Ready to buy a house....

[xram]

Have always rented. My wife and I are ready to buy a house. Any hints or thoughts from those who have bought a house? Things you wish you would have known? Would have done differently in hindsight? Good interest rate websites? Buying points? I know this is vague. Any info is appreciated.

Thanks
Xram

[pennstater2005]

I wish I would've gotten a better home inspector. I didn't do my due diligence in this area and we ended up with a terrible one. He missed some pretty important stuff. We would've bought the house regardless but it would've been nice to have a little more negotiating power with some of this info.

[zhiwiller]

I got a higher interest rate loan without PMI (10% down) on the silly assumption that since interest is deductible that it would be cheaper in the long run than a lower interest rate loan with PMI. Unfortunately in doing my taxes this year, I don't have enough deductions to itemize, so the deductibility of mortgage interest will be moot.

Pretty much everything else we nailed. We had a brilliant agent. If you don't feel comfortable that your agent is looking out for you, fire him/her and get a new one. You will know in your heart when you've found the house that is right for you. Don't settle! Buying a house is a pain! You don't want to have to do it again!

[NorCalDad]

Loan basics: Get pre-approved and find a lender who not only has great rates but is extremely responsive. If you face a bidding war, you don't want a lender who will take days to verify your borrowing ability with your seller. Put at least 20% down; if you can't afford 20%, wait and save.

House characteristics: If this is your long-term house, think long term. If you think you will eventually have kids, buy enough space and in a neighborhood that feeds into a top school.

House search: Visit open houses now and get a feel for what you want in a home in terms of size, layout, features, upgrades, etc. This will also help you gauge home values. Don't fall in love with any house you view and be prepared to walk away from any negotiation if you think the seller is demanding too much money.

Realtors: There are good and bad, but realize that ultimately you are the only one looking out for you. So do your research and be willing to question/verify what your agent advises you. Ask people here if you have doubts about any advice you're getting. You and your agent may have different values when it comes to money, so only bid at a price range you are comfortable with.

We didn't follow this advice the first time around, but we were much savvier the second time, struck a better deal and got a better home adhering to this advice.

[ddunca1944]

Loan basics: Get pre-approved and find a lender who not only has great rates but is extremely responsive. If you face a bidding war, you don't want a lender who will take days to verify your borrowing ability with your seller. Put at least 20% down; if you can't afford 20%, wait and save.

House characteristics: If this is your long-term house, think long term. If you think you will eventually have kids, buy enough space and in a neighborhood that feeds into a top school.

House search: Visit open houses now and get a feel for what you want in a home in terms of size, layout, features, upgrades, etc. This will also help you gauge home values. Don't fall in love with any house you view and be prepared to walk away from any negotiation if you think the seller is demanding too much money.

Realtors: There are good and bad, but realize that ultimately you are the only one looking out for you. So do your research and be willing to question/verify what your agent advises you. Ask people here if you have doubts about any advice you're getting. You and your agent may have different values when it comes to money, so only bid at a price range you are comfortable with.

We didn't follow this advice the first time around, but we were much savvier the second time, struck a better deal and got a better home adhering to this advice.

+1

In addition:
Don't get hung up on cosmetics. Paint, carpet, window treatments, even counter tops can be changed. You cannot change the location, the traffic, the neighbors. So pay attention to them. There is no perfect house. But some houses will be a better fit for you than others.

[LFKB]

Check out this thread for some more pointers...

http://www.bogleheads.org/forum/viewtopic.php?f=2&t=108549

[NOLA]

Lots of good advice in this thread already. Something that I wanted to add is that we started watching a lot of shows on HGTV (Househunters etc) when we were in the process of looking for our first home. I'm not sure if it helped us any, but I feel like I had a better understanding of the process. I know its a show that should only be used as entertainment but I felt like we learnd something.

[modal]

I plan on buying something later this year, but I'm not in a as much of a rush as my wife. We've narrowed our options down to 3 neighborhoods, which meet the following criteria:
Close to work
Close to highways
Easy to get out and exercise (sidewalks)

[hand]

"Buyer's agent" or not, your realtor's interests are not completely aligned with yours. Best description I have seen is "used house salesperson" as they are incented to close the deal as quickly as possible rather than incented to take risks to get you the best deal possible.

