Buying a house

[DigitalDisney]

This question goes out to all of those older people on these boards

I'm seriously considering buying a house in the very near future. I'm tired of throwing money out the window on rent in apartments, and I have a couple friends that want to sub-lease, so the monthly payments on the loan won't be too bad.

My problem is that I have no idea what is involved in the house purchasing process.

Can some of you please give me some insight and advice? What are the minimal and maximum roads I can take in the house buying process? Obviously I have to handle maintainence myself instead of talking to a landlord, but that's not a problem either. What other costs (such as insurance) are involved besides the loan?

Are there any advantages of going Buy Owner vs through a realtor? The house I really want at the moment is Buy Owner, which is good because I don't want to pay the extra commission of going through a realtor.

Also, since I want to buy a house, I also want to get one with a pool, if possible. I want to transform a typical Atlanta backyard into a tropical paradise, with exotic plants, tiki torches, tiki gods, tropical music, landscape lighting, and waterfall(s). I want to bring as much of the Polynesian Resort into my home as possible. What costs are involved in maintaining a pool (unheated, no spa, no slides)? I've heard that having a pool also increases insurance costs.

I'm afraid that my dreams of building my own tropical oasis will be shattered. Hah

 

[GoofyFan1]

Good luck with your purchase. :sohappy:

My one bit of advice, reading about your Polynessian dream, would be to watch out for neighborhood associations. Many associations have strict rules about YOUR property. I know a guy that was sued over his basketball hoop. When we were looking to put up a house, that was the first question I asked; Is there a neighborhood association?

As far as insurance goes, they're going to get you for what they can anyway, be it a pool, certain breed of dog or trampoline. Go for the pool!

 

[artvandelay]

THere should be no difference for you if you buy through a realtor or the owner. The difference is for the seller. If they sell their house themselves, they do not have to pay a commision to a realtor (2% to 6% of the selling price).

Depending on your state, you might have to hire a lawyer to represent you for the closing (NY you need one, FL you do not). The lawyer's fee is probably around $300 to $700.

You'll have to pay for a Title search. The title search makes sure there is no leins or other owners on the property that you could be liable for when you become the owner of the property. You might have to buy Title Insurance (The lender might want you to have this).

You're going to want an inspection done of the house before you sign the contract. The inspector will check to see if the house is sound structualy(sp?), the roof is good, electric, heat, AC, windows are good.

The Lender will want a termite inspection and a radon inspection (depending on your location).

Closing costs can be expensive. If you take a mortgage with points, you'll have to pay that ( a point is 1% of the borrowed amount). You might have to prepay taxes. You will have to prepay your first mortgage payment. All lender fees are paid at closing.

I hope this helped. Good luck.

 

[Erika]

We bought a little over 4 years ago, and we used a realtor (friend of the family). Due to all that's involved in buying a house (see above) I don't know that I would suggest going realtor-less for a first time buyer.

Definitely get yourself pre-approved before you start looking. And then, look at nothing that is anywhere NEAR whatever you've been approved for! The last thing you want is to be is house-poor. *shudder*

 

[AliciaLuvzDizne]

one thing you didnt mention is taxes... Property taxes, insurance, mortgage, and home depot.

thats where your money will go

 

[Yellow Shoes]

Always remember that when you are at realtor.com looking at houses and they give you an estimated mortgage payment, that isn't your ENTIRE payment.

I always figure (rather accurately, I must say) another 50% to cover insurance and taxes to come up with your absolute, bottom line mortgage payment.

If you (and your lender) figure you can handle a $800 / month P&I (principal and interest), you need to figure that you'll need to be financially able to write a monthly check of $1200.

Also bear in mind that you may not always have sub-leasees (roommates). Make sure you--and you alone--can handle your payments. Consider their rent payments as a bonus. And the best thing to do with their payments is apply it to your principal. (Make a note that the check is for principal only, or they will apply it to interest.)

House-poor is not a good place to live.

I'm not going to belabor this, but some apt complexes have certain utilities included--like trash, waste water, sometimes basic cable or phone. Remember to add in those charges.

