Buying a house 101

[Kit]

Jul 18, 2013 11:56:26 GMT -5 wambam said:

Jul 18, 2013 11:54:53 GMT -5 Kit said:

Keep in mind too, that just because that is what they say you can afford, you more than likely don't want to spend that much.  Being house poor is no fun. Head over to MM and I'm sure some of them will tell you that.

So about what % of the number that the calculator gave me should I be looking at? Or is that something that only an agent can tell me?


Ideally we'd like our mortgage payment to approximately what we're paying in rent. We have a really nice apartment and pay for two garages, so I think that would be doable. Maybe?

It's hard to say without knowing your budget and finances. Those calculators (most of them anyway) only consider your income and debts. But not groceries, utilities, spend money, childcare, etc.

[Kit]

wambam I'd actually stay away from those calculators. Sit down and outline your current rent/mortgage, expenses, etc and see what you'd be comfortable paying per month, and tell that number to your agent. Then she'll look for homes in that range for you.

[PennyCandy]

Find a good agent. Find a mortgage broker or go to your bank and have them help you figure out what you can afford and get pre-approved. Start looking with your agent and figure out what's important to you as far as what you want in a house. You'll start putting offers in and negotiating and then you'll close when someone accepts your offer. If you have a good agent and mortgage broker, it's actually pretty painless.

[wambam]

Jul 18, 2013 11:58:03 GMT -5 Kit said:

Jul 18, 2013 11:56:26 GMT -5 wambam said:

So about what % of the number that the calculator gave me should I be looking at? Or is that something that only an agent can tell me?


Ideally we'd like our mortgage payment to approximately what we're paying in rent. We have a really nice apartment and pay for two garages, so I think that would be doable. Maybe?

It's hard to say without knowing your budget and finances. Those calculators (most of them anyway) only consider your income and debts. But not groceries, utilities, spend money, childcare, etc.

Oh okay. 

[wambam]

Jul 18, 2013 11:59:29 GMT -5 @callmefia said:

Jul 18, 2013 11:47:34 GMT -5 wambam said:

Would that decrease our chances of getting a loan? 

Only if you are truly overextended in debt. 

We really are not. We owe my MIL my student loan and have one car loan and that's it. We have the cash in the bank to pay both off right now if we wanted to.

[Kit]

Jul 18, 2013 11:59:59 GMT -5 wambam said:

Jul 18, 2013 11:58:03 GMT -5 Kit said:

It's hard to say without knowing your budget and finances. Those calculators (most of them anyway) only consider your income and debts. But not groceries, utilities, spend money, childcare, etc.

Oh okay. 

My H and I just bought a house (we close tomorrow!) and the number that the lender pre-approved us for was so high, that if we actually bought at that price, we'd never be able to eat. LOL

It's much easier to add up your current expenses and go from there to see what you can really afford. 

[wambam]

Jul 18, 2013 12:02:47 GMT -5 Kit said:

Jul 18, 2013 11:59:59 GMT -5 wambam said:

Oh okay. 

My H and I just bought a house (we close tomorrow!) and the number that the lender pre-approved us for was so high, that if we actually bought at that price, we'd never be able to eat. LOL

It's much easier to add up your current expenses and go from there to see what you can really afford. 

Thanks, you've been very helpful!

Another interesting piece to this puzzle is that for the first 4-5 years we own the house our income will be substantially higher than in the future because I don't plan to work once we have kids. 

[Kit]

Jul 18, 2013 12:04:48 GMT -5 wambam said:

Jul 18, 2013 12:02:47 GMT -5 Kit said:

My H and I just bought a house (we close tomorrow!) and the number that the lender pre-approved us for was so high, that if we actually bought at that price, we'd never be able to eat. LOL

It's much easier to add up your current expenses and go from there to see what you can really afford. 

Thanks, you've been very helpful!

Another interesting piece to this puzzle is that for the first 4-5 years we own the house our income will be substantially higher than in the future because I don't plan to work once we have kids. 

See, good job thinking ahead! LOL



Then you definitely don't want to buy a home at what they tell you that you can afford! :-)  Tell all of this to your realtor, too.  He/She will really be your best source of information.  I'm happy to help, too.   PM me any time!

[lightbulbsun]

Before you start looking, you need to know your budget. You can get pre-approved (and should before you put an offer on something) but they'll generally give you way more than you'll want to spend.

Make a list of 3 must-haves, 3 nice-to-haves and 3 things that are totally negotiable. We wasted so much time at the beginning of our search because we didn't really know what we wanted, and if we had made this list from day 1 we probably wouldn't have had to see 200+ houses.

Start going to open houses just to get a feel for what's on the market. It's also a great way to meet realtors.

Once you get a realtor (either from a rec or open house or whatever), then looking gets easier, because they can find listings that match your budget and wants (hopefully!).

Good luck!

[wambam]

lightbulbsun - I have no idea what I want. Is that weird? I know I need lots of kitchen counterspace because I cook a LOT. But other than that, I'm like whatev.

[lightbulbsun]

Jul 18, 2013 12:17:31 GMT -5 wambam said:

lightbulbsun - I have no idea what I want. Is that weird? I know I need lots of kitchen counterspace because I cook a LOT. But other than that, I'm like whatev.

