First Time Homeowner -- Need Advice!

[ProMac1K]

Finally got settled in a location that is nice and a job that is good! I'm renting a duplex right now, but rent is outrageous for what it is, and their are several guidelines and restrictions with it. I've been looking at housing options for a couple weeks. Toured one yesterday and am scheduled to do four on wednsday.



The first place is on the outskirts of town, with a small "farm-sized" lot and a lot of outbuildings. The outbuildings are fairly decent (a long bar, smaller shed, and a two-stall garage). The house was built in 1910, and in my opinion should be gutted and needs to be redone and remodeled. The basement is also the original stone basement, is extremely small, and I have to crouch to get around in it. It's been vacant for a year, and is nothing special. The good points to the place is the big yard, the outbuildings on the yard, the north grove, and there is around 10 or so acres behind the yard that is tillable, or whatever. The house also looks presentable from the road (it looks decent from the outside). The bad point is that it would need to be redone before it could be lived in, and the basement isn't functional the way it is.



The other places are inside the city, and I really don't know enough about them to explain, other than they're liveable. I'm curious to know your experiences in purchasing real estate, and what's the best ways to go. Also, any benefits to first time homebuying?

 

[HoleshotHolset]

I'd be glad to help since I too was a first-time homeowner back in Sept. '04... but I don't see any specific questions in your post.



First-time homeowners are eligible for all kinds of things depending on how much money you make and the type of property you're buying. I bought a house that the previous owner foreclosed on and 'they' (HUD? Fanny Mae? I don't remember... sorry. ) helped me out a bit with closing costs, etc.



Matt

 

[bmoeller]

One plus buying, would be you are building equity of your own, and not for someone else. I see rent as grabbing a fist full of dollars and lighting them on fire.

Depending on the monthly loan payment, it can be cheaper than renting. It is for me. My house isn't very big, but it is big enough. Yard is small, but I don't hardly have time to mow as it is, so that helps that I can do it quick.

Most houses like the one you are looking at, rent for something like $550-900/mth here. My house is less than $500/mth.

As Matt said, there are different programs from the gov't or banks that help out first time owners. Can sometimes have the closing cost wrapped into the loan as well. But, since you'll be paying interest on that money too, I don't know if that is a good idea. The interest payments can sometimes help with your taxes.

Make sure to have the house that you want to buy is inspected, and an appraisal wouldn't be a bad idea either.

One downside would be if your job requires halfway frequent moves.

I think a fixed rate loan would be a good thing right now, as well. Particularlly with this being your first home. The Adjustable Rate Mortages (ARM) can bite you in the butt when the interest rate goes up. The payment will go up with it.

 

[ProMac1K]

I just wanted to be familiarized a bit on the incentives (if their are any) for a first-time home buyer. I hear about them, just never knew what they were.



Also looking for opinions on whether to move into something "turn-key", or to renovate something, or on a long shot, buy a house cheap on an auction and relocate it on a fresh foundation. Emphasis or main curiousity right now is on rebuilding/renovating a house.....

 

[bmoeller]

To rebuild or turn-key? Will depend on your time allowance, cash at hand and willingness or ability to do the work yourself. If you can do a lot of the work, you will be better off in the long run, or if you have plenty of friends who are willing to lend a helpful hand.

 

[CRuth]

Keep in mind theres more than just your mortgage payment to consider. When you rent you pay your rent, and probably phone, gas, electric (usually water, sewer is part of the rent). Now you need to add in taxes, insurance, sewer, water, and whatever other local government items get added in. Its significant. Varies by locality of course.

 

[Rotty]

Extremely Long.

I think others have covered most items.

Mortgage interest can be taken off your Federal taxes.

I would suggest getting a 30 year fixed. This will allow the lowest payment, but if you make one extra payment a year it will effectively lower you mortgage to 20. 5 years. It will also help out if times when you are short of money, you are not scrambleing so hard to make a larger payment.

I would stay away from variable rate loans, the interest rate will go up in the future.

Interest only loans are extremely dangerous as you are not reducing the principal. You are betting on the equity going up.



