where do I start? - First Home Purchase...

[whiskeytown]

Ok - here we go - I'm seriously considering leaving apt. living and going the home ownership route...

first off...where the [censored] do I start? - I know I don't want a house if possible - I'd rather do Condo or Loft - I have no kids or family (and can't plan on them for awhile) - and I don't feel like dealing with lawn mowing, chores, and all that crap -

I don't know how much a downpayment I need, or what my salary has to be - I heard plan 3 times your yearly salary for homebuying - that would be an ok home - 4 times I can get something pretty cool -

I currently have no down payment, but could probably scrape together 5K by December when my lease is up for renewal -

where the hell do I start? - Minneapolis residents esp. encouraged to apply.

RB

[MrMon]

The 3x rule no longer applies. Being a real estate agent, not in MN unfortunately, I'd suggest you start by contacting a lender. Let them tell you what the max home you can afford is. Understand where the number comes from and how you can change it. Don't use one of those online calculators except for rough estimates, actually talk to a lender to get some real data and a feel for how this works. And any lender that can't give you an answer in 60 minutes or less via phone probably isn't worth dealing with. (You probably want a 5 or 7 year ARM. At least use that to determine target price.)

Once you have a number, decide if you can live with the payments. Remember the tax benefits, this isn't the same as rent money. If it's too much, lower payment and target house price appropriately.

Now start educating yourself. Go to Sunday open houses, visit condo and loft developments. Go to different parts of your area, try different styles of house or condo. Just don't go look at things that you can't afford, you'll want them and it will make what you can afford look bad.

After looking for awhile, you should start to get a feel for what you like. Area, style, single level or two level, downtown or suburban, etc. Put down your ideal home, and see if it exists. It doesn't, trust me. Now you have to start to compromise, decide what's really important, what you have to have, what can be left out. Try to find that.

One final thing, never try to make a house fit your needs. It's a gut feel type of thing, you'll know it when you see it. If it doesn't scream "buy me", don't.

[smokingrobot]

before you apply, you might want to obtain yoru credit report and make sure its kosher (nothing on it that shouldnt be).

get together your W-2's or 1099's tax returns from last year and the year before.

get your bank statements together.

for a mortgage payment, take the price of the home you want to purchase, divide by 1,000 and multiply that nuber by 6.

that will be your principal and interest payment assuming a 6% rate.

add that number to your monthly expenditures (only the ones that show up on your credit report) and divide that number into your monthly income. make sure thats below 50%, if not, buy a lower priced home.

ex:

Purchase price 100,000
p&i = 600

monthly CC bills and auto loan = 400

monthly income = 4300

1000 / 4300 = 23%, < 50%. so its good.

thats called your debt ratio btw.

if you wanna know anything else, pm me. i can write more for you later, but im about to fall asleep.

[IHateKeithSmart]

Also, figure in the development/regime fees if its a condo. And homeowners insurance and property taxes for additional bills you'll have.

[whiskeytown]

I'll go thru it -

for what it's worth, I work in services for a very large financial institution that does lending for homes - I believe we get extra benefits that make it worth my while to go thru my company - but I shalt investigate -

will probably be a few months anyways - nowhere near a downpayment - not even close, really -

RB

[Broken Glass Can]

Be careful!

Once you enter the ranks of the propertied class, you will have an uncontrolable urge to vote Republican. /images/graemlins/grin.gif

Welcome aboard.

[whiskeytown]

bumping (hey, I posted at 3am - gotta try to get it out there before going to bed)

RB

[djoyce003]

get copies of your credit reports, tax returns, bank statements, pay stubs, any assets you own, such as 401(k) statements.

I'd go the pre-approved route...which is different than pre-qualified. Pre-approved means that your financing is totally in place and all you need to do is find a house. I think it's 90 days from your pre-approved date so don't do it right away cuz it could take 90 days to find a place you like.

Pre-qualification for lending isn't the same and don't do that...do pre-approval. Your bid carries more weight when you are pre-approved as well because the seller knows that the sale can close much easier. Sellers don't want to accept a bid only to have financing fall through so sometimes you'll get the house even though your bid is lower than a competing buyer who isn't pre-approved.

[chesspain]

[ QUOTE ]
I don't know how much a downpayment I need, or what my salary has to be - I heard plan 3 times your yearly salary for homebuying - that would be an ok home - 4 times I can get something pretty cool -


[/ QUOTE ]

A reasonable rule of thumb is to spend no more than a 1/3 of your monthly gross income on housing (i.e. principle & interest for mortgage, property insurance, & property taxes). Although lenders may be willing to loan you so much money that you are spending 40%-50% of your monthly gross on housing, I prefer to be able to sleep at night. /images/graemlins/smirk.gif

[PocketJokers72]

[ QUOTE ]
Ok - here we go - I'm seriously considering leaving apt. living and going the home ownership route...

