Buying my first home

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cavemonkey

Ice climber
ak
Topic Author's Original Post - Jun 27, 2017 - 10:30pm PT
Insight?
F

climber
away from the ground
Jun 27, 2017 - 10:41pm PT
Sh!t Skine, what's wrong with the homestead? Outhouse pit filled up?
Do at least 20% down. The more the better. Where are you looking? The valley?
Bargainhunter

climber
Jun 28, 2017 - 12:58am PT
Minimum 20% down and a 15 year fixed. If you can't afford that then keep saving; your aren't ready to buy.

And, Congratulations by the way!

I was once told, "It's the ultimate in consumer spending." Kinda true.

You'll learn a lot from your first house; it will make the second one go so much more smoothly.
Lorenzo

Trad climber
Portland Oregon
Jun 28, 2017 - 01:34am PT
Buy the worst house in the best neighborhood.

You'll get back whatever you put into it and more.
Bruce Morris

Trad climber
Belmont, California
Jun 28, 2017 - 01:53am PT
Always pay cash. Then . . . trash the place!
Skeptimistic

Mountain climber
La Mancha
Jun 28, 2017 - 04:13am PT
Since you get to write off the interest on your taxes, you should try to maximize that deduction (ie: 30yr fixed) unless you are trying to own the property outright asap for some particular reason.

Stay on top of the maintenance so repairs stay manageable. If you can, try and strike up some conversation with your potential neighbors and get a feel if you're moving in next to a whack-a-doodle.

Make sure a current survey of your property lines is performed so you don't have to find out after the fact that you might have to move an outbuilding or try and regain lost land from a less-than-agreeable neighbor.
Gunkie

Trad climber
Valles Marineris
Jun 28, 2017 - 05:14am PT
Lorenzo nailed it.
Reilly

Mountain climber
The Other Monrovia- CA
Jun 28, 2017 - 06:07am PT
I second Lorenzo's motion. 15 yr fixed, unless you like buying homes for bankers. This might not be a great time to buy. Hard not to believe a correction isn't due. Not saying we're in another bubble but prices are kind of insane in a lot of markets.
Contractor

Boulder climber
CA
Jun 28, 2017 - 06:16am PT
Insight?

Objective?

Forever house?
Investment?
Starter home?
Hold and rent?
Fixer upper?
Turn key?
Low maintenance?
Priorities-schools, parks, commute, etc., etc.?
Jon Beck

Trad climber
Oceanside
Jun 28, 2017 - 07:13am PT
There is some good advice here. But getting a 15 year loan is not such an easy call. Can you even afford a 15 year loan? A fifteen year loan effectiuvely locks up your equity, so in a financiual emergency you are limited in options.

Take a 30 year loan and pay down principal at your conveninece.

Another consideration is rather than paying down your loan, should you be putting that money into an investment account and earning more than the interest rate on your mortgage. A Dow indexed stock fund would have returned over 5% over the last 10 years. Higher return if you factored in the benefits of a tax deferred account (IRA or 401(k)) Also not factored in is the benefit of the mortgage interest deduction, that could be large in the first half of the mortgage term

https://dqydj.com/dow-jones-return-calculator/
cranky

Big Wall climber
Oceanside, CA
Jun 28, 2017 - 07:52am PT
What he wrote is correct. Be mindful of having your house paid off when you stop working.

My best advice is get a thorough home inspector. Ask if he uses a moisture meter on showers and walls and a camera to check out the roof or goes on the roof to inspect. If he says no, move on.

Remember that the agent has an interest in getting the deal to happen, not necessarily in getting you the best price or best house for the money.

Good luck. Real estate has made me a lot of money and I highly recommend it.
skcreidc

Social climber
SD, CA
Jun 28, 2017 - 10:21am PT
Lorenzo for the win. Best one line summation.
le_bruce

climber
Oakland, CA
Jun 28, 2017 - 10:39am PT
Lorenzo's got it. I'm no pro but this is what I've learned:

Treat your realtor with skepticism - their interests don't align with yours. Definitely talk to the neighbors. If you have/ are going to have a family look hard at the zoned schools.

If you buy a fixer (which is a good plan):

A good inspector is important. Do not take a reco from your realtor on this one.

Other things to be careful about during inspection, that mediocre inspectors will miss:

-Drainage issues around the house/foundation
-Anything that the sellers may have f'd up with their DIY energies, particularly structural stuff, interior walls, etc.
-The unseen horrors in the walls: plumbing, electrical, dry rot.

If you know a good contractor, bring her/him in before signing and have 'em give you a bid for anything major that'll need to get fixed. Another set of professional eyes. They may see things the inspector won't. Don't screw that contractor by then not giving them work after you buy.

If carpets, lift a corner and know what you're getting.

