How to educate myself about buying a house?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Post Reply
Topic Author
Kaeru
Posts: 13
Joined: Wed Sep 21, 2011 9:02 am

How to educate myself about buying a house?

Post by Kaeru » Fri May 08, 2015 3:02 pm

I'm wondering if anyone can point me towards good material for learning how to best buy a home.

I'm 44, wife is 39. 2yo kid, trying for another this year. We should have a combined income of ~150K and 180K in cash that we can put towards a home.

We've never owned a home before (both spent a lot of time in graduate school), but we are finally moving into a potentially permanent job/location so we are thinking about buying a house in 2016.

Where should I start? Seems like murky waters at this point.

thanks!

User avatar
Meg77
Posts: 2582
Joined: Fri May 22, 2009 1:09 pm
Location: Dallas, TX
Contact:

Re: How to educate myself about buying a house?

Post by Meg77 » Fri May 08, 2015 3:42 pm

Congratulations on the new job/location! To start, evaluate your budget and see how much you want to spend on a home. This has nothing to do with how much you can get approved for, which is almost always much more than you should spend (unless you're in a super high cost of living area). Lenders don't want to see more than 36% of your gross income going toward debt payments (which includes property tax, HOA and home insurance in addition to your new mortgage). But those housing costs alone should be under 30% of your gross income even if you have no other debt.

There are online calculators to help, or just do it on Excel. With a new kid potentially on the way it's a good idea to map out a "proposed" new budget for your new life, which will likely look a lot different from the one you have now. Moving is a great opportunity to wipe the slate clean and start fresh with all new expenses. Be aware that utilities and maintenance costs can vary and are typically a lot higher in older homes.

I recommend a 30 year mortgage in your case (or even a 5-10 year ARM if you don't plan to stay there indefinitely) so that you can have enough cash flow to contribute to retirement and for new kind expenses.

Once you have a price range, join a website like realtor.com, remax.com, redfin.com or trulia.com and start to get a good feel for the market in the area you plan to make a purchase. If the area is nearby, start going to open houses just to look around. Looking a pictures, prices, tax rates, etc. is very helpful in establishing a baseline of market knowledge so that you aren't at the mercy of whatever a real estate agent says or shows you.

Once you are a bit closer, start looking for a lender. Rates don't vary much these days, but fees can vary a little bit from bank to bank. You can call or email 4-5 banks in one day to ask them what their rates and fees are and then pick one and get "preapproved." Realtors usually want to submit preapproval letters with offers.

Once you're ready to buy, you need to be ready to move quickly and make an offer immediately when you find a home you love because inventory is moving so quickly in most areas right now. Then you'll have to be ready to apply for a mortgage immediately (like the next day) and also be ready to move within 30-45 days. So gather information at your leisure now, before your lease is up or you're otherwise ready to move.

Good luck!
"An investment in knowledge pays the best interest." - Benjamin Franklin

NOVACPA
Posts: 104
Joined: Mon Apr 28, 2014 4:13 pm

Re: How to educate myself about buying a house?

Post by NOVACPA » Fri May 08, 2015 3:44 pm

http://www.freddiemac.com/homeownership/educational/

And this is one I did before I bought to qualify for HFA type money that I didn't end up using but found helpful if you have no knowledge of the process: http://www.vhda.com/Homebuyers/Homeowne ... U0f2C43zlc

drawpoker
Posts: 2809
Joined: Mon May 19, 2014 6:33 pm
Location: Delmarva

Re: How to educate myself about buying a house?

Post by drawpoker » Fri May 08, 2015 5:32 pm

Would add this - unless your minds are already made up for private schools - you will want to look closely at the quality of the local school districts where the houses in your price range are on the market. This may mean higher taxes (especially in areas where mills are used to support the public schools) but the payoff to that is pretty obvious.

The old adage is still true - Buy the least expensive house in the most expensive neighborhood, not the other way around.

daveatca
Posts: 627
Joined: Thu Feb 19, 2015 10:03 pm

Re: How to educate myself about buying a house?

Post by daveatca » Fri May 08, 2015 10:52 pm

Go to the city-data fora on:
Real estate
House

Every day for a week
Read past threads

LeeMKE
Posts: 1886
Joined: Mon Oct 14, 2013 9:40 pm

Re: How to educate myself about buying a house?

Post by LeeMKE » Sun May 10, 2015 5:37 pm

http://www.nolo.com/products/nolos-esse ... -htbh.html

Nolo Press: Essential Guide to Buying your first home

None better.
The mightiest Oak is just a nut who stayed the course.

