Anyone own a home? Good update #23

[Pembroke_Corgi]

My husband and I are seriously considering purchasing a home while interest rates are low, but we are in our current lease until July 1st. We can't afford to pay a mortgage AND rent for very long, so if we do this I want to time it properly. There is a house on the market I like now, but I don't know if I can just terminate the lease even if I forfeit the deposit.

I know housing values are going down in many areas of the country, but we are planning on staying in this area so it's not like we would want to turn around and sell it.

What kinds of things do I need to know about buying a house for the first time?

About how long does it usually take to close on a house and move in?

Any other advice?

Thank you in advance!

[Emeraldgreen]

Hi, I live in Canada, so things may be different here with respect to buying a home but in general there is usually a 30 day period (roughly) between when an offer is accepted and all subjects are removed and money from the purchaser is given to the buyer. Once the money passes hands, the seller usually has to be out, either that day or soon after.
If you really like a house, the best possible advice I could give is to have a building inspection done. A place can look amazing but it can have structural issues or hidden issues that you may not know how to look for etc... These things could put a person in finanical ruin later on. Also, if you love a place and a building inspection done by a licensed inspector shows that there are certain things that will need repair within the near future (i.e. the roof or chimney etc..) then you can re-negotiate and lower your original offer to reflect those repairs that you will now have to take on. This happened to us regarding the roof and we re-offered 10,000 less than our original offer and the seller accepted our new offer.
Also, make sure that the person selling has shown you a disclosure statement that discloses any and all issues regarding the house. This is a legal document where the seller has to list if there have been any leaks and if they've been repaired, if there has been pests of any kind etc.. etc..
You can put an offer on a place and put 'subjects' on the offer such as, this offer is subject to having a building inspection done and the results of that building inspection are satistfactory to us, and if there is a well, you could put another subject that states the water will be tested and the results of that test approved by us, and even less serious things like if you really love something in the garden, like a bench, you could make the offer subject to the bench being included in the sale of the home. All kinds of stuff like that.
Hope this helps a bit and hope you get your dream home!
p.s. I used to have a Pembroke Corgi. My family got him from the Humane Society in Toronto back in the 70's. We had him for 15 years. They are great dogs!! Does yours nip your heels when you run?

[Karen]

We bought our house from my Great Aunt. Thankfully, we had a landlord that just wanted a couple months notice. Our case was different than most, because her house still had all her things in it, so we needed to do a lot of throwing stuff away respectfully before we could move our own stuff in. But normally, once you pass papers, you can move right in.

First you will need an attorney lined up, to handle the closing, etc. Then once your offer has been made and accepted, a closing date can be set and you can move in pretty quickly if the house is in good condition. You'll want a home inspection done first though, and remember, you can make a lower offer at first, just in case they accept it! You'll always need money afterwards anyway!

[Cookiebaker]

Get a Home Inspection!!!!! They know the ins and the outs of what to look for as far at flaws and damage done.

When we bought our house, instead of going through a regular real estate office, we went through a *buyer's* real estate office. They ONLY work with buyers, and therefore have no hidden motives, and anything you say to them is strictly confidential.

[caseysmom]

I think its a good time to buy. I would discuss it with your landlord, they may be willing to accomodate you.

[Ginger's Mom]

There are a few things I can add. First, be aware that closing costs are expensive (can add as much as an additional 2% to the cost of the house), so make sure you take that and moving costs (may be another $1000 or more depending upon distance who is going to help you move your possession, etc.) into consideration when figuring your down payment/out of pocket expenses. Find out what the real estate taxes are and when the properties were last assessed. I, too, highly recommend having a Home Inspector go through the house. Around here it seems that the most common closing times are about 60-90 days after the offer is accepted. I understand you are not worried about the fact that housing prices are going down (I don't think they are going to be going down so much at this time that it will make a difference), but don't allow that to sway you into making an offer that is really more than the home is worth. I really agree with Karen about going low at first.

[Freedom]

Karen said line up a lawyer. My understanding is that, out where you are, a Realtor handles it all and few people use an attorney. (Here in the East, we need both a realtor and an attorney.) For your first time, I strongly advise you to have a Realtor to walk you through step by step. It can be overwhelming, and having someone who knows "now do this" "next make that phone call" will save you lots of agony in the long run. You can line up a Buyer's Realtor, someone who represents YOU. It may cost you a bit extra ($300 to $500?) but well worth it!

Have a home inspection done.

I was going to say 60 days from offer to move in. But I didn't use a REaltor so I goofed up on a few things.

Go to your bank and get preapproved. It will speed the process along. It doesn't cost you anything for that step, at least it didn't when I bought 5 years ago.

[Edwina's Secretary]

I am in the fourth home I have bought. In Illinois you use a lawyer for the closing...here in California that is not how it is done. States are different.

The home inspection is soooo critical. Get references on the home inspector and don't just use the one your realtor suggests.

Also decide what you will do about real estate taxes. The first two houses I bought when I was single. I prefer to escrow my taxes. My husband and I do not agree on this.....

[Pembroke_Corgi]

Thank you for all of the good advice! It makes me realize how little I know about real estate!

We have decided to start by seeing if we can qualify for a home loan and how much we can afford. I am a little concerned about out-of-pocket expenses, especially since I saw at one lender that the closing costs alone were 3% of the purchase price (average homes in this area are over $200,000- we are hoping to find a home for $150,000 or less).