Yes, the pool will increase your homeowner's insurance substantially. Just for kicks, call an agent with the general specs on a house--sq footage, number of bathrooms, etc. Ask the price with and without a pool. You will also be required to have a locked fence of a certain height around the pool. Go to Wal-Mart and price a big bucket of pool chemicals. Talk to people who have pools.

Homeowners associations are :fork: . Don't buy where there is one if you can avoid it. Some try to create little Stepfords, and insist on approving paint colors for your house, fence styles (if they allow them at all), types of plants/mailboxes/front doors allowed. If you have a problem with authority, you'll have a problem with the homes assoc.

 

[Erika]

one thing you didnt mention is taxes... Property taxes, insurance, mortgage, and home depot.

thats where your money will go

Home Depot- ahhhh, yes! We could have bought a decent car with the money we've spent at that place!

The costs of home ownership are neverending. And things never go wrong one at a time. AND, it seems like they're always things you need right to replace immediately, like your refrigerator. Grrrr!!

Landscaping can get extremely expensive and it sounds like you have your work cut out for you there with your Tiki theme. If I were you I'd start buying yard & garden tools now so I didn't have to do it all at once later!
Plants, mulch, fertilizer, etc are not cheap. Mulch only SEEMS cheap until you realize you need 50 bags. :lookaroun And then it storms- and half of it gets washed away- and back to the store you go. :brick:

It's a pain, yeah, but it's worth it. Good luck :wave:

 

[speck76]

I am trying to buy a house right now....not having luck finding something in my price range that is in the area that I like.

I would suggest getting a realtor....it is free, and they are a great help.

Also, get pre-approved. It will give you an idea of the price range you can get financing for, along with the fact that many people will not show homes to those who are not pre-approved.

 

[speck76]

one thing you didnt mention is taxes... Property taxes, insurance, mortgage, and home depot.

thats where your money will go

Dont forget association fees, lawn service...........

 

[GenerationX]

When we closed on our first house, I read all of the documents carefully and asked questions of our loan officer and lawyer until I understood the ramifications of every paper we were signing. You will not believe just how many forms you have to sign. Or initial. Or sign at the top and initial on the bottom. Oy.

Anyway, this strategy helped me feel more in control of the situation and understand the transaction better.

Good luck! :wave:

 

[lamarvenoy]

Well, buying and selling homes is what I do for a living. My advice to you as a novice is find a reputable real estate agent. Once you find a house you are interested in HAVE IT INSPECTED!!!!! This will cost you $300-500 and may save you THOUSANDS. Don't rely on or expect the owners or real estate agent to give you the facts....that is why an independant inspector is so important. For instance,termite damage is fairly easy to conceal as is water damage,you don't want surprises.You will almost always get that money back anyway because the inspector will give you a list of faults that are found and you can use that as a bargaining chip to lower the price or have the damage repaired.Check your credit report and make sure your score is as high as possible,that score is going to determine your interest rate and amount you can borrow. Last but not least..........hire a lawyer to close for you and have him file a condition of sale-breech contract. This will give you a leg to stand on in court in case a problem comes up later that the previous owner tried to hide.Pre-paid legal plans can be a great deal when it comes to his stuff.One last thing when you are serious about a house but before you bring in an inspector,talk to the neighbors.You'd be surprised what that little old lady next door can tell you about.If you need any specific advice PM me and I'd be happy to help you.

 

[AliciaLuvzDizne]

Dont forget association fees, lawn service...........

not everyone has associations.
we dont in my area. And also we only just started having our lawn serviced since my dad got sick... so you might not have to think about those.

also, we have a pool...id say it costs between 100 and 200 to open and close the pool and then maintenence all summer might cost 200? I dont really know for sure but it can get exspensive.

 

[DigitalDisney]

Wow. Thanks for all of the replies.

