Need help with buying a house...

Halen5150 · March 9, 2005

I'm almost 24, and I'm tired of living in an apartment. I like my apt. just fine, but I'm tired of throwing money away month after month. Not to mention, some new people moved in above me with a loud-@$$ dog that barks all the time and keeps me up at night. All the other apt complexes are way more expensive than what I'm paying now, and they're not that much nicer anyway. I got a realtor to look up some houses, and the nicer ones that I'm looking at are anywhere from $110K-125K. I can get an older(around the year 1978-early 1980s), bigger house for much less than that, anywhere from $87K-$100K. I know some things to look for, like cracks in the foundation and walls, when the roof was replaced, when the AC was replaced, but I have no clue what else to watch out for. I'm really clueless as to how I should finance the house. I have some cash saved up to throw down on it, but the agent told me he would finance the house at 100% if he was going to buy one. Can someone give me some pointers? Should I stay away from the older houses? I'm going to look at some houses this weekend.

SnakeEyeSS · March 9, 2005

well one think to sthink of is that some houses are build with "target" life spans, made buy the quality of materials used......it may be better to buy a house built to last 50 years, that was built in the 80's than one a few years old built to last 30.

or maybe I don't know anything!

Elwood 2000 · March 9, 2005

Whatever house you decide on, you should have it inspected by a professional. It won't cost you much and can save you a TON of money in the long run. If they find nothing, it is a small piece of mind.

I am asuming that you are a first time home buyer?? If so, you will qualify for a "first time home buyers" program. Most banks have them. Usually a lower percentage of downpayment and maybe a tad bit cheaper interest rate. They may also lower the loan costs for you too.

Quality of construction is very important. Personally, I would look for a house that has a better quality of contruction and don't let "bells and whistles" cloud good judgement. Stainless appliances and granite countertops won't do much for solving water problems in your basement.

I don't know where you are located, but in my area there are a lot of older homes. I am talking 70-110 year old homes. Mostly, they are built like a brick s**t house. Strong as can be, but probly in need of some updating. Things like plumbing, electrical, maybe even windows and plaster repair.

Another place to look is with local banks. They will probly have a list of repossessed homes that you can usually get for under the appraised value. Banks are not in the business of owning empty homes, they are in the business of lending money, so they will dump a home for usually what is owed on it and many times less.

The biggest thing to remember is this. Real Estate is an investment, unlike your vehicle. You should buy your property with the idea in mind of at worst cast scenario, breaking even if and when you sell it some day in the future. Hopefully, you will make money on the deal. Location is a key factor in this as well. Buying in an area with "like-type" homes is key. You don't want to have the Munsters next door to you, nor the local "Jiffy-Mart". Things to consider for down the road are room to grow for the future family and school districts. Also, if you are in a larger Metro area, taxing areas.

Right now, money is fairly cheap, although it is rising. (Money is a commodity, just like any other). You can get a variable rate with a decent ceiling at a better rate than a fixed, but I would go with a fixed, that way you are locked in, even if interest goes to 19%! (Lord help us if it does!!). On the other hand, you can go with a variable right now, keep a very close eye on interest rates and re-fi to get a decent fixed in an attempt to save a few bucks, but the interest rate has been creeping up lately and I suspect it will continue.

A good frame and especially foundation are the two largest things to look for. Personally, I prefer a "Stick built" home vs. a Modular, but that is just me. Many of the newer modulars have huge quality improvements over years past.

Don't trust your realitor 100% either. They are there to make a sale and while some are honest, some will try to talk you into what you "think" you might want. Make your own list of what you must have in a home, what you really want, what would be nice to have and what you don't want. Stick to your list!

I will tell you this, a 3+bedroom home will sell a LOT better than a 2 bedroom will. When it comes time to sell, you are really limiting your potential buyers of a 2 bedroom home to young people starting out and elderly folks who are empty nesters.

I could go on for hours, but if you have any more questions, feel free to ask. Hope I was of some help.

Mighty HD · March 9, 2005

Get a inspector!!!!!! Have any house you are even thinking about buying inspected. $100 will save you tons down the line.

In Florida, houses built in the 1950's are by FAR stronger than the new crap they build. You can't beat how they are built. You have to think, how many hurricanes, tornado's, etc have happened since the 50's. A LOT in Florida. The walls are solid, thick plaster, the hard wood floors are thick thick, the roof & truss material is 10000x better than the crap 2x4's they use now. You can't beat it.

