Buying a home question

[roxygirl]

DH and I are looking into buying our own home in the the "near" future and have just started looking at some houses with a realtor to get an idea of what's in the area. Since we are new at this, we have quite a few questions, so I thought I might just list some here to see what others might say. Sorry if these are silly, we really are very new at this whole process.

1) Is it common practice to ask the current homeowners how much they currently pay for utilites each month if you are considering making an offer?

2) If a "dream" home were found before we were ready to actually move in, is there any way to make an offer, but with the intent that things wouldn't take place for say two or three months? Or do you keep an eye on the home and simply hope it doesn't sell until you are ready to move in right away and then make the offer?

3) What books/websites would one recommend for the first time home buyer to educate themselves a bit on the whole process? We have already been pre-approved for the loan, but I feel like we know so little about what even went into it that it makes me anxious. The loan officer just asked us some questions about income, down payment, looked up our credit score and then had us bring in paper work to verify it all and had it "sent off" to be approved. All we know is that we are pre-approved for xxx amount at xxx % rate with 30 year conventional loan. Surely there is more we need to know than that?

Thanks for any help! I'm so glad I found this site!!!

[frugalfranny]

#1 question.....might not be common practice but I know it is done. Will give you an idea......but could vary greatly with your use........temp.........who works, who is home.........etc.

#2 It will still take a little time for processing the papers.......counter offers........etc. But if you found your 'dream home'...........why would you want to wait?

I would just go online and start reading..........others might have sites to go to.

Check on the taxes!! The paperwork should tell you when it was last re-roofed............sided...........new furnace.....etc.

DRIVE AROUND THE NEIGHBORHOOD!! Look at the homes and see how they are taken care of.........location, location, location.

[KeithBC]

Do you have a realtor? He or she would be the person to talk to for answers, since he or she will know how things work in your local market. I would hope that you are working with a realtor as first-time home buyers, rather than doing it on your own.

About the utility prices, it is common practice to ask about the heating bill, which is a function of the insulation and the type of heat - in other words a house question. Same for water and sewer, since those tend to be fairly standard, and taxes, which are fixed. You might not get an answer for electricity, since that is very much a lifestyle thing. Again, ask your realtor. Often this information is provided already in the listing. If not, your realtor can get it for you.

You can ask for a possession date far in the future, but the seller might reject your offer on that basis if it is too inconvenient to them. This is a major negotiating point: you may have to sweeten the deal to get them to agree. Typical possession dates are one to two months in the future. If an ideal home comes up at a fantastic price, it may be worthwhile to accept an earlier possession date than you are ready for, just to close the deal. Then just let it sit until you can move in.

[jas]

When we sold our first house we showed potential buyers a years worth of utility bills. Of course it will really come down to personal use like others have mentioned. It can give you somewhat of an idea of what to expect. Just going up a few hundred square feet in a house can bring up the cost dramatically especially if they are those cathedral ceilings.

Like another poster mentioned look into the taxes and the insurance cost. Unlike the fixed mortgage these can and do go up, up , up over time.

[NikoSan999]

DH and I are looking into buying our own home in the the "near" future and have just started looking at some houses with a realtor to get an idea of what's in the area. Since we are new at this, we have quite a few questions, so I thought I might just list some here to see what others might say. Sorry if these are silly, we really are very new at this whole process.

1) Is it common practice to ask the current homeowners how much they currently pay for utilites each month if you are considering making an offer?
Yes, definitely ask and also ask what company. I have always called the electric, gas etc and told them we were looking at the house and wanted to know highest and lowest plus months. They keep for a year. Never been refused. Course as others said will also depend on YOUR usage also. Example if they have no kids and you have 3 then your's will be higher. If they both work and you stay home...same thing. Call the utilities, you can at least get a semi ballpark. Need address.

Same for land taxes. This could also be different for you also. Goes by what surrounding houses sold for etc. Theirs was geared for another time unless recently reviewed. Another poster is going thru this now.

You can get an insurance quote from several insurers by having all the information at hand. At least a ballpark. I've done this also. DO NOT give them your social security number, heck, I wouldn't even give them my name. You don't want a credit check to show up on your credit report at this time. They don't need your name to tell you that x=y.