[/ QUOTE ]

Having owned a few homes, I'll say this:

Don't but an old house!

Purchase a house/condo/townhouse that is less than 3 years old, or brand spanking new (my preference). The energy savings (esp. in a snowy state like yours) from the newer building technology (windows/insulation) is quite significant from a monthly cost perspective.

[morgan180]

[ QUOTE ]
before you apply, you might want to obtain yoru credit report and make sure its kosher (nothing on it that shouldnt be).

get together your W-2's or 1099's tax returns from last year and the year before.

get your bank statements together.

for a mortgage payment, take the price of the home you want to purchase, divide by 1,000 and multiply that nuber by 6.

that will be your principal and interest payment assuming a 6% rate.

add that number to your monthly expenditures (only the ones that show up on your credit report) and divide that number into your monthly income. make sure thats below 50%, if not, buy a lower priced home.

ex:

Purchase price 100,000
p&i = 600

monthly CC bills and auto loan = 400

monthly income = 4300

1000 / 4300 = 23%, < 50%. so its good.

thats called your debt ratio btw.

if you wanna know anything else, pm me. i can write more for you later, but im about to fall asleep.

[/ QUOTE ]

this is exactly right.

a few other things. many banks have 1st time homebuyer programs with little/no down needed. you pay a premium for it but don't have to come that much out of pocket. ideally if you can bring 10% down to the table you'll get some better interest rates.

there are some loan programs that will lend 103 - 107% of the purchase price so that your one-time non-reoccuring costs are in the loan too (title, escrow, lender fees, etc.)

make sure you don't over extend yourself. everyone is talking about a housing bubble, which may or may not hit. a safe assumption is to assume perhaps a 10% decline in the market value of your house over the next year - if you want to be a pessimist.

also negotiate like hell. come in low on the offer, review your HUD (settlement statement) thoroughly. throw out any junk fees, like sub escrow, admin fees, rush fees or any of that crap its all padding. also negotiate down the processing fee and underwriting fees. finally when you get near the end ask your real estate agent to cut their commission by a grand or two - they'll be so afraid to lose the deal that they usually drop their skirt.

[MrMon]

If you work for a financial institution, yes, that should give you the best possible deal. Where you'll really save is they'll usually charge little to nothing on origination fees, processing fees, etc. And you should get the best rate, especially if you'll agree to payroll deduction. (I work for a branch of Cendant and got a great deal on my rate for a refi, had to pay the standard 1% origination though.)

Also, since you're just inquiring about how much you can afford, you don't need all that other stuff. You can guesstimate. Be as accurate as possible. Only when you actually apply will you need all that other stuff. Just go at lunch and they should be able to tell you almost instantly.

Anyone who thinks you can get a prime loan at a 50% debt ratio is sadly mistaken. Industry standard has been 28%/36% of gross for some time now. (That's 28% of income for housing, 36% total debt including housing.) There are cases where you can push it, but you'll pay a higher interest rate. High income people can also push it, as they have more disposable income. Ratio is pretty stand for Average Joe.

[OtisTheMarsupial]

Don't try to buy in Baton Rouge. Apparently because of Baton Rouge's proximity to New Orleans, ALL the available real estate in BR has been sold. Amazing.

[whiskeytown]

my only serious debt (besides a $100 cable bill, $50 electric, $60 phone) - is a $4000 credit card bill - rent ant other expenses are approx. 25% of my POST tax wages, pretax maybe 15-20 percent - I don't know if that counts -

I am way up there in credit rating - near 745 according to my CC company - so I'm gonna make that go away first before applying -

RB

[smokingrobot]

you get qualified off your gross income, so dont worry about that.

also they wont count your cell phone bills or cable bills against you either.

if you have a fico above 700, you can get pretty much whatever you want. you might even want to contact a local bank instead of a broker or mortgage bank.

they sometimes wont charge for things that a broker or banker would normally still have to charge.