Things that are cheap'ish to fix/replace in a fixer are cosmetic:
-paint
-fixtures
-trim stuff

Things that are expensive:
-quality flooring
-windows
-systems
-roofs

If you're buying in the Bay Area, scrap everything in this thread and hope for the best. Most fixers go all cash w zero contingencies @ 130% over ask.

Good luck!
Spider Savage

Mountain climber
The shaggy fringe of Los Angeles
Jun 28, 2017 - 10:50am PT
Buy low sell high.

Not a great time right now in LA, SF, NYC, or hot urban markets. The bubble is growing. Risk is high. Market is high.


But for your first home you get in any way you can and hope for the best.

If you have to get a low down payment high interest loan, get out of it in two years.


I have been lucky. I've made over 5 years of annual income by flipping my residences over the last 20 years. A friend of mine has lost a couple of years worth due to bad luck. He bought high and sold low.


fear

Ice climber
hartford, ct
Jun 28, 2017 - 10:56am PT
You never own property in the USA. It's really just renting due to property taxes which only go up and up.


So if you must become a house slave, buy something well under your means, like waaay under.
Mungeclimber

Trad climber
Nothing creative to say
Jun 28, 2017 - 12:47pm PT
2nd this motion "A good inspector is important. Do not take a reco from your realtor on this one."
Brian in SLC

Social climber
Salt Lake City, UT
Jun 28, 2017 - 12:55pm PT
For me, as important as the condition of the house, was the neighborhood. I stayed away from being on major through streets, cheap apartment complexes and rental properties.

And...having a good home inspector is mandatory.

15 year fixed w/ 20% down.
stevep

Boulder climber
Salt Lake, UT
Jun 28, 2017 - 01:10pm PT
There's a lot of good answers here, but how many of them are good for you depends on your situation. 20% and a 15 yr loan might put costs out of reach in a more expensive market. And as pointed out, less to deduct from mortgage interest.

Even the buying the fixer upper depends on your situation. If you might move again in 5 years, or want a bigger house, and you can't do improvements yourself, or don't want to spend all your time doing them...don't buy a fixer upper.
Winemaker

Sport climber
Yakima, WA
Jun 28, 2017 - 01:41pm PT
Jon and several others are right; there's nothing wrong with a 30 year note. The interest rate will be a little bit higher, but you have more options and a lower mandatory payment. I bought my house with a 30 year note but pay an extra principal payment every month, basically converting it into a 15 year note. However, if necessary, I can just make the normal payment if conditions demand. 20% down is absolutely necessary or else you'll be paying pmi, which ain't cheap. Bankrate.com has a very good mortgage calculator that makes it easy to do what ifs such as extra payments, either lump sum or steady. Keep the credit score up; get into the 800's and it really helps speed the process.

Interest rates are at historic lows; if we head back towards the normal rate range of 7% to 10% there will be a huge shock to the housing market as people find out just how much money costs. At 10% you can pretty accurately estimate the monthly hit at about 1% of the loan amount. As for owning vs renting, here in Yakima I was paying (in 2011) $1100/month to rent a smaller house; bought a fantastic home for $255k, put $55k down and have a payment, with insurance and taxes, of $1200/month. Rent? Lease? No question what to do out here in Washington redneck country.

Median house price in Seattle is now about $730k which seems to me to be unsustainable, especially seeing how Seattle is no longer the great place to live it used to be; too many people and parking lot freeways (I hate going over there now). The house my brother and I bought there together was $65k BITD; Zillow (I know) suggests something over $700k now. Insane.
phylp

Trad climber
Upland, CA
Jun 28, 2017 - 02:49pm PT
some random thoughts:

Owning a home is wonderful and rewarding but worrying you might loose a home is horrible. Make sure you have your finances well thought out.

if you are a two income family, make sure your mortgage payments can be handled even if one person loses a job. Real estate agents and banks will always look at your total current income and say, you can afford X house, but the last thing you want to do is be freaking about about paying a mortgage and loosing your home when you are between jobs.

If you are a one income family, make sure you have 9 months of income in the bank.

I am on the "30 year fixed" mortgage side. When you can, make extra payments.

Look out for "fatal flaws" - those unchangeable things that will make your house undesirable when you want to sell. Like, next door to a school, on a very busy street, tiny sq ft with no way to expand, etc.

Never buy a house with just one bathroom! Insist on at least 1.5 baths.

Get a really good home inspector and pay attention to the infrastructure issues (foundation problems, plumbing system that is running through a concrete slab and is leaking.

If you are thinking of buying a condo or a townhome or something with common areas monthly fees, make sure you get the budget and CC&Rs before you buy and make sure you understand them. You don't want to go into an underfunded situation and be hit with a large special assessment for something like roof replacement, the next year, that you weren't expecting.

Ring the doorbells of your potential neighbors and say hi. If you get a horrible feeling, it might not be the place for you.
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