Buying our first house....suggestions?

[Flacolaco]

My wife and I, having been married in February, have started the process of buying our first home, as we are quite tired of paying rent.

We have a budget, we know how much we want to spend, how much the property taxes are in the areas we are looking, and how much house we need. We've been qualified by a mortgage banker for more than we would like to spend.

We are going to purchase a pre-existing home. Not that I feel the need to defend myself, but we are 25 and 24 years old, and are still working our first jobs since college. I don't know about other 25 year olds, but I don't make a ton of money.

We are currently screening realtors, and building a list of properties that intrigue us. We are looking in carrollton, lewisville, flower mound, highland village, the colony, and this general area. We work in kind of opposite directions, and it's fairly important to stay in the middle-ish.

So tell me friends, what do I need to look out for?

How much does homeowners insurance cost?

How much does it cost to have someone inspect the foundation?

Do I need to have roofs inspected?

Will sike still sit outside my window with his binoculars and a jar of Smuckers?

[MavsX]

you never hooked me up with a fat signature. So now I'm not going to hook you up with my fat brain, which is full of house buying techniques and strategies.

and i hate you.

[Mavdog]

[QUOTE=Flacolaco]My wife and I, having been married in February, have started the process of buying our first home, as we are quite tired of paying rent.

We have a budget, we know how much we want to spend, how much the property taxes are in the areas we are looking, and how much house we need. We've been qualified by a mortgage banker for more than we would like to spend.

We are going to purchase a pre-existing home. Not that I feel the need to defend myself, but we are 25 and 24 years old, and are still working our first jobs since college. I don't know about other 25 year olds, but I don't make a ton of money.

We are currently screening realtors, and building a list of properties that intrigue us. We are looking in carrollton, lewisville, flower mound, highland village, the colony, and this general area. We work in kind of opposite directions, and it's fairly important to stay in the middle-ish. I'd also suggest valley ranch or coppell, if you and the mrs. are thinking of procreating, the coppell isd is one of the best in dfw

So tell me friends, what do I need to look out for? residential agents who are not interested in doing their job correctly but are just interested in making a commission

How much does homeowners insurance cost? way too much. the key to reducing the cost seems to be the replacement value/deductible. we went to a percentage deductible and it saved us about 35%. if something horrible happens we could be out a lot of $ to repair, so there is some risk in this approach

How much does it cost to have someone inspect the foundation? money well spent, especially in the areas you outlined. a large swarth of land running from irving to north carrollton are infamous for having expansive soils, which keep the foundation repair cos. buzy

Do I need to have roofs inspected? absolutely! many of the new homeowners policies do not cover the roof, or if they do cover the roof and you do the percentage deductible the cost of a new roof will be less than the amount of the deductible

Will sike still sit outside my window with his binoculars and a jar of Smuckers? I'm told that is a definite yes...

[dalmations202]

Location, Location, Location...... but remember at 25, you may end up chasing the job.

Before you sign on the dotted line, have an independent inspector do a total house inspection from termite, to roof, to foundation, to water/gas/ele, to HVAC. Even check the insulation and type of windows (helps to know utility costs).

Check to see which ISD, county, and city you end up with for tax purposes.
Check for who you will have to answer to with any housing/properly changes you might want to make. Sometimes this one is a killer. Zoning, etc.

Get all the information you can, and then make the best decision for you.

[Flacolaco]

Does anyone have any thoughts on living in Frisco?

They have some great prices up there....but good lord it's just so far away.

[u2sarajevo]

Originally Posted by Flacolaco

My wife and I, having been married in February, have started the process of buying our first home, as we are quite tired of paying rent.

We have a budget, we know how much we want to spend, how much the property taxes are in the areas we are looking, and how much house we need. We've been qualified by a mortgage banker for more than we would like to spend.

We are going to purchase a pre-existing home. Not that I feel the need to defend myself, but we are 25 and 24 years old, and are still working our first jobs since college. I don't know about other 25 year olds, but I don't make a ton of money.

We are currently screening realtors, and building a list of properties that intrigue us. We are looking in carrollton, lewisville, flower mound, highland village, the colony, and this general area. We work in kind of opposite directions, and it's fairly important to stay in the middle-ish.

