Thursday, March 17, 2011

Buying a House: Some General Tips

I've been trying to think of some tips for first-time home buyers in case magically someone stumbles upon this and they too are looking to buy a house for the first time. I have a few, and they're listed below in some semblance of an order.

First thing's first: budget, budget, budget. Don't bother looking at houses above what you can afford. A. they're probably not worth the extra money if you're capable of making cosmetic repairs and B. you'll just make yourself sad if you find something you LOVE but would have to beg family members for money just to cover the closing costs/down payment.

Not being ones to listen to our own advice, we looked at houses we couldn't afford and you know what? They weren't impressive. A lot still had changes we wanted to make and the price + changes would have put us in a bad situation money-wise. Stick to what you're comfortable with.

Our philosophy? Go with something that's below your means. We're reducing our monthly housing costs by between 400-500 dollars so that we have built-in money for all the updates we want to do, and for the inevitable alien invasion or volcano sprouting up in the park across the street that will result in lots of costly home repairs (funny aside, when I was a kid, my biggest fears were volcanoes and aliens. I could take on the creepy porcelain dolls my mom insisted I should have in my room, but watching Mars Attack and Volcano left me mortified.)

Always have WAY more money than you need for closing costs and down payment. We lucked out and found a house that's being sold by a private seller so we were able to negotiate the bulk of our closing costs, but that's not always the case. Sometimes closing costs can run into the tens of thousands, TENS OF THOUSANDS, depending on the type of loan you're getting.

Negotiate closing costs. Even if this means paying a little more for the house, it's worth it. Did I mention these things can run into the TENS OF THOUSANDS? Now-a-days, almost any seller worth their salt will shell out closing costs. Keep your offer reasonable though. Unless the house is legitimately worth 20k less than what they're asking, be fair and don't try to low ball them. The only time I can think of this not being the case is if the house has been on the market for an ungodly amount of time and/or the seller is "motivated". Being fair about your offer means the more stuff you'll get on the back end. For instance, our house needs the roof repaired and an upgrade in the electrical system, and because we kept our offer reasonable, the hope is they'll be open to paying for this.

DO YOUR RESEARCH. Don't rely on the buyer's agent to do this. While many, including ours are helpful, you can move a lot quicker and make your own decisions if you do your research. Know the comps in the area before you look ( is a great resource for this though you may want to double check with the MLS), look at other houses in the area, assuming there are any, and compare what you get almost line by line. For instance, in our hopefully new neighborhood there are five houses, including ours, on the same street for sale. We looked at each one. They ranged from 70k -140k. We looked at how long each had been on the market, what they were bought for, what work had been done in each (or in the case of ours, what HADN'T been done), and came up with our offer from that. Also, know what the house sold for/was appraised for in the housing peak and if that information isn't available look at what a similar house in the same neighborhood sold for. We knew we didn't want to spend 140 on a house in the neighborhood because even in the housing boom the most the houses sold for were 160. While this is likely because most of them haven't been updated in 30 years, it still gives you an idea of what your absolute best resale value is going to be.

Where ever you're looking at buying see if there's a neighborhood loan program offered either by the city, state or county. These are usually gentrification/development loans for low-income neighborhoods or rural areas but in some cases you can find awesome, tucked away safe neighborhoods with these programs. Baltimore City has one that unfortunately wasn't funded in time for our closing date, but had we gotten it it would have been a 3% downpayment, a 4% interest rate and we could add on up to 70k worth of renovations into the house. These small loan programs are just as reliable as an FHA or conventional mortgage and have to be done through a (usually local) bank, but you get a lot of benefits by doing it. Some research can save you hundreds of dollars a month.

There are more, but this should be enough to get you started. We're going through the final mortgage approval process now, so I'll have some tips about that soon.

1 comment:

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