Buying my first home, UPDATE.

[flyboy01]

I am goung to look into the FHA 203K loan, I was hoping to find a 100% loan, no down, but the FHA might be doable on a $65-80K house. (prices are cheap around here, median home price is $130K in DFW area)

[jamesdart]

i have to say i feel differently about the whole equity thing. i understand where you are coming from though. in the last 5 years my home is worth roughly double what i bought it for, if i sold it today i would walk away with a good chunk, i could buy another one for less than i sell mine for that needs work, just like this one did. do the work and sell it in 5 more years. im not talking anything about home equity loans or 2nd mortgages. i know plenty of people that got them selves in binds with that stuff. they will burry you if you arent carefull.  actually my uncle is going through it now, he has 2 options, short sale and the bank loses roughly 100,000 or forclose. i personally think he is going to foreclose. i dont htink the bank is going to agree to lose than kind of cash, but then again im not a bank.  he sucked thee quity dry to do an addition which never got finished, that was when the market was really going. even if he finished with out of pocket money, he would still have a hard time breaking even. only thing, by him doing that he jacked the monthly payments up so high, he cant afford to stay in it. 

[acpat]

firstpreston.com    This is repo'ed hud houses

[67Satty]

I agree with the poster who said scout out the location.  Every time my wife and I have looked into buying a house (we are on our third now) we are practically like stalkers or private detectives.  We constantly drive through the neighborhood checking it out at different times, looking for barking dogs, how much car traffic is on the streets, what kinds of cars are parked in driveways and in front of houses, what kind of riff-raff is hanging out.  I'm not a snob, but hey, you need to be able to sell the thing again quickly someday if plans change.

Also, like someone else said location, location, location.  Better to buy the worst house in a great area than the best house in a crummy area.  Look for cosmetic fixers, they are a good deal because most other buyers just can't get past the bad first impression and have no imagination.  As long as your home inspector checks out all the major systems as good, then who cares what it looks like, painting, tearing out carpets, refinishing floors, even putting in new tile - all really easy especially compared to working on these old Mopars.  I'll take working on a 60 year old house over working on my 40 year old Plymouth any day.  The house is way simpler to deal with IMHO.

As far as equity goes, it's great.  In what other system can you get someone else to put up all the money for you but you get to reap all the reward?  Just can't get too worked up with the ups and downs.  A couple years ago we looked like geniuses because our house doubled in value in a couple years, now we look like idiots because the house we are in now lost 17 percent in one year.  But we are in it for the long term, it will go up again eventually.  We are still way ahead of where we started.

[440WIP]

We're on our fourth (and hopefully finall!!) house. We "moved up" every time. I agree with all the above comments. All I can add is always be prepared to walk away - A bad deal is a bad deal and it won't get better because it's cheaper, or they throw in a free trip to Las Vegas. If you're on a tour and you smell an aromatic smell (like a lavender air deodorizer for example) look for what it's masking, wet, mold etc. Use all your senses when you are looking at a house - not just what you see. Only take your first look at a house in the daylight. Never at night. Once you've narrowed down to your choice, then look at night - you'd be surprised what shadows can show you and the different perspective it will give you. Get an independent home inspection - DO NOT use one recommended by anyone else having anything to do with the sale.  There are no embarrasing questions and never assume anything. Take along a notebook and take notes - things get blurry after awhile. I'm not sure if you can get it there, but buy mortgage title insurance. It protects you in case something goes awry in the paperwork.
 Buying a house is a large step and the money flows out like there is no tomorrow it seems, but it's just like having kids, if you wait until you can really afford to - you'll never do it.
Daryl

[abodyjoe]

The home inspection is basically for you to know what you are facing once you get in.  The seller doesn't legally have to fix everything on that report, infact they don't legally have to fix anything on that report.

  they legally don't have to fix anything but at the same time for the $300 it takes to get an inspection you can negetioate down because of the results.  when we bought 2 years ago the septic came up bad. we made the owner pay the $12,000 for the new system.  they pretty much had to because there are very few people that will buy a place that needs a $12,000 septic system, we also got money in escro for electric work and a couple other things i can't remember right now... the breaker panel had rust in it like it got water in it at one time...  we used the money to have a friend upgrade us to a 200A service.  plus you can legally back out of a contract depending what comes back on a inspection.  we did it before we bought the house we are in now.

[67Satty]

They might not be forced legally into fixing anything as a result of the home inspection, but if they want to sell their house to you, they will either fix it or reduce the price the amount it would take you to hire someone to fix it.