Highland Village is a GREAT community. And my wife and I just bought (in August) our 2nd home. Our first was new which we built and I can tell you it will be a cold day in hell before I go through that again. The house we have now was built in 1985 but the lot we got is in cul de sac and is a very quiet neighborhood and our back yard backs up to a creek. There are issues you have to deal with typically with an older home but nothing that time won't take care of.

So tell me friends, what do I need to look out for?

When we bought our first house we thought we knew what we wanted. But after a year it became apparent that what we bought wasn't near what we needed. Not necesarilly space issues but storage issues. The house we built had little else other than a closet in each room for storage. That was our biggest gripe. So make sure the house you buy gives you space to grow into.

Also, don't buy a house on a busy street. Check with they city you are moving into for current/future plans of the area you are interested in. 6 months after we moved into our new home they built a "Ruin your neighborhood suites of America" about a mile from us.

How much does homeowners insurance cost?

Too much. Not sure on any cost per $ but someone here might be able to help you out.

How much does it cost to have someone inspect the foundation?

Around 500 bucks. And no matter what you hear from your home inspector get this done regardless. It is 500 bucks well spent whether they find issues or not.

Do I need to have roofs inspected?

Your home inspector will take care of that for you.

Will sike still sit outside my window with his binoculars and a jar of Smuckers?

Only if you are of the male species.

[jthig32]

Originally Posted by Flacolaco

Does anyone have any thoughts on living in Frisco?

They have some great prices up there....but good lord it's just so far away.

Traffic getting out in the moring and back in the evening is hell. I don't live there, just have friends that do.

Of course, the same can be said of Highland Village these days, but I don't think it's as bad as Frisco.

[MavsX]

come live here with me in DC, you can live on my couch, and your wife can sleep in my bed with my girlfriend and sike and doc.

[Flacolaco]

So what you guys are saying, is that travel time to and from the AAC should NOT be my primary criteria????

I've been doing a lot of reading about realtors/real estate agents. It sounds to me like a unnecessary middle man adding price into the house, even if it is the sellers that have to pay it. They build it into the price of your house. And then the sellers agent and buyers agent both want the same thing; for the price to be as high as it can be. But they say "they're on your side."

It sounds like your real estate agent is basically like a car salesman.

[Mavdog]

you are right flaco, the agent that represents you is paid by the seller based on the sales price. so why would an agent act in your best interests rather than the person who is paying them or even their own self interest?

believe it or not there are actually good residential agents who do care and are true pros.

you need a agent representing you when you buy a home, they tell you what comparable properties nearby have sold for (in tx this is not public information) and they can guide you thru the process without having the "uh ohs" when you get to the closing. they know about the schools.

get a buyer's agent to represent you. they'll more than save you what the commission would be, and in reality you don't save any money by not having an agent as the sales commission the seller pays is the same whether you have an agent or not.

[MavsX]

or become a real estate agent on the side. take the tests, and reap the benefits.

[sike]

Originally Posted by Flacolaco

Will sike still sit outside my window with his binoculars and a jar of Smuckers?

with a name like flaco...its got to be "self edit"

[MavsX]

wait, wait, wait. One very important aspect of buying a house that nobody has brought up, Is money down.

Do you have money saved up to throw down? I've always heard 10% of the house. $200K, so throw down $20 large. $300k, $ 30 large...

I guess if you don't throw money down you could get screwed. What about a locked in APR?, I've heard those variable mortgage rates, are turning some peoples lives upside down.

Good luck bro.

[Flacolaco]

Originally Posted by MavsX

wait, wait, wait. One very important aspect of buying a house that nobody has brought up, Is money down.

Do you have money saved up to throw down? I've always heard 10% of the house. $200K, so throw down $20 large. $300k, $ 30 large...

I guess if you don't throw money down you could get screwed. What about a locked in APR?, I've heard those variable mortgage rates, are turning some peoples lives upside down.

Good luck bro.

10% is for morons.

You need 20% at least.

Plus closing costs, lending fees, inspecting fees, etc....

Yeah, I got that covered. Don't you worry MavsX. We're saving you a room over the garage for when you come to visit.

[ocelot_ark]

Originally Posted by Flacolaco

10% is for morons.

You need 20% at least.

Plus closing costs, lending fees, inspecting fees, etc....

