Tuesday, April 28, 2009

The need to knows of buying in the current market.

So we got the house!!! Yay us! However others I know are looking to jump into the market right now so I figured it would be wise to post some basics that we have discovered through the process.

1. Fixed rate only - Do not ever ever EVER do an adjustable rate. That is how so many have lost their homes now.

2. Short sale = no bueno. Short sale means that the seller is selling for less than they owe so your offer is pending bank approval not owner approval. Usually this is someone facing foreclosure trying to get out before that happens. Another negative is that they take like 90 days at least for processing. Finally it also means that until closing other offers will be looked at so if someone comes along and offers $5 more they could very well take it from you.

3. No 100% financing - If someone offers you this there is a twist. Read the fine print and everything that goes with it.

4. Taxes, mortgage insurance, and homeowners insurance are often not added into a mortgage calculator so remember you will be paying these each month on top of what you finance.

5. Mortgage insurance is paid until you have 20% equity in your home. The faster you get there the better.

6. Pick the payment you want to pay BEFORE you look and prequalify. We went by what we want to pay not by what we qualify for. No point in being house poor.

7. You need credit above 650 for FHA and 690-750 and above for a conventional loan.

These are just the basics that we have learned. Do your due diligence. Research the are for comps, schools, and crime to get a good idea of what you are moving in to. If there is a houseing association read their rules and make sure you can live with them. Most of all good luck. This is an amazing time to buy that first home.


  1. I think figuring out what you can afford to pay and sticking with it is essential. Nobody knows your situation as well as you do.

    No way I would buy into a home ownership association. The idea that I pay for a home and someone else can tell me what I can and can't do with it is not acceptable.

    Got to save my $ and work on the credit score. Have a few years to work on it before home buying time.

  2. A lot of places now have associations. When we looked at the area we are moving to every house had one. If it was one of the rare homes without it had ghetto written all over it and bad schools and crime. Some are super strict but some really are mostly "Keep the yard nice and similar to neighbors" and "No crazy paint color."

  3. Lila, I suppose there are definitely shades of evil in them.

  4. theotherryan is right - you decide how much to spend and don't let anyone talk you into more. When we bought our houses the banks were all trying to push 2x what we wanted to spend. I doubt they would do that now.

    I would pay to have a lawyer look over the paperwork and explain it to you. It's not that expensive and can help you avoid "gotchas" that the bank my throw in there.

    When you make a contract make sure you specify "possession at closing" and stick to it. Otherwise the seller may try to close, then stay in the house for a week or two or even longer while they pack. When we bought our first house we specified possession at closing and an inspection of the house before closing and the seller agreed to it. We went over the day before closing and they hadn't even started packing. They had intended to stay in the house for another week while they arranged for a truck, packed, and who knows what else. The big problem with that is that the situation would have made them tenants and us landlords and we might have ended up having to evict them to get them out. We told them that we were sticking to the contract and if they weren't out we weren't closing. They stayed up all night and got packed so we could close the deal.

    If the seller insists on having a few days to pack and move after closing I would have a lawyer write the details in the contract very specifically stating how long they can stay, how much they will pay for rent during that time, etc. It's for your protection. I don't know about the state you live in but where I live you become the landlord and are responsible for some things in that situation.

    Good luck and have fun.

  5. Associations are very evil. Ours has tons of stupid rules but luckily they never enforce them. One of ours is that you cannot havce a car in your yard that has not moved in a month. So you can still have an old junker in your yard as long as you go out and push it a foot or two each month.
    My sister got a fine from her association when her kids took their shoes off at the door and left them on the porch. There were only three colors you could paint your house too. Tan, green and white I believe.


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