Unfortunately, the county I work in is also the most expensive county to live in in metro Atlanta (Fulton county). I guess I'm going to have to pay for the convenience of living half-way close to my work. I can easily handle all of the maintainence costs associated with owning a home (In fact, one of my future roommates is practically a handyman, so I'm pretty well set in that regard.) It's those hidden insurance and other costs that I'm worried about.

Thanks again for your help. You all have thought of some areas that I didn't even consider. For example, if the neighborhood association won't let me build my Oasis, then it's all pretty much a dud.

 

[TAC]

I (we) assume that you have enough savings for a down payment? 10% to 20% of the price of the house ?

Find a real estate agent. You can do it on your own, but if you find an agent that you are happy with, they will explain things and give you honest opinions, instead of "this is the house for you." You will have to pay the agent a commission for finding a house for you. We went through 4, until my wife and I both liked the person. Ask friends, family, etc. I started by asking my parents for the name of the name of the person they used.

After you meet the agent the first time, he or she will ask you what kind of house do you want, etc. Since you are single, DO NOT get 'profiled' into some sort of condo, or townhouse, certain area of town, etc. Make the agent work for YOU.

You will want to get pre-approved, NOT pre-qualified. Preapproved means that you have paid the $$ for the mortgage application, screening, employment verification, etc. You will have to supply pay stubs, bank statements, etc. (Pre-qualified means, "yea he has enough to buy a house")

Someone mentioned about using the extra money from sub-lets to pay your mortgage off early (applying the money to the principle). I wouldn't do that. Yes, it's a good thing to be "out of debt." But, my thought is that a mortgage is "controlled debt." A house is an investment. A credit card is "uncontrolled debt." I would build up a savings fund of say, 3-6 months of normal monthly expenses, THEN pay a little extra on that principle. Suppose the A/C dies, you'll then have have the money to fix/replace it. Or just start another savings fund. Taxes over time will slowly creep up. If you pay the mortgage off, you will no longer have a tax deduction (the interest on your mortgage).

After you buy the house, you'll want to apply for your special parking spot in Home Depot (and Lowes) with your name on it.

 

[wdwhoneymooner]

All have made very good points and I'd like for you to consider a few others:

If you have children or plan to have children, you may want to spend some time to investigate the town's/city's school system, local playgrounds and community activities.

Commute time. Being from Atlanta also, we know how traffic is here :fork: so we had to estimate travel times for the various homes we considered before chosing our current house. Since you would most likely be searching for homes on the weekends, be aware that the times leading to major roads/highways will be at least doubled during rush hour. Also, if the home is near a school traffic will always be bad during drop-off and pick-up times.

Some have already mentioned Neighborhood Associations. If possible, ask for a copy of the covenants to get a better understanding for what you can and can't do for a home that must follow these guidelines.

It's good that you understand the importance of maintenance because there's alot of it as a home owner. As you know, renting means calling the landlord to fix any problems. When something needs work as a home owner.....just be sure to get to know the associates at our local home improvement store! And watching alot of HGTV and DIY on the tele would be a good time investment. Helped us save alot of $$$$$.

PM me if you'd like and I'll be glad to discuss this further!

 

[Erika]

I can easily handle all of the maintainence costs associated with owning a home (In fact, one of my future roommates is practically a handyman, so I'm pretty well set in that regard.)

My husband has done everything here and it's still expensive- it's all in the materials! But if your buddy has all the right tools that's at least a step in the right direction

For downpayment, I have talked to financial advisors who say if you don't have the full 20%, go in with as little as possible. But I think for every person that tells you one thing, someone else will tell you something different. We went in as FHA with 3% down but within a year we were bumped up to conventional because we had done so many improvements (fixer-upper )

Tac, for some reason I thought the realtor's commission came from the sale of the house, not from the buyer. Do I have that wrong?

 

[TAC]

Tac, for some reason I thought the realtor's commission came from the sale of the house, not from the buyer. Do I have that wrong?

Right, but where does the money come from? The buyer (or the buyer's mortgage company). It may vary in different states, but if the seller has an agent and the buyer has an agent, both get 1.5% each. The way it worked for us as buyers, was that our agent got 1.5% from "us" and the seller's agent got 1.5% from the money that went towards the seller. (IE: the seller got 1.5% less of the money that was owed them).