+Tell the agent your budget, not what you can afford.
+You and your wife should not fall in love with a house in front of your agent - even better, one of you should voice serious objections to the house you write an offer on, so your agent gets the idea you are willing to walk away from the deal based on price or other issues.
+Inspections and other pre-purchase costs and time are sunk costs, don't fall into the trap of feeling obligated to purchase a house just because you spent a couple hundred dollars and wrote an offer.
+Recognize what your inspector can and can't inspect, and what their liability is for omissions or errors (hint, usually only the cost of the inspection!) and treat the inspection accordingly (budget significant contingency dollars).
+First year maintenance and decorating will be expensive, make sure you have plenty budgeted.
+If you can't put 20% down and avoid PMI, you likely can't afford the house.
+Tract housing builders are masters of getting the cosmetics optimized for sale, but often at the cost of sub-standard construction - insist on a pre-drywall inspection plus a final inspection.
+"To code" doesn't mean right, it means minimum acceptable, and in many cases governmental checks to ensure code compliance are minimal.

Specific to your options - also consider the quality of schools in your preferred neighborhood(s). Even if you don't won't have kids, access to quality schools often drives value / identifies where desirable neighborhoods will flourish. Even if you don't care, many, many buyers do. Not buying in a top school district can be the right decision, however it should be a conscious decision.

[xram]

Wow. Great responses. My wife and I are very appreciative.

Thanks.

[mrspremise]

Come up with a list of thing you MUST have, thing you'd like to have, and things you refuse to tolerate before you even start looking. You can update the list as you go if you change your mind, but it's a good exercise and helps you understand what's important to you and your spouse. When you're done you can go back over the list and figure out which of the must haves and like to haves are possible upgrades (wood floors, gas stoves) and which are probably too inherent to a house to be changeable (ceiling height, backyard size, one vs two story, school zone). This can also speed up your "shopping"- "Oh look, it has an electric stove, but there is a gas hookup so it would be easy to upgrade"

Be patient. Don't fall in love with a house because it's better than other things you've seen. You'll have the least timing pressure now while you're renting than when you're trying to sell another house. Having your priority list will help.

If you have a fundamental disagreement about a must have, take a look at your reasoning. If one person says "I want one story because when we have kids I don't want to have the nursery upstairs when we spend all our time downstairs" and the other says "But a house is supposed to have two stories because that's what I grew up with," it might be fair to favor the more practical argument. (In all seriousness, this happened to my in-laws. They bought a 2 story because he wanted one and wound up selling it with a 4 month old because it turns out she couldn't stand the stairs anymore. Actually, they also fell in love with an awkward house because they had been looking for too long too).

Decide up front if you expect this to be a transitional "starter" home or a long-term home. This should impact your priority list (resell value will matter more, bedrooms for all your eventual children won't) and your financing.

[Greg17]

Have always rented. My wife and I are ready to buy a house. Any hints or thoughts from those who have bought a house? Things you wish you would have known? Would have done differently in hindsight? Good interest rate websites? Buying points? I know this is vague. Any info is appreciated.

Thanks
Xram

I'll second the info about not trusting any agent and being prepared to walk away, no matter how much you like the house.
I had a bit of a horror story with the first house I put an offer on. Long story short, I fired my "buyer's" agent, and walked away from that house. So glad I did, but it was tough to do at the time.

After that, I had already seen a lot of houses and knew the one when I saw it. I had a much better agent, that even took less of a commission to get me the house at the price I was willing to pay.

The other thing I would say is don;t be distracted by a few new items. A lot of people don;t know what they are doing when they flip houses and out in a new kitchen but screw up other parts.

[pennstater2005]

Loan basics: Get pre-approved and find a lender who not only has great rates but is extremely responsive. If you face a bidding war, you don't want a lender who will take days to verify your borrowing ability with your seller. Put at least 20% down; if you can't afford 20%, wait and save.

House characteristics: If this is your long-term house, think long term. If you think you will eventually have kids, buy enough space and in a neighborhood that feeds into a top school.

House search: Visit open houses now and get a feel for what you want in a home in terms of size, layout, features, upgrades, etc. This will also help you gauge home values. Don't fall in love with any house you view and be prepared to walk away from any negotiation if you think the seller is demanding too much money.

