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

 
Old 06-10-2019, 09:37 PM
  #26  
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Default Re: What should I know about buying a house and when should I start looking?

See if you qualify for first time home buyer programs in your county, They may contribute to your down payment, Duplex is better option btw,
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Old 06-11-2019, 07:16 AM
  #27  
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Default Re: What should I know about buying a house and when should I start looking?

Lots of good advice in this thread. I'll chime in with mine, most have been repeated.

  • Max budget should be 3x your combined gross annual income
  • 20% down is ideal but not necessary, it's better to have the cash sometimes. Figure out if paying PMI for a 5% down loan is worth it to you (you can dump PMI usually after getting the mortgage balance down to 80% of the home value...but check with the bank).
  • You probably want to have $20-$30k left over in savings after your down payment for emergencies/unexpected repairs
  • New construction is preferable, less to worry about for the first several years plus you can buy exactly what you want...also new construction typically yields neighborhoods with a bunch of young couples like yourselves
  • I started with a townhouse and upgraded to a single family after 5 years...nothing wrong with a townhouse, a good way to learn the ins and outs of homeownership without a large amount of house/yard to be responsible for
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Old 06-11-2019, 07:24 AM
  #28  
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Default Re: What should I know about buying a house and when should I start looking?

^ Good stuff above there from Boooley!

We just moved from a new town house to a 20 year old single family home, I'd agree a new construction is the way to go but most on the lower side of pricing will Likely be Ryan or some other similar builder. Just pay attention to them through the process as some of these companies just throw the houses up and quality can sometimes suffer.

We would have went new construction again but most single family, new homes here in MD are 550K plus, without living 3 hours from anything.

We did not put a ton down as we wanted to still keep a chunk of liquid money in the bank and used about 10-15k for renovations and new stuff for the house. We are sadly paying PMI but it's not a killer.
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Old 06-11-2019, 08:01 AM
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Default Re: What should I know about buying a house and when should I start looking?

Generally, houses are a good hedge against inflation, so I don't think you reallllly need to put down 20% down to avoid PMI.(Inflation is just about 2-3% per year) so you can always refi after 2-3 years to avoid PMI down the road. If you don't put down 20%, put down 10% and leave the rest in savings. That way for any emergencies or house repairs, you're not taking out a HELOC or have to refi until you really want to. Don't forget to check foreclosure houses either, because they can be bought at a very heavy discount. My sister purchased a foreclosure in Forth Worth Texas for 150k, and it's now worth about 275k, with minimal upgrades after 4 years. Good neighborhood too.

Raising CC limits every 6 months on your most used cards makes sense. Creditors look at Debt to utilization. Generally you want to stay under 20% of utilization. Meaning, if your overall debt available from all your CC's is 20k, then you should be utilizing max 4000. Raising credit limits is going to raise your debt available, thus lowering your utilization naturally. It's also a soft pull on your credit. Also, if your Wife has better credit than you, adding you to her CC's might be advisable, as they will include all her prior history for that specific card in your credit report (if that makes sense)

My friend just bought a house for about 420k, combined income between him and his fiancé is 160k, and they were approved for a 4.75% loan for reference. Credit is 780/800 for both.
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Old 06-11-2019, 08:19 AM
  #30  
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Default Re: What should I know about buying a house and when should I start looking?

