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Advice On Buying A House?


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#1 Dupin

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Posted 09 May 2021 - 08:00 PM

You guys got any advice for buying a house?  Anything I should be thinking about in the process that I'm probably not?

 

I got the funds for a decent down payment, I applied for pre-approval at a few places for a mortgage, and I'm finding an agent.  It's time to do this.


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#2 Mackus

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Posted 09 May 2021 - 08:05 PM

My advice would be that if you are in a position to wait six months to a year, that you'll probably save 10-20% on a similar house and not have to do anything crazy like agree to waive all the inspections in order to be the best offer.

Beyond that, think about a few big things that matter to you and focus on those. Especially if they are things you can't change, like location, lot size, price, etc. Small things you can change, so don't dwell on those if they aren't right. And no matter how much you think a house is perfect, you're gonna wanna change stuff whether it's easy stuff like painting or appliances or bigger things like redoing a bathroom or landscaping or huge things like some renovations. So budget to need a bunch of extra cash or to have access to further loans depending on how much you wanna do.

Think about whole picture when it comes to finances, not just the purchase price. Property taxes and income tax vary by county/city, so know how much you'll have to pay all in.
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#3 Old Man

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Posted 10 May 2021 - 05:48 AM

My advice would be that if you are in a position to wait six months to a year, that you'll probably save 10-20% on a similar house and not have to do anything crazy like agree to waive all the inspections in order to be the best offer.

Beyond that, think about a few big things that matter to you and focus on those. Especially if they are things you can't change, like location, lot size, price, etc. Small things you can change, so don't dwell on those if they aren't right. And no matter how much you think a house is perfect, you're gonna wanna change stuff whether it's easy stuff like painting or appliances or bigger things like redoing a bathroom or landscaping or huge things like some renovations. So budget to need a bunch of extra cash or to have access to further loans depending on how much you wanna do.

Think about whole picture when it comes to finances, not just the purchase price. Property taxes and income tax vary by county/city, so know how much you'll have to pay all in.

Its a seller market out there for sure, prices have been rising for a while. Extremely low interest rates are helping that.

 

What are you basing your opinion about houses prices dropping if you wait?



#4 Mackus

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Posted 10 May 2021 - 06:51 AM

Its a seller market out there for sure, prices have been rising for a while. Extremely low interest rates are helping that.

What are you basing your opinion about houses prices dropping if you wait?

Optimism about the world returning to normal.
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#5 Mackus

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Posted 10 May 2021 - 06:54 AM

Stay within the guidelines of the Debt to Income ratio, under 28% toward mortgage and 36% for total debt load.

Dont apply at a few places, every time you run your credit report, it takes a hit.

The first part is terrific advice. Even now, don't spend up to the max of what banks will allow you to borrow, that's going to make you very house poor if not downright bankrupt you.

The second thing is not exactly accurate. Applying for mortgages doesn't lower your credit score to the point it'll impact your ability to get a loan. You don't need to be pre-approved at more than one place, so sticking with the first one you've gotten is a good idea, but definitely shop around for lenders, especially once you've gotten under contract. That's a competitive market now too and you can find good deals in certain places. Sometimes big national lenders are the best and sometimes small local guys give you the better loan (which they then usually turn around and sell, but that's fine).
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#6 Mackus

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Posted 10 May 2021 - 06:59 AM

Oh also since you mentioned having saved for a down payment...I'd consider not using it. Or rather using as little as you can. Put down enough to get a no-PMI mortgage, usually 20%, but don't put any more than that in. Rates are so low now that it's better to have a bigger loan but more cash on hand that you can invest for a better return than the <3% rate your mortgage will be. Plus it's liquid, and you can easily access it if you need it.  And the rates will likely still be low enough for this a year or so from now if you're able to wait.


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#7 Old Man

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Posted 10 May 2021 - 08:18 AM

The first part is terrific advice. Even now, don't spend up to the max of what banks will allow you to borrow, that's going to make you very house poor if not downright bankrupt you.

The second thing is not exactly accurate. Applying for mortgages doesn't lower your credit score to the point it'll impact your ability to get a loan. You don't need to be pre-approved at more than one place, so sticking with the first one you've gotten is a good idea, but definitely shop around for lenders, especially once you've gotten under contract. That's a competitive market now too and you can find good deals in certain places. Sometimes big national lenders are the best and sometimes small local guys give you the better loan (which they then usually turn around and sell, but that's fine).