Realtors: There are good and bad, but realize that ultimately you are the only one looking out for you. So do your research and be willing to question/verify what your agent advises you. Ask people here if you have doubts about any advice you're getting. You and your agent may have different values when it comes to money, so only bid at a price range you are comfortable with.

We didn't follow this advice the first time around, but we were much savvier the second time, struck a better deal and got a better home adhering to this advice.

+1

In addition:
Don't get hung up on cosmetics. Paint, carpet, window treatments, even counter tops can be changed. You cannot change the location, the traffic, the neighbors. So pay attention to them. There is no perfect house. But some houses will be a better fit for you than others.

This is so important. Location is so important and we are glad we waited to end up where we did. The house we bought had terrible carpet, lovely pink paint on most walls, and those giant 70's shrubs all around the house. Fast forward to a year and half later and we have beautiful hardwood floors(that were under the carpet), fresh paint, and new landscaping. Sometimes it's hard to get past that type of stuff but if you love the location and you're home inspector doesn't find anything major you may have a gem.

[Watty]

One thing to watch out for when looking at houses on the internet is that it is easy to see a pictures of several houses and either like or dislike houses because of the first picture that you see because the house either does or does not have good curb appeal and photographs well.

This can be a bit of a trap since often houses that might not photograph well are really great houses to live in and can be a lot nicer houses than more photogenic houses.

You can eliminate some dumps just by looking at the pictures but try to keep an open mind until you are actually in the house.
-----------------------------
Be cautious about buying houses on the edge of a subdivision that is next to undeveloped land or land that might be repurposed. My parent's subdivision adjoined a private golf course and even though it was not affiliated with the golf course people paid premiums to buy houses that adjoined the golf course and driving range. Twenty years or so later the golf course was bought by the city to become a municipal golf course, but on the driving range they put in a new municipal pool so people ended up with a noisy municipal pool in their back yard.
-----------------------------
Your real estate agent will hate this so you might not want to tell them, but once you have found a house that you are considering, then go back to the neighborhood in the early evening or Saturday and park your car and walk around talking to the people(other than the house owner) that live in the neighborhood.
-----------------------------
The best values now are likely in existing homes but new subdivisions have an interesting advantage in that there is a strong tendency for the first owners in a subdivision to bond in friendships that may last a lifetime. This is because not only because they are all the "new people" but they also tend to be in the same stage of their lives and careers and may have kids that are the same age. Sociologists have written about this. When you are in an existing neighborhood that is long established many of your neighbors may be your parents or grandparents age which can be fine but you are less likely to be close friends with them. If you find a house that is in a subdivision that is just a few years old you might take this into consideration.

[TO]

Loan basics: Get pre-approved and find a lender who not only has great rates but is extremely responsive. If you face a bidding war, you don't want a lender who will take days to verify your borrowing ability with your seller. Put at least 20% down; if you can't afford 20%, wait and save.

House characteristics: If this is your long-term house, think long term. If you think you will eventually have kids, buy enough space and in a neighborhood that feeds into a top school.

House search: Visit open houses now and get a feel for what you want in a home in terms of size, layout, features, upgrades, etc. This will also help you gauge home values. Don't fall in love with any house you view and be prepared to walk away from any negotiation if you think the seller is demanding too much money.

Realtors: There are good and bad, but realize that ultimately you are the only one looking out for you. So do your research and be willing to question/verify what your agent advises you. Ask people here if you have doubts about any advice you're getting. You and your agent may have different values when it comes to money, so only bid at a price range you are comfortable with.

We didn't follow this advice the first time around, but we were much savvier the second time, struck a better deal and got a better home adhering to this advice.

+1

In addition:
Don't get hung up on cosmetics. Paint, carpet, window treatments, even counter tops can be changed. You cannot change the location, the traffic, the neighbors. So pay attention to them. There is no perfect house. But some houses will be a better fit for you than others.

This is so important. Location is so important and we are glad we waited to end up where we did. The house we bought had terrible carpet, lovely pink paint on most walls, and those giant 70's shrubs all around the house. Fast forward to a year and half later and we have beautiful hardwood floors(that were under the carpet), fresh paint, and new landscaping. Sometimes it's hard to get past that type of stuff but if you love the location and you're home inspector doesn't find anything major you may have a gem.