Use the home inspection as one of your contigencies.  Like somewhere your realtor will write up "sale of house contigent on satisfactory inspection report".  That gives you an out to back out in case you put an offer on a house and your inspector finds something, anything at all that makes you nervous.  It's all about covering your ass with contingencies, think of as many as you can.  Make the sale contingent on you getting the interest rate you want, on the title being clear of liens, on the CC and Rs being acceptable, closing date of escrow, what escrow company to use - anything you and realtor can think of to cover your ass.   Also make it contingent on the results of the termite inspection.  It's not the law that they have to make the house free of termites or fix the damage from them but the lender will never, ever let the loan go through until the termite stuff is clear, at least not in California.

Sometimes people use the inspection report as an excuse to weasel out of the deal when they get cold feet.  I've had that happen to me as a seller and I've found out that they give tons of leeway to people for reasons to back out and still get all the earnest money back.  

But I've also been a buyer who has gotten my earnest money back and gotten out of a deal when I found out that the house we were going to buy had major structural problems that weren't obvious.  We even found out that the original builder had to buy the house back from the original owner to avoid a lawsuit when the house was only one year old.  All kinds of crazy stuff will come up in the disclosure papers, make sure to go over the disclosure papers with your realtor with a fine tooth comb.

But don't get freaked out about any of it, I still say our old Mopars are way more complicated and a PITA than any old house ever made.

[Pedalkisses]

The home inspection is basically for you to know what you are facing once you get in.  The seller doesn't legally have to fix everything on that report, infact they don't legally have to fix anything on that report.

  they legally don't have to fix anything but at the same time for the $300 it takes to get an inspection you can negetioate down because of the results.  when we bought 2 years ago the septic came up bad. we made the owner pay the $12,000 for the new system.  they pretty much had to because there are very few people that will buy a place that needs a $12,000 septic system, we also got money in escro for electric work and a couple other things i can't remember right now... the breaker panel had rust in it like it got water in it at one time...  we used the money to have a friend upgrade us to a 200A service.  plus you can legally back out of a contract depending what comes back on a inspection.  we did it before we bought the house we are in now.

To obtain any mortgage you need to have an inspection of your water and septic anyway.  The mortgage company won't give you a mortgage if the well and septic aren't in acceptable working order.  I always recommend a home inspection in our state but people that get them done don't usually get anymore from them than they do from an FHA mortgage.  Also, FHA has their own inspectors.  If you're not going FHA then you'd better by all means have a home inspection.  I had buyers for a house that ended up with structural damage and that was a worthwhile $300 spent.

Good point Satty, I didn't notice that before, but when you put the offer in it's always contingent upon an acceptable home inspection and ALWAYS...AND I DO MEAN ALWAYS...get a seller's disclosure.  Put this somewhere safe because if something is hidden and you don't find out for 6 months, you can pull it out and take the seller to court.  You only have 3 days after an offer is accepted to get a home inspection and then 10 days after the inspection to list your request in writing, then the deal can be nullified.  Even if a house is being sold as is, they may be able to say no to the home inspection requests but if the mortgage company refuses to give a loan for some repair that needs to be made and the seller doesn't go along with fixing it, they can't sell their home requiring a mortgage for 6 months I think.  It would have to be a cash only deal and who has that kind of money?  It's beneficial to the seller to make sure the house that is being sold is  FHA inspection safe and that benefits the buyer too.

[golferjohn]

Well it looks like you're knee-deep in good advice.  If you want to go zero-down, inquire about the FNMA (fannie mae) flex products they go to 100% and you can negotiate to have the seller pay up to 3% of your closing costs.  I've had many clients get over half of their $1,000 earnest money RETURNED to them @ closing, then you can use your cash for the updates and renovations.
If the lenders that you've been contacting don't offer this, find someone who does.  Keep in mind that your mid score on your credit report will need to be 680 or higher, if you need ANY questions answered, feel free to contact me.

[thecarfarmer]

Hey flyboy, good on ya' for stepping up.  WAY better to own than rent.

There's something I figured out buying a couple places:  once you make an offer, everyone involved smells that commission check - they're working towards that end; not protecting the interests of buyer or seller.  Personally, I'm more than happy to deal with the seller's agent directly, and not have someone else in the way.

Just like cars and guitars, there's no real problem in missing a good deal; you just miss a good deal but don't lose anything.  There IS a problem in picking up a poor one.  Not only is a bad deal a bad deal, but it also keeps ya' from going out and getting a good deal to boot.

