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Home Buying Advice

beefdaniel 204 62 September 3, 2015 at 05:55 PM in Home & Home Improvement
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Hello all,

I am looking for any and all advice related to home buying (first home). I am in Pennsylvania, outskirts of Philadelphia. I am in the market for a new home and I guess I can afford something between 350 and 400 K based on my calculations.

I have 20% down payment (about 75 K) with me and I in general understand the process in the following steps.
1. Get pre-approved (Question here is, how do I get the best rate from banks, what are some strategies shopping around)
2. Work with a realtor or without, I was looking at Redfin and it seems like they do give a small % of the commission back towards closing costs.
3. Give an offer, if accepted proceed with home inspection (how to find a reliable inspector?)
4. Give the details to the bank to have the home appraised and then work with them to get the funds and move towards closing.

I am not looking to buy something really old, I would prefer something build in the last 10 years or so. I guess this might end up being my forever home since I don't think I will be able to move out and afford a single family home and with the budget I have I guess finding a decent single family home in a good school district might be a challenge as well.

I would appreciate any advice from folks here.

Cheers!

18 Comments

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#2
Congrats on getting into homeownership. While it can be a stressful process it can also be a wonderful experience. First of all what do you mean by "I guess" I can afford something between 350-400k? Do you understand all the additional costs of homeownership besides PITI? Keep in mind of potential other costs such as Mello Roos, HOA. In addition to that 20% down, do you have additional to pay for other costs such as closing, furnishing, possible renovations?

1. Banks in general are not going to give you the best rates. Strategies include as you mentioned shopping around. There are pros and cons to different approaches. In general online and sometimes brokers can get you the best rates. Just be overally prepared with your paperwork ahead of time and communicate very very well. Be persistent.

2. I would personally work with an experienced well reputable full-time realtor that works well with first time homebuyers. It doesn't cost you anything. The seller is paying the commission. As you mentioned some may give you kickbacks on closing costs.

3. Search for one

4. I don't see any questions being asked

I would say just make sure you do your homework and the math correctly. The last thing you want to do is overbuy and be house poor because you used some random online calculator to figure out how much house you can afford. However if you were able to save 20% down (assuming you saved that on your own while renting at the same time) and covering at least the basics of money management, retirement, investing, etc then I think you will be just fine.
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#3
would like to add that do not underestimate the closing costs, usually that's a shocker for some.
I recently purchased a condo and even after mortgage shopping decide to do with a local lender and it made my process easier and i was less stressed.

As boingyman rightly pointed out finding a good Realtor is very important. here was our criteria when we interviewed
- full time
- needs to have good experience of the market in the area you are looking to buy
- needs to have sold some properties in the range you are looking for

good luck
S
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#4
Try http://ficoforums.myfico.com/t5/M...bd-p/loans

I've learned a ton about the mortgage process from the Myfico website. Lots of info on rates, types of loans, ect. They have loan officers who are regular contributors and give great advice. They can also show you where to pull the exact credit scores that will be used for mortgage lending so you will know the right time to apply for a loan.
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#5
A good way to keep from overbuying too much is don't go anywhere over 2.5x times your income. I'm more comfortable with around 2x. You ca get more house by having a larger down payment. If you make $100,000 and are shooting for a $250,000, I would recommend having $50,000 at least for the down payment which is exactly 20% which is suggested anyway for a conventional mortgage.

The math is more convoluted when you don't make as much. If you make $50,000 then 2x would be $100,000. Many would argue this doesn't buy much and maybe so depending on your location. Patience, a hearty down payment, and equity building on your first home should be a goal. If your first home resembles your dream home, you overbought and will experience what "home poor" means. If you make a huge salary, this will not be an issue.

Most people will chime in about certain areas being more expensive and 2x won't buy them much. The answer is that they are likely looking to purchase in the wrong areas or they don't make enough for their locale and should investigate moving to a more economical city. Of course this is just my opinion and this advice falls on the financially conservative side of the scale, but this advice also keeps you from going broke and blaming someone else for your poor mortgage choice.

Everyone is entitled to their opinions, this is mine and I stand behind it.
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#6
1. Get quote from direct online lenders like: http://www.aimloan.com/ or http://www.lenderfi.com/ Government controls mortgage rates. So, everybody has approximate same rates. Big banks are more reliable.

2. Do not trust relators. Neither buyer agent nor seller agent work for buyer. Personally, I would go with something like Redfin and do all research by myself. At least, there is cashback.