Yeah, I got that covered. Don't you worry MavsX. We're saving you a room over the garage for when you come to visit.

I'm curious why 10% is for morons. I must be an absolute idiot, 'cause I didn't put down a dime and I'm doing it all by myself. no down, no PMI, 6.5% (rate competitive in may - not sure now), 30yr fixed.

[Flacolaco]

Originally Posted by ocelot_ark

I'm curious why 10% is for morons. I must be an absolute idiot, 'cause I didn't put down a dime and I'm doing it all by myself. no down, no PMI, 6.5% (rate competitive in may - not sure now), 30yr fixed.

Then you sir, are a genius. How you do you put 0% down and pay no PMI?

[ocelot_ark]

Originally Posted by Flacolaco

Then you sir, are a genius. How you do you put 0% down and pay no PMI?

I could either accept a rate of 6.25% and pay PMI myself or a rate of 6.5% and the LENDER would pay my PMI. The second option resulted in a lower payment by quite a bit...I wanna say $50-60 per month savings.

[MavsX]

Originally Posted by Flacolaco

10% is for morons.

You need 20% at least.

Plus closing costs, lending fees, inspecting fees, etc....

Yeah, I got that covered. Don't you worry MavsX. We're saving you a room over the garage for when you come to visit.

okay good. Well I'm just trying to juice you up with my genius brain. Nobody mentioned it so i thought i would bring it up for discussion.

Thanks for the room over the garage. Don't mind that new stench.

[Ummmmm Ok]

i just payed $0 down on my 2nd house. Its called a 80-20 loan. no pmi.

[Flacolaco]

Originally Posted by Ummmmm Ok

i just payed $0 down on my 2nd house. Its called a 80-20 loan. no pmi.

Is one of the loans an ARM? or like an equity line of credit?

[Male30Dan]

When I bought my house 2 years ago I put 0 down as well. Maybe you should try a different mortgage company Flac... Or build your credit a bit more prior to purchasing a home. While you might have been approved to spend a lot of money, that doesn't mean the rate they are going to give you and the options you will get with that rate or going to be top notch.

I can't help at all with your location, (I am in Temple), but I will say that everyone harping on various inspections is right on the money. It is money well spent.

I also would have done a few things differently if I had it to do over again. First of all I wouldn't have made an offer on the house that was what the seller was asking for, (I know, I know - the wife LOVED the home and the agent selling the house said others were looking and I was but a mere rookie). I have since seen houses built around our neighborhood sit there for over a year before being bought. I think had I offered 10k less than they wanted he would have taken it.

Also, I would have requested more things included in the price of the home that I had to later buy out of my pocket. I had to put my fence up myself and I should have had that $1,500-$2,000 built into the payment to add $2.45 per month to the price rather than preventing us from having the vacation we really wanted. Some might say "why pay interest on 2k when you could just pay it out - putting it with the house means the fence ends up costing 5k" and they might be right...........BUT...........$2.45 is a lot easier to handle per month than 2k outright. So it is my opinion that if the house you want doesn't have a fence, gutters, a sprinkler system, etc... and you will want to pay later to have those items that you ask for those things to be installed and then offer the full price of the house or a little over, (the equivalent of offering 10k less when the newly installed items are factored in). If the market is slow, the seller will accept - especially if the seller is a builder as opposed to a couple trying to move away and get every penny they can.

One final thing, if you are going to put 20% down on a house that is 150k-200k, then you sir are the moron. If you are going to put 30-40k down and draw no interest on that money rather than investing that money - well, just stupid IMHO. 0 down means it obviously takes longer to pay the house off BUT if this isn't going to be a house you are going to grow old in and you are going to potentially sell it after 5-10 years the additional equity is just going to be the money you put in it anyway. Why not have that money growing some serious cash over those 10 years in a mutual fund or the like.

That is all I have....

[Flacolaco]

Good thoughts Dan!!

What kind of mortgage do you have, if you don't mind saying?

[Male30Dan]

Originally Posted by Flacolaco

Good thoughts Dan!!

What kind of mortgage do you have, if you don't mind saying?

This...

[Flacolaco]

I definitely see the advantages of an 80/20, but the math says that the monthly payments would be much higher. My hesitation there, is that at some point, my wife is basically going to force me to get her pregnant () and I worry about replacing her income if and when that happens. My job is not that great, but it's a great resumé builder, and eventually I'll get a better one, but I don't know when. Lower monthly payments are better for me, and I have the 20% to put down without coming even close to destroying our savings....

