Airstud
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Where to turn to learn about home buying

Fri May 17, 2019 10:29 am

At my age, I shouldn't be renting; and that same statement would've held true ten years ago, but alas it was not in the cards.

I think it might finally be time to become a home owner, and the big transition thereto is of course fraught with all manner of psychofiscal peril. It's the biggest single financial transaction of your life, it is.

There are too many books & webinars out there for first-time homebuyers, even ones that aren't brought to you by the banks and mortgage companies, so I thought I'd ask the esteemed a.net community for their opinions on whatever books, pamphlets, websites etc. are good ones to turn to as reliable, worthwhile primers for the total American homebuying novice. :boggled:

Gracias.
Pancakes are delicious.
 
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trpmb6
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Re: Where to turn to learn about home buying

Fri May 17, 2019 1:21 pm

Airstud wrote:
At my age, I shouldn't be renting; and that same statement would've held true ten years ago, but alas it was not in the cards.

I think it might finally be time to become a home owner, and the big transition thereto is of course fraught with all manner of psychofiscal peril. It's the biggest single financial transaction of your life, it is.

There are too many books & webinars out there for first-time homebuyers, even ones that aren't brought to you by the banks and mortgage companies, so I thought I'd ask the esteemed a.net community for their opinions on whatever books, pamphlets, websites etc. are good ones to turn to as reliable, worthwhile primers for the total American homebuying novice. :boggled:

Gracias.


Everyone must reflect upon their own situation and circumstances to decide the right path towards home ownership. You rightly point out that there are hundreds of guides/books/webinars etc on what you should do. You have extremes as well. The Dave Ramsey's of the world would have you renting out a cardboard box until you had saved enough money to buy the most modest house you can find with cash. Of course this is not realistic. So he has this bit: https://www.daveramsey.com/get-started/home-buying among other webinars.

Again it comes down to situation. If able, one should find a comfortable home with which they are not just able to cover the monthly mortgage payments. But also the maintenance that comes with it. I just had to replace my A/C unit. As a renter, that falls on the landlord. People forget those hidden costs. (Though the argument also falls the other way, the landlord will adjust their rental rates to account for maintenance costs, they just get smeared out over time and across multiple tenants). The issue is those costs can be a large hit at once, and living paycheck to paycheck makes that a tough pill to swallow.

First time home buyers qualify for FHA loans that only require 5% down. I still recommend saving enough to put 30% down if possible. It will save you on the private mortgage insurance costs (PMI). https://www.daveramsey.com/blog/what-is ... -insurance (Note, to get out of PMI you only need 20%, but if you're doing 20% might as well go to the 30% so you get the better interest rates).

15 year loan if you can swing it. You'll get a better interest rate which will lower your total costs. But you can always refinance a 30 year loan a couple years in if you find you have the excess capital to make a 15 year loan work. My wife and I did this when we bought our first house. We didn't have the credit or the income to make a 15 year loan work. We refinanced a couple years later once we had great credit established and have a sub 3% loan. We will have our house paid off before our first born is even driving a car. (Which we'll need just to cover the insurance on his car! haha).

Most importantly, temper expectations. Don't watch house hunters. That show drives me crazy. Two 22 year olds looking for a house with a budget of 2 million??? come on. More house just means more cleaning and more maintenance. Also consider houses you may be able to grow into. We bought a house with an unfinished basement and I finished the basement myself. Saved tons of money and was able to make it our own while also earning equity in the house.

When you do find the house you want. Make sure you get it inspected. This is where having a good real estate agent is important. They know the area, the market, what houses are worth and what houses have problems. They may even know that certain builders in the area have certain issues with their construction habits etc. (of course this doesn't apply if you are looking for a more antiquated house - a house with character if you will). House's with character can be money sinks so just keep that in mind. An inspector will help identify where you may have maintenance costs and issues. In your contract, make the seller pay for a 1 year home warranty that covers appliances, water heaters and the HVAC system (among other items). It's a great bargaining chip in your offer letter. Make sure it covers parts and labor. No body ever turns it down because it only costs about 500 dollars. But it can save you some money on potential items the seller may not have disclosed or the inspector missed. (We had a water heater go out on us about a month after we bought the house - the previous home owner had left it running while the house was completely vacant for over a year and the tank was never purged producing a build up of sediment and eventually rusted out the bottom - we got it replaced completely free - including the cleanup). Another reason to get your own agent - the seller pays the agent fees. No cost to you. They don't get paid unless you buy a house - so at least be sure you're committed to buying - They're going to work hard for you - so long as you're truly committed to it.