I only quickly browsed through the posts here, but I'll offer some of my thoughts:
  • You'll get some back and forth about how much to put down. I'm of the opinion that you should put down as much as you can afford to. It is easier for it to "hurt once" than to hurt every month for many years. Putting down another $20K or whatever might be hard once, but you'll quickly forget about it 6 months later and you'll be glad when the monthly payments are that much lower. And then you can (if you want) pay extra into the principle.
  • Go get a pre-approval from a bank. Again, you'll probably get some opinions on how they skew the numbers to look more favorable to buy a home, but it doesn't hurt. It adds in all the additional costs (closing costs as well as utilities, taxes, HOA, and other random expenses).
  • Everyone says it, but don't forget about the additional costs of living. Sure, a $20 water bill here and a $50 Internet bill there won't seem like much, but with all the things you need in your life, it adds up quick. Then add property taxes and whatnot into it. If your mortgage is $1500, it can easily be another $1500 on top of that per month.
  • You can choose (in most cases) to add in your property taxes to your mortgage payment. It might be easier to handle if you're in a high tax area (not noticing the automated debits vs. having to cut a check for $6K twice a year).
  • Think whether or not this will be your forever home (if it is your first, it most likely isn't). You'll want to think about that as you make a down payment or make renovations/spend a lot on the home. If you only intend to spend 5 years there before moving on, you'll want to think about that.
  • Make smart upgrades/renovations. You generally don't want to be the most expensive house in the neighborhood, because even if you have the best kitchen/bathroom remodel, nobody is going to want to pay for it.
  • Depending on the age of the home, you may want to consider home warranties such as American Home Shield. Just calling an electrician to look at something is going to cost you $100-150, then he has to fix it, which will cost more. Home warranties have a single deductible of about $75 and everything else is covered (either repaired or replaced).
EDIT: Adding some things...
  • The lender will look at EVERYTHING you have and probably go back at least 6 months. You will probably have to speak to any somewhat large transaction. Even if it was $1000 one time 3 months ago that seems out of the blue. Did you get a gift from your parents? Okay fine, but now they will look at your parents account to see where they got it from. They will get a detailed credit report and ask a lot of random things that you may not even remember. It is a good idea to start organizing your finances early. Getting gifted money is okay as long as there is a paper trail.
  • For the most part, homes generally increase in value (or stay steady). So if you upgrade, you can do a 10-31 exchange to avoid taxes and not have to worry about saving up for another huge down payment.
  • Save as much as possible for the first year just in case **** hits the fan. If you need a new HVAC unit or new roof, it is going to cost you. After that, continue to save. It becomes increasingly harder to save when you have a mortgage/taxes to pay each month.
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Old 06-11-2019, 08:51 AM
  #31  
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by njn63 View Post
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.
Duplex is nowhere near in the ball park. I just don't have any desire to live in a duplex, ever. You are correct we do jump around a lot, 7 houses in 9 years. I think we are ready to spend the next 10 years in Greenville though.

We don't intend to have kids and therefore school district is not too much of a concern. We keep an emergency fund separate from our house down payment savings but that's great advice. Thanks.

I hate HOA's but the one in our neighborhood isn't bad and I intend to keep an eye on that. Thanks.

Thanks a lot on the idea of walking the neighborhood at different times. Super great idea I didn't think of. Great advice sir! Thanks!
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Old 06-11-2019, 08:59 AM
  #32  
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by vLad11591 View Post
Generally, houses are a good hedge against inflation, so I don't think you reallllly need to put down 20% down to avoid PMI.(Inflation is just about 2-3% per year) so you can always refi after 2-3 years to avoid PMI down the road. If you don't put down 20%, put down 10% and leave the rest in savings. That way for any emergencies or house repairs, you're not taking out a HELOC or have to refi until you really want to. Don't forget to check foreclosure houses either, because they can be bought at a very heavy discount. My sister purchased a foreclosure in Forth Worth Texas for 150k, and it's now worth about 275k, with minimal upgrades after 4 years. Good neighborhood too.

Raising CC limits every 6 months on your most used cards makes sense. Creditors look at Debt to utilization. Generally you want to stay under 20% of utilization. Meaning, if your overall debt available from all your CC's is 20k, then you should be utilizing max 4000. Raising credit limits is going to raise your debt available, thus lowering your utilization naturally. It's also a soft pull on your credit. Also, if your Wife has better credit than you, adding you to her CC's might be advisable, as they will include all her prior history for that specific card in your credit report (if that makes sense)

My friend just bought a house for about 420k, combined income between him and his fiancé is 160k, and they were approved for a 4.75% loan for reference. Credit is 780/800 for both.
We are both on each other's credit cards. Her score is like 10 points better or something like that. Thanks for the info on your friend. I think our combined is nearly the same, $160k-$180k. I can't imagine buying a house for 420. I can't even imagine spending $250k to be honest. It's just me and the wife, we currently have a very nice 5 bedroom 2 car garage, huge deck and back yard house that is right around $200k.