So....this a is pretty stressful process, eh?

[Male30Dan]

Did you read the article?

An excerpt:

"It pretty much comes out to a straightforward mathematical evaluation," says Bob Walters, divisional vice president of Quicken Loans. You merely compare the cost of an 80-20 piggyback loan with a loan that includes mortgage insurance. The piggyback loan usually costs less each month.

Nevermind - you wouldn't need Mortgage insurance so I am mistaken. I still think that you are better off this way because in the long run you will make a lot more money off of your investment in a mutual fund.

[Male30Dan]

And for the record, if you can drop 40k down and not even come close to destroying your savings, well, good for you.

[Flacolaco]

Originally Posted by Male26Dan

Did you read the article?

An excerpt:

"It pretty much comes out to a straightforward mathematical evaluation," says Bob Walters, divisional vice president of Quicken Loans. You merely compare the cost of an 80-20 piggyback loan with a loan that includes mortgage insurance. The piggyback loan usually costs less each month.

The alternative for me, is not a loan with mortgage insurance. I don't need PMI with a 30 yr fixed and 20% down.

The question is whether or not I could invest that 20% and make more in interest on that, than the higher interest would cost me on the smaller loan with the higher rate.

Which I probably could. But I'm saying that for us right now, it's more important to have smaller monthly payments, which the 30 year fixed with 20% down would do for me, without PMI.

It's just like the story of the grasshopper and the octopus. All year long, the grasshopper kept burying acorns for the winter, while the octopus mooched off his girlfriend and watched TV. But then the winter came, and the grasshopper died, and the octopus ate all his acorns. And also he got a racecar. Is any of this getting through to you?

[Male30Dan]

Originally Posted by Flacolaco

The alternative for me, is not a loan with mortgage insurance. I don't need PMI with a 30 yr fixed and 20% down.

The question is whether or not I could invest that 20% and make more in interest on that, than the higher interest would cost me on the smaller loan with the higher rate.

Which I probably could. But I'm saying that for us right now, it's more important to have smaller monthly payments, which the 30 year fixed with 20% down would do for me, without PMI.

I know... I corrected myself prior to your post.

Your money is definitely in a safer position when invested in the house as the stock market obviously fluctuates; however, the ROI can be MUCH greater. It is a risk vs. reward thing. I put 4k a year in a mutual fund, (about to be 5k), and when we get one of our trucks paid off we are going to start one for the wife, (you can have one per person - not couple). Look into a Roth IRA. I don't think by the time you are 60 that house will have made you millions, but maybe I am wrong.

[Male30Dan]

Originally Posted by Flacolaco

It's just like the story of the grasshopper and the octopus. All year long, the grasshopper kept burying acorns for the winter, while the octopus mooched off his girlfriend and watched TV. But then the winter came, and the grasshopper died, and the octopus ate all his acorns. And also he got a racecar. Is any of this getting through to you?

You are such a nerd!

[Flacolaco]

Yeah we have a roth IRA as well, but I'm not putting as much in it now as I would like. I'm about to pay off my car in the next 10 months, and then will start pouring a little more into that.

[Flacolaco]

Originally Posted by Male26Dan

You are such a nerd!

You know you smiled.

[Male30Dan]

Why aren't you... If you have savings in the neighborhood of 40k + an amount so obscenely enormous that the subtraction of 40k is a mere drop in a bucket you should have tons of spare cash to invest with!!!

333 a month for now and 415 or something like that starting April of 08... DO IT!

[Flacolaco]

Because I'm young and stupid and I feel the need to have my assets as liquid as I can.

[MavsX]

well all i can say, is i am glad i brought up the point of money and money down. As you can see flaco..you learned something today.

[Male30Dan]

Originally Posted by Flacolaco

You know you smiled.

Me smiling makes you no less of a nerd... It just scares me that nerd-humor tickles my fancy!

[Male30Dan]

So the decision has been made for you. You will purchase a home for 185k using an 80/20 loan and no money down other than closing costs. Your monthly payments with home owners insurance and taxes included in the payment will be 1700 but you will send 2200+ every month to screw the lender's plan of giving you 185k and asking for 850k in return over 30 years. You will then invest your 40k+ in mutual funds and be a successful millionaire when you retire. You can thank me later.

