NGKUR: Advice for a First Time Homebuyer

[gabride2010]

So H and I are looking to buy our first house. We looked at one today that we loved. It is a bit above our ideal price range. It is a foreclosure, and the bank seems to be motivated to sell. They have dropped the price by 60k in 3 months.

We can afford to put down 20%, but would feel much more comfortable putting down 13%. The PMI would be $166 per month. Is not having to pay monthly PMI worth putting down the full 20%?

We have not gotten pre approved at a bank yet, but we plan to do that this week. We have great credit, and less than 10k of debt. I'm not sure what incentives are available to us as first timers, but we are anxious to find out.

What advice would you give to first time home buyers? Anyone know about mortgage options? What else should we know or be asking? Thanks y'all!

[cjchio]

Get an attorney to check over documents before you sign anything in relation to purchasingyour home. There is no such thing as a standard contract, and EVERYTHING is negotiable.

Look into grants around your area. Some grants exist for certain professions like teaching.

Double check how long you have to get the house inspected. We've had buyers try to break contracts because there was some issue with the home, and it was too late. They missed the cut off.

[ceejay]

I'm definitely not an expert, but I think if you can relatively comfortably afford to put down 20% and avoid the PMI, then that's what I would recommend. Depending on what your monthly payments are, that $166 could be a pretty huge percentage of that. When we bought our house, it was important to us to put down 20% and avoid PMI.

I really don't know much about home buying (we've only bought once and our realtor was amazing and handled pretty much everything for us), so I can't really think of any other advice. But good luck! I hope this one works out for you guys!

[cnf2013]

I would put the down the 20% if you can comfortably swing it. We're on our second house and have managed to avoid PMI so far. I have friends who own home paying PMI it just makes such a huge difference in their payment. Plus you'll have that much less to pay back.

We plan to have our 30 year mortgage paid off in about 25 years instead of the 30 we're scheduled for. Everything we could afford to throw at it, we did. PMI is such a money suck.

ETA: Take what I have to say with a grain of salt, I also don't have much expert advice, to be honest. Our first house we had a private note holder, no banks involved. Our new home we built so we bought our land as our down payment then got a construction loan. I have no idea how a traditional home buying process goes, lol.

[pismoduo]

If you can swing it, put down the 20%. But as a first time home buyer you should be eligible for FHA loans, which might offer you some benefits.

Be prepared to wait and wait and wait on a foreclosure, no matter how motivated the bank is. It can take a while for their process.

[cnf2013]

Oh, another thing, foreclosures are typically sold "as is" so get a really good inspector and just know that anything that comes up during the inspection, the bank will not fix. You can haggle the price more, but they won't do any repairs.

[Ray]

Feb 5, 2017 21:06:26 GMT -5 pismoduo said:

If you can swing it, put down the 20%. But as a first time home buyer you should be eligible for FHA loans, which might offer you some benefits.

Be prepared to wait and wait and wait on a foreclosure, no matter how motivated the bank is. It can take a while for their process.

Go back for a second look. Open every cupboard, flush the toilets, turn on every light, open the windows, run the hot water etc. don't stretch yourself beyond what you originally said you'd be comfortable with even if you love the place. Ask for electricity/gas/water bills so you know how much that stuff would be. Have a thorough home inspection. If you can swing it, overlap your moves a few days. That way you can paint/do very minor Reno type things before you move all your stuff in.

ETA: lol sorry idk why I quoted lol

[MsG]

I bought my first house a couple years ago and didn't put 20% down. We live in an up and coming neighborhood and we felt good about buying when we did anyway b/c we were confident the value of our home would go up - and we were right. So that was a gamble we took.

That being said, PMI is absolutely wasted money. You don't get it back, and it doesn't go toward your mortgage. So if you can afford the 20% down, I'd go for it. There is however another potential option to avoid it.

If you don't want to spend that much cash up front, you could potentially take out two loans. You take out one bigger loan, and a second smaller loan for the downpayment to get you to the 20% down. You'll just want to talk your mortgage broker about whether that's a possibility for you and any downsides attached to it.

Also, find a kick-ass realtor who you trust. That makes all the difference.

[gabride2010]

Good advice! Thank you cjchio.

Thanks ceejay!

Thank you cnf2013. We want to get a 30 year loan, but definitely want to pay it off as fast as we can.

pismoduo I hope we can get a good loan being first timers. Time isn't an issue since we are in our lease until Aug 1. If we buy a house before that, then we will just buy out of our lease early.

Ray The house has been winterized because it is vacant, so I don't think we would be able to run the water or flush the toilets. A home inspector would make sure all of that stuff works though I think. We would definitely look at the house again before putting an offer in.

MsG We definitely don't want to take out 2 loans. Our realtor has lived in the area for a very long time, and he is my boss's dad, so we definitely trust him!