3. Look for local inspector (who knows area). However, do not expect much from 1 hour home inspection. Sometimes it may take years to find problem.

4. Closing is rarely a problem. Always, check papers. I found $1500 printing fee. No idea who was going to print and what. Maybe they wanted me to print money for them. I guess so.
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#7
Knowing what you need for a down payment and all the other closing costs is so important in the home buying process.
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#8
A few additional things:

Inspection:
You're on the right track with wanting to have the home inspected by the best home inspector you can find. You don't want to buy someone else's problem.

Do not use the home inspector your real estate agent recommends to you. They often use inspectors who are soft on reports and who they know they won't kill the deal. You don't want one of those inspectors. You want someone who takes pride in finding every single little thing wrong with that house.

The inspector you hire should be ICC (Industry Code Council) certified, which means they're up to date on all relevant building codes. You can search for inspectors or check to see if one is certified at ICC's website [iccsafe.org]. A great website for referrals to inspectors is at the American Society of Home Inspectors' (ASHI) website [ashi.org]. Another website that offers great referrals is the National Institute of Building Inspectors (NIBI) [nibi.com]. NIBI requires that its inspectors carry errors and omissions liability insurance, which means they accept any responsibility for any oversight. You can also check with people you know to see who they liked.

You want to go with one that you're comfortable and one that is comfortable with you going along with them on the inspection.

New construction:
Avoid new construction. It comes with its own set of problems. Instead, shoot for a home that is at least five years old in a neighborhood that is completely established - no meaningful number of stubbed out (undeveloped) plots.

Shopping for best mortgage:
The best way to shop for the best deal (on pretty much anything) is to comparison shop with as many different sellers as possible. Get quotes from as many lenders as you're willing to in a single day. Comparison shopping all in a single day gives you the most accurate comparison as rates can change daily. Try credit unions, banks, and brokers. Make sure you're comparing apples to apples. One way to do this is to simply ask for rates and closing costs on loans that have zero points.

If you do several rounds of single day comparison shopping, do all of your shopping within a 14 day period. Each time a lender does a hard pull on your credit it lowers your score. But, the credit scoring model (actually, there are dozens, but this is referring to the shortest time frame of all of them) considers all mortgage hard pulls done within a 14 day period as one single pull. So, to avoid multiple hard inquiries on your report, do all of your comparison shopping with as many lenders as you'd like within a 14 day period.

Here's some additional information on how to get the best deal on a mortgage [time.com].

How to negotiate best deal on house:
The power in any negotiation always goes to the person who is truly willing to walk away. Never fall in love with a house until you actually own it. Until then, try as best as you can to remain completely emotionless about the house and willing to walk away at any point.

Making sure your credit is in good shape:
Three to six months in advance, pull your FICOs from all three major bureaus as well as all three of your reports. You can get your reports for free from AnnualCreditReport.com [annualcreditreport.com].

Owner's title insurance:
You definitely want to buy owner's title insurance, which is different from the title insurance your lender will automatically place on your policy. That policy protects them, not you. Comparison shop around for the best deal. I found the best deal and very good customer service from Entitle Direct [entitledirect.com], but others are Title Forward [titleforward.com] and OneTitle [onetitle.com].
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#9
Quote from Brian1 View Post :
Owner's title insurance:
You definitely want to buy owner's title insurance, which is different from the title insurance your lender will automatically place on your policy.
Wish I knew about ICC inspector.

Question about the owner's title insurance. On my statement from the title company, I see owner's title insurance and lender's title insurance. I didn't know you could buy it separately. Do you just tell them to take it out of "Title & Escrow Charges" and buy it yourself?
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#10
Quote from izmeeh View Post :
Wish I knew about ICC inspector.

Question about the owner's title insurance. On my statement from the title company, I see owner's title insurance and lender's title insurance. I didn't know you could buy it separately. Do you just tell them to take it out of "Title & Escrow Charges" and buy it yourself?
I'd get quotes from all three of those title insurers I mentioned - especially Entitle Direct. If any are lower than what your lender has listed for owner's title insurance, let them you''re going to go with the company you found and to send you another statement reflecting the new amount for owner's title insurance. They should remove the old company's line item and replace it with your title company.
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#11
Quote from beefdaniel View Post :
Hello all,

I am looking for any and all advice related to home buying (first home). I am in Pennsylvania, outskirts of Philadelphia. I am in the market for a new home and I guess I can afford something between 350 and 400 K based on my calculations.