I would take this a step further. Actively seek out an ugly duckling in a great neighborhood. By ugly duckling, I don't mean to imply that you should take on a huge fixer-upper project. Instead, it would be ideal to find a house with good "bones" that isn't attractive due to poor/outdated/overgrown landscaping, bad decorating decisions, and old/worn/misplaced furnishings that create a negative knee-jerk reaction during a walk-through. I'm always surprised at how many buyers can't see past these superficial problems.

I would also recommend buying a house in the best school district you can afford, regardless of whether or not you plan to have kids. My personal experience is that homes in great school districts remain in demand even during economic downturns. Like with any investment, it is best to find the exit before you walk through the entrance. You may intend for this home to be your "forever" home, but the world has a funny way of changing unexpectedly.

[LadyGeek]

This thread is now in the Personal Consumer Issues forum (home).

[mcrunyan]

Do an internet search of realtors who service the area you are interested in and see if you get lucky and find some yelp reviews of the agents. Interview them to see if you gel before you commit to work with them. Better yet, give them a list of your house requirements to see what they come up with and then go out and see some houses with them (but make it perfectly clear that this is an interview in case you decide to buy one of them). We were looking for a realtor that didn't apply any pressure ("There's never been a better time to buy!", "Better buy now or you'll be priced out.") and thankfully found one we like.

Of the real estate syndication sites, Redfin seems to have the most accurate listings. Perhaps more importantly, Redfin allows you to search and download sales data so you can get a feel if the area you are considering has corrected from the bubble yet or if there is still room to fall. Also, you can do your own comp analysis by searching for sales of similar homes in the area (or tract) of interest and have a very good idea of what a target house is worth (you might have to tweak values for the quality of the house or a good view).

Consider the back end of your home ownership; you want a house that you'll be able to sell. We personally don't have a problem with street noise or views of power lines, but apparently these are big turnoffs to buyers and some of the houses we've considered buying have languished on the market because of flaws like these.

[beachplum]

I wish I would've gotten a better home inspector. I didn't do my due diligence in this area and we ended up with a terrible one. He missed some pretty important stuff. We would've bought the house regardless but it would've been nice to have a little more negotiating power with some of this info.

I second this advice and would add that when you do need an inspector, DON'T use one that has any connection whatsoever to your realtor. this is a conflict of interest and it will never be in your favor.

[Greg17]

Another thing to watch out for.

Some agents try and get you to sign an exclusivity with them. Don't!

And don't be honest with your time frame, even if you have one. Never say I need buy something in X amount of time.

[hand]

I would take this a step further. Actively seek out an ugly duckling in a great neighborhood. By ugly duckling, I don't mean to imply that you should take on a huge fixer-upper project. Instead, it would be ideal to find a house with good "bones" that isn't attractive due to poor/outdated/overgrown landscaping, bad decorating decisions, and old/worn/misplaced furnishings that create a negative knee-jerk reaction during a walk-through. I'm always surprised at how many buyers can't see past these superficial problems.

+1

I am convinced that the housing market, and especially the first time buyer's market is hugely inefficient.

First time buyers tend to overvalue pretty and "move in ready" and undervalue location and quality.
Additionally, quirks of the financing process (conforming loans capped at $417k, desire to buy as soon as you have the 20% down required to avoid PMI) there is a significant break between buyers who can afford $521k or less and those few who have the cash to afford more.


On one hand, this presents an opportunity for flippers to add "prettiness" (with or without quality) and sell to buyers for more than the cost of renovations.
On the other hand, this presents opportunities for smart buyers with ample financial reserves to buy cosmetically imperfect in good locations with quality bones, borrow well less than the max allowed by the banks, and make updates to fixtures, carpet, paint, appliances and counter tops without incurring major expenses and end up with a house that is finished exactly how they want it and hopefully worth more than they paid.


In my location, there is a sweet spot for unrenovated houses around $600k - it would well behoove first time buyers to identify the sweet spot in their market.

