Purchasing a home advice

The big thing I learned is patience. Be prepared to walk away from any house that is not what you want/doesn't feel right/isn't the right price etc.

We ended up in a great house that is pretty much exactly what we wanted because we walked away from several that were almost right. We even balked at the final minute on one, having made an offer, had it accepted almost, and we were going to sign the papers when I said, "No."

We found an awesome realtor. We used a mortgage broker. Both were really helpful.

Remember, you owe nobody as a buyer (until you sign the mortgage papers.) If you've been dealing with someone, and they are not giving you the service you think is reasonable, find someone better. The idea of interviewing realtors is a good one.

When you find the house you want, decide on the price you are willing to pay. Then bargain hard to get it for less (if that is reasonable to do in your market.) If you can't get it for what you believe it's worth then remember my first piece of advice.

With regards to interest rates. Over the last ten years (or more) an adjustable rate mortgage has been considerably better than a fixed rate loan. Right now a fixed loan is probobly safer because the yield curve is so flat. Safer yes but better is a matter of opinion. Keep in mind that the long term trend for rates is still lower and bond rates have dropped 60 basis points in the last month. There is a chance that short rates could also go considerably lower over the next several years if inflation and growth moderate as expected. The people predictng much higher interest rates have been wrong. Bill Gross, CEO and manager of the largest bond fund in the world is predictng lower rates over the intermediate term.


"Citing a Federal Reserve study finished in September 2005 analyzed housing cycles in 18 different countries over a span of 35 years, the study said:

We find that real house prices are pro-cyclical and tend to reach a maximum near business cycle peaks, often after a prolonged period of buoyant growth in activity has raised output above its potential level and inflation pressures have begun to emerge. Subsequently, real house prices fall for about five years and their previous run-up is largely reversed. Real GDP growth slows during the first year or so after house prices peak as do growth rates of private consumption and investment.

House price booms are typically preceded by a period of easing monetary policy with FF rates bottoming out about three years before house prices peak. Rates then reverse quickly (after the peak) in response to falling GDP growth.

So Gross thinks that likewise, the Fed will be forced to start cutting rates again soon when housing softens further and that reverberates into the economy.

"On average," said Gross, "short rates have fallen by over 400 basis points once a peak in housing prices has been established, a necessary function of central bank policies worldwide in order to rejuvenate asset prices – housing, equity, and bond markets among them."

And here's what Sir Alan Greenspan had to say about Arms:

"Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward.

American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance."

4matic, something your analysis doesn't show is that some of us lived through the 1980's, when interest rates were double digits for a long time.

Don't use a realtor to be your "buyer's agent", it's a rip-off. They'll get a portion of the commission even when you do most of the leg work.

Have an attorney look over the contract before you purchase. I have heard many stories about buyers suing the sellers because of misrepresentations in their contracts. The extra money you use for a lawyer might save you a major headache down the road.

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Originally Posted by skuff

Don't use a realtor to be your "buyer's agent", it's a rip-off. They'll get a portion of the commission even when you do most of the leg work.

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Wow. You clearly have NO idea how real estate works.

If you don't use a buyers agent, the seller's agent gets 100% of the commission. You, the buyer, don't save a penny and in fact, probably spend more because your bargaining position is substantially weakened.

I nominate this as the worst response yet in this thread. :nonono2:

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Originally Posted by RootSkier

My one bit of advice is this: just because you are approved for $XXX doesn't mean you should spend that much. Most lenders will qualify you for FAR more than you would want to spend every month.

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WURD!
My .02 and I'm no expert but again:

1. Be conservative. Being house poor is not fun. I guarranteed you will not be in the house for many years so don't kill yourself. Buy less than you qualify for. THIS IS THE MOST IMPORTANT PIECE OF ADVICE I THINK YOU SHOULD ADHERE TO. I know people that make 30k a year and a couple of million a year and I've seen each of them be house poor and unhappy.

2. 30 year fixed; no ARM loans and not 15 year fixed at your age either
Predicting interest rates is a joke. Nobody knows what will happen to rates. Get a fixed to ward off surprises.

3. Whether your home is a good investment nobody really knows but the rule of thumb is that if you hold for several years you can make some money. But to conrast that, if you bought three years ago you would have a tough time selling in most markets right now.

4. No PMI. It's throwing money into the toilet.
Try 90% loan with a 10% home equity line or 80% loan with a 10% home equity line if you have little to put down.

5. Realtors have a bad rap but there are a few gems. My g/f just got out of real etate and she went the extra mile and never took advantage of anybody. In fact, some clients took advantage of her.

6. Home inspection by reputable company, esp the roof!

7. Never see a home in dark. Go during busy times to 'hear' traffic on adjacent road, planes overhead if you are under flight paths; are you behind infrastructure or close to it where you'll hear trucks unloading at 4am, etc?