I have 20% down payment (about 75 K) with me and I in general understand the process in the following steps.
1. Get pre-approved (Question here is, how do I get the best rate from banks, what are some strategies shopping around)
2. Work with a realtor or without, I was looking at Redfin and it seems like they do give a small % of the commission back towards closing costs.
3. Give an offer, if accepted proceed with home inspection (how to find a reliable inspector?)
4. Give the details to the bank to have the home appraised and then work with them to get the funds and move towards closing.

I am not looking to buy something really old, I would prefer something build in the last 10 years or so. I guess this might end up being my forever home since I don't think I will be able to move out and afford a single family home and with the budget I have I guess finding a decent single family home in a good school district might be a challenge as well.

I would appreciate any advice from folks here.

Cheers!
You do not need to get pre-approved from the bank or lender you ultimately use for your mortgage, so I'd just go to your nearest bank or CU and get a pre-approval letter. May cost $10 or so for a credit check. You can then shop for lenders while you look at houses.

I'd use a realtor for your first home. There are a lot of pieces and steps to buying a home, and having someone familiar with the process will be a big help. They'll also know some area- or regional-specific practices, like the seller providing money to the buyer for closing costs, sellers providing title insurance or home warranties, etc.

Brian1 offered some great advice on home inspectors, but I'd add / emphasize that you definitely want to be present for the inspection. Many inspectors will be able to ballpark prices for fixing the various issues they find (e.g., is it a ~$100 fix or a ~$1000 fix), and some will show you how various things work. They'll also point out locations of shut offs (which will be in the report, but always good to see it in person). I'd also add to try and find an inspector who uses infrared cameras, which can "see" behind walls and will show areas of heat loss, insufficient or missing insulation, potential electrical shorts, etc. They may charge a little extra for this, but it's worth it IMO. Also think about a termite (or other pest) inspection at the same time, if appropriate for your area.

Applying for the mortgage will trigger the bank to do the appraisal and all that. Once you've applied for the mortgage and gotten the home inspected, there's usually not too much else they need from you until closing. You'll need to find home insurance in that time, but the lender pretty much does everything they need to behind the scenes. You'll probably get a lot of documents to look over. For a first time buyer, I'd shoot for a 45-60 day closing; you may be able to get it done in 30 days, but having a buffer will help keep it from being pushed back.
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#12
Quote from TheDreamer View Post :
1. Get quote from direct online lenders like: http://www.aimloan.com/ or http://www.lenderfi.com/ Government controls mortgage rates. So, everybody has approximate same rates. Big banks are more reliable.

2. Do not trust relators. Neither buyer agent nor seller agent work for buyer. Personally, I would go with something like Redfin and do all research by myself. At least, there is cashback.

3. Look for local inspector (who knows area). However, do not expect much from 1 hour home inspection. Sometimes it may take years to find problem.

4. Closing is rarely a problem. Always, check papers. I found $1500 printing fee. No idea who was going to print and what. Maybe they wanted me to print money for them. I guess so.

Just want OP to know I disagree with every one of this poster's 4 points.


Purpose here is not to refute point-by-point, but rather to highlight the value/danger of asking advice on internet. This thread already has a lot of very useful, insightful information and personal experience, but you also have commentary like this with blanket statements (for instance: all institutions do *not* have the same rate/points/closing cost schedule and big banks are not necessarily reliable).


Good luck with your search! The more specific you make your questions, the better we can offer our humble advice.
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#13
What is a good strategy to find the best mortgage provider? I read a lot but couldn't make much head or tail about it. So if someone has some specific tips or experiences, I would really appreciate it. I have reached out to BoA and no one else as of now. The home I am looking for is 375 K and I will be putting 20% down.
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#14
If you are a Costco member, you'll get rock-bottom mortgage rates and fees from their affiliated lenders. Hands down. If you're an executive Costco member, your fees are even lower.
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#15
Quote from beefdaniel View Post :
What is a good strategy to find the best mortgage provider? I read a lot but couldn't make much head or tail about it. So if someone has some specific tips or experiences, I would really appreciate it. I have reached out to BoA and no one else as of now. The home I am looking for is 375 K and I will be putting 20% down.
The only way to know if you're getting a good deal is to shop around. Call as many lenders (credit unions; small, local banks; bigger banks) and brokers as you're willing to in a single day. Ask for their closing costs and rate on the length of loan you're looking for with zero points. I'd call a bare minimum of 5 - more would be better.
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