[ryuns]

My tip: This house will take about twice the amount of time from your schedule than you mentally prepared for. People gave me that basic message and it never really sunk in. Even if it's good condition, you'll quickly find how much your relationship to it changes and nothing is ever good enough. Paint that was slighly faded or imperfect was fine at the rental because it wasn't worth your time--that won't be the case anymore. Landscaping that you either didn't touch or barely cared for won't be good enough. Every creak, slip, crack, bend, chip, or fade will hit the to-do list. If you enjoy that at all, you'll find it massively. After a lot of long weekends, there's nothing I find particularly annoying about my house anymore, and the items on my current to-do list aren't nearly gratifying, so I kind of miss that.

But if you're right for home ownership, it could be a fantastic decision. I was a renter for a long time and there's no problem with renting forever. But for us, buying a home felt like finding a place that was really home. The work we put into the place has a different meaning. Relationships with our neighbors are different, my attachment to the neighborhood and city is not like anywhere else I've lived.

[NorCalDad]

I will second Redfin. I used all the major real estate sites but found Redfin was the most up-to-date and accurate. And I found the e-mail alerts were every bit as good as the ones my agent's system sent me.

[xram]

Thanks again for all the great responses.
Xram

[xram]

My wife wanted to thank everybody as well........

[stan1]

On one hand, this presents an opportunity for flippers to add "prettiness" (with or without quality) and sell to buyers for more than the cost of renovations.
On the other hand, this presents opportunities for smart buyers with ample financial reserves to buy cosmetically imperfect in good locations with quality bones, borrow well less than the max allowed by the banks, and make updates to fixtures, carpet, paint, appliances and counter tops without incurring major expenses and end up with a house that is finished exactly how they want it and hopefully worth more than they paid.


In my location, there is a sweet spot for unrenovated houses around $600k - it would well behoove first time buyers to identify the sweet spot in their market.

I can't speak for your area, but where I live it is not easy in this market to find "cosmetically imperfect houses in good locations with quality bones" -- at a good price. Around here a few years ago flippers were not operating in the best locations; now they are, and I've seen flipped houses offered at over $1M in very good neighborhoods. Well connected flippers do get access to some listings before they are placed on the MLS. Need to find something that is too expensive for flippers, but priced below a modernized/renovated house. This probably means you'll be paying more than you like for a house that still needs work and could mean that you end up paying more than you would for a house that's already modernized once you get the work done -- but the end result will be exactly what you want. Estate sales are a good opportunity (house paid off, heir doesn't want to leave too much on the table but also doesn't want to sit on the property for more than six months so may negotiate on price, heir may have a sentimental attachment to the property and may be willing to accept a slightly lower offer if they think the buyer will take good care of it/fit in with the neighborhood).

[TRC]

I wish I would've gotten a better home inspector. I didn't do my due diligence in this area and we ended up with a terrible one. He missed some pretty important stuff. We would've bought the house regardless but it would've been nice to have a little more negotiating power with some of this info.

+1. Same boat.

Our home inspector really glossed over some stuff that cost us LOTS of money to fix after we bought the house. I feel like home inspectors & realtors are in cahoots. Most home inspectors get their business through Realtor referrals. If they're known as an inspector that blows up deals, they lose their referrals.

In hind-sight, I would have done the home inspection with the inspector and a handyman / contractor to give me the honest opinion on the severity of the issue / cost to fix.

[xram]

I wish I would've gotten a better home inspector. I didn't do my due diligence in this area and we ended up with a terrible one. He missed some pretty important stuff. We would've bought the house regardless but it would've been nice to have a little more negotiating power with some of this info.

+1. Same boat.

Our home inspector really glossed over some stuff that cost us LOTS of money to fix after we bought the house. I feel like home inspectors & realtors are in cahoots. Most home inspectors get their business through Realtor referrals. If they're known as an inspector that blows up deals, they lose their referrals.

In hind-sight, I would have done the home inspection with the inspector and a handyman / contractor to give me the honest opinion on the severity of the issue / cost to fix.

Something we will most certainly keep in mind. The houses we are looking at are around 5-6 years old so HOPEFULLY not too many MAJOR things that will be missed..but you never know...thanks
xram

[hand]

Was your home inspector recommended by your realtor? If so, they very well could have been in cahoots.