My wife's parents $400,000 house and their neighborhood got torn to hell after the 3rd hurricane here. My house and others in my neighborhood, not a scratch. That to me tells a lot. Even other newer houses had tons of problems, where as the older houses had no problems what so ever.

BUT when buying an older house, have it inspected, check for termites, everything!!!

When we bought our house, we just turned 18. It was hard the first year but it's worth it. When we had it inspected the house inspector told us he was simply amazed at how it was built. I guess when it was built in 1956, they filled the inside of the cinder block with rebar and concrete--creating a solid super strong wall, the bathroom is completely encased in a foot thick solid concrete wall, even the roof. It's almost like a concrete box inside the house. I assume it was for some sort of bomb shelter. Hopefully the neighbrhood will stay good (prices are in the 200's now. We bought for the payoff of the Mtg (the guy was in a divorce and wanted to ditch it quick) of 67,000. Next door to me sold last week for $225k, and 3 down from that sold for $210k. Can't beat it.

A house is a gold mine.

99silveradoz71 · March 9, 2005

I looked around near mom and dad at some approx. 30yo splits and such. I ended up having mine built new a little further west. For what I would've paid for an older home needing kitchen work, I got a new house with all the touches done the way I wanted it. I ended up with a 3 bedroom 2 bath ranch with a full basement after figuring that I was going to look at already built colonials and splits. Perhaps a consideration for you depending on how construction is. But like someone else said, you want to be goal/future minded. How long do you intend to be there and what kind of activities do you do? You may also end up in a situation like mine...being so dead set on one thing and then opening your eyes and seeing that it's not necessarily what's best. I wouldn't have been able to do half the things I've done to my place had I built the more expensive colonial, and I've got more room now than I can see myself needing for a long time. Like any major purchase, take your time and do your homework.

Wingnut · March 9, 2005

You guys are telling him to get an inspector...I thought that this was a mandatory part of the process? I guess it varies from state to state.

Elwood 2000 has some great advice in there...But I'll add my .02

Nobody can tell you what to look for in a house, we all have our priorities and preferences...And nobody is going to tell you what you need. You already know.

Most of my advice is about the money side of it...I'm a freak about money sometimes.

If you find a house you really want, don't haggle over $1000, even $2000 or $3000 if it's going to cost you the deal. A very general rule of thumb is...Every $1000 will cost you about $6 per month in mortgage payment (excluding tax and insurance). Is $18 a month worth losing your dream home? Not to me.

If you want to haggle, haggle about your interest rate with the mortgage people. Don't just go with the mortgage company/broker that the real estate agent tell you to go with. Check with several. You'll be surprised at how much leeway they might have in terms of your loan.

If you can...Buy a house that's easy for you to afford, and pay extra every month on the mortgage. Lets say you have a loan of $125,000...Your base mortage payment is going to be around $800 a month @ 6.5% on a 30 year note.

Pay an extra $100 a month and it will pay your loan off 8 freakin' years early! It will save you $50,000 in interest payments over the life of the loan. That's not a typo. Fifty grand....Oh, and in case you didn't realize it...A $125,000 house at 6.5% over 30 years comes out just shy of $300,000 total payed out. That's what you'll pay if you pay the normal payment every month for 30 years.

Also keep in mind that if you aren't going to give them a 20 percent down payment, they're going to charge you PMI...Basically, it's insurance for the bank in case you default on the loan. Usually about .5 percent of the value of the home (per year). That can add up fast when you're talking $125,000.

Keep asking questions...Most of us have bought houses, and might give differing advice, but we can help sort through some of the mess for you.

LuvMyDenali · March 9, 2005

Whatever house you decide on, you should have it inspected by a professional. It won't cost you much and can save you a TON of money in the long run. If they find nothing, it is a small piece of mind.

I am asuming that you are a first time home buyer?? If so, you will qualify for a "first time home buyers" program. Most banks have them. Usually a lower percentage of downpayment and maybe a tad bit cheaper interest rate. They may also lower the loan costs for you too.

Quality of construction is very important. Personally, I would look for a house that has a better quality of contruction and don't let "bells and whistles" cloud good judgement. Stainless appliances and granite countertops won't do much for solving water problems in your basement.

