This is for everyone that has bought a house.

I'm sure I'm not the only one here that is dumb when it comes to buying a house. First off, I haven't got a pre approved loan yet but am going to the bank Monday. Also I will be getting a VA loan, which I know makes a difference. I don't want to get into what if's or anythings.

I'm moving from North Dakota to New Mexico in about a month. I'm in the Air Force, so they pay housing allowance. I don't want to spend to much more then that. Which will be about 600-650 a month. I just can't see renting a house anymore, the apt. I live in now is over 700 $ a month and just makes me angry everytime I walk in this place.

What are some of the hidden cost and other fees that nobody tells you about with buying a home? I'm not worried about resale, I'll cross that road when it comes. Also let me know about some of the lenders you have had luck with and haven't had luck with.

But anyway thanks for taking time to help me out.

DB

 

I used Farm Credit. Easier than buying a car and actually took less time! They use great appraisers and lawyers (low cost). Closing costs were about half of standard bank loan. Must buy 5 acres or more to qualify and either have 15% equity or cash down. They don't do PMI (mortgage Insurance)

Keep in mind the additional costs of owning a home such as any utilities that may be picked up by your current leesor such as Water/Sewer, Power or Cable. Also, get an estimate on real estate taxes. They can creep up on you! I would never put them in escrow if you can foot them by themselves. You will have some tax advantage with mortgage intrest and I would take that into account when estimating what you can afford. Also, hope you like mowing grass!

Regardless, it's always better to own than rent. Owning alows you to gain equity and credit. Renting does not.

 

my mortgage is with Countrywide. Next months bill arrive 7 days after they get the previous months payment. Being on a bi-weekly salary schedule, this makes 13 payments per year.

Aside from bank closing costs, expect appraisal fees, abstract fees, termite inspection fees, maybe some survey fees, and possibly state/county/city taxes from the previous year due.

Oh, dont forget your home owners insureance. Get the replacement value option (another $40/yr for me). The insurance company will pay the current cost of of replacement, not their depreciated value (IE, replace that 20 yr old 26" TV with a new 26" TV)

 

I just bought my first home last july, and here's what I've found:

off-topic advice
Utilities are high. No way around it.

Taxes and homeowners are high. No way around it, and they always go up.

Something will break. I didn't have a lot of green in the bank, so I let the sellers pay some closing. That cash I kept in the bank came in handy after I moved in!

It's a buyer's market. Beat the sellers up on price. It took over two weeks of haggling to get an agreeable price... and then I fought them for some minor repairs... and won.

Don't sweat the cheap stuff. If the walls are an ugly color, paint is cheap. If the carpet is worn or tattered, that can mean some more significant dollars. Shop smart.

Don't settle for 'acceptable'. Set realistic 'must haves' and stand by them. This is a major investment.

on-topic advice
I went with 5/3rd Bank out of Cincinatti OH, and they were a pleasure to deal with. They told me everything up front, and in writing. I had no surprises throughout the whole process. Mortgage companies are more flexible than I ever thought, so don't be afraid to ask for things and haggle a bit. Also, there are a number of ways to work the numbers, so ask for all potential options and compare. And obviously, fixed rate ONLY.

Another note... when I worked with the 5/3rd Mortgage Office by phone, they quoted a much higher interest rate than when I met with a 5/3rd Mortgage Broker in person. I don't know how that works, but I appreciated working with someone in person and got a better deal to boot.

Good luck!

 

one more bit of advice, more to those who are still thinking about it, mortgage laws are set to change, possibly dramatically, and definitely going to make it harder/more expensive to get a mortgage. buy soon if you can before the mortgage reform act hits.
I rented for a long time. rent more than doubled over that time. my payments are fixed for the next 20 years. I know insurenace and taxes will go up, but thats not going to double my current mortgage.

 

Sounds like a lot of good points to take in. The nice thing with the VA loan is I don't have to put anything down. Also if I got out of the Military and couln't make a payment, the way I understand it, is the VA will make the payment that month. But I assume that it will just make one more month of payments if I kept the place for 30 years.