I would also get a good friend or relative to inspect the house with you above the paid "professional" yea right#@$%! , and help point out problems, good and bad points as you are going to be to goo gaa and just wanting to buy,move in. They essentially have no interest in the house and have a different set of eyes.



Figure out your budget. Maybe start payment size like what you are paying for rent. Then back track that to a loan payment amount. Add 20% for down payment, this is how much house/property you can buy. Again be realestic on numbers.

It is actually better to buy smaller then upgrade later, then to bite off too much.

Be very careful about nickle and dimeing yourself to a bigger house. Stand firm and you will be very happy in the future.



Don't try an purchase the first house you see, work on you critera for what will fit you/four family and your budget.

I would make a list on absolute needs, wants, will not work, dislikes and absolutly not, etc.

I have passed up many houses to find the jewel that fit my wifes and my critera. It is not easy or quick, unless you are absolutly lucky.

Pick your neighborhood very carefully, crime, schools, shopping, traffic, noise, neighbors, yes neighbors, access to highways.



If it is a fixer upper, double your budget as you will find more problems than you expect. Triple your guestamated time, we are all too idealisitic. (I speak from too much experience on both issues).



I have been extremely lucky, but worked very hard to get what I have now. I am conservative but open to opportunties. Timing is never perfect...



An as always, negotiate. Don't offer full price unless you are in some type of bidding war (I avoid this) or trying to take the property from somebodys else similar offer.

Also keep your ernest money small.

Get a good realestate agent that you can trust (recomendation from friend/relative) Do not use a realestate agent that is your relative. If the deal goes bad for what ever reason, you still have to deal with the relative, where as a professional you can just walk away from an call it experience.



Never trust anything verbal. Get it in writing.

Just before you sign, get a copy of all of the documents. Read and try to understand what you are signing. You are responsible for your signature. You may not understand everything (I still don't), but you can catch errors before it is put to final ink.



At signing allow 2-6 hours and severe signature/initialing cramps. You will have to sign and intial everything in site and then some (like 3-5" thick in paper).



Improve your credit score now. It will help you with the interest rate/fees when you apply for a loan. The higher score the better. Shoot for greater than 750.



Sorry for the long post, but it comes from experience.

Good luck

Kevin

 

[daytripper63]

I have to pretty much agree with the above post by ROTTY, but one thing to keep in mind and will vary a little by area but the mortgage industry is estimating that there will be approximately 1. 5 million foreclosures this year with all the greedy crappy loans that have been written in the last 6-7 years, so if you market area had large price growth in the last 5 ears or so, it might be a good idea to sit tight for for a bit and wait for more of a buyers market. I am not familiar with your area so just check for yourself but beware of what a real estate agent may say.

Homeownership is great and can be even better if you dont pay too much.

Good luck

Here are some links to research for Foreclosures in your state/area

http://www.foreclosurefreesearch.com/relay/sitemap/MN/



http://www.foreclosurenet.net/states/minnesota.asp



http://mn.foreclosure.com/



http://realestate.yahoo.com/Minnesota/Saint_Cloud



http://ezinearticles.com/?cat=Real-Estate:Foreclosures

 

[bighammer]

I didn't read the other replies, but my advise would be to wait until you find the right one for you. I have lived in a few different homes, and remember looking at a lot of others. I laugh when I think of what enticed me to consider some of them, but I held off. When you find one that's right, I think you'll just know it. Good luck with it.

 

[DennyDay]

Be Careful, be smart

These are a couple of points that must be adheared to:

1. Cheap Insurance - - - Use a lawyer for pre closing and closing - - - make sure he reads EVERYTHING before you sign anything. I will cost a few $$ but is worth the cost and will keep you out of trouble.



2. In this day and time, with all the forclosures getting ready to happen, only mortgage the property at 80% of the real value as set by an independant appraiser.



3. The house has been on the market for over a year, so there is nobody pushing you to make a quick deal "while it is still available,"



4. Good luck - - Think with your head - - not your heart



Denny

 

[ProMac1K]

Thanks for the replies.



