[MILESTONE] Financial gurus, please help. Trying to buy first ever house.

Yes, you definitely will need the priceless advice of "housing always goes up," "buy now or be priced out forever," and "location, location, location."

Seriously though, it's definitely helpful to let a realtor walk you through the complex process, but I wouldn't take any advice beyond that. They're not performing a charity. Their livelihood depends on their clients (you) buying a house. And the more expensive that house is, the better it is for them.

Do all the research about neighborhoods, schools, and the measure of what you can afford on your own and stick to it. There are plenty of resources on the web.

Don't be like this guy (in one of the most terrifying commercials I've ever seen). How this makes someone want to buy a house is beyond me.

Spoiler

<iframe width="420" height="315" src="//www.youtube.com/embed/hPIxrzmatq0" frameborder="0" allowfullscreen></iframe>

 

I don't like realtors. I think they should be eliminated from the process completely. If you want advice you hire a consultant for a fee. No commission based pee-pee games.

 

1. Don't buy a house until you've saved up 20% for a down payment - It will save you a lot in the end.

2. Don't buy more house than you can afford - try to keep your monthly mortgage payment to less than 25% of your take home pay (this is easier if you have the big down payment)

3. Location, location, location. Try to buy in an established neighborhood - I wish I had done this. We bought in a brand new community of starter homes and like someone on this board once said..they can quickly become trailer parks without the wheels. You never know what the hood will look like after ten years. In an established neighborhood, you already know whether or not the neighbors will keep up their yards or homes. We'll be looking to move out of ours in about 3 years.

4. Really try to get no more than a 15yr mortgage. The idea is to live mortgage free by the time the kids go to college.

5. Never buy a home that you don't intend to live in for less than five years.

6. Definitely use a realtor - they can save you money and they already know where to find the better neighborhoods.

 

i have to disagree with the first sentence. i think it's always better to go with a 30 year mortgage to lock in the lower monthly payment (albeit higher interest rate) but voluntarily pay more each month. he can still effectively pay it off in 15 years. but if he encounters any reduction to his income, he won't be in as much of a bind to make his payments.

 

My wife is a Realtor and has helped several members of this board with home purchases and would be happy to help you out and answer any questions you have- I emailed you her contact information.

 

I also prefer 30. You can invest the extra money too, plus it's a bonus if you want to rent it out a few years later.

 

did you mean 30?

 

Just talk to your bank. You will have a good overview after a half an hour meeting.

 

are you married? have kids? i'm asking because you sound young. if no to both, why do you want to buy a house? i don't think many single people really think about it. they just assume that's what you're SUPPOSED to do (kinda like marriage and kids) because everyone else is doing it. buying isn't always right. home ownership can be quite a burden if you're not fully prepared for it.

definitely follow DFWRocket's advice (i would go with a 30 year instead of 15) though if you go through with it.

 

Sure did. And changed. You only get me at about 75% on Monday and Friday.

 

dont buy a house..

 

Best advice so far.

 

I just bought my first home a month ago. It was roughly a year and a half process overall but only 4-5 months with my final lender.

Cliffnotes Version:

-Find a lender (bank or private lender) to approve you for a certain amount of home based on your credit, income, job history/security etc (I went private lender). If you are buying a new home, most builders have a lender who are willing to give you more. You will get preapproved almost automatically. But getting the money is not as easy. Once you have been preapproved for an amount, get a realtor if you don't already have one (and please get a good one, not a family friend to help him out like I did. Worst mistake I ever made) and go find a home (if you dont have one in mind already). Houses are going quick, so you have to tell them quickly if you are interested.

If the house value is in the same range of the lender's loan amount, then you go through underwriting. Underwriters will look for ANYTHING to not give you the loan. I was denied 2 times, once for job history and another for being denied for a home loan before (it was the same builder, a year later, a different loan company, but they knew all the details. it was the stupidest thing I have ever heard). If you can get the approval from the underwriters, then you win.

EDIT: I read some of the young remarks. I am 23, and I own a home. granted it's only been a month. If you really want a home, get it. Don't let anyone tell you what'll make you happy except yourself.

 

Why? Because someone will steal your basketball goal if you got one? 3 times :grin:

Buy a house but in a good location

 

This is good advice. I work for a mortgage lender in Secondary Marketing. We do business with some of the larger lending institutions (Wells Fargo, Chase, etc.). You do not want to get a mortgage through those banks. They may have good rates, but the service is terrible. Right now Wells Fargo is making serious cutbacks, so we've seen their turntimes on non-delegated Underwriting jump. And that's just when we have Jumbo loans underwritten by them. If you were with them for the whole process, you'd be getting the run-around the entire time.

Mortgage Banks specialize solely in mortgage lending. Most aren't in the business of servicing loans (although you may be able to request this), so they're built to originate and fund loans quickly. Bigger banks are built for massive servicing, and consumer and business banking. That's what they're good at.

At any rate, if you need a good Loan Officer, I can get you in touch with one of our best here in Houston. We've helped out other people on this board with their loans, and we've actually been mentioned in this thread.

 

As far as advice on the process goes. You can either get your credit and income pre-approved with a lender, so you'll know what you can afford prior to searching for homes, or you can find a home and sign the contract. Once you've done that, you'll need to put pay "Earnest Money" to escrow for being under contract. This is creditted back to you whenever title is transferred. If you go that route, you can then start the same aforementioned process with a lender.