Kickbacks aren't unheard of (though illegal), but more common is that realtors don't recommend inspectors that aren't "deal killers" AND don't bother to disclose the conflict inherent in their recommendation.

Often the "recommended" inspector is one who is more motivated to please the realtor and minimize issues than to do a good job for you.

Making matters worse is that the inspector's liability is usually limited to the cost of the inspection(!)

[hand]

Something we will most certainly keep in mind. The houses we are looking at are around 5-6 years old so HOPEFULLY not too many MAJOR things that will be missed..but you never know...thanks
xram

Are you considering a house built by a production builder in a PUD (Planned Urban Development / a tract home)?

Many of these builders were/are masters of maximizing build speed / cosmetics / selling points while minimizing costs (quality). Don't make the mistake of assuming newish means safety from major or expensive to repair issues. I wish you the best of luck, but personally, would be very leery of purchasing house built by a high volume builder near the peak of the housing boom when skilled labor was in short supply, and buyers would wait in line to buy anything, and were often willing to waive inspections to do so.

[xram]

Something we will most certainly keep in mind. The houses we are looking at are around 5-6 years old so HOPEFULLY not too many MAJOR things that will be missed..but you never know...thanks
xram

Are you considering a house built by a production builder in a PUD (Planned Urban Development / a tract home)?

Many of these builders were/are masters of maximizing build speed / cosmetics / selling points while minimizing costs (quality). Don't make the mistake of assuming newish means safety from major or expensive to repair issues. I wish you the best of luck, but personally, would be very leery of purchasing house built by a high volume builder near the peak of the housing boom when skilled labor was in short supply, and buyers would wait in line to buy anything, and were often willing to waive inspections to do so.

I will look into this. thanks a million
xram

[xram]

Was your home inspector recommended by your realtor? If so, they very well could have been in cahoots.

Kickbacks aren't unheard of (though illegal), but more common is that realtors don't recommend inspectors that aren't "deal killers" AND don't bother to disclose the conflict inherent in their recommendation.

Often the "recommended" inspector is one who is more motivated to please the realtor and minimize issues than to do a good job for you.

Making matters worse is that the inspector's liability is usually limited to the cost of the inspection(!)

We havent even gotten that far yet. Still kinda looking. Still weighing options etc. We are renting a beautiful house right now but way too expensive for my tastes. And I dont want to raise my kids in a big fancy schmancy house. I want them to grow up in a more normal kinda house like I grew up in. You know, living room, game room, bedrooms but not big enough that people can go and hide from the rest of the family etc..... The one we are looking at now is 2800 square feet i think. real nice neighborhoood. dont look like cookie cutter type houses. But I will look into all this stuff. Again, we are ready to buy for sure but just not sure which house yet...

I will make sure to get our own inspector when we get to that point.....

thanks

thanks

[NoVa Lurker]

Many comments here about inspectors.

Our inspector was fantastic. He prepared a detailed report, filled with color photos, and sent me a PDF within 48 hours of doing the walk-through. Now, 2.5 years later, we have had no problems that he did not mention in the inspection report.

But let me state that another way: all of the many problems that we've had with the house were stated in the inspection report. We fell in love with the house and bought it despite many, many flaws. It was built in 1947 and has tons of "character." I have often thought that we should have walked away based on the 30-page inspection report, filled with potential problems.

We still love our house, and the price was a good deal in a purely financial sense, but it's been a ton of work, and we still have some issues that we have only partially addressed.

I have no experience looking at houses that are 5-6 years old, but that sounds fantastic!

[BYUvol]

Have always rented. My wife and I are ready to buy a house. Any hints or thoughts from those who have bought a house? Things you wish you would have known? Would have done differently in hindsight? Good interest rate websites? Buying points? I know this is vague. Any info is appreciated.

Thanks
Xram

In hindsight, I wish I had spent more money to buy a house within walking distance to my work. I absolutely hate my 40 minute commute, and honestly believe it will kill me if I can't move closer in the next 10 years.

There are several large transaction costs in buying a house though, and I feel locked in for at least the next 3-4 years.