I don't know where you are located, but in my area there are a lot of older homes. I am talking 70-110 year old homes. Mostly, they are built like a brick s**t house. Strong as can be, but probly in need of some updating. Things like plumbing, electrical, maybe even windows and plaster repair.

Another place to look is with local banks. They will probly have a list of repossessed homes that you can usually get for under the appraised value. Banks are not in the business of owning empty homes, they are in the business of lending money, so they will dump a home for usually what is owed on it and many times less.

The biggest thing to remember is this. Real Estate is an investment, unlike your vehicle. You should buy your property with the idea in mind of at worst cast scenario, breaking even if and when you sell it some day in the future. Hopefully, you will make money on the deal. Location is a key factor in this as well. Buying in an area with "like-type" homes is key. You don't want to have the Munsters next door to you, nor the local "Jiffy-Mart". Things to consider for down the road are room to grow for the future family and school districts. Also, if you are in a larger Metro area, taxing areas.

Right now, money is fairly cheap, although it is rising. (Money is a commodity, just like any other). You can get a variable rate with a decent ceiling at a better rate than a fixed, but I would go with a fixed, that way you are locked in, even if interest goes to 19%! (Lord help us if it does!!). On the other hand, you can go with a variable right now, keep a very close eye on interest rates and re-fi to get a decent fixed in an attempt to save a few bucks, but the interest rate has been creeping up lately and I suspect it will continue.

A good frame and especially foundation are the two largest things to look for. Personally, I prefer a "Stick built" home vs. a Modular, but that is just me. Many of the newer modulars have huge quality improvements over years past.

Don't trust your realitor 100% either. They are there to make a sale and while some are honest, some will try to talk you into what you "think" you might want. Make your own list of what you must have in a home, what you really want, what would be nice to have and what you don't want. Stick to your list!

I will tell you this, a 3+bedroom home will sell a LOT better than a 2 bedroom will. When it comes time to sell, you are really limiting your potential buyers of a 2 bedroom home to young people starting out and elderly folks who are empty nesters.

I could go on for hours, but if you have any more questions, feel free to ask. Hope I was of some help.

<{POST_SNAPBACK}>

SOME GREAT ADIVCE - and Ditto!!!!

I buy and sell Real Estate for a living - and i absolutely agree!!!

One thing i have found - use a home inspector that has been recommended

a lot of them i have used in the past tend to pick up on stupid little things that are wrong with the house to justify their fee - make sure that whoever you use knows

what they are doing and they tell you what state the house is really in - whether there is a problem with the foundation, termites, roof caving in, structural problems etc.

Another hint - as well as all of the above - dont let the decor or the way a house is set up when you see it sway your opinion, see the space, see how you could make it with a few coats of paint, see how you want it not how it currently is. A lot of people dont like the furniture in the house, or how a room is used to store boxes, look past all of that and see your own things!!! Good luck!

Wingnut · March 9, 2005

He's a guy...He doesn't have to worry about decor.

Unless you count the "spool" for a coffee table, roadsigns in the hall, and a construction cone for a toilet brush holder.

Roofer · March 9, 2005

inspectors, inspectors, think what you will. I am in contracting and I have my own view of inspectors.

Anyhow, one thing to look for is future or immediate equity. I am in the process right now of possibling selling and moving. Here are a few things to consider.

-square footage is nice but property and location is worth more

-a house on it's own 5 acres is worth more and will increase value faster than a house in a development

-a house in a development will increase value faster than a house in town

-find out who the builder is, how many houses they build, and if they are a custom home builder. unique is almost always better.

-you don't want a house that someone can duplicate easy, wether it be the property, the house itself, or both. You want to have something desirable to a certain market of people in order to make money in the future.

It is confusing at first, but the more you think about it, you find out how simple it really is. I am 26 and going to buy my second house soon. My buddy is 26 and is trying to buy his first house. He is so far behind, it is pathetic. He makes more money than I do, but I invest in better things. One of the best things I have done is buy a house. I am looking at making almost 100K on this one in 4 years. Pick a good location and buy what you can afford. Like was said, anything is better than renting.

Greg · March 10, 2005

Let me play the devil's advocate for a minute. Home ownership is not the greatest thing since sliced bread, especially for a single in their mid-20s:

- Think about your job situation. Are you going to be working in the same community in 5 years? Is your income level stable over that time? Relocating or moving to a cheaper apartment is easier that selling a house, buying a new one, and maybe having two house payments or house and rent during the interim. Then there's the 6% + real estate commission if you sell with a realtor.

