Author Topic: First time home buyer  (Read 3525 times)

orangenotebook

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First time home buyer
« on: August 20, 2014, 10:54:19 AM »
Hey All,

Long time reader of the blog and the forums, first time poster. Thanks to this blog and forums, as of last week, I am debt free. Thank you all for your knowledge. Now that I am debt free, I am posting to get your knowledge of being a first time home buyer.

I live in Columbus, Ohio and found a neighborhood near work that would give me a great piece of property without breaking the bank for ~100k. I'm currently renting in a small studio apartment for $725 a month (I know, I know), and throwing that money away. I'm posting because I know how knowledgable everyone on this topic is and I'm looking for any and all advice.

I'm tempted to stay another year in my studio, but I'm hoping to get a swift kick in the ass from the mustachians here!

Thanks,
Andy

usmarine1975

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Re: First time home buyer
« Reply #1 on: August 20, 2014, 11:07:02 AM »
Take a note of what you like about your apartment, and what you don't like.  It will give you a list to start with your search for a home.  Zillow can be a great place to start looking, it's not the only place but a good start.

Having 20% down will make it much easier throughout the process and if I could do anything differently I would have had 20 % down on all the properties I have bought.

Using a Realtor is really a choice for you.  I have used one to date but going forward would use my lawyer.  I have found the Realtors tend to be thinking more about their own income and less about what you need.  (not all Realtors)  For a first time purchase it may actually be a better idea to utilize a Realtor but again know what you want and don't want.  Stick to your budget.  And be willing to offer less then the asking price.  Be careful with what you sign etc...  Read everything.

Look for the area you want and for the type of house you want.  If you think you may want to rent it down the road try to pick a home that would be easy to rent.  I have found 2 to 3 bedroom stand alone homes in my area very easy to rent.  Location determines any of that so it may not be the case in your area.  Look on Craigslist for what's listed for Rent and the rates they are asking.

I would not waive the inspection.

Pre qualifying for a loan means nothing but many Realtors will want you to have one. 

Good luck

Look be patient and find the right place at the right price.  Paying your monthly rent is not necessarily throwing money away.  If you pay 2,000 more in rent and save 20k on your home purchase it's a win.  Don't rush and don't be fooled into paying more then asking if your neighborhood doesn't warrant that.  Realtors will try to keep the price up.

RWD

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Re: First time home buyer
« Reply #2 on: August 20, 2014, 11:19:41 AM »
Whatever you do, do not get an FHA loan. I will second the recommendation to put 20% down.

orangenotebook

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Re: First time home buyer
« Reply #3 on: August 20, 2014, 04:07:17 PM »
Wow, usmarine1975, I can't tell you how much that information means to me, thank you! Now I know my next big phase in life!

Thank you and good luck with your own buying/selling/renting endeavors in the real estate world!!

not_a_trex

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Re: First time home buyer
« Reply #4 on: August 21, 2014, 08:05:09 PM »
Whatever you do, do not get an FHA loan. I will second the recommendation to put 20% down.

What's wrong with an FHA loan? Doesn't it allow you to put less down (allowing you to invest more in other projects/investments) while also give you a smaller interest payment?

usmarine1975

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Re: First time home buyer
« Reply #5 on: August 21, 2014, 08:13:54 PM »
Regarding FHA I would simply look for a loan that fiscally works the best for you by the numbers.  If its an FHA so be it if not that's OK.  I would have the 20%. No PMI that way and it just makes more sense.

Boz86

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Re: First time home buyer
« Reply #6 on: August 22, 2014, 06:36:26 AM »
I would not waive the inspection.

Me neither. Not my first house purchase, and I'm a big diy'er on home stuff, but still used a home inspector and he found all kinds of stuff I didn't. Part of that is because we didn't have a lot of time (long story) but a nearly all of it is his training, expertise, and attention to detail.

And as mentioned in another thread, he had no emotional tie to the property.

usmarine1975

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Re: First time home buyer
« Reply #7 on: August 22, 2014, 06:46:18 AM »
I call it "Buyers Goggles"  similar to beer goggles.

RWD

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Re: First time home buyer
« Reply #8 on: August 22, 2014, 08:53:03 AM »
Whatever you do, do not get an FHA loan. I will second the recommendation to put 20% down.

What's wrong with an FHA loan? Doesn't it allow you to put less down (allowing you to invest more in other projects/investments) while also give you a smaller interest payment?

I does allow you to put less down, but don't expect a smaller interest payment. FHA loans made after June 3, 2013 require mortgage insurance payments (PMI or MIP) for the life of the loan (or 11 years, if you put at least 10% down). You can't get rid of this without refinancing to a different type of mortgage. Mortgage insurance typically adds 0.5% to your rate.

My wife and I purchased our house in 2008 with a 3% down FHA mortgage. FHA mortgages in that time frame were a bit less strict and you only had to pay PMI for 5 years. However that 5 year number reset when we refinanced in 2010, so we're still paying PMI six years later (~$1k/year). I suppose it wouldn't have been so bad if the housing market hadn't crashed so hard...

usmarine1975

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Re: First time home buyer
« Reply #9 on: August 22, 2014, 08:58:23 AM »
FHA and VA Loans usually are only the way to go when the Interest rates are higher.  My first mortgage was in the 9% range and I know others that remember double digits.  With normal interest rates in the 3 to 4 % range they normally don't make sense.  It's the reason I didn't say never use an FHA and rather said use the one that best suits you financially.  There are times the FHA's and VA's make sense.  Good luck.  I would also deal directly with the bank or a credit union.  You can try a broker but going forward I try to work directly with a bank's loan officer.

neo von retorch

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Re: First time home buyer
« Reply #10 on: August 22, 2014, 09:23:04 AM »
$725 / month for rent... is throwing money away?

What is $200 in taxes/insurance, $150 in maintenance, $300 in interest payments, $100 in repairs, $50 in water/sewer/trash?
(And if you don't have 20% saved for a down payment, $30-50 PMI...)

Ah, that's an investment :-)

Owning a home can be awesome, particularly if you stay put at least five years (preferably seven+) and you minimize interest costs, shop around for homeowner's insurance, do as much maintenance and repair work yourself, and avoid lifestyle expansion. (For example, moving from a 600 sq ft apartment to a 1200 sq ft house tends to call for new furniture, window dressings and various other purchases.) But there's a time cost in "doing maintenance/repairs yourself" not to mention things you often do not have to worry about in a rental - mow, snow, maintain driveway, trim the hedges, wash the siding, refill the salt, replace the water filters.

Since the Mustachian lifestyle is very much about freedom to use your time for important things, you should have a really good idea of how much you enjoy home maintenance before you decide to lock yourself into ownership, and are pretty much stuck with those tasks (or chaos, or expensive help.)


Blindsquirrel

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Re: First time home buyer
« Reply #11 on: August 22, 2014, 08:35:15 PM »
1. Do not pay retail for a house. You would laugh at how cheap some houses are. Seriously, no retail buying. If you could get a steak dinner half off you would buy it, same goes for houses.
1A. Look at a lot of houses, ie 30-50 that will give you an education and near the end, you will know what a good deal is and is not. If you have never bought a house you need to see what is out there. We have  bought/flipped/rented/ 22 houses in the last 10 years.

2. Buy a foreclosure or short sale that can be fixed up.
3. Union Savings/Guardian is probably cheapest/best for you as far as loans.
4. I live in Oh, and I am a veteran RE investor. PM me if you want free advice that is worth the price. :)
5. Go Bucks!