Look for 'environmental' issues about the building.  No, not tree-huggers (although that's something else to look for - run like hell if you hear 'wetlands') but look for frost and drainage problems.  We don't have problems with the ground freezing in Seattle, but we do get some drizzle. 
Turns out my yard is a swamp half the year, because the water just pools up instead of running off - so it's better to see a place once it's rained good and hard for a week...  but I bought in the summertime...

Know what your setback rules are BEFORE you buy.  I have a 9800 sq foot lot, and am zoned for 35% coverage.  Since the house is only about 900 sq foot, I thought I could build the garagemajal...  the neighbor's house was built within five feet of the property line in back... I figured I'd get to build an EASY 2000 foot garage.  But, turns out that I hadn't done my homework - the neighbor's addition was not conforming, and I had a 25' setback on the end of the property where the garage would have to go.  I've maxed out at 843 sq feet - and even worse, that's a triangle shaped addition (live on a 'pie wedge' in a cul-de-sac) so the corners aren't really useable.

Oh yeah,  one other thing, spend some time driving thru there on Fri and Saturday nights.  Trust me, you should ALWAYS do that.  Almost every residential sale (at least in these parts) has a contingency for 'neighborhood review'; use it if  you have to.

Good luck!

-bill

[Duster Five-O]

Use a real estate attorney. It will be money well spent.

[Pedalkisses]

Enough tips,  go buy the thing and show us the pics!   

[moparbubba]

When you see a house you like, don't fall in love with it. You must control yourself, or you will offer too much for it. You can always make a higher offer. I would go to zillow.com and punch in the address. It will show the prices in the  whole neighborhood. If you can buy a house for 100k in a 200k neighborhood you'll be in kick ass shape.....

[Brad4406]

Keep in mind that the mortgage company and your real estate agent make more money as the price of what you are looking at increases.  My first home I qualified for a $90K home, but only bought a $74K home because I knew I could afford the payments.  However, that didn't stop my real estate agent from attempting to show us $89K-$90K homes even after I told her I didn't want to go higher than $75K.  One house I even refused to look at when we got out of the car and I asked her what the price was.  She stated $88K and I got right back in my car and told her to take us to the next property.  Don't forget that you are the customer of the mortgage company and your real estate agent; don't let them push you into something you don't want just so their wallets can be a little fatter.  Even the home we are buying right now is onlly $190K when we qualified for a $250K home.  I know how large a payment I can afford; I'm not going to pay more than that.

On my first home, FHA in SC had a first time buyers incentive.  It was a lower fixed percentage rate than VA and they would have given me the money for a down payment if I needed it.  The only bad part of the deal was a clause that if I sold the house for a profit within 10 years of the purchase, SC was authorized to seek the profits I had made.  To preven that all I did was refinance it about 5 years later after the percentage rates had dopped about 2.5%.

I definately recommend a fixed mortgage, unless you plan to sell it shortly after your purchase.

Good luck.

[krabysniper]

Lotsa good thoughts here, I will just add a few thoughts of my own.

If a realtor makes the statement "Someone else is making or made an offer" walk away. Scam to drive up the price (and their commision$) no matter true or not.

Home inspections are money well spent for anyone who dosn't have the knowledge, but after you have spent $1000+ on inspections, you had better have payed close attention and know what to look for yourself. Average home inspection runs $300+ around here, and is NOT a gaurantee that you wont find problems or issues that they couldn't find, they just give you a rough idea.

Stay away from homes with finished basements (if that applies in your area) a finished basement can hide foundation problems that home inspectors will have no means of finding. (ask me how I know!) There are 2 things that ARE A MUST in a house. 1. A good foundation 2. A good roof , everything else is just the filling in between and you can butter that yourself. If the house you buy has a bad roof or foundation, nothing else will matter and you will become a statistic like all the rest who are being foreclosed on.

If a house has been on the market for a long time (3 months or more) do some serious research, there is most likely a reason.

House "flippers" are a bane on the housing market. They only cause housing to become more expensive than it is worth and unobtainable by the average family that needs it, also cause property taxes to go up because of "artificialy jacked" prices (government will never step in to stop what is making them even more money, now will they?). They buy houses to profit from, not to have a place to raise a family. Should be a crime. Especially some of the crap you see them do on the boob tube on those stupid flip shows.

What was stated about equity, that there is none until your dead. You got that right. Only peeps making $ are flippers who take loans of one year or less on property they are going to "ARTIFICIALLY" jack the price of, do their nasty deed, and then bilk the buyer, who unless they are trying to spend the next 20 to 30 years there raising a family, are probably attempting to do the same (turn around and sell in a year or 2 with the goal of "making a buck") and thus just further falsely jack prices until the market just cant take it anymore and home prices turn around and tank like they are now in the process of doing.