[Deleted]

Avoid PMI if you feel you can do the 20%. On our first place, we had PMI but it was a foreclosure in a very desirable complex, and we sold it for close to double what we paid after only 2 years. That made it a worthwhile choice in retrospect, but it sucked while we did it. It's much nicer knowing that the entire monthly payment is going towards paying off the mortgage.

Really read over the inspection reports, and get quotes on anything that will need to be addressed right away. For instance, on our first place, we knew we had to have the asbestos ceiling removed right away since it was crumbling in a few places, so we got quotes and factored that into the decision. On this house, we didn't have any upfront big ticket repairs, but the inspector made great notes on when we might expect to do certain repairs, which has really helped us plan out our house projects.

As you're looking at houses, remember to consider things you can change and things you can't. You can't change location, road noise, etc. Ugly wallpaper, dated fixtures, those can be changed, just factor that into the update cost of the house.

[gabride2010]

Definitely good advice @bonzo2012. The location is awesome, and there isn't any road noise. There are some cosmetic changes we would like to make, but nothing we would have to do before moving in.

[hoosiermama76]

I would put down the 20% and avoid PMI. It's a better investment for you.

[teraiin]

My understanding is to avoid PMI if at all possible.

Some banks and credit unions have like "first time home buyer" programs that can give incentives (although we didn't use any because none worked for us at the time).

Find out about bi-weekly payments and how the monthly payments break down. In our case we chose to go with the bi-weekly payments but because of that our interest rate was slightly higher. But we still save money in the long run. But sometimes it isn't the best option.

We went with a local bank and its super easy to make extra payments. My SIL did an internet search for her mortgage and ended up getting it through an out of state bank. I don't know al the details but she ended up needing to drive 3.5 hours for closing and she claims it's a PITA to make extra payments since she's not local. (I'm sure this experience varies greatly)

I'm probably rambling but our bank was able to provide me with specific break downs of "every" option for the mortgage. How it would break down with various down payments, with or without escrow, with or without bi-weekly
Payments. We were able to pick the best option for us and it helped us to choose.

Don't be afraid to search reviews and see what people are saying about different mortgage companies.

As far as a foreclosure go, ours wasn't but it was sold "as is". In our area hiring a lawyer is strongly recommended and in our case it was well worth the money due to a dispute about "as is". (Long story short something was working during initial walk throughout but was malfunctioning during the final walk through)

I also +whatever to the thorough home inspection and looking at everything.

Also since it's 5am and I'm half asleep I'm hoping this is coherent and relevant lol

[cnf2013]

We have bi-weekly payments too and that has us paying off our mortgage is 25 years. It literally shaves five years off our mortgage even though we technically have a 30 year. We're really happy with that decision and will throw extra money at it when we can too.

[britta]

****Lurking****

Congrats gabride2010!! (Maybe I would have known this had I replied to the last PM by now 😳🤐)

+ whatever to, if you are able to afford it, definitely putting down 20% and avoid PMI. If the $166/month isn't that big of a deal financially, use that money to pay extra on your monthly payment. We do this and, assuming we we're staying here for the length of our 30 year mortgage, will have our home paid off in 22 years instead of 30. That's huge to me.

Agreed on a good, thorough inspection. Have you looked at other homes yet? I ask because during the course of our home buying experience we looked at many and to start with they all seemed like "OMG this is a great fit!" The more we looked, the more we honed in on little things that we weren't willing to live with and, OTOH, really learned what we were willing to sacrifice for other things.

I'm not sure I have any other really helpful advice. I think there are special loans available for foreclosures that may help and are a little different than standard mortgage loans (our home was a foreclosure too-5 years ago), but I may be remembering incorrectly. Admittedly, I helped look at houses but the financial stuff MH was responsible for. I was planning our wedding at the time. THAT I don't recommend. LOL.

[Deleted]

britta, we had the same situation of buying our first house while planning our wedding. Ended up closing on the condo at the beginning of June, got married July 1, dealt with having the asbestos removal people in there while we were on our honeymoon!

[pismoduo]

Feb 5, 2017 22:51:44 GMT -5 gabride2010 said:

pismoduo I hope we can get a good loan being first timers. Time isn't an issue since we are in our lease until Aug 1. If we buy a house before that, then we will just buy out of our lease early.

We were first time home buyers back in 2009, when the market was crashing and banks were putting new rules in place about who could buy. As long as the loan you're taking is within the limits of the bank you're borrowing from, there's no issue with the inspection, and you have reasonably good credit, you shouldn't have an issue. Particularly if you're willing to put down the 20% (though if it was me and it didn't change my payment too much, I'd go with FHA's 3% down and hold onto the rest as an emergency fund for repairs and such).
Save

[diamondsndaisies]

gabride2010, I agree with pretty much everyone said.
avoid PMI if you can. Get the house checked out for everything you possibly can. Try not to fall in love too quick. Sometimes it just ends in heartbreak when something doesn't work out. As a first time home buyer you can apply for a FHA loan, but if you can reasonably put down 20%, I wouldn't even deal with it. There are extra hoops to jump through and requirements on how long you have to live in the house (at least in NE) so I guess what I would suggest is to really research what your options and sit down and decide what would work the best for you.

