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What should I know about buying a house and when should I start looking?

 
Old 06-10-2019, 01:13 PM
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Default What should I know about buying a house and when should I start looking?

Ok GDD financial advisors, rich guys, and lawyers... I need advice.

Wife and I are looking to buy a house. We would love to purchase the one we are currently renting. We intend to make an offer on it in the near future but not overly confident the owner is wanting to sell.

We've got about $43k sitting in a savings to be used as a down payment. When my in-laws repay the $4k they owe us it'll be $47 and trying hard to get to $50k down before the end of the year. I figure with $50k down I could be putting 20%-25% down allowing me to keep my mortgage much lower.

Currently my credit is 761. Unfortunately it took a drastic drop when I purchased the car 6 weeks ago. I put my $5k down payment on the credit card so I could get miles, but I've already paid that off so I imagine the credit will go back up soon. Wife's credit was 806 but she also took the same dip I did when purchasing the car. I had a 37 point drop and I think she had the same. Depressing but I imagine it won't stay low for long.


So with my life's story above, what's the rule when determining how much I can spend on a house? My wife and I have decided we could do about $200k - $230k for a house. Possibly a little more if it's the perfect house but I'm not sure if I'm budgeting wisely or what the general rule is when determining how much house to purchase based on your income.

Also, how soon should I start looking for a house? Our lease ends in about a year. How much time in advance should I start looking?

Is there anything I need to be aware of? I usually float a balance on my credit cards of roughly $1500. Should I pay that down to $0 before applying so I have the lowest possible debt to income ratio? I understand that after the approval process starts you can't do anything at all to run your credit or even pay off anything. Should I prep and pay those things off before?
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Old 06-10-2019, 01:17 PM
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Default Re: What should I know about buying a house and when should I start looking?

It varies state to state but depending on what you want to pay monthly obviously 20% down to avoid PMI is always smart. Local NV program allows you to do 3% down and not pay PMI but they only do so many of those a year. That way you could keep all that savings in the bank for just in case but obviously the payment goes way up.

I think just finding the correct monthly amount you feel safe with and finding the right house price/ down payment amount/ and savings left over to be safe is all you need to worry about.
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Old 06-10-2019, 01:41 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by .Grimace View Post
It varies state to state but depending on what you want to pay monthly obviously 20% down to avoid PMI is always smart. Local NV program allows you to do 3% down and not pay PMI but they only do so many of those a year. That way you could keep all that savings in the bank for just in case but obviously the payment goes way up.

I think just finding the correct monthly amount you feel safe with and finding the right house price/ down payment amount/ and savings left over to be safe is all you need to worry about.
So the 50k we are trying to get for a house down payment is separate from our 6 months of living expenses savings. We'll still keep that and won't be draining our funds completely to buy a house.

Plus I think with the money I'd be saving on a monthly mortgage with $50k down I could be extremely comfortable in my lifestyle. Currently I pay nearly $1600/month in rent.

Also, local NV program? What is that?
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Old 06-10-2019, 01:52 PM
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Default Re: What should I know about buying a house and when should I start looking?

You have a larger debt now which will lower your credit score. Inquiries also lower the score. The bureaus also typically keep it down until they see payment patterns. There is a lot of variables that go into it. I can recall a 800 plus score dropping into the 600s. Someone told him it was a good idea to close all his credit accounts. Which can be true, however he closed all his open lines of credit except one with not much left on his available credit. This gave him a debt high ratio to credit factor reducing his score. Now a days even credit cards use a ability to repay for with your limit. Think of a pie chart with your income mortgage/ rent / debt/ etc. Part of the credit card act / housing bubble burst. Good luck on your purchase!
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Old 06-10-2019, 01:55 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by austinkli View Post
So the 50k we are trying to get for a house down payment is separate from our 6 months of living expenses savings. We'll still keep that and won't be draining our funds completely to buy a house.

Plus I think with the money I'd be saving on a monthly mortgage with $50k down I could be extremely comfortable in my lifestyle. Currently I pay nearly $1600/month in rent.

Also, local NV program? What is that?
Well in that case you sound golden. I live in Nevada so just saying it's a local state plan for NV only. Check to see if your state has anything worthwhile. Sounds like your set on doing 20% to lower the monthly payment so might not even be worth looking into.
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Old 06-10-2019, 02:11 PM
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Default Re: What should I know about buying a house and when should I start looking?

Put 20% down
Put an extra couple hundred bucks a month towards your principle, whatever you can afford, to pay that **** off early
Look first on the lower end of the price spectrum. I know too many people that buy the biggest/most expensive place they can “afford” and then they can’t even furnish all the rooms in it.
Get any house you are serious about buying inspected before buying it. I think on average it’s ~$500?
Decide beforehand if you’re going to roll your taxes into escrow or not
Be patient when looking
Have like $10k put away for “oh ****” moments or upgrades to the place
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Old 06-10-2019, 02:23 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Chief Brody View Post
Put 20% down
Put an extra couple hundred bucks a month towards your principle, whatever you can afford, to pay that **** off early
Look first on the lower end of the price spectrum. I know too many people that buy the biggest/most expensive place they can “afford” and then they can’t even furnish all the rooms in it.
Get any house you are serious about buying inspected before buying it. I think on average it’s ~$500?
Decide beforehand if you’re going to roll your taxes into escrow or not
Be patient when looking
Have like $10k put away for “oh ****” moments or upgrades to the place

What he said x1000000


Are you a first time homebuyer? Personally (I dont know the OP very well) I would stick between 2.5-3x income.
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Old 06-10-2019, 02:29 PM
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Default Re: What should I know about buying a house and when should I start looking?