2) If a "dream" home were found before we were ready to actually move in, is there any way to make an offer, but with the intent that things wouldn't take place for say two or three months? Or do you keep an eye on the home and simply hope it doesn't sell until you are ready to move in right away and then make the offer?
If you're not going to be ready for 3 months don't start looking now. You're going to find something out there and possiblity set your self up for disappointment. Wait a month. Rest will take a couple months. If nothing holding you back for now and you find it then go for it.

3) What books/websites would one recommend for the first time home buyer to educate themselves a bit on the whole process? We have already been pre-approved for the loan, but I feel like we know so little about what even went into it that it makes me anxious. The loan officer just asked us some questions about income, down payment, looked up our credit score and then had us bring in paper work to verify it all and had it "sent off" to be approved. All we know is that we are pre-approved for xxx amount at xxx % rate with 30 year conventional loan. Surely there is more we need to know than that?
Get home inspection from a GOOD home inspector, not necessarily the cheapest. Could save you thousands in the long run and don't assume because it's a "new' house it is just hunky dory.


Thanks for any help! I'm so glad I found this site!!!

Other than that...READ, READ, READ THAT CONTRACT. Know that contract inside and out. DO NOT let them rush you by turning the page for another signature or initial and running their mouth to distract you. TAKE THE TIME TO READ. No, they won't like it and will make it clear that you are taking up to much of their precious time. Oh well, that's what they get paid for.

Go to zillow.com and see what other houses sold for in that area. You can ALWAYS go up on the offer but you can't go down on an offer. You could but undoubtedly wouldn't work. Insulting. I would start lower and go up from there.

And remember, even tho your agent is working for YOU, the more the house goes for the more money he/she makes. Never trust 100%. Arm yourself with knowledge beforehand. It's 30 years of your life and hard earned money.

Last don't fall in love to the point good reason on the payment goes out the window. Even if they say well, you can borrow up to xxx dosen't mean you HAVE to. If you're not comfortable with that amount then don't. If you know that braces, a newer car etc in coming up in the near future YOU have to factor that in. The bank dosen't know about it.

[Greebo]

I'm going to ask some different questions rather than address yours.

1) Are you debt free?
2) Do you have a good emergency fund in place?

Do not go by "You are preapproved for ****" lines. You want to buy a home with at least 10% preferably 20% down, and you want the payment on a 15 year fixed to be no more than 25% of your take home pay.

THAT'S how you figure out what you can afford.

Read the news over the last two years - trying to get your "dream home" as your first home before your properly ready will turn your dream into a nightmare.

[KeithBC]

To be frugal, plan to put extra money into the mortgage as early and as often as you can. An extra $1000 (on top of your regular payments) in the first year of your mortgage can take $10,000 or more off the total amount you pay over the life of the mortgage. The same $1000 later in the life of the mortgage will be less effective, though still an improvement over just paying the regular payments.

Doing this can take years off the life of the mortgage. I paid off my 25-year mortgage in 11 years using this strategy.

[akolb]

We purchased in December of last year. My best advice is find a good realtor and look in areas that you may not have considered. Also, remember that just because you were approved for up to $XXX, you do not have to purchase at the top of your approval amount. I have too many friends who didn't take into account insurance, taxes, other random expenses that occur with homeownership and are now struggling to pay their mortgage each month.
We on the other hand found a small house, perfect for us with that was FAR below our top loan amount. Our mortgage is equal to what our rent on our last apartment was. It's fabulous. We're here for the long haul.

[roxygirl]

Wow! Thank you thank you everyone for the help and advise so far! It has given me a lot to think about and ideas about where to go for specific information.

To answer a few questions, yes we do have a realtor and we do need to wait for at least 3 months before moving from where we are now. Thank you KeithBC for suggesting the extra payments in the first year to help reduce the overall cost of the life of the loan. I didn't realize that making extra payments in the first year made that big of a difference. However, I believe I have heard from some that their mortgages do not allow this? Is this correct? Because I would definately need to look into that if so.

Greebo: I appreciate that you are willing to ask the "tough" questions that so many new home buyers may not want to consider! I'm familar with Dave Ramsey and that sounds quite a bit like something he suggests as well We do have enough put a side for a fully loaded emergency fund (6 months), and enough for a 20% downpayment. While 15 year loan definately saves in the interest paid over time, we are comfortable with the 30 year none the less. At the present we are over the 25% take home pay IF we were to go for the max of the loan (which we don't intend to, plenty of homes well below that amount that would suit our needs just fine). I am a student, set to graduate next May and we live on DH's income. When I do start working, our income will double and put us under the 25% (and I don't say that as a guess, I know exactly what hospitals in the area pay new grads and who is willing to take them on and what the climate for my state is for new grad nurses.) We have a pretty good handle on our budget and know where we stand financially. BUT we are not in a hurry, per say to go and buy before I graduate either. It is obviously safer to wait till I am working as well. But we may have to move out of where we at before that happens and neither of us wants to rent when we can afford to buy.