The 20-25% down is mostly to keep the mortgage low. I really want a low monthly payment. I think before buying the car our credit was 795 and 806. I think we'll get back there pretty quickly. Just had a big increase in DTI because the $5k i put down on the car we put on a credit card for the miles but then paid it off.
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Old 06-11-2019, 09:01 AM
  #33  
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Default Re: What should I know about buying a house and when should I start looking?

Shamoo hit it on the head imo
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Old 06-11-2019, 09:07 AM
  #34  
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by BauleyCivic View Post
Lots of good advice in this thread. I'll chime in with mine, most have been repeated.

  • Max budget should be 3x your combined gross annual income
  • 20% down is ideal but not necessary, it's better to have the cash sometimes. Figure out if paying PMI for a 5% down loan is worth it to you (you can dump PMI usually after getting the mortgage balance down to 80% of the home value...but check with the bank).
  • You probably want to have $20-$30k left over in savings after your down payment for emergencies/unexpected repairs
  • New construction is preferable, less to worry about for the first several years plus you can buy exactly what you want...also new construction typically yields neighborhoods with a bunch of young couples like yourselves
  • I started with a townhouse and upgraded to a single family after 5 years...nothing wrong with a townhouse, a good way to learn the ins and outs of homeownership without a large amount of house/yard to be responsible for
Thanks. Probably not going to do the purchase of a townhouse or anything. I still can't get over this whole 3x you combined annual income. There's no way I'd come anywhere near spending that much. The houses we are looking at are literally half that cause I'm over here like, "Babe we only $170k. We can't afford a $250k house.

I'm not opposed to a new construction home, I just hate how they always sit on top of the neighbors. Like some of these new construction homes have a whole 12 feet in between houses and I'm like wtf? At least around here that's very popular.

Originally Posted by shamoo View Post
I only quickly browsed through the posts here, but I'll offer some of my thoughts:
  • You'll get some back and forth about how much to put down. I'm of the opinion that you should put down as much as you can afford to. It is easier for it to "hurt once" than to hurt every month for many years. Putting down another $20K or whatever might be hard once, but you'll quickly forget about it 6 months later and you'll be glad when the monthly payments are that much lower. And then you can (if you want) pay extra into the principle.
  • Go get a pre-approval from a bank. Again, you'll probably get some opinions on how they skew the numbers to look more favorable to buy a home, but it doesn't hurt. It adds in all the additional costs (closing costs as well as utilities, taxes, HOA, and other random expenses).
  • Everyone says it, but don't forget about the additional costs of living. Sure, a $20 water bill here and a $50 Internet bill there won't seem like much, but with all the things you need in your life, it adds up quick. Then add property taxes and whatnot into it. If your mortgage is $1500, it can easily be another $1500 on top of that per month.
  • You can choose (in most cases) to add in your property taxes to your mortgage payment. It might be easier to handle if you're in a high tax area (not noticing the automated debits vs. having to cut a check for $6K twice a year).
  • Think whether or not this will be your forever home (if it is your first, it most likely isn't). You'll want to think about that as you make a down payment or make renovations/spend a lot on the home. If you only intend to spend 5 years there before moving on, you'll want to think about that.
  • Make smart upgrades/renovations. You generally don't want to be the most expensive house in the neighborhood, because even if you have the best kitchen/bathroom remodel, nobody is going to want to pay for it.
  • Depending on the age of the home, you may want to consider home warranties such as American Home Shield. Just calling an electrician to look at something is going to cost you $100-150, then he has to fix it, which will cost more. Home warranties have a single deductible of about $75 and everything else is covered (either repaired or replaced).
EDIT: Adding some things...
  • The lender will look at EVERYTHING you have and probably go back at least 6 months. You will probably have to speak to any somewhat large transaction. Even if it was $1000 one time 3 months ago that seems out of the blue. Did you get a gift from your parents? Okay fine, but now they will look at your parents account to see where they got it from. They will get a detailed credit report and ask a lot of random things that you may not even remember. It is a good idea to start organizing your finances early. Getting gifted money is okay as long as there is a paper trail.
  • For the most part, homes generally increase in value (or stay steady). So if you upgrade, you can do a 10-31 exchange to avoid taxes and not have to worry about saving up for another huge down payment.
  • Save as much as possible for the first year just in case **** hits the fan. If you need a new HVAC unit or new roof, it is going to cost you. After that, continue to save. It becomes increasingly harder to save when you have a mortgage/taxes to pay each month.
Lots of good advice here, thanks. I tend to agree about more money down now so I can live more comfortably each month.
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Old 06-11-2019, 09:46 AM
  #35  
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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. Probably not going to do the purchase of a townhouse or anything. I still can't get over this whole 3x you combined annual income. There's no way I'd come anywhere near spending that much. The houses we are looking at are literally half that cause I'm over here like, "Babe we only $170k. We can't afford a $250k house.
I think it depends on the area. Greenville, SC sounds like a low cost-of-living area. In my zipcode, you cannot get into a single family home for less than $600k. So people naturally stretch their buying power as much as they can to get into the home that they want. I'm sure in your area SFH's for $200k are plentiful and that makes your decision to stick with a lower priced house easier.
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Old 06-11-2019, 09:54 AM
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Default Re: What should I know about buying a house and when should I start looking?