I would use that $43k to buy Powerball tickets because you're 14,332 times more likely to win it than one of those random people that only buys one ticket.
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Old 06-10-2019, 02:37 PM
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Default Re: What should I know about buying a house and when should I start looking?

Also make sure you post in the “Window Shopper House Thread” $750k houses you have no intention of buying
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Old 06-10-2019, 02:41 PM
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Default Re: What should I know about buying a house and when should I start looking?

Buy a duplex
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Old 06-10-2019, 02:41 PM
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Default Re: What should I know about buying a house and when should I start looking?

"Buy" a house? What, do your parents hate you?
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Old 06-10-2019, 03:24 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Chief Brody View Post
Put 20% down
Put an extra couple hundred bucks a month towards your principle, whatever you can afford, to pay that **** off early
Look first on the lower end of the price spectrum. I know too many people that buy the biggest/most expensive place they can “afford” and then they can’t even furnish all the rooms in it.
Get any house you are serious about buying inspected before buying it. I think on average it’s ~$500?
Decide beforehand if you’re going to roll your taxes into escrow or not
Be patient when looking
Have like $10k put away for “oh ****” moments or upgrades to the place
Thanks for the great info. Could probably afford an extra but on the house. Historically I care a lot about the house I live in and will happily drive a less nice car and budget less towards eating out etc so I can afford a nicer house. That said I don't want to be house broke at all.

That's a lot of great advice and much appreciated!

Also I wasn't thinking of closing my credit accounts, just dropping my balance down to $0-$50 per card. Right now we use them to rack up the miles a lot. I expect it won't take a year to go back up.

Originally Posted by FrostyDC4 View Post
What he said x1000000


Are you a first time homebuyer? Personally (I dont know the OP very well) I would stick between 2.5-3x income.
Yes I am a first time home buyer. My wife doesn't qualify because she and her father did something retarded a few years ago.

I honestly can't imagine spending 2.5 times our annual income on a house and damn sure not 3x. Like holy **** that's expensive and I could never have a need to own a house that expensive. That's nearly double what I'm looking to spend on a house. Probably aiming for 1.5x our annual income. That's basing on our current income. Wife getting a new job and about to make a lot more money. That extra money will get funneled into retirement and paying off debt quicker.

Originally Posted by Skelly View Post
Buy a duplex
And live in peasantville? Bish please.
Originally Posted by solsisters View Post
"Buy" a house? What, do your parents hate you?
Yes. My sister got their old house. And by got I mean she bought it from them. Also, **** living in FL!
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Old 06-10-2019, 03:30 PM
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Default Re: What should I know about buying a house and when should I start looking?

I would advise to buy a new construction home. The reason is, even with the best home inspection, SOL does happen such as a leaky room, mold, appliances breaking down, etc. That puts a bummer on this experience. You paid a lot of money, and only have to come with more. Even if it's DIY, you don't want to spend time fixing things, and repairing this and that.

Not saying new construction homes will be perfect, but at least there is a warranty and you don't have to worry about anything for ~10+ years. Construction materials are not as good as they once were. And are not built to last. Kind of like the saying, one would have less fear in buying a 70 year old home, but it's more scary to by one that is 25 years old.

Money and what you can afford is king, but sometimes the piece of mind and trouble free home ownership should be factor in too.

Just want to throw up this 2 cents for what it is worth.
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Old 06-10-2019, 03:42 PM
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Default Re: What should I know about buying a house and when should I start looking?

15 year mortgage and 20% down. rates are low right now might go lower. I'd start shopping 6 months before your lease runs out.
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Old 06-10-2019, 03:48 PM
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Default Re: What should I know about buying a house and when should I start looking?

I’d first start by not owning 3 mustangs
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Old 06-10-2019, 04:02 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Skelly View Post
Buy a duplex
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Old 06-10-2019, 04:04 PM
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Default Re: What should I know about buying a house and when should I start looking?

Dont buy a house. Continue to rent until you have enough of a downpayment to buy a duplex to house hack. First time buyer rates and lending. Rent one side, live in the other side. Next year do it again.

Delayed gratification.
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Old 06-10-2019, 04:07 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by austinkli View Post
Thanks for the great info. Could probably afford an extra but on the house. Historically I care a lot about the house I live in and will happily drive a less nice car and budget less towards eating out etc so I can afford a nicer house. That said I don't want to be house broke at all.

That's a lot of great advice and much appreciated!

Also I wasn't thinking of closing my credit accounts, just dropping my balance down to $0-$50 per card. Right now we use them to rack up the miles a lot. I expect it won't take a year to go back up.



Yes I am a first time home buyer. My wife doesn't qualify because she and her father did something retarded a few years ago.