The American dream of owning a home has been destroyed by our government that keeps selling us out to the rest of the world in their greedy search for more power and by all the losers who look at homes as a source of $$$$.

I wish you the best of luck with your journey into the not so happy world of "home ownership".  I am not knocking it, just sharing a real world opinion from someone who dosn't look at the world thru rose colored glasses and try to pretend it's not a big steaming pile.

Just my opinion and .02

[flyboy01]

OK. Final installment on this subject.

I was a little too late on bidding on the first home I found, the bank accepted an offer made by someone else before I even had a chance. I was pretty bummed out.

For grins I decided to do a search for houses with 3 or more garage spaces. And, I found one close to work (9 miles, no traffic), it has a 2 car detached garage, a one car attached garage, and 2 covered car port spaces. Holy crap! A car guys dream. I looked at it twice before I decided to make a bid, I did, and I am now waiting for closing. At the end of this month I will have my very first home, with plenty of space to work on cars! Woo hoo!

[hemi62valiant]

Alot of good advice here. I am a licensed real estate agent in Tn., as well as having a father in a home inspection business. The market was due for a correction. Houses have been escalating for 10 years. They will continue to lose value for the next year or so before they start to balance out. Real estate agents are not selling as much so you can definitely find one willing to take less commission. Interview several before making your pick. They should have your best interest at heart instead of what they will try to sell you because there is a hidden bonus. Buyer lower than you can afford. Pick one of the cheapest houses in the neighborhood you choose. Location is the only thing. Make sure it is in a desireable area.Dont let emotion dictate the purchase. Like others have said, have someone else along to find the negatives.I always suggest home inspections because it will tell you present and near future big expenses.Do your homework concerning taxes, heating costs, schools (it may matter to a future buyer), upcoming zoning changes, flood plains etc. Home ownership gives you a sense of belonging that cant be measured...Congrats and good luck...

[dangerdawg]

sounds real good, best of luck to you.

[flyboy01]

Yup, I did all that. The house is in the lowest price range for the neigborhood, the area is just within the border of an upscale area, house prices are at an all time low, interest rates are in my favor also, and my best friend is a carpenter/contractor that is also a home inspector, plus, he needs a place to live for a few months, we will be trading rent for labor during that time. Also, all the mechanicals have been replcaed in the past 3 years, all new appliances. It needs paint, carpet, and updating, and I am also converting a one bath into two, and installing steel entry doors. Nothing thats too hard to do. It is the perfect house for a car guy, the owner is a former Motocross and Baja racer from the early 70's, now retired.

[rarefish]

It looks like your all set, but if things fall thru, here's a couple more pointers.

I didn't read every post, so if some one already said this, it won't hurt to hear it twice.

Just because you get a real estate agent, that DOES NOT mean they work for you. Unless you hire a buyer's agent the realator works the seller. Say you're looking at a house for $300,000 and the agent knows the seller will take $250,000, He may say offer $280,000 they might take it. If the deal goes through like that he just made commission on an extra $30,000. All the while you're patting him on the back for saving you $20,000.

I did read some posts on fixer uppers. That doesn't mean you have to buy a wreck. I payed $69,000 for my first house in 1983. We were staying at my inlaws at the time, so we were not pressed to move in real fast. All the woodwork was stained dark brown, it had dark brown shutters on the inside instead of curtains, and dark orange shag carpet. First we painted every thing in light neutral colors, got rid of the shutters, got cheap carpet with good padding, and painted the extrerior. Did some basic lawn work and had the place shining. Soon after moving in I changed jobs and went on the night shift. I was driving 55 miles each way (in my 67 R/T) and not sleeping well. I dozed off coming home twice and the next day my wife had a for sale sign in the yard. That was about 18 months after we bought. I told the agent I would not sell for less than $96,00. At first the agent said no way can you get that much for that house in that short of time. Then she came out and saw what we had done and listed it for $100,000, and we got our $96,000. So, if you just buy a cleaner upper, the value goes up alot almost instantly.

So,as every one else said, good luck, espiecially with all that covered car space, Joe.

[68_Val_Sedan]

congrats flyboy .. post up some pics ...

[golferjohn]

well done Mr. Boy, I couldn't be happier for you.  I've been a mortgage banker for 21 years and I always enjoy that feeling when a first-time homebuyer gets handed their keys   You're on your way to having a more secure financial future.
Congratulations!!