Think of it like this: You (as buyers) are at one end of a long table. The sellers are at the other end. You turn toward your left, and take the money from your mortgage company, and put it in a heaping pile in front of you. This amount of money is NOT just the selling price of the house. Add in the (your) lawyer's fee, title seach fee, 1st year's homeowner's insurance, any taxes that are due to be paid from that day until the end of the month **, extraneous monies. Then you peel off 1.5% of it, and hand it to your agent on your right. Then you push the money to the center of the table. There several people take pieces of it. If any of these fees or monies haven't been paid, they will be paid now. At that point, it is pushed towards the seller. If he/she/they have a lawyer, he/she takes their fee. The seller's agent then takes their 1.5%. And then finally the seller takes what is left off the table.

Of course, the money that you paid upfront as "promise money" when you made your bid, and the real money that you have, the down payment, is talled up is what is actually divided up. The mortgage money is proably going to go to another mortgage company, since the sellers are probably buying another house.

** That is why closings tend to be done at the end of the month. People THINK they are saving money/taxes. When in reality, it doesn't matter.

Extraneous fees could also be paying the seller for the oil left in the oil tank. Etc.

That's why we fired one agent. He kept pushing very hard to sell us a house that he had listed, so that he could get 3%, not 1.5%.

I know it's confusing! It was a BIG learning experience for us.

I'm sure Woody could explain it better, but that's how I got to understand the process.

:wave:

 

[The Mom]

Erika, many realtors will charge a fee or comission to work for the BUYER. Otherwise, they're really working for the seller, even though they seem to be working for you. If you keep that in mind, it's not a problem.

I would also hire my own lawyer to review the title search, etc. and buy my own title insurance even if the lender doesn't require it! Despite having both a lawyer review the search, and purchasing title insurance, we were involved in a title dispute, and had to hire a lawyer to get the title insurance company to defend our claim! He oversaw their lawyers to make sure our interests were protected; the title insurance lawyer didn't see any problem with our new neighbor wanting to relocate his drive through our property, "allowing" us to share it, blocking our existing drive, cutting our neighbors off from the county road (forcing them to put in new drives) and erecting a security gate to the new drive, but "providing" us with the code, meaning he could change it at any time and we would have to fight to get the new one so we could get on our property.

Since the case ended up in court, and also in appeal, we figure that even with our personal attorney fees we still ended up saving around $40,000 by having the insurance.

 

[Erika]

Right, but where does the money come from? The buyer (or the buyer's mortgage company). It may vary in different states, but if the seller has an agent and the buyer has an agent, both get 1.5% each. The way it worked for us as buyers, was that our agent got 1.5% from "us" and the seller's agent got 1.5% from the money that went towards the seller. (IE: the seller got 1.5% less of the money that was owed them).

That's why we fired one agent. He kept pushing very hard to sell us a house that he had listed, so that he could get 3%, not 1.5%.
:

Ahh! I would have fired him too- that's extremely unethical. Our realtor friend is very adamant about never representing both sides.

Erika, many realtors will charge a fee or comission to work for the BUYER. Otherwise, they're really working for the seller, even though they seem to be working for you. If you keep that in mind, it's not a problem.

This is true. We really lucked out having such a close friend in the "Biz", and especially one who's been doing this over 20 years in the same area. She knew all the ins and outs AND we could rest easy knowing she was looking out for us. We were young, too, and probably would have made all kinds of mistakes if it weren't for her! I was 2 months shy of 23 when I signed those papers

 

[The Mom]

I took a Real Estate course AFTER we bought our house. Had I taken it beforehand, I could have saved myself a lot of aggravation, and probably a bit of money. I would have known for certain that one realtor was being unethical, in that she refused to convey a good faith offer to the seller because it was "insultingly" low. Turns out it was only a few thousand below the actual selling price of the property, so was well within negotiating territory.