I think in cali its something like 8x to 10x your gross salary is the norm for purchase price.
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Old 06-11-2019, 09:56 AM
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My sister and BIL are literally paying twice my mortgage for a 1bed/1bath apartment in SF.
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Old 06-11-2019, 09:57 AM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Rguy View Post
I think in cali its something like 8x to 10x your gross salary is the norm for purchase price.
It is higher here only because that's the price of entry in many areas....or you just don't get a home.

It isn't that high though. Otherwise making $100K means you get a $1M home? I don't think so. That being said, a lot of folks in my area have a lot of family wealth from a generation or more back. So while they might be making $100K household, they are in a $1M house because their family put in $600K for a down payment. Then you're left with a $400K loan at $1800/month.
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Old 06-11-2019, 10:04 AM
  #39  
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by shamoo View Post
Otherwise making $100K means you get a $1M home? I don't think so. .
Pretty much. 177k salary qualifies you for an 800k home.

Actually i was wrong. In LA its 11.7x your salary.

https://www.jchs.harvard.edu/blog/pr...istoric-highs/
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Old 06-11-2019, 10:27 AM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Rguy View Post
Pretty much. 177k salary qualifies you for an 800k home.

Actually i was wrong. In LA its 11.7x your salary.

https://www.jchs.harvard.edu/blog/pr...istoric-highs/
How's that possible without some sort of gift down payment from another party?

$1M home has a down payment of $200K. So that means you have an $800K mortgage. At $150K household, how can you make a $3800 monthly payment? That doesn't even include taxes, HOA, utilities, etc. I mean *maybe* it is passable if you're not going out or saving anything. Say 40% taxes out of the $150K gross and you're at $90K net. So $7500 per month. I mean I GUESS you could make it work, but it is tight. And you better home no emergencies.
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Old 06-11-2019, 10:41 AM
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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
We are both on each other's credit cards. Her score is like 10 points better or something like that.
who ever has the lowest score is the score that will determine your rate. Above 720 or so, it doesn't matter, you'll be getting the best rates. Also, a larger down payment will usually get you a better rate, and in most cases you can pay points to lower your rate further, but with rates this low, its not really necessary.

Even if you don't plan to have children, it's a good idea to buy in a good school district - - just in case... and houses with better schools appreciate more and are easier to sell.
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Old 06-11-2019, 10:41 AM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by shamoo View Post
How's that possible without some sort of gift down payment from another party?

