First Time Home Buying: Advice?

[Philociraptor]

Rebels,

I feel the time has come for me to move out of my parents house and purchase a home. Rates are good, lots of foreclosures in the area mean a constant stream of houses coming into the market, and a city that's had constant home building for the last few decades means lots of different options (suburb in DFW area of Texas).

Current plan: find starter home (3br/2ba) around $100k. I can afford this on my own. Girlfriend will move in with me and get a job, combining incomes; this makes paying for the house easy and I can refocus on my student loans. Get a couple roommates for around $500/month (cheaper than any other apartments, plus they get common space and occasional leftovers), effectively paying the mortgage and utilities so that I can further focus on paying down my student loan debt.

I've been pre-approved for anything in my range (up to $130k). I've already seen one house I absolutely love but since I've only been looking for a week I want to see a few more before I decide it's the one.

What are some common and not so common things I should be thinking about? What things about homes do y'all find you don't notice at first but learn to love/hate? Any other solid advice on the entire process would be awesome as well.

-Phil

[cline]

Rebels,

What are some common and not so common things I should be thinking about? What things about homes do y'all find you don't notice at first but learn to love/hate? Any other solid advice on the entire process would be awesome as well.

-Phil

First, do not, no matter what, buy at the top of your budget and never buy at the top of what the bank says you can afford. Main reason - you will want to paint, make repairs, buy furniture, etc. You will not (I promise) be happy living with no furniture for a while or living with the broken tub or the ratty backyard. I can't tell you how many times people say this and sink deeper and deeper and deeper into debt because they really want to redo the kitchen because they just can't live with it. So, if you find your dream house but the kitchen needs redone - plan on it now, up front, not "I'll live with it" because you won't. If it irks you now, you'll give in. We decided on one of two routes for every house: 1) yes is totally 100% move in ready right down to the paint colors (rare -but actually what we bought!) or 2) yes, it's 75% and the price is lower than our budget so we have the extra to fix what needs fixing. This is so important. And I really mean, think about furniture, carpeting, etc.

Second, no matter what, be prepared to walk away. Everybody loves the first house they see. Everybody loses out at some point. Do not get too attached to a house until the offer has been accepted. Some owners/sellers are major jerks, working with sheriffs etc can be a major nightmare, other buyers swoop in. You'll be okay. There's another house out there. If you get too attached and get too eager, you'll make some unwise decisions like "well, the owner won't pay for a new roof and the house will cave it, but sure we love it!". gah! Lots of people do this.

Third, no matter what, buy in a good school district if you can. This totally matters for resale. Always think about that possibility.

Fourth, no matter what, can you really live with those neighbors? Example: we find a nice house and were touring it thinking "yeah" until we heard the dogs next door (townhouse style) and found out they had 6 HUGE dogs (not labs either) that they kept outside all day and that barked all day. Now I like dogs and I have some awesome four legged neighbors, but 6 huge barking dogs all day when one of us works at home? no way. Walk away. Your neighbor's trash pile will not be picked up, the yard will not be mowed, that car will not suddenly spring tires. If it bothers you now, it will be there in 5 years.

Fifth, get a lawyer to help you with closing. And not your realtor. The lawyer you hire will have a standard price for house closings. That is the only person in the room on your side (because you will be overwhelmed). Our lawyers have been phenomenal. Often only for minor stuff, but it matters.

whew. I've bought a few houses over the years. Always very carefully.

Also, if you want insight from the seller, let me know...

[Fink]

1. Make sure the layout of the house is accommodating to not just your needs now but any possible future needs, bathrooms in good convenient locations, doors don't open into each other

2. Avoid buying too much home, more space means higher upkeep costs

3. Avoid the top of your budget, issues can and will come up. Even though our home passed inspection, we quickly found out that a lot of issues can pop up that needed to be remedied

4. Make a checklist of what you like/don't like about each house and how much work/money it'll cost to address the things you want to change

5. Meet the neighbors before you buy, The house can be great but neighbors make or break the whole experience

6. Decide before hand how much work you are willing to put in a foreclosed home.

[wildross]

Fifth, get a lawyer to help you with closing. And not your realtor. The lawyer you hire will have a standard price for house closings. That is the only person in the room on your side (because you will be overwhelmed). Our lawyers have been phenomenal. Often only for minor stuff, but it matters.