Denver was once the foreclosure capital of the country (it's lower now) so there are many homes that are at auction or can be had for less money than going through an agency. The bad thing is that apparently it can be hard to get approved for a loan as a result. I guess we'll see what happens. I'd really love to own a home- $1000 a month towards rent doesn't go towards any future investment like a mortgage payment would. I also put a ton of books on hold at the library about buying your first home, so hopefully I will do my research well.

p.s. I used to have a Pembroke Corgi. My family got him from the Humane Society in Toronto back in the 70's. We had him for 15 years. They are great dogs!! Does yours nip your heels when you run?

They are great dogs! My dogs don't nip but they will always run after anyone running!

[Twisterdog]

I've bought two houses, one in Colorado, and a business. In all cases, all I did was find a realtor I liked and trusted. My realtor did all the work, all I did was sign papers and show up at closing. I did have an inspection done on the properties.

[Emeraldgreen]

You might be able to see if you can get all of the closing costs included in your mortgage/loan. We've used a mortgage broker the last two times and she was awesome. She did all the leg work and submitted our financial details to a number of banks until she found us a few banks that were willing to give us a loan and then we picked the one with the best interest rate. The fee for a mortgage broker depends on where you live and on the broker themselves. Ours cost about 3,000.00 but, she gets paid after the mortgage goes through and the money comes from the mortgage, she just rolls her costs into it. And, the second time we used her she got us a mortgage with a bank here in canada called TD Canada Trust and the bank had a deal that they would pay half of our broker fee's so we only had to pay 1,500.00 and it was just added to our overall mortgage. I think it's totally worth it if it can help you get your foot in the door.
Also, both times, we put an offer in on a house and put a subject on the offer that was 'subject to financing' and requested 3 weeks to get our finances in order. It was during that 3 week period that our mortgage broker went to bat for us and found us financing. If she hadn't been able to, the offer would simply expire and nothing would be lost except for the opportunity to buy that house. One of the times we were trying to buy a house we needed some extra time, above and beyond the 3 weeks so we contacted the realtor and told them so. The seller gave us an extension of a week and that gave our broker some more time to find us a lender.
I agree, putting 1,000 each month towards a mortgage instead of to rent just makes sense. Getting your foot in the door is the hardest part but once you do, you'll be able to begin building your investment with each monthly payment as you watch your mortgage get smaller and smaller. I hope everything goes really well for you.

[caseysmom]

Yes usually the closing costs get added into the mortgage, and its a good idea to have tax and insurance folded into your mortgage also. If you can get a 15 year mortgage you save a fortune on interest.

[Rachel]

its a good idea to have tax and insurance folded into your mortgage also. If you can get a 15 year mortgage you save a fortune on interest.

Oops, I have to disagree a bit on this opinion. If you get a 30 year mortgage your monthly payments will be less. You can always pay extra toward the principal any time you have the funds to do so. (Be sure there are no prepayment penalties in your mortgage contract). You can thereby get the benifits of paying off early and saving what you would have spent on interest just like you would have if you had a shorter mortgage, but you have the flexibility to do it as your circumstances allow.

As to taxes and insurance, I like to be in control of that myself. If I send in the check, I know these things have been paid and on time, rather than rely on the mortgage company to do it for me (and probably for a fee). With mortgages being bought and sold so many times there have been stories of an inordinant amount of time having to be spent trying to follow up and correct errors when someone hasn't done their duty. Sorry Edwina's Secretary, I'm siding with your husband on this one.

I guess I would add that you should shop around for a mortgage. Closing costs can vary quite a bit between banks. Be very inquisitive about each little detail and try to understand what each charge is for. Get it in writing if you can before making a decision which one to go for. The rate of interest is perhaps the easiest thing to understand.

[Cataholic]

I think Ohio is the foreclosure capital, now. LOL.

Here, most people do not use a lawyer for closings, and I always try to talk someone out of using me. The buyer's bank will arrange for the closing, and while it is true, the bank is ONLY protecting the bank's interest, so much of the paperwork is form. Sign it, and you get the loan. Don't sign it, and you don't get the loan.

You can have an attorney review the closing docs, which your bank's title agency will send you ahead of time, if you request it (and request, and request). Here, in OH, occupancy is usually 30 days out.

You would still owe under the lease, PM. It depends on what sort of place you are renting from whether they will pursue or not. In OH, you cannot use your security as last month's rent. So, skipping out on three months rent, and believing your security would handle one month translates, here in OH, to owing 3 months rent, AND forfeiting your security, for breaching the lease. Now, most places aren't going to come after you for one months rent...it isn't really economically feasible, BUT, they could.

If you go to the end of your lease, then, renew on a month-to month, you have a bit more flexibility in your move out date.

And, finally, owning a home CAN be great. But, IMO, buying a home is just as much of a lifestyle choice than a financial win-win, all the time. For some, renting does everything for them that owning does minus the minimal tax break. Owning a home comes with a heavy burden that sometimes people overlook.

I own because I want millions of cats, with no fuss.

[Pembroke_Corgi]

We found the perfect house- it's in a great neighborhood (it is in the best school district in the metro area) and only 5 minutes away from my job. Since it's a foreclosure, it's also about $50,000 less than most comparable homes in the neighborhood. The best part is that we can actually afford it- the mortgage even with taxes and insurance would be $100 less than our monthly rent!

We had our real estate guy put in a bid, and we will find out next Tuesday (01/29/08) if ours was the highest or not. I am keeping my fingers crossed but trying not to get too excited. It's very possible someone else will have more cash to put in a much higher offer. But we will see!