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Thread: Buying a house - also, m'f'in' buckets!

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    #11
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    Quote Originally Posted by villanelle View Post
    Owning a house is way, way more expensive than most people think. Make sure you take in to account not only property tax (a good realtor should be able to help you get a very, very good estimate of what that will be), homeowners insurance, PMI (if that applies, which is generally if you are putting less than 20% down and aren't using a VA or some other special loan), and HOA (if applicable), but also an actual reasonable number for home maintenance. That latter often trips people up. Yes, your house doesn't need a new fridge, washing machine, garage door opener, decking surface, a/c, roof, or furnace every year. But there's a very good chance it is going to need one of those most years. There all sorts of calculators out there for estimating maintenance costs, but they are mostly shit. It depends so much on location (because roofing costs don't vary nearly as much as housing costs, so a house in SoCal that costs 300% more than a house in Rural Iowa but has the same amount and type of roof isn't going to cost 300% more to roof, which is what a number based on % of house price would tell you). It also depends on type and age of house, among other factors. So to get a reasonable estimate, you are going to have to put in some work. But do this, or all you may well end up house poor, even if you buy one that you think costs 30% less than you can afford.

    Also, it's unclear what you are basing "can afford" on, but hopefully that's not just the number for which you are approved. Because the amount approved is a ridiculous number and should immediately be ignored, other than as a measure of what "what to f'ing much" is. "What you can afford" should look at all the amounts I mention above plus any improvements you want to do and services you want to pay for (like gardening, for example), and any increase commuting costs if you are further (this is one people generally grossly underestimate as well!). And then add what will likely be increased utility costs if the place is larger, older, or otherwise more expensive to heat and cool than your current place. Then, compare that to what you are paying for housing and utilities currently, and look at the Delta. So if your current rent and utilities is $1500 and the new number is $2000, ask yourself where that $500 a month is going to come from. In a best case scenario, you would take at leas a few months to live that way--take $500 out of your account every month and stash it somewhere and see how it feels to live like that. If it feels tight, you need to adjust down your housing numbers accordingly.

    Also, don't be in a rush. Ideally you can set up your current living situation so it is month-to-month, so you can take all the time you need to find the right place. When you rush, you make desperate, bad decisions. Don't buy in to "if we don't offer now, and offer high, someone else might get this house!". They might, in which case you will eventually find another one.
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    #12
    Everyone else offered great advice. Selecting an excellent realtor is important, I worked with one who didn't require me to sign a contract with her. She had the philosophy that people should want to work with her and to continue to work with her rather than be obligated by contract. Realtor contracts for buyers and sellers are the norm in my area, I don't know if that is true everywhere. Also, being a first time home buyer she was extra patient with me, attended all home inspections to answer questions, and showed me a few houses multiple times because I wasn't sure. She was also able to recommend quality title insurance and home inspectors. Having an excellent realtor can make a stressful situation easier.

    When looking at home I would ask for an estimated cost of utilities. Couple that with the mortgage, taxes, and insurance, that will allow you to run a mock budget. The bank pre-approved me for twice what I was comfortable spending, I have no idea how they come up with those numbers. They are just helping people get into houses they can't afford. Having 20% down will let you avoid PMI (and is smart) and allows you to put in a strong offer in case there are multiple offers. And like Vil said, legit maintenance is no joke. I am lucky that I do most of the upkeep myself (seal coat driveway, power-wash, grass/landscaping, plumbing repairs). Last week I replaced an element in the water heater, that would have been hundreds if a plumber had completed the job. And it's always something, sometimes big and sometimes small. I spend more money at the Home Depot than most everywhere else. My parents paid $15k just this week to have trees taken down to deal with the emerald ash borer. This is all to say, that I would increase your emergency fund or easy access savings fund to cover these items on a daily basis.

    Good Luck!
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    #13
    Along what people are saying with budgeting - call your insurance company and get a homeowners quote before you put an offer in. I don't know many times I've talked to people under contract who underestimated how much the insurance would be (the lender and/or realtor will give estimates - but they're just that, estimates, and it's in their interest to give you lowball numbers) and then they're scrambling to find a company that cheap or aren't able to buy the coverage they need. Keep in mind insurance is basing the value off the amount it would take to reconstruct your home at the same location, so factoring in home characteristics + materials and labor + demolition and debris removal. That amount can vary greatly from the market/appraisal price depending on your area. You can get a quote with just the address and home characteristics - usually there's enough on the listing to run a pretty accurate quote, but even if you're missing some of the information you will get a better ballpark than what the lender will tell you.