Topic Author
Kaeru
Posts: 13
Joined: Wed Sep 21, 2011 9:02 am

Re: How to educate myself about buying a house?

Post by Kaeru » Mon May 11, 2015 8:34 am

Thanks for all this advice!

I bought the Nolo guide as a start and learned what a "mill" is.

User avatar
lthenderson
Posts: 4437
Joined: Tue Feb 21, 2012 12:43 pm
Location: Iowa

Re: How to educate myself about buying a house?

Post by lthenderson » Mon May 11, 2015 8:44 am

One of the things we did that really helped out is to find all the open houses in your area and go to them, whether the house is interesting to you or not. By seeing a house in a non-one-on-one situation which can be pressuring, you can envision how you would be using the space and figure out what kinds of things work for you and most importantly, what doesn't work. We went to a lot of open houses and even looked through a realtor for almost a year before we bought our first house. Because we weren't in a hurry to buy, it allowed us to become familiar with the market and learn the actual sell values on homes so when we eventually found the home we wanted via a private seller, we knew what to offer. Good luck.

User avatar
LiveSimple
Posts: 1461
Joined: Thu Jan 03, 2013 7:55 am

Re: How to educate myself about buying a house?

Post by LiveSimple » Mon May 11, 2015 10:23 am

Have your list of things you do want in you new home.

Let us say you have a list of top 10 things; also decide that you will buy the home if 8 out of 10 criteria is met. ( 8 out of 10, or what ever you think is appropriate ?)

Some top 10 things we considered

1. School
2. Location
3. Style of the home
4. Area of the kitchen
5. Area of the bathrooms
6. Number of rooms

You get the idea.

Don't get into the trap of seeing many houses in open house, and then have your criteria add up in your mind, on all the good things you saw in many houses in one house.

Have a plan and execute by the plan. Dont change the plan as you go !
Last edited by LiveSimple on Mon May 11, 2015 10:29 am, edited 1 time in total.

User avatar
JupiterJones
Posts: 2815
Joined: Tue Aug 24, 2010 3:25 pm
Location: Nashville, TN

Re: How to educate myself about buying a house?

Post by JupiterJones » Mon May 11, 2015 10:26 am

Maybe pick up a copy of Eric Tyson's "Home Buying... for Dummies"?

I haven't read it, but his personal finance/investing "dummies" books are top-notch (and very Bogleheadish), so I'd assume his home-buying advice would be just a good.
Stay on target...

investor1
Posts: 1051
Joined: Thu Mar 15, 2012 8:15 pm

Re: How to educate myself about buying a house?

Post by investor1 » Mon May 11, 2015 10:41 am

Make sure you can afford the following in your monthly budget:

1. Principle (mortgage)
2. Interest (mortgage)
3. Taxes (property taxes)
4. Home owner's insurance
5. PMI (if applicable)
6. Utilities (electricity, gas, sewage, water, trash, tv, internet, phone, etc.) / HOA fees
7. Maintenance & Repairs

As well as some one time costs:

8. Any transfer taxes that may exist in your area.
9. Closing costs on the mortgage.
10. Furniture

1-5 are known as the PITI payment. This is the figure the bank will be interested in to determine what they think you can afford. Mortgage payment calculators can help you understand #1 and #2. You can likely check your county's website for property tax information and you can get quotes for home owner's insurance. If you put down at least 20% (highly recommended), you'll avoid #5. There are other ways to avoid this, but you can google for that.

You should be able to estimate utilities based on what you pay where ever you live now. If you'll have an HOA, look for one that covers actual utilities you would be paying for anyway rather than simply having another monthly bill.

You can google around, but most of the recommendations I have seen say you should save 1%-1.5% of the purchase price of the home each year for maintenance and repairs. The older the home, the higher end of the spectrum you should be. If you have an HOA that covers some of the big stuff, you can be a little lower on the spectrum.

IMHO, you should be able to afford 1-7 on less than 30% of your income on a 15 year loan.

Penfed tends to have good deals on mortgages.

investor1
Posts: 1051
Joined: Thu Mar 15, 2012 8:15 pm

Re: How to educate myself about buying a house?

Post by investor1 » Mon May 11, 2015 10:44 am

Oh, and not everything is listed publicly. Sometimes realtors don't make the listing public until they have an offer and are looking for counter offers. Decide the neighborhoods you want to live in, drive around those neighborhoods and look for For Sale signs. Between that and your realtor knowing the areas you want to live in should make things quicker and easier.

Post Reply