I honestly can't imagine spending 2.5 times our annual income on a house and damn sure not 3x. Like holy **** that's expensive and I could never have a need to own a house that expensive. That's nearly double what I'm looking to spend on a house. Probably aiming for 1.5x our annual income. That's basing on our current income. Wife getting a new job and about to make a lot more money. That extra money will get funneled into retirement and paying off debt quicker.


And live in peasantville? Bish please.

Yes. My sister got their old house. And by got I mean she bought it from them. Also, **** living in FL!

Ah gotcha!

I don’t know how soon you are planning on buying but I would try to get your DTI (based on minimum payments) down at least 2 months prior to getting a credit report.

I agree with your plan. Anything more than 2.5x income puts a strain on your lifestyle.
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Old 06-10-2019, 04:08 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by rino924 View Post
I’d first start by not owning 3 mustangs

Yeah that health hazard is worse than absestos
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Old 06-10-2019, 04:20 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by FrostyDC4 View Post
Ah gotcha!

I don’t know how soon you are planning on buying but I would try to get your DTI (based on minimum payments) down at least 2 months prior to getting a credit report.

I agree with your plan. Anything more than 2.5x income puts a strain on your lifestyle.
Thanks for the advice. Yea I have a buddy that is buying a property to put a double wide on (that's really popular a little north of here) up in the mountains just north of me. He was told by the bank NOT to pay off his car early or anything else. Can't run a credit check, can't pay anything off early, just make the regular payment like always. Sucks for him because he's been in limbo for like 5 months. He ended up having to get special approval from some loan manager to switch to a new job that came with a 21% base pay increase and better bonuses.

But I'm assuming the lower my DTI is when I purchase the better my rate will be. Currently my DTI still isn't high. I think my DTI is literally like 6.5% right now but if I took the credit cards away it'd probably go down another 3%ish.
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Old 06-10-2019, 05:05 PM
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Default Re: What should I know about buying a house and when should I start looking?

duplex, rent other side to help pay off duplex, use duplex to fund new home, once you get into new home rent out the other side of the duplex to help pay for your new home quicker.
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Old 06-10-2019, 05:59 PM
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Default Re: What should I know about buying a house and when should I start looking?

If you can do the duplex (or more) thing, it's pretty solid. Yes you have to deal with renters but generally that rent should nearly cover the entire mortgage.

Overall house buying advice:
-Only buy when you're going to be in the same area for 5+ years. With your past jumping around I think this is a real question you need to answer.
-Pay credit cards in full every month (statement balance). Should be doing this anyways but it's especially important when you're inflating your credit score. Request limit increases if you're 6 months or more out to increase available credit to lower the percentage utilization... will take a short term hit if they do a credit pull but it will be a longer term benefit.
-Look at school districts and buy a house that won't need to be sold within 5 years. Bedrooms, neighborhood, etc. all need a longer term perspective.
-Pay attention to HOA fees as some people forget to factor those in. Make sure you have read the HOA rules in full and are ok with them before making an offer.
-Put the minimum down to avoid PMI (usually 20%). Keep the rest in savings until you have a suitable emergency fund built up.
-Before putting in an offer walk the neighborhood at a few different times (Sunday at 2pm, Monday at 5pm, Saturday at 8am). Introduce yourself to the neighbors and see how they are. Simulate your commute from the house to your job (at the hours you commute) to make sure there aren't any surprises there.
-Look at various areas for differences in property taxes. Not as big of a deal in the south but while living in the Chicago area I found towns that were very similar but had 2k difference in annual taxes. That **** adds up quickly.
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Old 06-10-2019, 06:42 PM
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Default Re: What should I know about buying a house and when should I start looking?

One of the biggest things about buying a used house is the hidden, unexpected expenses that always pop up. IF you are buying the house you now live in, then that takes care of it as you know what's working and what's not. I have bought used houses and each and every time, I had to dump money onto them right away and they weren't fixer uppers ( one was, but I know what I was getting myself into)

My only advice is do not drain your home buying fund on the purchase, leave a few grand aside for the stuff you can't think off right now.
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Old 06-10-2019, 07:39 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by austinkli View Post
Thanks for the advice. Yea I have a buddy that is buying a property to put a double wide on (that's really popular a little north of here) up in the mountains just north of me. He was told by the bank NOT to pay off his car early or anything else. Can't run a credit check, can't pay anything off early, just make the regular payment like always. Sucks for him because he's been in limbo for like 5 months. He ended up having to get special approval from some loan manager to switch to a new job that came with a 21% base pay increase and better bonuses.

But I'm assuming the lower my DTI is when I purchase the better my rate will be. Currently my DTI still isn't high. I think my DTI is literally like 6.5% right now but if I took the credit cards away it'd probably go down another 3%ish.

Yep


The majority of the underwriters go by your reportable taxable income and the minimum payment on whatever debt (revolving/non-revolving) you have outstanding.
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Old 06-10-2019, 07:44 PM
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Default Re: What should I know about buying a house and when should I start looking?

The rule of thumb for figuring out how much house you can afford is to keep your mortgage payment under 30% of your take home pay.
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