See, this is a problem!  You need to sit down with your H and really talk about it.  Once I did this it made life sooo much easier, because we were able to weed out houses before going to them, instead of spending every weekend looking at 10+ houses that we didn't like.

Start with something easy, like room numbers.  How many beds/baths.  Do you need a garage?  Would you be ok with a condo/townhouse or do you want a large yard?  It gets easier the more you think about it!

ETA: or just fill this out: www.hud.gov/buying/wishlist.pdf

[Kit]

Jul 18, 2013 12:17:31 GMT -5 wambam said:

lightbulbsun - I have no idea what I want. Is that weird? I know I need lots of kitchen counterspace because I cook a LOT. But other than that, I'm like whatev.

wambam, lightbulbsun has a good point. You'll need to know what you want, because your realtor will ask you, and that info is used to conduct the search for homes.  Better figure it out, girl!  

Buying a house is an exciting thing, take your time, get all of your info first. Good luck!!

[goaskalice]

wambam Since you're not sure about what you can afford I recommend speaking with a mortgage broker ASAP. They can explain how much taxes, insurance, PMI (if necessary) would be at current interest rates so that you can work backwards to get a home price to shoot for.

A good agent will have a mortgage broker they work with closely, and who they know can get deals closed on time. Ask your friends and family for a referral. Meet with them and get a feel before you commit. Finding one who's niche is first time buyers would be pretty important since you're going to need some hand holding. I don't mean that in a condescending way About 70% of my clients are first time buyers, and they just require a different skill set and need to be talked through the process more thoroughly. Not every agent is good at that, trust me!

If you have specific questions feel free to ask here or PM me.  

[thatgirl2478]

Jul 18, 2013 11:49:34 GMT -5 sergey said:

Jul 18, 2013 11:34:34 GMT -5 wambam said:

I'm actually really surprised by how much house it says we can afford.

I think these are typically on the high end; they'll make you house poor even if you can technically make the payments. Do not spend as much as you're approved for.

Honestly, the mortgage 101 calculator has always been pretty accurate for us - we used it on our first house and it gave us an upper limit that was lower than what the banks would approve us for ($30k difference).  I like it because, if you are honest about your numbers (debts, incomes, downpayment) it can give a pretty accurate estimate. 

I would make sure to take into consideration the property tax & insurance premiums.

[thatgirl2478]

Jul 18, 2013 12:08:52 GMT -5 @callmefia said:

Jul 18, 2013 11:59:25 GMT -5 Kit said:

wambam I'd actually stay away from those calculators. Sit down and outline your current rent/mortgage, expenses, etc and see what you'd be comfortable paying per month, and tell that number to your agent. Then she'll look for homes in that range for you.

This is really good advice. And keep taxes and insurance in mind.

 Beware when you use calculators because they won't automatically calculate that for you. I also pay $80/month outside my mortgage for homeowners insurance. Plus some of my utilities are higher in the house than our apartment (surprisingly, it's not that much worse even though our sq ft doubled).

Hope that helps you when thinking about your budget. I know around here, the amount of taxes are required to be listed with the home data, so just be sure you divide that up and tack it onto your payment amount.

This is why I recommended the one at mortgage 101.com - it DOES include property tax & insurance.  And it's pretty accurate - for a 210k house value it calculates approximately $400 / mo as the property tax, which is spot on (if you want to see the math:  ((210,000 / 3) - 5000) *.075=4800/12 = 400).  Insurance is a little low @ 35/mo, but pretty close (we pay about $45 for a less expensive house).

[thatgirl2478]

Jul 18, 2013 13:33:42 GMT -5 @callmefia said:

Jul 18, 2013 13:02:39 GMT -5 thatgirl2478 said:

This is why I recommended the one at mortgage 101.com - it DOES include property tax & insurance.  And it's pretty accurate - for a 210k house value it calculates approximately $400 / mo as the property tax, which is spot on (if you want to see the math:  ((210,000 / 3) - 5000) *.075=4800/12 = 400).  Insurance is a little low @ 35/mo, but pretty close (we pay about $45 for a less expensive house).

app like! I do have to say I'm curious about this because taxes are very different based on region. If we bought just one town over, our taxes could go from $3700/yr to $4200/yr or in the other direction as low as $2700/yr on a similar house. If we had a similar house in say, New Jersey, our taxes could be $8000/yr. It differs so much that I think you really just need to know how much they are on each house you look at.

Our house is valued under $210k and I said our insurance was $80. I can't remember for sure now if its $80 or maybe $60, so that $35 or $40 seems REALLY low. And we are underinsured according to a lot of people (we are comfortable with it and insured enough for mortgage etc). Of course, our area has seen a LO of wind damage in the last few years so maybe our rates are high.

But I can't look at the link now. Either way, I don't mean to second guess you at all, but just want to be informative at just how much of your payment goes to other items. I remember using the mortgage calculator and being surprised we could pay $700/month for our house. Lol. D'oh, I didn't include taxes.

The calculator I linked to asks for your zip code - so it should be pretty accurate unless your rates have changed recently.  I was just looking at my property tax records, so I know our tax rate is 7.5%.  Plus, YMMV on the $5k subtraction (homeowners exemption).