I think it depends on what your current credit score is, years ago, I was rebuilding my credit and received the advise that running your credit will cost you a couple of points. If you are right around the lower side of that bracket, then it "can" hurt you. The lower your bracket is, the more risk you are, and the higher interest rate.

 

Lucky I grew up and learned how to manage my money better.



#8 Old Man

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Posted 10 May 2021 - 08:21 AM

Optimism about the world returning to normal.

I wish I could share that optimism.

 

Wall Street has been on edge for a couple of weeks, with the news about tax changes, and what they think it will do to the economy.

 

I dont think the politicians really gasp that the economy is driven by the rate the feds set for the banks. So far that has stayed low.



#9 Mackus

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Posted 10 May 2021 - 08:34 AM

I think it depends on what your current credit score is, years ago, I was rebuilding my credit and received the advise that running your credit will cost you a couple of points. If you are right around the lower side of that bracket, then it "can" hurt you. The lower your bracket is, the more risk you are, and the higher interest rate.

 

Lucky I grew up and learned how to manage my money better.

 

A credit check will lower your score maybe 5-10 points, should bounce back within a year, and multiple inquiries within a month or two are treated as a single inquiry (so you can shop around).

 

I guess if you're right on an edge it can hurt you, but each credit service is slightly different and banks tend to use the middle or take an average, so really the act of applying for a loan doesn't hurt you.  And since it's an absolutely necessary part of getting an offer accepted and then closing on that offer, you gotta do it.


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#10 Mackus

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Posted 10 May 2021 - 08:37 AM

I wish I could share that optimism.

 

Wall Street has been on edge for a couple of weeks, with the news about tax changes, and what they think it will do to the economy.

 

I dont think the politicians really gasp that the economy is driven by the rate the feds set for the banks. So far that has stayed low.

 

I'm talking about the housing market.  It's crazy right now because there is no inventory, because almost nobody is moving during the pandemic, so the few buyers that are out there are finding even fewer sellers and it becomes a very simple supply/demand issue.  So any decent house that hits the market has a dozen over-list offers on it, some with wildly irresponsible contingencies like waiving inspection.

 

As we get vaccinated and people start doing more and more, we'll return to a more normal housing market, so prices will go back down to being reasonable rather than 10-20% higher than a year before all this started.



#11 The Epic

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Posted 10 May 2021 - 08:57 AM

Mackus -nailed- the post. Well done. 

 

Do you have kids? I think there's more things to consider as well, if you have children to account for (schools, access, etc).

 

We casually looked into moving a little while back, as our commute days look like they'll be permanently limited, and we stopped looking really quickly when it became clear that it's a seller's market. We have no real motivation to move other than "we'd like more land" so we're gonna go back to waiting. 



#12 Old Man

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Posted 10 May 2021 - 09:01 AM

I'm talking about the housing market.  It's crazy right now because there is no inventory, because almost nobody is moving during the pandemic, so the few buyers that are out there are finding even fewer sellers and it becomes a very simple supply/demand issue.  So any decent house that hits the market has a dozen over-list offers on it, some with wildly irresponsible contingencies like waiving inspection.

 

As we get vaccinated and people start doing more and more, we'll return to a more normal housing market, so prices will go back down to being reasonable rather than 10-20% higher than a year before all this started.

Makes sense. 



#13 Old Man

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Posted 10 May 2021 - 09:03 AM

Mackus -nailed- the post. Well done. 

 

Do you have kids? I think there's more things to consider as well, if you have children to account for (schools, access, etc).

 

We casually looked into moving a little while back, as our commute days look like they'll be permanently limited, and we stopped looking really quickly when it became clear that it's a seller's market. We have no real motivation to move other than "we'd like more land" so we're gonna go back to waiting. 

Also look at things like car insurance.

 

Years ago, I loved in PG county, stayed in the same "city" but moved over to AA county and my insurance dropped by 60%. When I asked my agent, they said it was based on accident/theft rate for that county.

 

Let me tell you, even as a married male, in my early 20s, that 60% was a significant reduction.