Where can a guy find an appraiser/inspecter?

 

[DennyDay]

TMAAS - - Check the phone book or contact your banker



Denny

 

[CRuth]

I dont' know about that finding the perfect house thing. For some people sure, for me I'm not to particular and would have been happy with just about anything. Though the three car garage was something that made me very happy.

 

[nickleinonen]

i too soon will be a first time home owner. . house prices are just way too much around my area. . average house price where i am now is over $400,000 [cdn]

my price range is $275,000 - $325,000 [cdn] and locally all i can get for that is a dump on a postage stamp. . if i go about 1 hour north of where i work, i can get some nice places [built ±1950's on several acres of land]. . but then i need to deal with a septic system & well water. .

 

[daveshoe]

You could also consider a lease-option to purchase. If you could find a motivated landlord--someone that may have inherited a property,is having trouble with crappy tenants,ect. you may be able to ask for a lease-purchase option. Perhaps this very house is a good candidate for a lease-purchase option. If you still like it after living there for a time,excercise the option. If not,think of the headache you saved.

Explain that you like the house,show them a serious security deposit that can be converted to a down payment,and come to the meeting pre-qualified for the purchase. From the seller's standpoint there is nothing more of a pain than a ''dreamer'' that wants a house,but is not qualified to buy it. Expect plumbing problems in a house standing empty. Cast iron drain pipes can develop cracks that are sealed over with slimy waste. When they dry out for a year,watch out. Pressure pipes may be frozen. If the pipes look old,figure on a total replacement.

Credit scores are paramount to your success. If you want a sobering experience,do the math on 30 years of payments at 51/2, 61/2, 71/2 percent to see what I mean. I control loans on five properties at 5 1/8 percent,and it is a great feeling.

In any case, if you decide to buy this house,feel free to ask me stuff,as I have a lot of experience with vintage plaster,cast iron pipes ,and living with the mess during remodeling.

 

[HEMI®Dart]

While we are on the subject..

Hey guys,



I researched this but could not find and answer.



Can we still withdraw 401K funds penalty free for a first time home buyer?

 

[ProMac1K]

In any case, if you decide to buy this house,feel free to ask me stuff,as I have a lot of experience with vintage plaster,cast iron pipes ,and living with the mess during remodeling.

Thanks



If I do decided on that farmsite, my initial concern is going to be the mortgaging. How to do it, what type of loan to use. Also, if and when to bring a inspector into play, how to work with the realtor on conditions such as taxes/how much heat used/energy efficiency, and then how to offer or work with the seller as far as making an offer and settling on a price. This is all new to me!

 

[bmoeller]

CHECK THE BASEMENT FOR WATER!

Not a happy camper. Came home this morning from a trip, and have water coming into the basement. Even appears to be coming up through the joint in the slab. Gutters are clean, too. #@$%! Been kind of wet this year, and just had 1 1/2" while I was gone.

Been busy with a mop and squeegee, and throwing some things out that are ruined by the water.

 

[ProMac1K]

I've experienced that before..... We've got a lot of stuff boxed up in Rubbermaid containers downstairs now.

 

[AMassaro]

I'm a Realtor with Century21 in the Chicagoland area. I'm not trying to sell you anything, but if I can be of any help just ask some questions. Honestly I don't see why you don't call an agent. Let me tell you some of my reasons. Buying a home is a major transaction. For most people its the largest monetary investment in their lifetime. Why wouldn't you want to use the services of a Realtor, especially since they are free. We have access to information the public generally doesn't have and we have a strict code of ethics. I am able to ask a client exactly what he or she wants in a home or property, establish maximum price guidelines, precisely encapsulate areas of interest (ie, North of this street, yet south of ... . ) and set up a search and have it email to my client all the results each day for all transactions that occur. This includes when something closes and at what price, when there are price changes, when a home under contract is re-activated, etc.

I understand that some people don't like salesmen. Believe me I do... But I really don't sell a house. A home sells itself. There is no way I can have the persuasive powers to make someone fall in love with a property. All I can do is be honest, and as helpful as I can be.