Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 10 years ago

Starting the process of buying a home...need help?

What should I know about buying a home?How much should I spend? How much of a loan should I take out? Just any information of how you went about the process would be great! Thanks!

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  • 10 years ago
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    Oh boy, this is a huge question!

    I bought my first home two years ago... here's some of what I learned...

    - Your monthly payment will be more than just your mortgage payment. Your mortgage is the amount you pay for your loan - often called the principal and interest (P&I). You also have to figure in property taxes (you should get an estimate for houses you're looking at, but you may have higher costs your first year, since you don't get a homestead exemption for the first year) and your insurance costs.

    - Often the bank will ask you to include estimated pre-payments for your taxes and insurance with your mortgage. They hold the money in escrow, and then pay these on your behalf. But, you don't always HAVE to do this. I don't pay mine to the bank, I keep the money in a savings account, so I can get interest on it (and make sure it is paid properly).

    - Make SURE you understand the terms of your loan. Is there a prepayment penalty (make sure the answer is no!), how long is the loan term, is there any way the rate may change. Also, if it's a special, non-standard loan (not sure if they're doing these anymore) there may be other restrictions, like you need to stay in the house for so many years before selling... or before refinancing...

    - Many many banks will give you a home loan, then sell it within the first few months to a bigger bank. They generate the loans, but don't keep them, they make money by selling them. Don't be alarmed, it happens to nearly every one.

    - Do you have a down payment? The best way to do it is to save up so you can put 20% down. It's a big chunk of money, but it lets you avoid PMI (private mortgage insurance, insurance for the bank if you get foreclosed on. No benefit to you, but extra cost per month.)

    - You need to figure our your budget - how much can you put down (keep some in savings for emergencies) and how much can you comfortably pay from your monthly income. Then use an online calculator, look at different house prices/interest rates, and see what prices ranges get you near what you can afford.

    - The shorter the loan, the lower the interest rate - a 15 year loan will have a lower interest rate than a 30 year loan. But, I chose a 30 year because a) it was stable over the long term, b) there was no penalty for prepaying, so i can actually pay it off in 15 years by paying extra each month, c) i like the flexibility - i make extra payments while i have a job, but if i have an emergency/lose my job, my "required" monthly payment is fairly low

    - On a financial site I read, the gurus often recommend that (depending on your income tax bracket) you are better off putting extra money into a 401k rather than paying off your loan early. They claim that you will make more over time with the compound interest in the 401k than you will save on interest with the house. Just something to think about (I do a little of both - pay a little extra on the house, but not as much as I could - the extra goes to 401k).

    - Find a mortgage broker that you really really trust. They're important in you getting a good rate (rates change DAILY, sometimes in the middle of the day), and in getting through closing.

    - Be picky and find a great inspector to do your home inspection, look for someone with recommendations - they will be able to alert you to problems with the home, and help you avoid anything that needs costly repairs or is on the verge of falling apart, plus give you tips on how to keep the house up.

    - Be aware of the extra costs of utilities for the home, over an apartment. In a house (versus condo), you'll have to factor in things like trash, sewer, and higher electric cost (to cool a bigger space). Make sure you have room in your budget for this!

    Phew... that's just off the top of my head, from memory. Good luck, I hope you find something you love and that's within budget!

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  • 10 years ago

    Let's look at this logically. How much are you comfortable with paying each month. Target that payment, and don't let any loan officer tell you that it's ok to spend more. Now, talk with several lenders in your area. Each is a separate company and may have different policies and programs. Choose the program that best fits your financial goals. After you are pre qualified with a lender, then begin looking for a Realtor you can trust, and has many years of experience. Begin your search with reading up on short sales and foreclosures so you understand what each of them are and how they work. There may not be too many normal properties for sale now. I will tell you that a short sale requires many more approvals than just the homeowner and can take quite some time to work out. A foreclosure is a pretty simple deal, although most properties have issues of some kind and may need work. What to look for if buying a homeowner owned? Check for the items that require regular maintenance and cleaning, the furnace filter, the oven, read the seller disclosure carefully if you like the property.

    The Realtor can help you with the transaction and paperwork.

    Now you'll need some extra money. Generally $1,000 as earnest money down, then most loans will require at least 3.5% downpayment once your offer is accepted. Then you'll have inspection and appraisal costs. ($350-$475). I strongly urge you to buy Title insurance for you the buyer. It's required that you buy it for the lender. If the title company missed finding for example a lien on the property, if you didn't have title insurance, you would be responsible for paying that lien. With it, the title company would pay it. You'll need a cashiers check for closing, but all of those details will be explain as you go thru the process.

    I know it sounds scary, but that is why you try to pick the best people to help you with this.

    So begin right now, take out a note pad and draw a line horizontally down the middle. Top of one column write "MUST HAVES' and the second column "WOULD LIKE TO HAVE". and write down what your needs are according to those two columns. It will change as you go thru looking at homes, but this should be a big help to you and your Realtor in finding you the perfect home.

    I do sincerely, wish you the best of luck and enjoy the ride!

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  • 10 years ago

    To get answers to how much you should spend and how much of a loan you should talk to a loan rep at a bank or to a mortgage broker. They can let you know how much of a loan you can qualify for. I don't know where you live, but if they are in your area you should go to ziprealty.com. There you can search the local MLS online, use the tools to calculate monthly payments, and start an email conversation with a local real estate agent who can counsel you and answer all your real estate questions, and help you find your home.

    Source(s): Zip Realty client, seriously, they are great.
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  • louann
    Lv 5
    10 years ago

    call several banks in your area and ask about getting pre-qualified. they will tell you what you can afford and how much you will need to put on the down payment,real estate agents are also a good source for information.my son just bought his first home and had to put down about 1500. in earnest money as well as paying a few debts and other expenses,he went to a real estate agent who guided him through the entire process.

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