Thanks again everyone! This has been extremely helpful

[Russ]

However, I believe I have heard from some that their mortgages do not allow this? Is this correct? Because I would definately need to look into that if so.

This used to be true for most mortgages I believe, but not so much anymore. Regardless, ask your mortgage writer and make sure it IS IN WRITING!

[Greebo]

Wow! Thank you thank you everyone for the help and advise so far! It has given me a lot to think about and ideas about where to go for specific information.

To answer a few questions, yes we do have a realtor and we do need to wait for at least 3 months before moving from where we are now. Thank you KeithBC for suggesting the extra payments in the first year to help reduce the overall cost of the life of the loan. I didn't realize that making extra payments in the first year made that big of a difference. However, I believe I have heard from some that their mortgages do not allow this? Is this correct? Because I would definately need to look into that if so.

Very few mortgages disallow extra payments or have a pre-payment penalty. Ask up front and don't do business with them.

Greebo: I appreciate that you are willing to ask the "tough" questions that so many new home buyers may not want to consider! I'm familar with Dave Ramsey and that sounds quite a bit like something he suggests as well We do have enough put a side for a fully loaded emergency fund (6 months), and enough for a 20% downpayment. While 15 year loan definately saves in the interest paid over time, we are comfortable with the 30 year none the less. At the present we are over the 25% take home pay IF we were to go for the max of the loan (which we don't intend to, plenty of homes well below that amount that would suit our needs just fine). I am a student, set to graduate next May and we live on DH's income. When I do start working, our income will double and put us under the 25% (and I don't say that as a guess, I know exactly what hospitals in the area pay new grads and who is willing to take them on and what the climate for my state is for new grad nurses.) We have a pretty good handle on our budget and know where we stand financially. BUT we are not in a hurry, per say to go and buy before I graduate either. It is obviously safer to wait till I am working as well. But we may have to move out of where we at before that happens and neither of us wants to rent when we can afford to buy.

Thanks again everyone! This has been extremely helpful

Sounds good. Going back to your question number two, there is NO reason you cannot put in an offer now and put your settlement date out 90 days. You can even put up a huge deposit as a show of REALLY good faith (like give YOUR realtor $5,000 to hold as earnest money for the house). That shows that you are serious and mitigates risk to the seller if you back out of the deal.

[NikoSan999]

Very few mortgages disallow extra payments or have a pre-payment penalty. Ask up front and don't do business with them.
.

You would think. We asked this questions on both houses and the answere was no, there is no penalty.

HOWEVER, when the shtf and I dug the mortgage papers out and re-read every page guess what!!!! Yep, there it was toward the back. A penalty for paying off early.

READ, READ, READ every line of every page. Don't believe what they tell you. If their mouths are moving they're lying. It's only what's in the papers that count.

[roxygirl]

You would think. We asked this questions on both houses and the answere was no, there is no penalty.

HOWEVER, when the shtf and I dug the mortgage papers out and re-read every page guess what!!!! Yep, there it was toward the back. A penalty for paying off early.

READ, READ, READ every line of every page. Don't believe what they tell you. If their mouths are moving they're lying. It's only what's in the papers that count.

Yikes! This is the kind of stuff I'm worried about. I definately need to do some research and get myself better educated on this whole process. I don't want just rely on the "experts" and hope what they are telling me is true or in my best interest.

Thanks again everyone!

[NikoSan999]

These two are Bank of America ( geesh..it feels funny calling them that ) and First Horizon ( First Bank of Tennessee ). I do believe it's also in Wachovia/Wells Fargo also.

[KeithBC]

Regardless of whether the mortgage allows extra payments or not, all mortgages allow you to pay any extra amount you want at the end of the mortgage term without penalty. So if you have a 3-year term, for example, when it comes time to renew it after 3 years, you can put as much extra money as you want into it. That is because each term is a separate contract.

So if your mortgage allows no flexibility, put the amount you want to use for extra payments into savings, and and use it to pay down the mortgage at renewal time.