[xram]

Have always rented. My wife and I are ready to buy a house. Any hints or thoughts from those who have bought a house? Things you wish you would have known? Would have done differently in hindsight? Good interest rate websites? Buying points? I know this is vague. Any info is appreciated.

Thanks
Xram

In hindsight, I wish I had spent more money to buy a house within walking distance to my work. I absolutely hate my 40 minute commute, and honestly believe it will kill me if I can't move closer in the next 10 years.

There are several large transaction costs in buying a house though, and I feel locked in for at least the next 3-4 years.

I will only live within 5 minutes or so of "work". I "take call" and need to be able to drive in quickly.

[origami]

House characteristics: If this is your long-term house, think long term. If you think you will eventually have kids, buy enough space and in a neighborhood that feeds into a top school.

It's a very common view. How do people rationalize it?

Every day you live in a bigger house than you currently need in a good school district you don't use - you overpay.
You overpaid for the house (school district) and you spend more on maintenance, utilities, property tax, interest...

Why to buy for the future? If you don't even have kids yet, it easily could be 7-10 years before you will really need bigger house in a better school district.
Save bunch of money during these years, and then buy a house you need and sell or rent the old one. Isn't it financially the most logical plan?

[origami]

Also - a lot can change in the future. You may easily be required to move (because of the job or something else). In this case you overpay with no reason at all.

[interplanetjanet]

A few things to check out when you are starting to look at houses...

Check out flood insurance rates and a FEMA map. I live in a town that is fairly flat and has not experienced flooding in some time, though 20-25 years ago was a different story. A portion of the town is in a FEMA "special flood hazard area" and flood insurance premiums are much higher there then elsewhere. When looking at houses in that area I have to adjust what I am willing to pay.

Investigate property taxes in the area. Some areas may have special assessments levied, some of which run out after a specified time. Factor this into your cost of ownership.

Find out how you feel about homeowners' associations. Some people loathe them, some love them. They do tend to introduce additional costs which you should factor in. If you plan on moving into an area covered by one, I highly recommend socializing with some of your potential neighbors first and getting a feel for how things are run. Personally, I plan on staying far away, but that is less of an option in some areas than others.

[Imperabo]

House characteristics: If this is your long-term house, think long term. If you think you will eventually have kids, buy enough space and in a neighborhood that feeds into a top school.

It's a very common view. How do people rationalize it?

Every day you live in a bigger house than you currently need in a good school district you don't use - you overpay.
You overpaid for the house (school district) and you spend more on maintenance, utilities, property tax, interest...

Why to buy for the future? If you don't even have kids yet, it easily could be 7-10 years before you will really need bigger house in a better school district.
Save bunch of money during these years, and then buy a house you need and sell or rent the old one. Isn't it financially the most logical plan?

Counter Factors:
1) The transaction costs in money and time of exchanging houses are expensive.
2) People like to customize their houses with improvements. There isn't much point to that if you plan to sell.

To me, the question is why buy a house at all if you don't plan on keeping it for many many years? Better to rent.

[origami]

To me, the question is why buy a house at all if you don't plan on keeping it for many many years? Better to rent.

My mortgage payment is half of the rent I would pay for the same place.

[Imperabo]

To me, the question is why buy a house at all if you don't plan on keeping it for many many years? Better to rent.

My mortgage payment is half of the rent I would pay for the same place.

Then for the love of [insert deity] buy up every such property you can find and arbitrage away this inefficiency in the market.

[origami]

My mortgage payment is half of the rent I would pay for the same place.

Then for the love of [insert deity] buy up every such property you can find and arbitrage away this inefficiency in the market.

Well, the monthly rent in this case will be about 1% of the property cost. It's not bad, but 1% is not an unbelievably good deal in the rental world )

I own one rental property, but in the nearest future I'll go with REITs - no hassle is addictive.

[xram]

Thanks again for all the info. Still looking at houses but I think we will make a move pretty soon and make an offer.

Any recommendations on where to get the best rate? How many banks do folks get rates from before accepting one? Again, first time home buyer so sorry for basic questions.

We have really good credit and have a very nice income so I'm hoping to get a good rate.

Will also have the 20% down payment up front.

Thanks
Xram.

[rr2]

Thanks again for all the info. Still looking at houses but I think we will make a move pretty soon and make an offer.