My experience with signing a buyer's agent contract was terrible. She didn't need to do anything to receive a commission from a sale. She showed me some properties that were nothing like the descriptions of something that I would purchase. I ended up looking and finding a home to purchase, she had no incentive to do anything. Then, when I find something she's right there looking for her commission.

Why should anyone pay another commission to the buyer's agent when the agents typically split the commission from the sale?

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Originally Posted by RootSkier

Wow. You clearly have NO idea how real estate works.

If you don't use a buyers agent, the seller's agent gets 100% of the commission. You, the buyer, don't save a penny and in fact, probably spend more because your bargaining position is substantially weakened.

I nominate this as the worst response yet in this thread. :nonono2:

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Originally Posted by skuff

My experience with singing a buyer's agent contract was terrible. She didn't need to do anything to receive a commission from a sale.

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Well, that's fine. You had a sucky agent. They are out there. But a GOOD buyer's agent will make sure you are taken care of from the day you first see a house until after the closing.

Why didn't you fire her? If someone wants to get out of a contract with me...I will ask them why and then let them (hasn't happened yet, though).

Wow this thread is bringing back a lot of memories...
Another really big piece of advice, DO NOT, I repeat, DO NOT use an online mortgage company like Priceline or Lending Tree! We did that once to do what should have been a rediculously simple refi (< 50% LTV - i.e. we were the majority owners, not the bank). It took 4 MONTHS for them to finally close the loan and that was after I spent practically every day on the phone with them for weeks on end. What's more they managed to attach someone else's credit report to ours and refused to fix the error. Once the loan was closed we were absolutely innundated with junk mail and cold calls. They flat-out lied when I demanded they get my name off the junk mail lists, but miraculously the junk mail ended after I took names and threatend legal action. The final insult was they then called us back to try and sell us a second on the home (let's just say I'm glad I didn't have kids yet when that call came in :cussing: ).

How we got out of that without permanent damage to our credit report I'll never know...

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Originally Posted by Jim S

WURD!
My .02 and I'm no expert but again:

1. Be conservative. Being house poor is not fun. I guarranteed you will not be in the house for many years so don't kill yourself. Buy less than you qualify for. THIS IS THE MOST IMPORTANT PIECE OF ADVICE I THINK YOU SHOULD ADHERE TO. I know people that make 30k a year and a couple of million a year and I've seen each of them be house poor and unhappy.

4. No PMI. It's throwing money into the toilet.
Try 90% loan with a 10% home equity line or 80% loan with a 10% home equity line if you have little to put down.

7. Never see a home in dark. Go during busy times to 'hear' traffic on adjacent road, planes overhead if you are under flight paths; are you behind infrastructure or close to it where you'll hear trucks unloading at 4am, etc?

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Just a few comments here.

1. The standard idea is to buy as much home as you can afford, because your income will go up and you won't be house poor for very long. I think it's worthwhile to warn him of being house poor, but ultimately, it's a personal decision. I had to go house poor to get a place I wanted to live in, and less than 2 years later it is already easier to make the payments.

4. Your examples are wrong, you will pay PMI in the first scenario. The primary mortgage must be 80% or less to avoid it, if I understand correctly. And while PMI is a crock, your analysis is simplistic. Because you will end up with a much worse rate on that second loan. Though the interest from that second loan is tax deductible, while PMI isn;t. He should do the math. For ex., say a 90-10 situation vs an 80-10-10 situation. Compare the total payment including PMI in the 90-10 scenario with the payment on the 80 loan and the 10 loan. Also consider how secure that 10 loan is (variable rate, for ex.). Then decide. PMI sucks, and I do think it's usually worthwhile to do the 80-10, but not always.

7. Excellent advice. If you see a home you like and want to make an offer, try to check it out at different times of the day and week; no need to go in the house, just check out the neighborhood. Saturday night at 11pm is a good time (are there loud parties?). 7am on a weekeday is a good time (will things wake you up?). Also, there's the simple fact that the more you look at a place, the more familiar with it you become and the more comfortable or uncomfortable you will be with the purchase.

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Originally Posted by skuff

My experience with signing a buyer's agent contract was terrible. She didn't need to do anything to receive a commission from a sale. She showed me some properties that were nothing like the descriptions of something that I would purchase. I ended up looking and finding a home to purchase, she had no incentive to do anything. Then, when I find something she's right there looking for her commission.

Why should anyone pay another commission to the buyer's agent when the agents typically split the commission from the sale?

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You still don't seem to get it. There was no additional commission paid anywhere. It is merely an issue of how many people divide up the existing commission. SO your agent did nothing for you, but you were not harmed in the least by her sucking; the only people "harmed" by you having her on your side were the selling agents. If she sucked, you should have fired her.