As for the process itself, you'd be filling out a loan application, which includes information on yourself, the property, your income, your employement, previous addresses, your credit, liabilities and assets, and how much you're asking for and how much you'll be putting down on the house. A Loan Officer will be able to help you out with the most beneficial loan structure for you, and they'll have various tools to show you how much you'll pay over time, and comparisons on different options. Once you've done this, they'll request documentation to support the information in your loan application. This is the "processing" stage. Once they have this information, they'll order an appraisal and title work on the property, along with various other items required in by conforming loan guidelines to be included with the mortgage package. Once everything is ready, they'll submit the entire file to an underwriter, who'll review investor guidelines, loan guidelines for the program you're borrowing under. Once they've verified that your credit, income and assets support the loan you're taking, they'll give approval for the loan. Typically they give conditional approval and have small items that are still necessary. After that, they'll prepare the file for closing, and request final versions of documents for you to sign at closing, which takes place at the title company you chose, or that is contractually chosen in your purchase contract. At closing, you sign final mortgage documents, and the seller is paid for the home. This is called funding. Typically, the seller has a mortgage, so usually the bank holding their mortgage is paidoff for their outstanding loan balance, and they'll receive some money back. They sign off the title to you, and hand over the keys, and voila! you've purchased a home.

After this, a mortgage company typically sells the note to another banking institution. This can be one of the major servicing banks, or they can sell to Fannie Mae or Freddie Mac. In this instance, servicing rights can be sold off, as well, so you can end up being serviced by Wells Fargo, while Fannie Mae owns the note.

Anyway, if you have any questions, feel free to ask, and I can elaborate.

 

I just saw this posted today - Learn from the mistakes of others:

http://www.daveramsey.com/blog/when-home-buying-goes-wrong/?ectid=elp.facebook.post.9-26-2013

When Home Buying Goes Wrong—Real-Life Lessons

We’ve all experienced buyer’s remorse at some point. And that’s fine when you’re talking about a gizmo that sets you back a couple hundred bucks or so. But homebuyer’s remorse can be overwhelming, especially if you spot problems once the papers are signed. Or worse, you realize you can’t afford the home you love.

We asked some of Dave’s Facebook fans to share their homebuyer’s remorse stories and we found a general theme. Patience—simply waiting a few days, months or years—would have made all the difference for these homeowners.

Too Much House Too Young

Natty B. told us the classic story of someone who bought too soon. She was in her early 20s when she followed the example of her friends and bought her own place. She already had $100,000 in student loans and had to have her mom co-sign the mortgage for her.

“I ended up having to work six days a week to afford the house,” she told us. “I lived in a four-bedroom house for nearly two years completely unfurnished—no money for furniture.”

Natty said she eventually rented her home out and moved back into her parents’ house. “It’s taken me almost three years and Financial Peace University to fix that mess.”

“Young people nowadays just need to wait,” she cautioned.

You Can’t Buy Community


For Heidi H.’s family, the situation was different. They were ready to buy but decided on a home before they knew anything about the neighborhood she described as “Stepford-like.”
“We were drawn in with what seemed like promises of ‘community,’” Heidi explained. The amenities included a large community center, frequent family-friendly activities and a pool.

“It was an emotional decision, and our agent assured us we were getting a great deal,” she added. “We quickly learned that you can’t buy ‘community.’” The house was too big for their needs, and even worse, they were living in a neighborhood full of “Joneses” everyone seemed to be keeping up with.

They sold the home after 18 months. “We would have gladly made it work if it was our dream, but it wasn’t,” Heidi said. “We are now happily renting in a community that is a much better fit for us.”

Too Eager and Zero Help

For Sheila P. and her husband, their eagerness to buy a home overpowered their need to consider their future. “We didn’t have a [real estate agent] the first time around and ended up with a very tiny, overpriced home,” she explained. “We knew we were going to have kids, but we never thought about schools when we bought either.”

Pretty soon, their family of five was crowded into a 1,500-square-foot home in a terrible school district. They finally made the decision to sell.

“[It was] the best decision ever,” she said. “We had an excellent [real estate agent] who got us out of that small house and into something twice the size that cost less than before,” she said. “We have the added bonus of an incredible school district!”

“Someone said a good real estate agent is gold, and I completely agree,” she added.

How You Can Avoid Your Own Homebuyer’s Remorse

Don’t let these stories convince you that homeownership is a bad idea. We had plenty of fans tell us how rewarding their home-buying experiences were because they did it the right way.

First, get out of debt and have an emergency fund in place to take care of any surprises you may find once the home is yours. Then do your research to find a location that works for your family, both now and in the future. Finally, work with a real estate agent you can trust to help you find a home that fits your family and your budget.

Work with an experienced real estate agent in your area through Dave’s nationwide network of Endorsed Local Providers (ELPs). Your ELP is an expert in your market and is focused on helping you save time and money in your home search. Find your ELP today!

 

I see what you're saying, but of course the flip side is he will be paying more interest over that 15 years because there won't be as good of an interest rate... so there is a downside. I say if you feel comfortable with a 15 year mortgage then do it.

Plus, thirty years just seems ridiculously long to me. At that point why not just make it 40 years? Hey, you'll be able to "afford" more house! Always felt like extending the length of a loan was a trick that ultimately just benefits the banks and causes home prices to go higher.

 

and it keeps the poor in debt longer.

 

it's all relative to his income really. if the payment on a 15 year loan doesn't take up more than 15% of his income he should accept it. but if it's closer to say 25% and something were to happen with his job then a 30 year mortgage provides him with some flexibility. i hate paying interest as much as anyone. but there's something to be said for peace of mind. of course, it's completely irrelevant if he doesn't use the extra money towards the mortgage.