    Congratulations! Home shopping is a really exciting time.
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    #14
    Thanks to everyone for all the advice!!

    We've indeed worked in insurance & taxes & a conservative estimate of utilities into cost. For the houses we're looking at, we have significantly over 20% deposit saved up. We're basing our house-buying-cost on what we want to spend, which is ridiculously lower than what we're able to spend according to the "what you can afford" calculators. Both Hubs and I want to keep our general living costs able to paid on one of our salaries, and the budget we've made works with that. So hopefully we should be quite comfortable paying for a weird plumbing incident or water heater, etc.

    We're both flummoxed by the "what you can afford" numbers, since those just don't seem real. Or logical. I mean, yeah, IF we put both salaries towards a house, we could technically pay for the ridiculous amount we're being told....but that's not how we want to live. That's not how we're living now, and that's not the plan ever in the future if we can help it. It seems really backwards for the bank to calculate it the way they seem to be calculating it to me.

    My dad does 90% of the maintenance work on the duplexes he rents out, so maybe over Thanksgiving I can ask him to walk me through what he spends a lot of time maintaining - not going to be 100% applicable, but hopefully will give us a decent idea and more things to think about.
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    #15
    For our home buying experience, the shock for us was the city taxes going up so much. We were blessed with a fix rate loan at 3.5; but, when you add in the city taxes going up 30% this year, that was a larger increase in our mortgage. I knew it would happen; but, didn't expect it as high as it went.

    Things that helped us out. We figured out what hubby's retirement check would be in the DFAS calculator and we budgeted about 600 below that to cover the mortgage, utilities, ect. That way, the house would always (we hope) be covered.

    We took the calculators on line with a grain of salt. For our house, the calculators were off by about 500. It isn't a lot; but, it is enough each month. Going in and talking with a loan agent is what really helped us in our quote and seeing our price range. Ours would give us a guarantee for about 30 days and we could walk away if we wanted too. Nothing was for sure. Calling utilities, talking with neighbors in the area, knowing the area, those helped us.

    We used a VA loan and didn't need the down payment; but, wanted 10K in the savings for housing expenses.

    Also, moving too much more then we realized. Not that we weren't prepared; but, when you add in painting, moving costs, fixing things, changing how you want it....it all adds up. I think it cost us about 5K in those expenses.

    Just my thoughts.
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    #16

    My recent experience.. do your research & know your deal breakers

    Based on recent personal experience-- you need to look at home prices in the area you want to live. I was clear on a max price in the Denver area (Buckley AFB) and THEN looked at home prices and realized that it wouldn't cover a single car garage must less a home. If you are willing to live further out, what is the cost of going back and forth to work? What are your deal breakers, location wise? Two of mine were 1) distance to medical care and 2) distance to maybe a freaking store that sold, ohhh, anything. DH wanted to consider living in the mountains an hour from absolutely everything. No thanks. I don't want to die while driving an hour to a Doc in the Box... an hour in the summer, mind you.
    Also, are you willing to live with an HOA? What are the restrictive covenants? What is the monthly HOA costs and how often has it gone up in the past? (It can always change but the past can be a good predictor of the future.)
    "They" whoever they are, say that your mortgage, insurance and taxes should be no more than 28% of your gross income - if that helps.
    In some parts of the country paying less than that is hard to do; in other parts it is easier and if you can do so and be happy- pay less.
    With that in mind, DON'T look at houses you cannot afford. Never works out well. Resist that temptation.

    And my last piece of advice, get ready to negotiate because the price depends on the market and your ability to negotiate. Even in a HOT market like Denver, you can offer things (other than money) that might make your offer better than the next. Do they want to skip painting the house? Does the seller need a quick close? You can find out (in many states) what the seller owes on the home by looking at the public records. (If they have a big mortgage they may want to sell quick to skip making the next mortgage payment.) A bit of research can save you money or make your offer more attractive than the others.
    I hope that helps!
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