Buying a House

[dmiles2186]

Any of you 'in tune' on this stuff? My wife and I have been married about about a year and a half. We're in a sweet setup right now. We're renting from her grandmother and living in a two bedroom house for the time being. It's nothing special, but we're able to save up some money and not having to worry about house repairs, taxes on the house, etc. We have no lease. We can stay as long as we want, we can leave when we want, our rent is not too pricey for a two bedroom house.

We've been looking at houses in our home town from time to time. It's a small town, so the housing market isn't that great, but it's not too competitive since more people are leaving the town than staying. We found a house that really struck our fancy and thought, what the hey? Let's go look. Turned out to be pretty much what we wanted. 3 bedrooms, 2 bath, fenced in back yard, an awesome deck out back, storage shed, quiet neighborhood, big two car garage, appliances come with the house (save for washer/dryer) and it's in our home town.

We just wanted to look, get our feet wet but turns out we may have hit a home run on this. The couple that is selling the home is actually building, and if they close on the house, they may not have optimal living conditions (not many houses for rent around here, they have two kids as well. Apartment living wouldn't be a good thing). They know our situation, they said if we were the ones to purchase the house, they'd essentially pay us rent and we'd stay put until their house was built.

With the interest rates as low as they are, and this house (from what I can tell) is moderately priced for 3 Bed, 2 Bath for a 14 year old house, it's tough to pass up. On the flip side, we were hoping to save more money, have a bigger down payment up front and go from there.

Any tips out there? I know each situation is different but I know nothing about the housing market. From what I can tell, now is a good time to buy.

[Portland Blues]

I'm sure others will chime in but my wife and I have always felt that if you find a place that feels perfect it deserves serious thought. If it's a house you can see living in for the next 10 or 15 years (instead of investment property) you may have found your perfect home. If you're only planning to live in it for a short time the current price is much more of a concern. I'm not familiar with the market in your area though.

My questions would be:

Is is comparable in price to others in the neighborhood?

Are you guys pre-approved for a mortgage?

Would the payment of all home-ownership expenses still leave you with enough money to enjoy your house and life at the end of the month? Nothing worse than paying all your bills on the 5th and having $37.00 left to last the rest of the month for things like food, gas, entertainment, etc.

How do the other houses on the street look?

And a few more things about the immediate neighborhood, your commutes, etc.

[dmiles2186]

Yeah, I forgot to mention all of that. We haven't been pre-approved but we talked about doing so this weekend. I don't foresee much of a problem, but I don't want to assume that, of course.

The good thing about my area is that it's a small town of 3,100 people. I work from home. My wife works less than a mile away. It's in a little subdivision on the edge of town. It's a nice neighborhood, quiet. The folks that own it now say it's great. There are train tracks nearby but I've grown up near train tracks all my life so I'm not worried about that.

We've calculated our expenses, we should still have a comfortable amount left over each month (definitely not 37 bucks haha) to live comfortably. The only thing that would start causing problems if a lot of stuff breaks down right off the bat. Or if we have kids right away. But as of right now, pending pre-approval, I'd say it would be a very nice situation.

[big d note]

Definitely shop around for a loan. Don't just look at rates or the monthly payment - consider all the closing costs and fees too because they will vary from one lender to the next. Check out credit unions in addition to banks. Last year I refinanced mine with a local credit union when the rates got really low, and the service and fees were very good. Now is still a good time to buy. Talk to the sellers about paying the closing costs too - this is really common nowadays and it will leave you with more money for a down payment.

Do you have a real estate agent? It's great to have a buyer's agent so that you have someone on your side that knows the system and the local market and can help you negotiate. After you've made an offer and gone back and forth and reached an agreement, hire a good inspector. Depending on what they find, it could be time to negotiate some more, or even walk away if there are big problems.

Don't jump in too soon if you're only going to live there 5 years, like Portland Blues said. I lived in my first house in Dallas for just 5 years. We sold it for $10k more than we paid, but we put plenty of money into the house, plus paid closing costs, interest, etc., so we did not actually come out ahead. With another 5-10 years there we probably would have.

With a small down payment, get ready to pay PMI as part of your monthly payment too. I pay about $100 a month for PMI now, but at least it is tax deductible. Being able to deduct the interest and PMI really helps out at tax time.

With my first house the sellers were in the same situation where they were building a new house and it wasn't ready yet. They rented the house back from us for 2-3 months (at a really generous price) while we stayed in our apartment. That worked out pretty well.

For any appliances you need, like the washer and dryer, check craigslist. You can find some awesome deals on appliances there.

If you are concerned about things breaking right away, ask the sellers to provide a 1-year home warranty. They can buy one for like $500 or $1000. In Dallas this was really common - everybody did it - but in Denver I don't see it offered as much.

[Leedog]

Prices all over the country are down 30%. They will only go up. Same with interest rates. Now is the time.
"Buy land, because God ain't makin' no more of it." ~ Tony Soprano
Try to swing a 15 year mortgage. Compare an amortization schedule on a 15 and a 30 and the 30 will make you puke.
Lastly, make sure you get a survey. I thought it was mandatory, but apparently not everywhere. I know someone who bought a house w/o one. Got one later only to find she didn't own the land her pool sits on, which is practically against her house. Has since spent about $40k on legal fees trying to get out of it.

[cprice12]

Inspection...
If you decide to put an offer down...during the home inspection, be there when the home is inspected. Follow the guy around and ask tons of questions.
When we bought our first house, I learned so much about the house just by following the guy around and getting his two cents on everything. It's invaluable information he can give you. Don't just rely on his notes or his report.
Also, make sure he goes on the roof, inside the attic and in the crawl space if it has one.

Gutters...
Check the gutters. In our first house, the gutters didn't have leaf guards or anything on them...and they hadn't been cleaned out in forever. They were 3/4 full of sludge/leaves/shingle residue/etc. And half of the gutters on the house were about 20' in the air...and our roof was a hip roof, so it had gutters on all sides. It was the most miserable job to clean those damn things out. I installed gutter covers after I cleaned them out and after that we never had anything get in there, nor did we have any other issues with them in the 7 years we lived there...except for the fact it seemed to not have a downspout in an area that seemed to need one, so I ended up installing another one.
Poor gutter systems or clogged systems will lead to water getting into your house sooner or later. Make sure they aren't clogged or leaking...and make sure they drain far away from the house. 90% of wet basements are caused by bad gutters/downspouts.

Another tip...
When we built our house, we upgraded in areas that would be impossible/inconvenient or ridiculously expensive to to upgrade later. We used 2x6 studs for our exterior walls and used premium blown in fiberglass insulation (Optima) in the walls and we went R-60 blown in fiberglass in the attic (R-60 is the maximum recommended for our area: http://www.energystar.gov/index.cfm?c=h ... tion_table). Those are things that you can't see and probably don't think about, but are actually a big deal. Excellent insulation saves on heating/cooling costs and proper insulation in the attic reduces heat loss and prevents mold buildup and increases the life of your roof. If I were buying a house, I'd want to know what kind of insulation it has in the walls and attic and how many inches of insulation are in the attic, what the R-Values are, etc. And you can be sure that if we sell our place in the future, those are going to be listed amongst the features of the house.