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Thread: Advice on Buying a House

  1. #1
    Bullpen or whatever RedEye's Avatar
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    Advice on Buying a House

    Any resources anyone would offer? I feel like good advice on buying a house is hard to find. Everyone wants a piece of the pie, and I don't know who to trust to be disinterested. I've read about the 28/36 rule, but people seem to be all over the place about what is a responsible amount of debt to carry. Anyone I do know doesn't know enough about where I live to be of help.
    Last edited by RedEye; 12-10-2019 at 11:31 PM.
    "Iíll kind of have a foot on the back of my own butt. Thatís just how I do things.Ē -- Bryan Price, 10/22/2013

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    breath westofyou's Avatar
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    Re: Advice on Buying a House

    Find the best mortgage broker in your area, choose what you want over the realtor's wants

    Be prepared to live there long enough to be able to care for it

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    TyrannoSuarez Wrecks WrongVerb's Avatar
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    Re: Advice on Buying a House

    I've bought two houses in my life.

    Price range: 3x your household yearly salary is reasonable.

    Get approved for your loan amount before you go shopping. That will narrow things down further.

    Be sure to price any HOA fees into your overall affordability.

    Both my homes were new construction, and I definitely prefer that over something with age. But that's personal preference. It was nice getting exactly what I wanted without having to worry about significant repairs or alterations.

    Don't do something crazy like a teaser rate or adjustable rate. I figure if you have to do financial tricks to buy a home, then you're buying too much home.

    Understand the neighborhood you're buying into. That includes traffic patterns, proximity to schools, shopping, and recreation.

    Understand any HOA restrictions if there is an association.

    Finally, be certain you're in it for the long haul. It's hard to get out from under a home if things go south in your life regarding job, marriage, finances, etc.
    Gratitude + Forgiveness = Happiness

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    Bullpen or whatever RedEye's Avatar
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    Re: Advice on Buying a House

    Thanks, guys. We've actually got a contract on a house now, but are getting sticker shock and cold feet. The house is just five years old, so almost like new construction. The mortgage will be a 30-year fixed and we took a loan from my wife's 403b retirement account to put 10% down. Even so, paying back that loan + the PMI of not reaching 20% is going to add about $600 to our monthly payment. That's hard to stomach with all of our other expenses, so we are thinking of pulling out. I'm just wondering -- is this kind of stress what others went through?
    Last edited by RedEye; 12-11-2019 at 12:26 AM.
    "Iíll kind of have a foot on the back of my own butt. Thatís just how I do things.Ē -- Bryan Price, 10/22/2013

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    Member Sea Ray's Avatar
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    Re: Advice on Buying a House

    Quote Originally Posted by RedEye View Post
    Any resources anyone would offer? I feel like good advice on buying a house is hard to find. Everyone wants a piece of the pie, and I don't know who to trust to be disinterested. I've read about the 28/36 rule, but people seem to be all over the place about what is a responsible amount of debt to carry. Anyone I do know doesn't know enough about where I live to be of help.
    It's hard to give much advice without knowing your situation, such as what are your reasons for wanting to be a homeowner at this point in life? Do you have a family? how long do you think you'll be in the house? Do you want the privacy and control of a house?

    Those questions aside, let me start with a couple lessons I learned on house #1...Make sure you put enough down to avoid mortgage insurance. I think that's 20%. Private Mortgage Insurance (PMI) is a huge ripoff. It's a fantastic deal for the insurance co and you get nothing for it.

    When you close on the house, be firm that you get the house the minute you sign the papers. My first realtor told us that it was customary to put in the deal that you (the buyer) would not take occupancy until 30 days later. Well that's a great deal for the seller. He has his money and he can stay another 30 days but you're out your down payment and closing costs yet you've got to spend another month renting wherever you are.

    Since the last Trump tax cut, very few people benefit from deducting mortgage interest. That incentive to buy a house is pretty well gone. Remember that you're looking at putting at least 1% of the house value into maintenance on an annual basis.

    Finally my advice is not to buy a new house. You pay a healthy premium for brand new and I don't think it's worth it. There is a new street in my neighborhood and they're priced at least $100K over what the "used" houses cost and the brand new ones don't have the improvements that people might have done in owning a house for 20 yrs or so, such as built-in cabinetry, shelves etc.

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    Member Sea Ray's Avatar
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    Re: Advice on Buying a House

    Quote Originally Posted by RedEye View Post
    Thanks, guys. We've actually got a contract on a house now, but are getting sticker shock and cold feet. The house is just five years old, so almost like new construction. The mortgage will be a 30-year fixed and we took a loan from my wife's 403b retirement account to put 10% down. Even so, paying back that loan + the PMI of not reaching 20% is going to add about $600 to our monthly payment. That's hard to stomach with all of our other expenses, so we are thinking of pulling out. I'm just wondering -- is this kind of stress what others went through.
    You're seeing how much that PMI sucks. I'd talk to your realtor about options to get out from under that. I had a neighbor who sold to a young couple that couldn't afford the down payment so they worked out a deal where they raised the price of the house high enough to cover what was needed and then money was transferred back to the buyer at closing to cover the 20% down payment.