Any recommendations on where to get the best rate? How many banks do folks get rates from before accepting one? Again, first time home buyer so sorry for basic questions.

We have really good credit and have a very nice income so I'm hoping to get a good rate.

Will also have the 20% down payment up front.

Thanks
Xram.

The best website for mortgage related questions is the
http://www.mtgprofessor.com

My understanding is that a median credit score of 760+ will usually give the best rates with a 20% down. If the credit score is between 740-760, the loan is costlier but not by much -- requires about 0.25% extra points to get the same mortgage rate as 760+. Everything is negotiable. It is difficult to compare rates from different vendors if they are not issued at the same time. Mortgage rates can change 2-3 times daily. Also most rate quotes are not guaranteed until you lock. Usually you have to lock the same day.

[sls239]

My strongest suggestion would be if the home is occupied and you are interested, go back for a second showing with the understanding that you will be poking and prodding much more than polite company would do. This means moving furniture to look for carpet stains and to locate electrical, phone, and cable outlets, turning on the faucets, stove (make sure to turn it off), furnace, a/c, ceiling fans, turning off any plug in lights to see how the built in lighting does, and the like. There are lots of things that people will do and see in an empty house that they might not be inclined to check unless explicitly given permission to do so in an occupied home.

My other suggestion is to take a tape measure and measure things like the linear feet of counter space in the kitchen, the width and depth allowed for a washer / dryer in the laundry space and the fridge space, and wall space uninterrupted by windows for furniture placement.

[xram]

The loan a bank (liberty bank) gave us today as an example of what they might be able to offer once we make an offer is

Rate: 2.67% for 15 year loan
1% origination fee that might get waived partially or fully
Other fees = $700 total
No "yield service fee"
No "service release premium"
That's it, no other fees


Is that a good deal these days?
Thanks

Edit: this is what they would have officially offered today if we were making offer today....And I think she said they would have waive 1/7 of the origination fee today......

[LadyGeek]

It's better than my 3.00 %, 1% origination fee, 15 year loan.

Note that they said "might be able to offer" - that's not guaranteed, and it was made today. You don't lock into a rate until you actually apply for the loan.

No other fees? You have no idea how many different types of fees that will show up. What about title insurance? Read up for your first closing here: Closing Process - this site is from a title insurance company, so there is some bias. However, it's a good tutorial. Then, read the rest of the site.

[xram]

It's better than my 3.00 %, 1% origination fee, 15 year loan.

Note that they said "might be able to offer" - that's not guaranteed, and it was made today. You don't lock into a rate until you actually apply for the loan.

No other fees? You have no idea how many different types of fees that will show up. What about title insurance? Read up for your first closing here: Closing Process - this site is from a title insurance company, so there is some bias. However, it's a good tutorial. Then, read the rest of the site.

She said absolutely no other fees as far as the bank loan is concerned.

[LadyGeek]

The phrase "as far as the bank loan is concerned" is not the full picture. Title insurance is not processed by the bank. Read the tutorial and then ask your bank person a different question: Are the total closing costs covered? If they say "yes" - that's good.

- Be sure that they're not rolling the costs into the loan somehow. Somebody, usually you, ends up paying for these costs unless they're having a promotional offer.

The rate is based on how many points you pay down. If this is a "0 point" loan, you may get a better rate by paying a point or so more. However, that takes away from your available funds.

[rr2]

The loan a bank (liberty bank) gave us today as an example of what they might be able to offer once we make an offer is

Rate: 2.67% for 15 year loan
1% origination fee that might get waived partially or fully
Other fees = $700 total
No "yield service fee"
No "service release premium"
That's it, no other fees


Is that a good deal these days?
Thanks

Edit: this is what they would have officially offered today if we were making offer today....And I think she said they would have waive 1/7 of the origination fee today......

Here are some of the typical fees the bank charges:
Application Fee
Origination Fee
Credit Score Fee
Flood Insurance certification Fee

Here are some of the third party fees:
Appraisal Fee
Title Insurance Fee
Escrow/Settlement Fee
Government/Recording Fee

Ask them about all of these. Now if they say that this is all included in the $700 without rolling it into the loan then this is likely a good deal.

[xram]

Will do
Thank you
Xram