ESPECIALLY if "your" real estate agent is also the listing agent

Seventh. Do NOT skimp on the inspection. Take the day off and watch what he/she does or does not look at. Start watching all of Mike Holmes's shows TONIGHT!!

[nickls]

You might want to think very carefully about how buying a house together will affect your relationship with your girlfriend. If you are already committed to each other for the long haul, great, if not, moving in together for primarily financial reasons might not be the best idea.

Plus you have some assumptions in there that your girlfriend will be able to find a job, and that you will be able to find renters to move in. I would make sure you have a bit of a safety net in case things take longer or don't work out exactly as planned.

[bigm141414]

ESPECIALLY if "your" real estate agent is also the listing agent

Seventh. Do NOT skimp on the inspection. Take the day off and watch what he/she does or does not look at. Start watching all of Mike Holmes's shows TONIGHT!!

As a fellow DFW area nerd who has bought a home what wildross says is true. Very important to have a good detailed inspection.

Also, a few other unconventional things to look at are:

1) Check door frames and corners for cracks or hard to close doors

2) Check the garage concrete for major cracks.

Both of these things point towards best case foundation settling or worst case the foundation has cracked and is in need of repair.

For example when I bought my home 2 years ago my realtor and inspector said I should get the foundation inspected. Sure enough one corner of the house was 4 inches lower than the other one. I asked the seller to have it stabilized before I would buy it which let me tell you is expensive ($7k+) and that is for stabilizing not even leveling! If buyers find the foundation cracked they won't buy it 7 out of 10 times.

Given the drought last summer I am sure there are a lot of houses out there that have this issue.

Oh also look at the windows. Are they double paned or single? Single paned will cost you a lot of money in electric bills during the summer due to poor insulation.

Oh, and one last thing depending on the DFW neighborhood the house might have a Federal Pacific breaker box. These are known to be fire hazards in homes from the 70s and 80s. Your home insurer will know of this and it will affect your insurance premiums. They are about $1k to replace. I have one in my home and so far no issues but it is something to be aware of when buying.

[Bean]

Inspect absolutely everything. Open every door and cupboard, look behind things and under things. If you can afford it, or have a friend in the industry, get a professional to do the inspection for you and give you a detailed report.

Also, if the present owners are willing to share the info, find out what they pay for utilities - will help you with determining your own budget.

From a budget perspective - nickls makes a similar point - make sure you can afford this in your own right without the need for other sources of income. Any additional sources of income can be used to pay off debt and some blow money for the things you want to do around the house that would just make it cooler (like a really large flat screen TV!).

That being said, if your parents aren't chasing you and there is no pressing need to move out, why don't you try and pay off the student loans first before making the plunge of taking on additional debt to buy a house. If you have no debt when starting in your own place, you will feel much less stressed.

[Philociraptor]

@cline: Solid. The range I’m looking in is already below my budget by a decent amount, especially if we add in a second income. Plus, as an engineer, I’m pretty handy, so fixing things will be cheap. School district, good idea. Babies scare me so I don’t plan on having any soon, but I’ll keep it in mind as I look. I did see a garage sale happening next door, should I be worried? Also, do I really need the lawyer if I’m using a realtor who my parents have known for ~28 years (worked together back in the day)?

@Fink: Layout is SUPER important. We don’t need a lot of space, but we want it all usable. Checklist made.

@wildross: Who is Mike Holmes?

@nickls: We’ve been together almost 6 years and basically live together now (mind you, in my parent’s house).

@bigm: Good call on the foundation stuff, last year’s drought was TERRIBLE. Would have never thought of windows or the breaker box either, thanks!

@Bean: Definitely. If we put down the money to hold it, I’m for sure taking an entire day off to play around with it. I want to get out of my parents house because I feel I’m ready to start a life of my own and I want to be closer to work. Also, 100k in student loans is going to take much longer to pay off than I want to stay with my parents.

[Silentplanet]

NEVER buy at the full amount which the bank offers.

Ohh and since this is a property to live in and not necessarily an investment. Get a property you love in a location you love.