Get a pre-approval letter from your preferred bank or credit union (i prefer the later as most will not sell your home loan). Some (maybe most?) real estate agents won't even start working with you until you get this. They, and you, need to know what your budget really is.

Lastly, I am not a CPA or registered Real Estate Agent, so all guidance provided above is simply based on my own personal experiences. Good luck house hunting! It can be fun. And don't settle! Make sure it's really the house you want, you'll be there for a while.
 
BlueberryWheats
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Re: Where to turn to learn about home buying

Fri May 17, 2019 2:32 pm

I seriously feel that such things should be taught in school (at least, they're not here in the UK).

I also rent, and I really should be an owner by now, but I wouldn't have the first clue about what to look for in mortgages etc. I have no idea about the buying process.
 
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casinterest
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Re: Where to turn to learn about home buying

Fri May 17, 2019 2:33 pm

If you are single and plan to move around a bit, and you don't see yourself in the same place in 5+ years(maybe longer now that the mortgage interest deduction doesn't really apply anymore).
Do not Buy!!!!!!!!!!
You will be restricted into a place, with no where to go.

The downside of Renting is that you do not build equity. You piss money to the wind every 30+ days.
The upside of Renting is that you can leave and move on when the place is not kept up for you by the landlord.

I have had to replace pipes, AC units, fridges, washers, dryers, and a host of other items for my home which has driven the costs up. However i still have positive equity in the home due to it's appreciation.
I plan to stay in my home for decades though.



The Dave Ramsey site is good for financing a home, but also remember to get what you want, and don't settle for less when you do buy.
Where ever you go, there you are.
 
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trpmb6
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Re: Where to turn to learn about home buying

Fri May 17, 2019 3:10 pm

Btw, I should also note, I generally don't agree with Dave Ramsey on a lot of things. But for foundational (is that really even a word?) principles he's good. He takes things to the extreme. He'd have you eating pork and beans out of a can with rice every meal of every day until you paid your house off. I'll let you in on a secret, I know he doesn't eat pork and beans out of a can.

Depending on interest rate, I don't think paying off a house is actually worth it. I feel you can get a better return for your savings in a high yield money market account. What paying off your house does do is reduce your obligations in the event of a job loss etc. (Of course, he tells you to maintain 6 months of your budgetary obligations as an emergency fund so you should always be prepared for a job loss anyways - to this point I do agree!)
 
mham001
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Re: Where to turn to learn about home buying

Fri May 17, 2019 3:14 pm

casinterest wrote:
(maybe longer now that the mortgage interest deduction doesn't really apply anymore).


That's big news to lot of people. Where did you get that?

But there is a point about whether it makes financial sense to buy. The OP needs to sit down and add up rent for a year vs ALL costs of home ownership and then make an educated guess on appreciation/depreciation.
 
mham001
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Re: Where to turn to learn about home buying

Fri May 17, 2019 3:18 pm

trpmb6 wrote:
(Of course, he tells you to maintain 6 months of your budgetary obligations as an emergency fund so you should always be prepared for a job loss anyways - to this point I do agree!)


The latest roadblock from lenders I've been running up against is a requirement to have 12-24 months of mortgage payments in reserve, even for a refinance with huge equity. Then they want proof of from where that money came, no sudden large deposits.
 
seat64k
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Re: Where to turn to learn about home buying

Fri May 17, 2019 3:25 pm

Airstud wrote:
At my age, I shouldn't be renting


This is a truism that may or may not be true. I've been reading a lot about personal finance over the last year or so (being unexpectedly unemployed tends to focus the mind on personal finances!), and I've learned some things I hadn't considered:

1. The increase in value of your property, minus the cost of ownership (interest on your mortgage, rates & taxes, maintenance, insurance, etc) may not even track inflation.

2. Your money could be doing much better in sensible investments.

This, of course, depends a lot on your area and inflation where you live.

As for where to learn, http://www.reddit.com/r/personalfinance is a fantastic resource, if you're in the US. Read the wiki, follow the sub for a while, you'll get a feel for it.
 
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casinterest
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Re: Where to turn to learn about home buying

Fri May 17, 2019 3:33 pm

mham001 wrote:
casinterest wrote:
(maybe longer now that the mortgage interest deduction doesn't really apply anymore).


That's big news to lot of people. Where did you get that?

But there is a point about whether it makes financial sense to buy. The OP needs to sit down and add up rent for a year vs ALL costs of home ownership and then make an educated guess on appreciation/depreciation.