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    Bullpen or whatever RedEye's Avatar
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    Re: Advice on Buying a House

    Quote Originally Posted by Sea Ray View Post
    Since the last Trump tax cut, very few people benefit from deducting mortgage interest. That incentive to buy a house is pretty well gone. Remember that you're looking at putting at least 1% of the house value into maintenance on an annual basis.
    We just realized this today, actually. It was like punch to the gut. I knew I didn't like the Trump tax cuts for other reasons, but this really hurts.

    - - - Updated - - -

    Quote Originally Posted by Sea Ray View Post
    You're seeing how much that PMI sucks. I'd talk to your realtor about options to get out from under that. I had a neighbor who sold to a young couple that couldn't afford the down payment so they worked out a deal where they raised the price of the house high enough to cover what was needed and then money was transferred back to the buyer at closing to cover the 20% down payment.
    Whoa. Now THAT'S creative. Is it legal?
    "Iíll kind of have a foot on the back of my own butt. Thatís just how I do things.Ē -- Bryan Price, 10/22/2013

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    Member Sea Ray's Avatar
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    Re: Advice on Buying a House

    Quote Originally Posted by RedEye View Post
    We just realized this today, actually. It was like punch to the gut. I knew I didn't like the Trump tax cuts for other reasons, but this really hurts.

    - - - Updated - - -



    Whoa. Now THAT'S creative. Is it legal?
    Sure it's legal. There's no harm to anyone. You're just a little more in debt but that's your choice. No one's putting a gun to your head. It doesn't change a thing for the seller provided the realtor's commission is figured into the calculus.

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    Member Sea Ray's Avatar
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    Re: Advice on Buying a House

    If you're just now learning about the Trump tax cut and PMi, I wish you'd started this thread sooner but let's not cry over spilled milk. Let's move forward and let's see if we can help you get into your first house! You've started the dialog. I and others will be glad to help you out from here

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  16. #10
    Bullpen or whatever RedEye's Avatar
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    Re: Advice on Buying a House

    Quote Originally Posted by Sea Ray View Post
    If you're just now learning about the Trump tax cut and PMi, I wish you'd started this thread sooner but let's not cry over spilled milk. Let's move forward and let's see if we can help you get into your first house! You've started the dialog. I and others will be glad to help you out from here
    Thanks. I actually did know about PMI, but for some reason I thought we wouldn't have to pay this time. We owned a house from 2007-2013 under very different circumstances, so I had a vague memory of it. I think this time around there were some deceptive financial instruments available out there early in our search that got me thinking that it didn't apply to us.

    I admit I had no idea that the Trump tax cuts were so bad for home owners.
    "Iíll kind of have a foot on the back of my own butt. Thatís just how I do things.Ē -- Bryan Price, 10/22/2013

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    Re: Advice on Buying a House

    Quote Originally Posted by RedEye View Post


    Whoa. Now THAT'S creative. Is it legal?
    As long as the seller is willing to deal and the final sale price is below the mortgage lender's appraisal you can ask them to do pretty much anything.

    If it's an older home, I find that cash allowances for new appliances or even a riding mower if it's a large lot are big perks to ask for. If you see a piece of furniture in the home you can always ask for it too.

    I once asked a seller who was unwilling to come down an additional 5K$ on an already reduced counter price, to throw in his almost new 6K$ john deere gator and a 4K$ montezuma toolbox that I saw in his garage as a condition to buy, they agreed.

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    Re: Advice on Buying a House

    These are general, some will not apply to you since you already have a house picked out, but putting them out there anyway:

    1. Buy in the best school district you can afford, whether you have kids or are planning to have kids or not. If/when housing ever crashes again, it doesn't hit as hard in good school districts.

    2. Don't pay 3x your household salary if you can avoid it. Why leave your margin of error so low? This can eliminate the whole issue of PMI. If someone thinks they don't have 20% for a down payment, well what if they buy a house that costs half as much? 1/4th as much?

    3. Just assume nobody in the transaction is looking out for your best interests, including your realtor. If someone actually does turn out to care and helps you in a real way, great! Probably they won't. Probably they would make less money by looking out for you, so it's easy to understand how that happens.

    4. Buying a bad house on a good street is a decent strategy on a lot of levels.

    5. Never, ever, ever do the opposite of #4 unless, like #1, you plan on living there very long term. Even then, probably don't.

    6. We live in an eternal hellscape where you have to press every advantage possible, so consider buying a duplex and renting out the other half. Very, very hard for your life to completely crash down around you in such a situation, and if things go well it's a first step towards building a little bit of wealth.