[wildross]

Mike Holmes is a Canadian general contractor with a way with words and a love for the camera. I've remodeled all or part of 3 homes, and still learn stuff everytime I watch a show. Sort of a lower keyed Extreme Home Maker Over. With an emphasis on showing you the details. His motto is "Make it Right".

His shows are on HGTV http://www.hgtv.com/holmes-on-homes/show/index.html

[msuroo]

Babies scare me so I don’t plan on having any soon, but I’ll keep it in mind as I look.

Doesn't matter if you don't/won't have kids - school district is huge for resale. By your OP, you are looking for a starter home - which by definition is something you intend to move out of (read: sell) eventually.

[bigm141414]

Doesn't matter if you don't/won't have kids - school district is huge for resale. By your OP, you are looking for a starter home - which by definition is something you intend to move out of (read: sell) eventually.

Ohhh yeah this is important. What good schools are near affects 1) resale value 2) Taxes. Better schools = higher yearly taxes (not a bad thing but something to consider)

Also, check out the the local police blotters. Most have an interactive map of what types of calls have been responded to. (I know Richardson and Dallas have one as well as Plano). This can give you a sense of the crime rate in a particular area.

[Thrillho]

Mike Holmes is a Canadian general contractor with a way with words and a love for the camera. I've remodeled all or part of 3 homes, and still learn stuff everytime I watch a show. Sort of a lower keyed Extreme Home Maker Over. With an emphasis on showing you the details. His motto is "Make it Right".

His shows are on HGTV http://www.hgtv.com/holmes-on-homes/show/index.html

He's also my wife's secret boyfriend. Sshhhh! It's such a secret, even HE doesn't know!

I came into this thread with good intentions, since I'm a home designer and builder and have done home inspections for my friends, but almost everything got covered... and I'm amazed how much stuff I did that flows against the conventional wisdom. We bought at the verrrrrry upper end of our affordability range, so we ended up making almost all of our furniture (http://ana-white.com) or buying it at auction (my awesome real-leather full-arm club chair was five bucks) and our renovations to the house (landscaping, painting and whatnot) really only cost the amount of the paint, a $50 compressor on sale and a $30 paint spraying kit. Really, if you're not changing the drywall, customizing the house is all about labor, not materials.

Otherwise I generally agree: buying with resale in mind is pretty important. Take note of the neighborhood around you, is it on an upswing or a downswing? We bought a cheap-ass piece of crap in 2005 for $154,000 and just because of the surrounding property values increasing we sold that piece of crap for $245,000. It was a big house on a big lot, close to schools and groceries, but when we bought it the basement was trashed due to it being a former grow-op and the huge property was nothing but rocks and weeds garbage. It's amazing what buying a bit of a beater will do for you in the long run!

[Librarian of Doom]

I don't have much to add that hasn't already been said, but my husband and I just bought our second house together. The first one was a disappointing experience in a lot of ways, but this time was much better, mostly because of the things we learned from the first time.

Bathrooms and kitchens are a big deal. You use them multiple times a day, every day. Bad layout, limited space, limited storage space, all of these issues are a big deal. See what Cline said re: repairs. Don't just assume you can live with it.

Storage space is a must. Even if you're someone without a lot of possessions, you will have some, and unless you want them just cluttering up your house, you will need space to store them (and that's not even considering the space your gf or possible roommates will need. Consider the closets and other storage spaces as well as the living space.

Look at this house as if you will be spending the rest of your life in it, or at least the next ten years. You never can tell how the housing market is going to go, and even if you don't live in it forever, the features that make it great for you will also make it easier to resell later on.

[Malnux]

Also, check out the the local police blotters. Most have an interactive map of what types of calls have been responded to. (I know Richardson and Dallas have one as well as Plano). This can give you a sense of the crime rate in a particular area.

This is one of the main points I make whenever I want to rent/buy a place. There are websites that show you how many calls and arrests are made in the area and what kind they were. Sometimes they show little dots. The more dots (or the bigger the dots) the more crime rate. A lot of people don't pay attention or think it's unimportant until something happens.