I make good money, and this year, I couldn't qualify for anything but the standard deduction. The mortgage interest deduction went bye bye.

But here is an article that really drives it home.

https://www.fool.com/taxes/2018/10/13/c ... -2018.aspx
THink of it this way: The 2017 standard deduction for a married couple was $12,700. So, a married couple that paid $15,000 in mortgage interest and also had $3,000 in charitable contributions and $6,000 in state and local taxes would have been able to reduce their taxable income by an additional $11,300 by itemizing. For 2018, the standard deduction for a married couple is $24,000, so this couple wouldn't be any better off by itemizing.

Traditionally, roughly 30% of taxpayers have itemized deductions each year. In 2018, early forecasts predict that this will drop to just 5%. In other words, 25% of the U.S. population will no longer be able to itemize deductions, and therefore won't be able to use the mortgage interest deduction in 2018.
Where ever you go, there you are.
 
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trpmb6
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Re: Where to turn to learn about home buying

Fri May 17, 2019 5:10 pm

mham001 wrote:
trpmb6 wrote:
(Of course, he tells you to maintain 6 months of your budgetary obligations as an emergency fund so you should always be prepared for a job loss anyways - to this point I do agree!)


The latest roadblock from lenders I've been running up against is a requirement to have 12-24 months of mortgage payments in reserve, even for a refinance with huge equity. Then they want proof of from where that money came, no sudden large deposits.


That's ridiculous. Requiring proof of employment with steady income, sure I get that, but requiring someone to have 12-24 months of mortgage payments? The only thing I can think that would track with is waiving the private mortgage insurance which goes away after 20% (which works out to about 2 years if you had put down 10% - ie you need to pay another 10% to get to the 20% which takes about 2 years to do). So maybe they're saying you're required to show 24 months of payment in reserve in order to waive PMI?

Also, @Airstud, you may find that in a year or two you cross the 80/20 threshold through a combination of payments and home appreciation and can get the house re-appraised to prove to the bank the home is worth more than the original cost of the mortgage and thus they can drop the PMI requirement.
 
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WingsFan
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Re: Where to turn to learn about home buying

Fri May 17, 2019 5:53 pm

trpmb6 wrote:
mham001 wrote:
trpmb6 wrote:
(Of course, he tells you to maintain 6 months of your budgetary obligations as an emergency fund so you should always be prepared for a job loss anyways - to this point I do agree!)


The latest roadblock from lenders I've been running up against is a requirement to have 12-24 months of mortgage payments in reserve, even for a refinance with huge equity. Then they want proof of from where that money came, no sudden large deposits.


That's ridiculous. Requiring proof of employment with steady income, sure I get that, but requiring someone to have 12-24 months of mortgage payments?


It's not really unreasonable. If you have stashed away 6 months of *living* expenses as an emergency fund in your bank account, you already have more than year's worth of mortgage payments in savings.
Generally mortgage payment is supposed to be 1/4 to 1/3rd of your take home pay so as long as one doesn't buy a home they can't afford, they should be OK.
 
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trpmb6
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Re: Where to turn to learn about home buying

Fri May 17, 2019 6:52 pm

WingsFan wrote:
trpmb6 wrote:
mham001 wrote:

The latest roadblock from lenders I've been running up against is a requirement to have 12-24 months of mortgage payments in reserve, even for a refinance with huge equity. Then they want proof of from where that money came, no sudden large deposits.


That's ridiculous. Requiring proof of employment with steady income, sure I get that, but requiring someone to have 12-24 months of mortgage payments?


It's not really unreasonable. If you have stashed away 6 months of *living* expenses as an emergency fund in your bank account, you already have more than year's worth of mortgage payments in savings.
Generally mortgage payment is supposed to be 1/4 to 1/3rd of your take home pay so as long as one doesn't buy a home they can't afford, they should be OK.


Valid point. I guess I'm just thinking of when I first bought my house. Definitely did not have that saved away. But we were young engineers with solid jobs. And in full disclosure we bought our house on the tail end of the housing crisis. I know many across the country and likely here on these forums don't want to hear this, but for my age group, the housing crisis hit at the perfect time. I managed to buy my house at rock bottom prices. Easily 50k below what it was built for several years earlier. House is worth at least double what i paid for it at this point. (granted, as i noted earlier I finished my basement myself)
 
seb146
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Re: Where to turn to learn about home buying

Fri May 17, 2019 9:18 pm

Nothing but nothing prepared us for this. The brosband and I bought a house and have really big plans to make this place look great. It just keeps getting worse and worse. Anything that can go wrong will. Be prepared for everything.