    7. Specific to Atlanta, really look long and hard at the HOA you're probably about to join.

    8. 15 year mortgages are cool.
    Last edited by Redsfaithful; 12-11-2019 at 02:10 AM.
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    Re: Advice on Buying a House

    We bought a townhouse in 1994 and just recently sold it. I don't know where you live but in the DC area it is very much a sellers market. The prices have gone crazy here and we got more than we asked for our TH. If its like that in your area you may want to wait a bit and let the market cool.

    As for the PMI, I don't know what the laws are now but in our case we were able to drop that after a while. As long as you have been on time with payments you can ask your lender to waive that after a while. I don't remember exactly when we did that.

    Watch out for the HOA if you have one. It didn't take long before I despised our HOA. They were all too glad to take your money but they did selective enforcement of the rules and regs they set down. Plus I just didn't like being told what to do about certain things for my own home. IMO they are a waste of money and do little to really help a home owner out.

    Buy a single family home! Don't do a townhouse like we did. You can't control who moves in next to you for one thing. We got some very bad neighbors next to us who grew progressively worse as time went by. HOA wouldn't do anything about them either even though they were not following many of the rules they had set down. Having bad neighbors can make your life miserable and you don't want your home to be a burden to live in. It should be a refuge and place of peace. By all means take that into consideration first when you look at the area you want to buy into.

    Also make sure your monthly mortgage payment are not so much you that you can still live fairly comfortable. Ours was too much for a long time and we got ourselves into way too much debt. If not for my dad helping us out for a while we would have had to have sold our house at a loss or most likely had it foreclosed. You really don't want to go down the heavy debt path because it will affect every aspect of your life.

    Once you buy just keep up on the routine maintenance. Change the filters,watch for leaks etc.... It will pay off in the end. If we hadn't have done that all along we would not have got the price that we ended up getting.
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    Re: Advice on Buying a House

    Quote Originally Posted by RedEye View Post
    Thanks, guys. We've actually got a contract on a house now, but are getting sticker shock and cold feet. The house is just five years old, so almost like new construction. The mortgage will be a 30-year fixed and we took a loan from my wife's 403b retirement account to put 10% down. Even so, paying back that loan + the PMI of not reaching 20% is going to add about $600 to our monthly payment. That's hard to stomach with all of our other expenses, so we are thinking of pulling out. I'm just wondering -- is this kind of stress what others went through?
    I purchased my first home 5 years ago, I was struggling to save money (thanks student loans) and was only about to muster a 5% down payment, and was stuck with PMI. However, I looked for a cheap house (1X-1.5X salary) in what I was confident would be an upcoming neighborhood. As a result I was able to comfortably afford a 15 year mortgage and within a bit over 3 years I was able to refinance and get rid of the PMI because I was at an 80% LTV.

    My thinking was that in 5-7 years when my student loans would be paid off I could reassess and purchased a nicer home and will have built some equity. If I am happy there, then I can stay and put some money into upgrading the house. I also looked at it if I wasn't happy with the area or house, I could never get too far underwater since it was cheaper and wasn't stretching me thin, and also it would be able to be a quality rental property if need be. Turns out the area has started taken off, property values are rising, and it is in a good location. I'll be sticking around for the foreseeable future and am currently starting to do some upgrading.

    I would suggest picking a home that won't stretch you thin financially, the bells and whistles are nice, but they won't be so nice when the new wears off and they offer less financial comfort.

    I'd also only buy a house if the ultimate goal is debt free home ownership (I'll never touch a 30 year mortgage). I wouldn't recommend owning because you are looking for home value appreciation, to me it is an added bonus.

    Just my two cents.
    Last edited by Griffey012; 12-11-2019 at 09:53 AM.
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    Re: Advice on Buying a House

    My only advice is to never make only your minimum mortgage payment unless you have other higher rate debt that you're trying to pay off at the same time or if you absolutely cannot afford it. $15, $20, anything, but the more the better. Particularly early in the mortgage, because you're paying so little principal in the minimum payment in the early years of your mortgage that even a little bit of extra principal makes a huge difference. I will save well over $100k in interest on my mortgage by making additional principal payments. Now, given the way the stock market has gone in the last decade, I'd actually be far ahead if I'd have taken that money and invested it, but I like the guaranteed return of paying off interest-bearing debt. I'm a bit risk-averse like that.

    Also, if you're committed to the strategy above, I also disagree with the advice to avoid ARMs. I've had ARMs on both my homes, and they've worked out great. You generally get a substantially lower rate locked in for the first five years, and if you're able to (and committed to) aggressively paying down principal those first five years, the interest savings can be enormous, and it severely reduces the risk of your rate going up (because there will be less principal to charge that higher interest rate on). In the recent rate environment, we've had our rate adjust down a number of times (and will again next March), but you certainly shouldn't count on that.

    Also, the new tax law isn't "bad" for homeowners (at least not in relatively low tax states like Georgia). It's just not advantageous for homeowners. Everyone gets the benefit of the higher standard deduction, so you get to take the deduction whether you actually pay mortgage interest or not. You're not going to be worse off because of it. You just (likely) won't see a mortgage interest deduction on a Schedule A.

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