GL and FX everything works out!

[♪♫choppinbroccoli♫♪]

Feb 5, 2017 22:51:44 GMT -5 gabride2010 said:

Good advice! Thank you cjchio .

Thanks ceejay !

Thank you cnf2013 . We want to get a 30 year loan, but definitely want to pay it off as fast as we can.

pismoduo I hope we can get a good loan being first timers. Time isn't an issue since we are in our lease until Aug 1. If we buy a house before that, then we will just buy out of our lease early.

Ray The house has been winterized because it is vacant, so I don't think we would be able to run the water or flush the toilets. A home inspector would make sure all of that stuff works though I think. We would definitely look at the house again before putting an offer in.

MsG We definitely don't want to take out 2 loans. Our realtor has lived in the area for a very long time, and he is my boss's dad, so we definitely trust him!

I haven't read all of the thread, but if you are planning on making extra payments, make sure to pay principle only, and ENSURE that that is how your mortgage company is applying any extra payments. Some will try to just make extra payments be "future payments" which applies it to interest, too. Fuck that noise - get the principle down!

[gabride2010]

I didn't even know you could do biweekly payments teraiin. We will look into that. I think we definitely want to go through a local bank.

Those biweekly payments sound good cnf2013, especially if the loan can be paid off earlier!

No worries britta! This is the 6th house that we've looked at. All buy one we're definitely a no. We like 1 other, but not enough to jump in and put an offer on it.

That's very good advice starbuck27. It's hard to stay emotionally detached, but I'm trying. I'm hoping we can wait this house out so they will drop the price some more.

I didn't realize each bank had lending limits pismoduo. I like the idea of saving some of the down payment money for an emergency fund!

Thanks diamondsndaisies! I think we will definitely have a better idea of financial stuff when we see what loan options are available.

Very good advice ♪♫choppinbroccoli♫♪! I didn't realize you had to specify principle only.

So I had H look up the utilities on the house. This will probably put us over budget with the house payment. I'm hoping that the bank will continue to significantly drop the price of the house at the end of each month. There aren't a ton of people looking for houses right now, so hopefully we will be able to get it. On the flip side, maybe something else will come along that is just as great, but more affordable. Everything is so expensive where we live!

[sleepymonkey]

***Lurking***
If you do end up paying PMI, try to find a lender who will let you drop PMI if your house increases in value. Some lenders will stick to the rule that you have to pay 20% of the original loan value but some will allow you to drop PMI if you get your house reappraised and it shows that you now have 20% equity in it. That is what we are in the process of doing. We purchased our house 2 years ago and chose to only put 10% down because we wanted more of a cushion in our emergency fund, knowing that home prices were increasing in our area. We estimate that our value has increased 20% in the past 2 years so we're working to drop PMI.

[pismoduo]

Feb 6, 2017 15:15:08 GMT -5 gabride2010 said:

I didn't realize each bank had lending limits pismoduo . I like the idea of saving some of the down payment money for an emergency fund!

Think of it more like risk tolerance levels. It's not so much about how much they'll lend, it's about whether they think you can afford to pay it. Some are more tolerant than others and will be ok with a mortgage payment that's a high portion of your monthly income, others won't approve loans like that.
Save

[britta]

Feb 6, 2017 12:22:31 GMT -5 ♪♫choppinbroccoli♫♪ said:

Feb 5, 2017 22:51:44 GMT -5 gabride2010 said:

Good advice! Thank you cjchio .

Thanks ceejay !

Thank you cnf2013 . We want to get a 30 year loan, but definitely want to pay it off as fast as we can.

pismoduo I hope we can get a good loan being first timers. Time isn't an issue since we are in our lease until Aug 1. If we buy a house before that, then we will just buy out of our lease early.

Ray The house has been winterized because it is vacant, so I don't think we would be able to run the water or flush the toilets. A home inspector would make sure all of that stuff works though I think. We would definitely look at the house again before putting an offer in.

MsG We definitely don't want to take out 2 loans. Our realtor has lived in the area for a very long time, and he is my boss's dad, so we definitely trust him!

I haven't read all of the thread, but if you are planning on making extra payments, make sure to pay principle only, and ENSURE that that is how your mortgage company is applying any extra payments. Some will try to just make extra payments be "future payments" which applies it to interest, too. Fuck that noise - get the principle down!

Yes, so much this.

[gabride2010]

Thanks for the advice sleepymonkey. We would definitely make sure that we get a lender that would let us drop PMI.

Thank you @thatgolfbitch. That's a great point about unexpected costs!

Gotcha pismoduo. That makes more sense!