 19, 2017, 09:44:08 AM by zeruel »

Car Jack

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Re: Buying a house in the Boston Area
« Reply #1 on: April 19, 2017, 02:12:45 PM »
Take a breath.  :D

It's certainly good to go get pre-approved for a mortgage.  If nothing else, this gives you *some* idea how much you can afford for a house.  If you're able to put 20% down, you won't have to pay Darth Vader....uh, I mean PMI.  If not, then you will.  PMI is like the DOC FEE when buying a car.  It buys you absolutely nothing. 

Go look at houses.  How?  Feel free to contact any real estate agency.  Go with the agent to houses that match what you're looking for.  Look on zillow.  Feel free to contact yet another real estate agency if you want.  Sellers pay agents so you owe them nothing.  Take your time and ask questions of the agents.

When you do go into the buying process, the mortgage provider will have a lawyer overlook everything.  You could hire your own lawyer or pay the bank's lawyer to also represent you but I've yet to figure out what my own lawyer would cover that the bank's lawyer isn't already doing.  The bank's lawyer will search title, which if you get to go along, it's pretty fun and done at the county courthouse (our houses have all been in Middlesex so we went to Cambridge and saw old titles back to the king first hand). 

Take your time. 

If you look at houses being sold by owner, then an agent isn't involved and won't show you the house.  The bank's lawyer can handle the closing.  We've done that twice and paid a small extra to have the bank's lawyer represent us.  You also wouldn't have to personally go to the closing as you'd give the lawyer your POA for this transaction.  When we sold our last house and bought another, we closed on the sale in the morning and then started moving stuff and the lawyer handled the buy closing then came over with the paperwork (move from Ashland to Hopkinton so close by).

zeruel

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Re: Buying a house in the Boston Area
« Reply #2 on: April 19, 2017, 06:11:38 PM »
Thank you for the response.

Hmm, in order to avoid PMI, I guess I should wait until I have more saved, considering the the likely price of a home. I have just about enough for 20% of the asking price on a place I would like, but it would cost more than that.

Jessamine

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Re: Buying a house in the Boston Area
« Reply #3 on: April 20, 2017, 11:37:53 AM »
Redfin's website may also be helpful too to see what properties are available with the requirements you're looking for (size, price, location, etc.).  They'll also list open house dates when you can just show up to the property to view it and ask questions; you don't need an agent with you.

waltworks

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Re: Buying a house in the Boston Area
« Reply #4 on: April 20, 2017, 02:15:43 PM »
With expenses under $50k a year and after-tax income of at least $150k, how do you only have $90k for a DP?

I'd look at your cashflow very carefully before buying a house. $2k in rent a month is a great deal compared to owning a $600k house in most cases.

-W

GetSmart

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Re: Buying a house in the Boston Area
« Reply #5 on: April 20, 2017, 02:59:11 PM »
Don't forget to save some for closing costs ~ 2% of sale price according to some up to 5% !

Definitely start going to open houses - it's a great learning experience.  Take your time - don't go to more than 3 in a day or they'll all blend together.  It gives you a way to decide what you like, the location, the schools, etc with no pressure.

You'll also want some contingency money for moving in to cover moving costs, painting, furnishings that you don't have.  Patience here is key, but there's always something that you'll want to do before you move in - especially on an older house.

If you go to Bankrate and use one of their mortgage calculators you will see what you might qualify for.  One way of preparing yourself is to figure out the PITI on a prospective property and then save that for a year.  It gets you used to that amount of money going out every month and then you'll have your down payment at the end of the year. 

redbirdfan

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Re: Buying a house in the Boston Area
« Reply #6 on: April 20, 2017, 11:41:51 PM »
Don't rule out smaller local banks and credit unions.  Most of them have options for less than 20% down without PMI.  Don't wipe out your reserves just to buy a house.  You can get a general idea of qualification and rates by starting with Bankrate.  Then google local credit unions and small banks.  Many have an online presence with mortgage calculators to give you an idea of your monthly breakdown. 

zeruel

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Re: Buying a house in the Boston Area
« Reply #7 on: April 21, 2017, 11:42:16 AM »
With expenses under $50k a year and after-tax income of at least $150k, how do you only have $90k for a DP?

I'd look at your cashflow very carefully before buying a house. $2k in rent a month is a great deal compared to owning a $600k house in most cases.

-W

Well, the income has only been that high for a year. I just completed a PhD and wiped out 30k of student loans a little over a year ago (I did not include this in annual spending, since they are gone and no further payments are required). Plus 36k in contributions to 401k (18k each), HSA contributions, and several k in ROTH ira contributions (using the megabackdoor roth), and the build up of an emergency fund; none of these are spending but that money is not available for a downpayment. So, we come to 93 k.

I'm a bit concerned that rents and housing prices continue to go up in the area. They are up 8 % over last year, more in my specific neighborhood. But your right that we have a pretty good deal; I would not be able to purchase a house as good as what I am living in now in the location I am living for much less than 600k.
« Last Edit: April 21, 2017, 11:43:47 AM by zeruel »

waltworks

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Re: Buying a house in the Boston Area
« Reply #8 on: April 21, 2017, 08:27:56 PM »
Housing prices and rents are both ultimately constrained by wages, so I wouldn't be too worried about it. Rents will flatten out, as will house prices.

Stick with where you are and build up your savings. Kudos on the PhD and the student loan slaying!

-W