$1M home has a down payment of $200K. So that means you have an $800K mortgage. At $150K household, how can you make a $3800 monthly payment? That doesn't even include taxes, HOA, utilities, etc. I mean *maybe* it is passable if you're not going out or saving anything. Say 40% taxes out of the $150K gross and you're at $90K net. So $7500 per month. I mean I GUESS you could make it work, but it is tight. And you better home no emergencies.

It's like youre waking up to reality that everyone in California is just running on credit and the razors edge with their bank accounts. It's beautiful.

It's been apparent everytime I visit California that either 1. Salaries are sky high in California for EVERY JOB or 2. People are living life on credit and are paycheck to paycheck.
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Old 06-11-2019, 10:46 AM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Rguy View Post
It's been apparent everytime I visit California that either 1. Salaries are sky high in California for EVERY JOB or 2. People are living life on credit and are paycheck to paycheck.
Not just California...everywhere.
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Old 06-11-2019, 10:55 AM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by Rguy View Post
It's like youre waking up to reality that everyone in California is just running on credit and the razors edge with their bank accounts. It's beautiful.

It's been apparent everytime I visit California that either 1. Salaries are sky high in California for EVERY JOB or 2. People are living life on credit and are paycheck to paycheck.
Well no, I knew that that problem was everywhere.

I think it is just very risky to do it on such a large scale. If you're living paycheck to paycheck and renting, okay sure. That's fine in this day and age when things are so expensive. But going all in for a very high priced house seems risky to me.
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Old 06-11-2019, 10:58 AM
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Default Re: What should I know about buying a house and when should I start looking?

Austin, make sure you venture into the Home Improvement thread too.


A lot of us doing great stuff in there and quite possibly could be things you will need or want to do in a new home.
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Old 06-11-2019, 11:04 AM
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The only reason to post in the home improvement thread is to get roasted.
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Old 06-11-2019, 11:11 AM
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Default Re: What should I know about buying a house and when should I start looking?

I don't even enjoy improving my home anymore because of that thread
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Old 06-11-2019, 12:26 PM
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Default Re: What should I know about buying a house and when should I start looking?

It's cheaper to buy a house in need of fixing but you'll need to know if it's worth it money and effort wise. Both the require researching and getting a good inspection.
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Old 06-11-2019, 02:33 PM
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Default Re: What should I know about buying a house and when should I start looking?

Originally Posted by The GreenD16 View Post
The only reason to post in the home improvement thread is to get roasted.
Originally Posted by 5SpdH22 View Post
I don't even enjoy improving my home anymore because of that thread

PewPewwwwwwwwwwwpew

Originally Posted by Tennobanzai View Post
It's cheaper to buy a house in need of fixing but you'll need to know if it's worth it money and effort wise. Both the require researching and getting a good inspection.
I've never really came across a good inspector yet, I actually plan to get my license sometime soon because I feel like there is a need for good inspectors.
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Old 06-12-2019, 04:55 AM
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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
100% agree with the 20% down; HOWEVER, depending on your credit and the apr you find, you can do what's called an 80/10/10 loan if you dont have enough downpayment initially. Long story short, you put 10% down, borrow against it and put that money down to come to the total 20%. Saves on PMI, but it needs to be paid off quickly, as the majority are quarterly adjustable ARM loans.

Also, with the escrow - if this is your first house, you may not have a choice in paying the escrow separately. Some states dictate that first-time home buyers roll the entirety into a PITI (mortgage) payment rather than paying escrow at the end/beginning of the year.

And the $10k for 'oh ****' moments is dead-on. Just a month after we bought our house, a storm knocked down a gigantic willow tree in our yard and since it was hanging over our house, it had to be removed with a crane and bucket truck...cost us almost $4k, and this was right after we just put $45k down on the damn place, so it wasn't like we were flush with cash.

Otherwise, i agree with the rest completely. Be conservative - i worked in mortgage refi/ modifications after the recession and can tell you that a solid majority of the people in foreclosure did it to themselves by buying more than they could ever hope to afford. They were all hoping the property value would go up (then refi) or they'd get a better job, etc...next thing they know, they're six-digits underwater on the place
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