So my wife and I are taking the plunge into house buying. We've read a ton of materials, and took a home buying 101 course to familiarize ourselves with process, but beyond that one pearls of wisdom do you have that could help me through this process?
1. Do it; it's a good idea.
2. Have a house inspection, to watch for nasty surprises. May need to include a radon test.
3. Get a big enough down payment you don't have to pay for the mortgage company's insurance against your default; I think that's 20%?
4. Points are a bet that interest rates won't go down significantly (1/2% or so) after you finance. But even if they look low, they just might. I wasted money on points.
5. The amount you'll pay total (counting interest) is huge; don't be too shocked! An extra payment a year can reduce the cost a great deal.
Great advice from Will. I would add -
1. Shop around to get the best mortgage rate. This includes being careful of extra fees lenders will try to stick you with. You may get a great rate only to find extra fees attached to it. Read the fine print.
2. Don't use Billy Bob for a home inspector. Some states don't require them to be licensed. You might end up with a handyman out there. Check their references.
3. 20% downpayment is usually the minimum to avoid the mortage premium insurance (MPI).
4. Great advice above on the extra payment a year. You can easily knock off several years of payments if you keep it up.
5. Get several appraisals for the value of the house. Don't over pay. Be careful of appraisers that are friends with lenders. I found this out the hard way.
6. Negotiate to the fullest. This is a buyer's market. If you aren't comfortable with the deal. Walk away. Give it a day or five. The sellers will more than likely be willing to re-negotiate unless there are several people trying to but the house.
7. Try to get the sellers to pay some of your closing costs.
8. Definitely have them pay for any necessary repairs.
9. I'm sure you've heard this a million times - Location. Location. Location. Think long term. You may think today that you'll stay in the house for a long time but something may happen (job change, etc.) that you may want to relocate. If you buy in a bad location, now you have to find someone to take it off your hands. Busy street? Train horns nearby? Fire Station across the steet? It's all about the location.
Thanks for the advice fellas. We have ended up looking at roughly 50 homes and settled on a house and just got an offer accepted. We were able to negotiate at 20K below asking, seller to pay 3% at closing, and $3000 in moving expenses. The 20% would have been ideal, but we've got a little one coming and wanted to get into a place in time for the $8K first time home buyers tax credit. But we went with a conventional to avoid the 5 year mandatory PMI with a standard FHA. We are likely walking into about 40K in equity so the five year requirement could really have hurt us. Anyway thanks again for the advice.
Depending on what part of the country you're in, radon levels can vary greatly within just a few hundred feet. I'd go ahead and do a radon test. The ones you can buy at Home Depot or Lowe's and then send off should be sufficient, just to tell you what the levels are like, and then be sure to check your state EPD or the EPA for what the local levels should be.
Mold tests are good, if anything pops up on the inspection or there are unfinished areas in the home. And check the eaves and attic space for tree rats and signs of them. Furry little bastards are driving me nuts.
I would like to add something about the inspections, don't just hire a home inspecter. You can probably get a plumber, an electriction, and a heat and air specialist to come out really check out what is their specilty in addtion to the home inspecter. Our home inspector missed a lot the little things that an expert in that field would have caught.
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