[cline]

@cline: Solid. The range I’m looking in is already below my budget by a decent amount, especially if we add in a second income. Plus, as an engineer, I’m pretty handy, so fixing things will be cheap. School district, good idea. Babies scare me so I don’t plan on having any soon, but I’ll keep it in mind as I look. I did see a garage sale happening next door, should I be worried? Also, do I really need the lawyer if I’m using a realtor who my parents have known for ~28 years (worked together back in the day)?

You do not, I repeat: do not, want to come home from work or spend your weekend in your exciting new house fixing things. Minor jobs (faucet replacement), sure. Major jobs - kitchen redo, wall removal, new driveway - no way. You'll spend your life doing it. Find something you can honestly (be brutally honest) live with for a couple of years. For my last purchase, that was a requirement because I wanted to enjoy living in the evenings. I really did buy a house where I could even tolerate the paint colors for a couple of years. Over time, I repainted but not the first two years.

I wouldn't worry about a garage sale. I'd worry about cars on blocks, 10 dogs in a fenced in yard built for 3, rabbit breeding hutches, toxic ponds, overgrown yards, those types of things. I had a friend who bought a house believing the neighbors were tearing down the run down garage. Nope, never happened. Got worse and worse. Neighbors let it cave it. Best was - that was the view from their lovely deck.

As for a realtor/lawyer? Nope, wouldn't advise it. That person is still looking out for him/herself as a realtor. I loved my realtor (even saw her socially a few times) BUT still had my own looking out for me lawyer. Esp important if you are buying a foreclosure. It should be cheap and most lawyers have a house closing package. Standard here is about $500. It's worth every penny, every time.

[AuroraNorth]

Things to consider from HUD: http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home

They give advice on what to look for, checklists, getting a mortgage, homebuying programs and lots more.

[Shortkaik]

This is great to see! This is something i've begun toying with lately - I'll be probably looking to buy my first home within the next 2-4 years. It scares me how expensive they are!

One question I have is about down payments and upfront costs: I've heard the down payment can be anywhere form 5%-20%, which isn't very helpful (the difference between 5% and 20% in my estimated price range is an entire year's income!) Any comments on what a typical down payment is, and how that gets decided upon? And what other up front costs are there? (Lawyer, inspection, realtor, fees, etc.)

[Thrillho]

It's generally minimum 5%. You are approved for a higher mortgage the more you can put down up front. For example, they might only loan you $100,000 if you can only put down 5% of the total cost, but they might loan you $150,000 if you can put down 20% of the total cost yourself.

[msuroo]

You can get into an FHA mortgage with as little as 3.5% down. Generally anything under 20% and you are paying PMI (insurance against the chance you default) on top of your principal and interest payments.

[bigm141414]

This is great to see! This is something i've begun toying with lately - I'll be probably looking to buy my first home within the next 2-4 years. It scares me how expensive they are!

One question I have is about down payments and upfront costs: I've heard the down payment can be anywhere form 5%-20%, which isn't very helpful (the difference between 5% and 20% in my estimated price range is an entire year's income!) Any comments on what a typical down payment is, and how that gets decided upon? And what other up front costs are there? (Lawyer, inspection, realtor, fees, etc.)

Down payment is usually whatever you can afford. I payed 15% down for my place not the full 20% because I was uncomfortable with clearing most of my savings out. The PMI charges range anywhere from $30 to $60 a month extra.

So you'll have closing fees, inspection, realtor fees (depends on state, in Texas the seller pays realtor fees which are around $3k-$4k), and there are other things you want to consider on the loan amount such as if any major repairs are needed right away or any remodeling costs you would want to figure into your mortgage loan.

[Strawberry Squatcake]

I agree on everything here, especially the foundation stuff. I would hesitate to buy a house with foundation issues at all. I personally know people who had issues repaired only to create new issues. But I'm from Kansas, so most houses have basements. If you buy a house with a basement, don't do slab. And I'd also never buy a house with a basement that leaks. Generally also foundation-related, and leaks are very hard to find and fix. I don't think these are issues in Texas though. Do houses in Texas even have basements? If not, where do you guys build your "man caves?"