[whiskeytown]

like I say, I work for a major banking institution -

I just looked it up, and here's what I see for benefits for going with my company...
------------------
Waived origination fees, typically 1.0% of loan amount for active team members

Waived processing fees

Savings on private mortgage insurance premiums

Special options to reduce appraisal and closing costs

[Bulldog]

I just moved into my first new home this week. Here is some advice I got here recently:

thread (http://forumserver.twoplustwo.com/showflat.php?Cat=&Board=exchange&Number=2980327&Fo rum=,f20,&Words=&Searchpage=1&Limit=99&Main=298032 7&Search=true&where=bodysub&Name=8185&daterange=1& newerval=2&newertype=m&olderval=&oldertype=&bodypr ev=#Post2980327)

[Bulldog]

My salary is almost exactly 25% of the purchase price of my home. I got an 80/10/10 mortgage, which is basically a way to get around PMI (mortgage insurance, which is like lighting cash on fire) by getting a first and second mortgage at the same time. I put about 16% down, but I also needed about $7,000 more for costs, taxes, etc. If not for those other costs, and wanting to keep a fair amount of cash, I would've had 20% to put down.

The whole thing was relatively simple. Find a good real estate agent (recommendations from people you trust), and let the agent recommend lending sources. Also, plan for $3,000 to $5,000 in appliances and other expenses (stuff adds up quickly), more if you need a lot of furniture.

[sublime]

owning a home is a LOT better than owning a condo.

[sublime]

[ QUOTE ]
owning a home is a LOT better than owning a condo.

[/ QUOTE ]

i will go a step further. buying a condo is a mistake. the condo fee is reason enough. save up until you can afford a home you plan to live in for a long time.

[CaptSensible]

[ QUOTE ]
Be careful!

Once you enter the ranks of the propertied class, you will have an uncontrolable urge to vote Republican. /images/graemlins/grin.gif

Welcome aboard.

[/ QUOTE ]

This is actually quite funny. After I bought my first house I started to understand the republican party a great deal better than I had before (think taxes, taxes, taxes).

Thankfully I am still a staunch democrat. I looked the devil in the face and resisted.

[jacki]

[ QUOTE ]
I'd suggest you start by contacting a lender. Let them tell you what the max home you can afford is.

[/ QUOTE ]

I think this is terrible advice, unless you're willing to make big cuts in discretionary spending.
My lender for my first house had us approved up to $200,000. Based on the monthly payments, we decided we could afford a $135,000 house.

[CaptSensible]

1. As many posts here have stated before get PRE-APPROVED. With your salary and credit rating that should be no problem whatsoever.

2. Find a real estate agent YOU LIKE. If you don't like your first one get another. Your real estate agent is going to become your best friend through the entire home buying process (this is not an overstatement). You will be calling them at 9pm, weekends, etc etc etc. They should be fine with that. If they're not get another one. I've had 3 different real estate agents (2 for buying, 1 for selling). Two have been fantastic one was just good. Get recommendations if possible.

2a. Your real estate agent needs to understand your needs and what you're looking for. You need to have a rapport with them. You need to be able to understand each other and be on the same page.

3. I highly recommend getting a house instead of a condo IF you can afford it.
A condo is an apartment you own. A house is, well, a house.
The 60-90 bucks a month you might pay for a gardner is much less than you'll pay for association fees. I like owning something that's free standing as opposed to something that's connected to other dwellings. I can turn up my stereo without bothering anyone and I don't have to worry about my neighbors turning up theirs.

4. Someone suggested you buy a newer built house. There's wisdom to that but I personally prefer older houses.
Older houses have a lot more character if you care about that sort of thing. Newer houses are more reliable and don't have 45 year old plumbing that needs to be replaced though many older houses have had their plumbing updated.

Many say that older houses were built better. I don't know if that's true or not but I just purchased my 2nd house from the 50's. If I could have found one that served my interests I would have bought one from the 30's. Again, that's all based on personal preference.

4.Go to realtor.com (http://www.realtor.com).
You can get a great idea of what's available and what things are going for. It's a great resource while you're looking for a house.

For me home ownership has been an extremely rewarding experience for. It is INFINITLY more satisfying paying a mortgage on something you own than it is to make someone else money by paying them rent.

Well, I hope this info helps. CONGRATULATIONS and GOOD LUCK!

[NutzyClutz]

Find a place with LOW taxes.

[MrMon]

[ QUOTE ]
Find a place with LOW taxes.

[/ QUOTE ]

He lives in Minnesota. I assume he's going to continue living in Minnesota. The tax bill is kinda fixed.

The only real way to lower taxes once you've choosen a place to live is to choose a cheaper house. Now, the 'hood has some house with real low taxes for those obsessed with lowering their bill, but it's not a route I would recommend.

[whiskeytown]

I'm not gonna be a cheapass - I'll pick security and comfort over size - a 4 bedroom house near Chicago and Lake just ain't goddamn worth it - LOL

RB