My buyer's agent was a good guy, trustworthy and knowledgeable. Yes, I did some leg work on my own (anyone who doesn't is dumb). But given that he didn't cost me a thing, it made it a no-brainer to have him on my side with all of his knowledge and experience, even though I did some work on my own. And I would use him again in a heartbeat.

I had a very sucky agent. She wouldn't release me from the contract because she thought she would find a house for me. All she showed me were homes I had no intrest in. The contract ended and I never spoke to her again.
Again, why should a buyer pay a commission for the purchase of a home? Typically the seller pays the commission. I could see paying a buyer's agent if I lived out of state and I had difficulty finding time to search on my own.

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Originally Posted by RootSkier

Well, that's fine. You had a sucky agent. They are out there. But a GOOD buyer's agent will make sure you are taken care of from the day you first see a house until after the closing.

Why didn't you fire her? If someone wants to get out of a contract with me...I will ask them why and then let them (hasn't happened yet, though).

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Originally Posted by skuff

I had a very sucky agent. She wouldn't release me from the contract because she thought she would find a house for me. All she showed me were homes I had no intrest in. The contract ended and I never spoke to her again.
Again, why should a buyer pay a commission for the purchase of a home? Typically the seller pays the commission. I could see paying a buyer's agent if I lived out of state and I had difficulty finding time to search on my own.

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Hello, McFly!!! Knock, knock, anyone in there? :tongue:

You never paid the buyers agent a cent. Not. a. cent. If you did, you fucked up and were taken for a ride. The seller paid their commission. Not you.

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Originally Posted by Jim S

WURD!
2. 30 year fixed; no ARM loans and not 15 year fixed at your age either
Predicting interest rates is a joke. Nobody knows what will happen to rates. Get a fixed to ward off surprises.

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ARMS's are required by law to have an overall cap. Therefore, you can accurately determine your risk from day one. So, to categorically write off ARM loans is a disservice to a borrower when other than a brief period in the late 70's early 80's an ARM would have been a good bet. Remember that ARM loans were not even available in the USA until the mid 80's. As far as predicitng interest rates, well, you can do research and make an informed decision based on history. History has shown that after housing prices peak SHORT TERM rates fall dramatically. So here we have two of the brightest people in the interest rate arena, Bill Gross and Alan Greenspan, one predicting lower rates and the other saying that ARM's are a better deal for consumers. Remember that the Fed's reason for raising rates as much as they have was to reign in house prices and moderate the economy. Right now we have an inverted yield curve. Something will give. History is on the side of lower short term rates down the road. Good luck!

From the Federal Reserve website:

By law, virtually all ARMs must have an overall cap. Many have a periodic cap.
http://www.federalreserve.gov/pubs/a...ms_english.htm

The contract I signed in 1991 had a $2,000 commission fee that the buyer (me) was supposed to pay in addition to the seller paying a commission. Close to fucking up, but I didn't pay anything because I didn't buy a house with that agent. I didn't have enough information about those contracts before meeting with that agent.

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Originally Posted by Danno

Hello, McFly!!! Knock, knock, anyone in there? :tongue:

You never paid the buyers agent a cent. Not. a. cent. If you did, you fucked up and were taken for a ride. The seller paid their commission. Not you.

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Originally Posted by Danno

1. The standard idea is to buy as much home as you can afford, because your income will go up and you won't be house poor for very long. I think it's worthwhile to warn him of being house poor, but ultimately, it's a personal decision. I had to go house poor to get a place I wanted to live in, and less than 2 years later it is already easier to make the payments.

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There is a big difference between what people can realistically afford and what they can get approved for. Generally people get approved for payments that would equal one third of their gross monthly income. Making a bit of a strecth is fine but most people can't reasonably afford the full approved payment. That is the terrain where people get fucked by ARMs b/c if one third of your gross monthly income is already going to housing...that little extra really hurts.

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Originally Posted by skuff

The contract I signed in 1991 had a $2,000 commission fee that the buyer (me) was supposed to pay in addition to the seller paying a commission. Close to fucking up, but I didn't pay anything because I didn't buy a house with that agent. I didn't have enough information about those contracts before meeting with that agent.

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You got totally taken/fucked on that deal. That is an atypical situation. Your advice should read: Don't ever sign a contract where the buyer pays a fucking dime to an agent. Having a buyers agent is nice if you have a decent one.

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Originally Posted by lemon boy

There is a big difference between what people can realistically afford and what they can get approved for. Generally people get approved for payments that would equal one third of their gross monthly income. Making a bit of a strecth is fine but most people can't reasonably afford the full approved payment. That is the terrain where people get fucked by ARMs b/c if one third of your gross monthly income is already going to housing...that little extra really hurts.