- Your house payment is just the start of your costs. Don't forget to add property taxes, insurance, all utilities, appliances, yard care, maintenance, repairs, improvements, etc.

- Do you have the time and inclination to do the routine and non-routine work required for a house? In many towns, if you don't shovel your sidewalks within 24 hours of a snowfall, you get a ticket. If you let your lawn go au-natural, the city will mow it and give you a ticket and a big mowing bill. If you don't keep up with the little stuff like painting, weed control, caulking, etc., the value of your property will suffer. Water heaters, furnaces, A/C units, appliances, etc. all eventually fail or need service. DIY requires time and expense. Repair persons cost time waiting for them to show up and big bucks.

- As an investment vehicle, home ownership is not a guaranteed home-run. In many communities, the rate of increase in home values has leveled off in the past couple years. Other locations are still appreciating. Also, take a look at just how much interest vs. principal you pay for the first few years of a mortgage. If your house appreciates and you sell it for a big profit, you'll still have to live somewhere, and the value of that new place will probably have appreciated, too.

- The girlfriend of a co-worker bought an affordable house in a so-so neighborhood shortly before she met my co-worker this year. Her work location changed and she's got a lousy commute now. He works even farther away. The house needs continuous work and costs. They're kept awake at night by various neighbors around them that leave their barking dogs outside. He can't wait for the wonderful smells of dog droppings all summer. Now that they're getting serious, the house doesn't have garage space for all of his and her toys: two cars, truck, motorcycle, boat, etc.

I'm living in the 4th home I've owned. I had this one built to meet my spouse's accessibility needs and we intend to live here for the next 30 + years. (I'm a consultant and I'm within a hour+ commute of plenty of clients.) Home ownership makes sense for us. Be sure it makes sense for you before you make the commitment.

Roofer · March 10, 2005

I agree with almost everything Greg said, but one thing I don't understand. Why would you have two cars, a truck, a motorcycle, and a boat, when you don't have a house?

This is what don't make sense to me about some people. Why buy things youa re definitely going to lose on when you can buy something that you can't lose on like real estate.

Different areas differ quite a bit, I understand, but that's why I say choose wisely. There is maintenance on any house, but most of the time it is worth it. Especially if you can enjoy the work you did or had done.

This is the touchy part for me. There are WAAAAY too many people that think they can fix or do things around their house. I see it everyday. So many houses are screwed up because someone thought they knew something. Some should just do themselves a favor and hire things done professionally. Sorry for the rant, but now it's out of the way.

If you need a place to live anyhow(which everyone does), and if you can afford it....why not invest rather than give it away on rent. Like I said other areas may be different, but around here rent is $750-$900 minimum. A house is probably not much more.

Also, like Greg said....don't forget to add taxes and insurance to that monthly payment.

Elwood 2000 · March 10, 2005

People who have places for rent don't do it for their health. They do it to MAKE MONEY!

Why not invest in your own property??

Like I said before, location is everything!

Halen5150 · March 11, 2005

Wow, thanks for the help, everyone. Right now, I have a secure job that I've been at for over two years. I like the job, but I just don't know if I can live in Houston for the rest of my life. I'd love to buy some land and have a house built, but land around Houston is scarce and $$$. Property tax is about $4K+/yr on most of the homes I'm looking at right now. I have a nice chunk of change saved up though. I can't really think of anymore questions right now, but if I do I'll be sure and post them. Thanks again.

cokedrvrbjw · March 12, 2005

my advise, i am looking into houses now as well. If youre pretty handy i would get a duplex or a three family first. The rent from the other two apartments lets the bank qualify you for a little higher loan. You will also get the rates and advantages of a first time home buyer. Wait a few years after the first property is purchased and then go out and look for another, weather it be a single family home or another rental, you can use the equity from the first one to purchase the next.

Halen5150 · March 13, 2005

I looked at some houses today. Some old, some newer, and a couple that are brand new. The older ones are out of the question. I can get a really good deal on the brand new ones although they are more expensive, of course. But I can get a low interest rate(3.78% for the first year, 4.78% for the second year, and 5.78% for the remainder)on the brand new homes, and my monthly payments will be a lot lower than I thought they would be. I might go with the new house if everything I was told about the payments turns out to be true.