Not sure if where you're looking has special taxes. These are loans from the county to improve the area you live in - building streets and other "stuff." Rather than raise the purchase price of the home, they put them in taxes and you pay them back for 5-10 years. It's not uncommon in Wichita to have specials that make your payment another $100-$200 per month. Also consider how much per month property taxes and insurance will be. All three of those things (special taxes, property taxes and insurance) are part of your monthly payment, if you escrow them. If not, you pay them twice a year, lump sum.

Not sure if other areas have flooding issues like we do, but I would never buy in a flood zone. Some insurance companies won't insure you at all. Others insure you at astrnomical rates. And each rainstorm is an anxiety attack waiting to happen.

I also agree with talking to the neighbors. They know the general landscape of the neighborhood. And most will talk specifically about your neighbors and the previous owners. When my neighbor moved, I had three or four potential buyers approach me, and I was very honest. Most people have no stake in their neighbor's sale so they will tell you about the neighborhood, your potential neighbors, and the previous owners. All good stuff!

If you have allergies, always ask about pets. Last thing you need to do is rip out carpet and clean vents (and often repaint).

Consider home owner's association fees. Sometimes the fees suck, but on the other hand, it keeps neighborhood upkeep in check.

Radon is a big deal in Kansas recently. Both my house I lived in for eight years (yikes?!?) and my new house had higher than safe radon limits (causes cancer). For both houses, this was sump pump-related.

It's no fun to buy your house for someone else, but consider resale, like everyone else said. This includes house layout, school district, neighborhood upkeep, highway access, etc. In Wichita, homeowners are a very high percent families. So it's hard to resell a house with 2 bedrooms. Consider your demographic because it probably isn't going to change much by the time you sell. Pools are a really hard resale in Wichita, partially I think because of the safety and upkeep issues, but also insurance rates go up. Like I said, sucks to feel like you're buying for more than yourself, but as someone who spent two years trying to sell my first house, trust me, it's worth it!

Look around for any first time buyer deals. I got bond money when I bought my first house. I always recommend a first time buyer do FHA. The approval and inspection process is more tedious, but as a fist time buyer, it protects you a little from yourself. They'll require things you might think aren't a big deal or a conventional inspector will mention but not emphasize how important it is. And, yes, inspections are a must regardless of financing. Inspect everything. And your realtor will probably be experienced enough to help you organize what's important. FHA rates are generally a little higher and some lenders require FHA for first time buyers.

Speaking of lenders, look around at lenders. I work at a credit union, and know that closing costs vary a lot. Don't just get a summarized number, get the details of what each fee is going toward. Some places charge you what they get charged for pulling credit and flood certs. Others charge a premium on top of it. So consider rate AND closing costs when choosing a lender.

Also (sorry, I'm dragging on and on and on)- I had the breaker box bigm mentioned. I lived in that house for eight years with absolutely no issues. But FHA required me to switch it out for their buyers. I was also required to re-treat for termites that had already been treated before I moved in because I didn't have proof they were treated. And generally FHA makes you bring in dirt so there's a negative grade away from the house. They also check the roof and foundation. They're looking for big-picture items that would protect the bank (from their resale perspective) if you foreclose. I consider these deal-breakers. Conventional loans assume you're less risky, and don't worry as much about these details.

Hope that helps! Buying your first house is over-whelming, but a lot of fun! Never accept a crappy counter-offer. Remember, you don't have a house to sell, so you're a home seller's dream come true!

[wildross]

Be careful in a community where there is a lot of "Minimum down payment" homes. They tend to be former renters/first home buyers who don't have the budget for repairs. In a couple years, the lack of upkeep in the community drives the prices down, which drives the taxes down, which means they can't fix the streets, etc, etc, etc...

[Philociraptor]

Update since y'all have been so helpful:

Making an offer on a house this morning. Bidding $5k under asking price and closing costs ($6k). This should be around what they paid for it (we looked it up) and so we'll see how they take it. On the roommate situation: this house has 3 spare rooms and we have 2 strong (verbal) commitments to move in once it's ours, one of which has offered to gift us for a portion of the down payment. I'm so excited! And if it doesn't work out, hey, I don't NEED a house right now. Thanks again for all the advice folks!

[Shortkaik]

Good luck, Philociraptor! Hope it works out. If not, seems like a good learning experience.