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I agree 100%. In fact earlier in this thread I said

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Originally Posted by Danno

You need to figure out what you can pay each month, not what they will lend you.

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And as has been said, each person has to make that call as to what they can afford.

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Originally Posted by lemon boy

You got totally taken/fucked on that deal. That is an atypical situation. Your advice should read: Don't ever sign a contract where the buyer pays a fucking dime to an agent.

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What LB says. Damnit, I need a translator.

Skuff - I've never even heard of anything like that before. Apparently you did get screwed - at least in having to wait out the contract.

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Originally Posted by Jim S

2. 30 year fixed; no ARM loans and not 15 year fixed at your age either

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I'm curious what your reason is for avoiding a 15 year fixed.

real estate investment 101

find a home representing good value in a good neighborhood (preferably near a school). buy the house in need of a cosmetic makeover; kitchen/bath update, new paint and some landscaping. get the home inspection and walk away from anything requiring more work than the above 3 things.

go with a low interest/low payment loan to keep your carrying costs low and factor in a home equity loan to cover the work, prolly 10k-15k for a starter house. utilizing free labor is a must. offer your buddies free beer. since your only 22, your family will be more than happy to come over for a painting party or yard day to help you out. any educated human can install a new kitchen.

as soon as your done with your cosmetic makeover, turn around and sell that biatch for a profit. use your realtor to maximize the sale price, the commision you pay is the cost of doing business. if you've done your homework and bought a value property, money will be made.

next, find another home similar in nature and do the same thing all over. if you roll your profits into the new investment within a certain time frame of closing, you avoid capital gains on your profits.

again your 22, so being house poor aint so bad because your investing for the future. when you aquire a pile of cash big enough, go after value oriented mulit-family units. enroll in your states licensing course. get your RE license and find a broker willing to take you on part time so you can list your own properties.

if your good at this, it will become your main source of income and you will be able to ski all winter.

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Originally Posted by The AD

I'm curious what your reason is for avoiding a 15 year fixed.

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Arguably, and arguably and there is no absolute right or wrong


You could take the extra $and invest it diversifing your assets or enjoy

If you won't be in the home for long, the first several years of payments are interest with little principal paid off in either scenario

I've seen 15 year fixed recommended if you want to pay the house off fast such if you are in or close to retirement


I do stand corrected on several accounts and it's just my .02 as a maggot. In fact, if one stays in the home only for several years then an ARM could be a decent idea, to contradict myself. I know about caps but still, many folks have gotten burned with ARMS. Not all but not isolated cases: and it's their own fault for not being prepared. And I believe a younger person is more prone fall into that situation.

As I said, I'm not expert but have tried to learn and pay attention. "Damn it Jim, I'm a doctor; not a financial guru!" ;)

If the house is not "new" (like more than 5 - 10 years old) give some serious thought to buying the "home warranty" they will offer you at or before closing... typically will run about 200 pr 100k house value and is generally baked into your loan so you are not out of pocket... one major applaince failure and you are more than paid back... the older the house the more you should consider the warranty.

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Originally Posted by Jim S

You could take the extra $and invest it and diversify your assets or enjoy

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True, but would most people actually invest the extra money? My guess is no. My opinion is, if you can afford the 15 year payment, you might as well go for a 15 year loan.

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Originally Posted by The AD

True, but would most people actually invest the extra money? My guess is no. My opinion is, if you can afford the 15 year payment, you might as well go for a 15 year loan.

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If you set something up as an automatic withdrawal type investment, you probably would do it though. And by that token, arguably, in a decent real estate market, you could do an interest only loan, put the money you would be paying as principal into an investment of some sort, and do better than paying off the house. The equity you have in your home isn't earning any money - the house appreciates the same whether you have it paid off or 100% finance. The only cost is the interest on the loan. Can you find an investment that will get better returns than the interest you're paying on the loan?

Granted, this all requires the discipline to actually invest that extra money and not just spend it. If you can't do that, then by all means, pay off your house ASAP.

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Originally Posted by altagirl

Can you find an investment that will get better returns than the interest you're paying on the loan?

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In the short term (which is presumably what we're talking about)? I wouldn't bet on it.

DO NOT GET A RELATIVE OR FRIEND “in the Business”. That is the kiss of death.

You need to know of a new listing with’in hours. Most brokers slack off here:mad:, If your lucky you will find a broker who checks once a day if not once a week. Many times I've black listed a broker becuase they did tell us about a property till a few days later :nonono2:. Try and get a email service to notify you.;)

If you find a house, All you need is a closing lawyer they can hopld your hand threw the process:confused:. They are really the ones that represent you anyway. Find out what they charge for a “standard” closing.