I will say it is nice to not have neighbors on the other side of the wall and it is also nice to be paying the same in mortgage as others do in rent. But all the work......
You bet I'm pumped!!! I just had a green tea!!!
 
mham001
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Re: Where to turn to learn about home buying

Fri May 17, 2019 9:20 pm

WingsFan wrote:
It's not really unreasonable. If you have stashed away 6 months of *living* expenses as an emergency fund in your bank account, you already have more than year's worth of mortgage payments in savings.
Generally mortgage payment is supposed to be 1/4 to 1/3rd of your take home pay so as long as one doesn't buy a home they can't afford, they should be OK.


It does seem unreasonable on a simple no cash-out refinance that would save ~$2k per month with 50-60% equity and a solid history of paying on time.
 
Airstud
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Re: Where to turn to learn about home buying

Sat May 18, 2019 12:42 am

BlueberryWheats wrote:
I seriously feel that such things should be taught in school (at least, they're not here in the UK).


It's not taught here in the U.S. either.

(At this point, neither is arithmetic.)
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mham001
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Re: Where to turn to learn about home buying

Sat May 18, 2019 1:18 am

Airstud wrote:
BlueberryWheats wrote:
I seriously feel that such things should be taught in school (at least, they're not here in the UK).


It's not taught here in the U.S. either.

(At this point, neither is arithmetic.)


If that bothers you, you need to spend more money to live in a better school district. My kids are learning far more math sooner than I ever did, but that is a large part of why I rent the house I live in (my sixth grader came home today with her first college scholarship)
 
NIKV69
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Re: Where to turn to learn about home buying

Sat May 18, 2019 1:24 am

trpmb6 wrote:
Btw, I should also note, I generally don't agree with Dave Ramsey on a lot of things.



You kidding the guy is a guru! I love him. He tells it like it is and I have used his teachings in my life. I am lucky though I bought a condo for half of it's worth in the down market and paid cash. No mortgage the fees were nuts and the money I saved was worth hitting the bank account.

As for the original question. Ask a lot of questions and try to find a good lawyer. It costs a little money but it's worth it.
"Some people did something" Rep Omar on 9/11
 
Airstud
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Re: Where to turn to learn about home buying

Sat May 18, 2019 7:09 am

BlueberryWheats wrote:
I seriously feel that such things should be taught in school (at least, they're not here in the UK).

I also rent, and I really should be an owner by now, but I wouldn't have the first clue about what to look for in mortgages etc. I have no idea about the buying process.


But surely there are some beginner's resources out there, like a British counterpart to this site (from the U.S. federal government): https://www.consumerfinance.gov/consume ... mortgages/

trpmb6 wrote:
foundational (is that really even a word?)


Yes.
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fr8mech
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Re: Where to turn to learn about home buying

Sat May 18, 2019 7:22 am

Airstud wrote:
, so I thought I'd ask the esteemed a.net community for their opinions on whatever books, pamphlets, websites etc. are good ones to turn to as reliable, worthwhile primers for the total American homebuying novice. :boggled:

Gracias.


Quite simply, the wife and I used whatever edition of Home Buying for Dummies was current in 1998, when we bought our first house. Simple, concise, and good information.
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Aesma
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Re: Where to turn to learn about home buying

Sat May 18, 2019 4:24 pm

Here in France real estate has been going up pretty much all my life, since more than 25 years ago. The economic crash didn't affect this, because here everybody has a fixed interest mortgage, and if you lose your job you have good unemployment benefits, so people didn't lose their home, consequently the housing market didn't crash.

Now with low interest rates (less than 1% for 15 years, 1.5% for 25 years) and high demand in many places, prices are increasing faster, so I really want to buy soon.

Currently I live very close to my workplace, that's good, except I can only afford a condo here, when what I really want is a house, with some distance between it and the neighbors. Means I must look at suburban or even rural places, that are commutable. Places I'm not familiar with, so it's complicated.

I will put more than 40% down, but I must research how much are the property taxes for every city, because that could make a big dent in my budget.

Buying versus building is also something to consider, here building comes out cheaper, but finding land is a big problem. I'm looking for a big plot and that simply doesn't exist without a house already built, because if it does exist, it's sold as several smaller plots. In fact plenty of available plots are really people selling part of their large garden, for a 6 figures amount of money.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
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TWA772LR
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Re: Where to turn to learn about home buying

Wed May 22, 2019 5:36 pm

A guy a work used Youtube to research how to buy a house.
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