[Flacolaco]

Originally Posted by Male26Dan

So the decision has been made for you. You will purchase a home for 185k using an 80/20 loan and no money down other than closing costs. Your monthly payments with home owners insurance and taxes included in the payment will be 1700 but you will send 2200+ every month to screw the lender's plan of giving you 185k and asking for 850k in return over 30 years. You will then invest your 40k+ in mutual funds and be a successful millionaire when you retire. You can thank me later.

Do I owe you a fee?

[MavsX]

Pros and cons
The 80-20 loans have their pros and cons, says Vijay Lala, senior vice president of product development at Countrywide. "The pros are that you can get into a home with almost no money down," he says. "You just have to have your closing costs, and you can get your payment as low as possible with the interest-only feature."

The main drawback is a biggie. If the house loses value -- a possibility in overheated markets where these loans might be especially tempting -- the owner ends up owing more than the house is worth. That becomes a problem if the owner needs to sell the house or wants to refinance the loan. In such a case, the owner has to come up with cash to repay the loan in full.

An 80-20 loan isn't just for the cash-strapped borrower. Some home buyers have ample down-payment money, but the money is invested and they don't want to liquidate it.

"For relatively wealthy people, it's a cheap way of borrowing money at these low interest rates," says Diane Saatchi, who deals with plenty of wealthy clients as regional vice president of the Corcoran Group in the East Hampton, N.Y.

This is the problem i have heard about and seen here where i live in northern virginia, and washington DC.

1 bedroom condos going for $300K to $350K, 2 bedroom condos going for more than $450K. The market was up(or maybe it is up), so the prices are skyrocketing. Some people around here have no savings, because the cost of living is higher than their income. So they buy a house, but then the market drops off and suddenly their condo isn't worth as much as they paid for it. If they want to sell it they are screwed, and they can't even afford to pay the monthly mortgage.

I know a couple that bought a 2 bedroom condo, they bought when the market was up with no money down. Now the market is down and the condo isn't worth as much. No one will give them what they paid for the place, and now the guy is talking about how he needs a $40K a year raise to afford the monthly payments.

They are screwed.

Good conversations and ideas fellas, thanks flaco, and Dan.

[Male30Dan]

Originally Posted by Flacolaco

Do I owe you a fee?

Only daily rep my friend... Only daily rep!

[Male30Dan]

Originally Posted by MavsX

Pros and cons
The 80-20 loans have their pros and cons, says Vijay Lala, senior vice president of product development at Countrywide. "The pros are that you can get into a home with almost no money down," he says. "You just have to have your closing costs, and you can get your payment as low as possible with the interest-only feature."

The main drawback is a biggie. If the house loses value -- a possibility in overheated markets where these loans might be especially tempting -- the owner ends up owing more than the house is worth. That becomes a problem if the owner needs to sell the house or wants to refinance the loan. In such a case, the owner has to come up with cash to repay the loan in full.

An 80-20 loan isn't just for the cash-strapped borrower. Some home buyers have ample down-payment money, but the money is invested and they don't want to liquidate it.

"For relatively wealthy people, it's a cheap way of borrowing money at these low interest rates," says Diane Saatchi, who deals with plenty of wealthy clients as regional vice president of the Corcoran Group in the East Hampton, N.Y.

This is the problem i have heard about and seen here where i live in northern virginia, and washington DC.

1 bedroom condos going for $300K to $350K, 2 bedroom condos going for more than $450K. The market was up(or maybe it is up), so the prices are skyrocketing. Some people around here have no savings, because the cost of living is higher than their income. So they buy a house, but then the market drops off and suddenly their condo isn't worth as much as they paid for it. If they want to sell it they are screwed, and they can't even afford to pay the monthly mortgage.

I know a couple that bought a 2 bedroom condo, they bought when the market was up with no money down. Now the market is down and the condo isn't worth as much. No one will give them what they paid for the place, and now the guy is talking about how he needs a $40K a year raise to afford the payments.

They are screwed.

Good conversations and ideas fellas, thanks flaco, and Dan.

Buy smart and don't be stupid. It isn't hard...