#14 RShack

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Posted 10 May 2021 - 12:10 PM

If you fall in love with a house, be careful... decide what it's worth to you, stick to that number, and then leave it up to fate... otherwise it'll drive you nuts... plus, you can get nickel-and-dimed into paying way too much... a few thousand here, a few thousand there, next thing you know you're spending way too much...

 

Also, listen to Mackus... put the least down you can and still  avoid paying that should-be-criminal PMI... usually 20% down is what's required... dunno if there are exceptions to that which allow a smaller downpayment...


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#15 Pedro Cerrano

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Posted 10 May 2021 - 12:27 PM

The first part is terrific advice. Even now, don't spend up to the max of what banks will allow you to borrow, that's going to make you very house poor if not downright bankrupt you.

 

 

So if you earn 100k/year your max mortgage payment should be $2,300?


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#16 Nigel Tufnel

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Posted 10 May 2021 - 01:23 PM

I guess also keep in mind that your property taxes might not be fully tax deductible - you have to add your state income taxes and property taxes together, and the total deduction is limited to $10,000. 



#17 The Epic

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Posted 10 May 2021 - 01:41 PM

So if you earn 100k/year your max mortgage payment should be $2,300?

 

Assuming your student loan/vehicle situation is paid off, yes. I've always baked it into that ratio but (I believe) most people don't.



#18 Mackus

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Posted 10 May 2021 - 03:06 PM

So if you earn 100k/year your max mortgage payment should be $2,300?

 

Yes, that's a good ballpark for what your mortgage payment should be.  36-43% total debt-to-income is another good benchmark, so add your car payments, any credit car debt payments, any student loan payments, etc to your mortgage payment and make sure it's not more than 43%, or $3583 for your example $100k salary.  36% ($3000) if you wanna stay conservative.  And add in the property tax and homeowner's insurance if you wanna be more conservative.

 

Also remember that your mortgage is just the amount financed, not the purchase price.  So if you put 20% down, it's 80% of the purchase price.

 

I wouldn't buy a house without fully evaluating all my incomes and expenses and seeing how much house I can afford factoring in property taxes, homeowner's insurance, and the tax savings of the property tax and mortgage interest.  But the above ratios will give you a pretty good idea of what you can afford for basic search parameters.  I'm pretty risk-averse so I'd also give myself a lot of margin.  On the other hand I just blew the budget on a massive renovation by a ridiculous amount while adding 2 new dependents that will need child care and my wife just had her salary cut 10% (Covid struggles) and now is on unpaid leave for 1/3 of a year.  I'm a bit out of my comfort zone :)



#19 Pedro Cerrano

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Posted 10 May 2021 - 04:01 PM

Yes, that's a good ballpark for what your mortgage payment should be. 36-43% total debt-to-income is another good benchmark, so add your car payments, any credit car debt payments, any student loan payments, etc to your mortgage payment and make sure it's not more than 43%, or $3583 for your example $100k salary. 36% ($3000) if you wanna stay conservative. And add in the property tax and homeowner's insurance if you wanna be more conservative.

Also remember that your mortgage is just the amount financed, not the purchase price. So if you put 20% down, it's 80% of the purchase price.

I wouldn't buy a house without fully evaluating all my incomes and expenses and seeing how much house I can afford factoring in property taxes, homeowner's insurance, and the tax savings of the property tax and mortgage interest. But the above ratios will give you a pretty good idea of what you can afford for basic search parameters. I'm pretty risk-averse so I'd also give myself a lot of margin. On the other hand I just blew the budget on a massive renovation by a ridiculous amount while adding 2 new dependents that will need child care and my wife just had her salary cut 10% (Covid struggles) and now is on unpaid leave for 1/3 of a year. I'm a bit out of my comfort zone :)

Hmmm it’s almost like I should speak with a loan officer or something before doing this haha.

I am still saving for a down payment. Plan to buy myself a nice place as a 40th bday gift next year.
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#20 BSLChrisStoner

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Posted 10 May 2021 - 04:21 PM

Hmmm it’s almost like I should speak with a loan officer or something before doing this haha.

 


Equity Mortgage... Ken Venick ([email protected]). Tell him you found him through BSL. 

 

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