I like to get seller going and see what I can't get out of them. So it sounds like this will be somewhat of a fun process. I have a couple houses that I'm looking at right now and I'm going to talk with a realtor down in New Mexico next week and pick their brain to find out what taxes are like.

Thanks again for sharing some of your experiances. If anybody else wants to chime in please do so. The more advise the better.

DB

 

Put 20% down and get rid if the PMI insurance charge.

 

why fixed rate only? lf you're only planning on being in the house for 5 or 7 or 10 years, why pay the higher interest rate on a 30 fixed year loan? or, if you have a reason to believe that interest rates will be dropping in the coming years, why pay for a 30 year fixed rate, only to re-fi in a couple of years? btw, make sure there is no early pre-pay penalty- this lets you re-fi or sell and pay off your loan, at any time, and not have to pay a penalty. also, shop around for a company that does not charge any loan origination points or discount points.

 

I don't think VA loans have PMI. DO consider fixed rate, with the rates dropping like a rock right now, it is a good time to be a home buyer-but ask the people that have opted for an adjustable rate loan how happy they are.

 

Fixed rate may mean a higher initial payment but it also means that there will never be a rise in the interest rate. No matter what happens in the market you will know where you stand with your payment. You can always re-finance later to another, lower fixed if you want to. And you can always pay an extra principal payment each month that takes away the interest you'll owe on that payment at a later date and drives down the principal.

Variable is only good if you are absolutely sure that the market will go up at a fast rate and you plan to either move in a few years or re-finance in a few years. A big factor in the current housing market colapse is variable rate mortgages. They may help you initially, but if the market gets worse you'll end up owing more than the house is worth and have a large mortgage payment you can't get rid of.

Here are a couple of interesting examples in my neighborhood: One house tripled in value and sold for 409,000. The new buyer came in at the top of the prices and soon realized they were loosing a lot each month. They had a variable. So they just walked away from the house. Just left. Now it's been a year and the asking price is about 250,000 with no takers. Another one is across the street. The owners turned down a bid that was 100,000 more than they ended up selling if for a year later. The new buyer bought it on speculation, based on the realtors recommendation, for a one year turn around. Now it's empty and worth at least 100,000 less than he paid. Meanwhile the payments go on. I tried to track down who owned the first one and the county didn't even know because it was being shuffled around in portfolios from bank to bank. Their info was three months old and it had changed five times that they knew of. The only way to find the current owner was to sue the property as a public nuisance, which stops the trading till it's cleared up.

For stability, get the fixed. For speculation, get the variable, if you think the market will rise soon. But be careful.

Around here prices have not bottomed. In the general region they are very low with vacant homes sitting around, and not too far away, they are still going up. Location is everything with housing prices. It's a very good time to bid from a position of power. Low ball a bunch of them and see who bites. Try not to get too emotionally involved with any one house while looking around.


John

 

Personaly I would definatly go with fixed rate. I bought my house 8 years ago and got a loan for the current rates of around 8.xx%. Then a few years latter the rates dropped so I refinanced for 4.XX% and shortly ther after the rates went back up. If I would have had a adjustable rate loan my rates would have gone rite back up with it. Now I have it locked in for the life of the loan at my 4.xx%. I cant remeber the exact number rite now but its around 4.75%. A lot of the home loan isues rite now are 100% atributable to people buying more house than they can aford with adjustable rate loans and when the rate goes up they can no longer aford the payment. The other thing I did was have my insurance and taxes escrowed in on the payment. ITs super easy as its 2 less bills every month and you dont have to come up with the big chunk of change every year for taxes. They pay it for you out of your escrow account. Some years if insurance or taxes change it will change your payment a few bucks a month but nothing like a adjustable rate morgage will.

One thing I can not emphasize(sp) enough is to get your own home inspector that you hired, not the banks person. Walk threw the house with them as they inspect it so you know its being done rite. I did not do that and have consiquently bought a house that on the surface looks great but is becoming a major money pit because some one cut corners on things years ago. My bank required a home inspection and even lined it up for me but I never saw the results or even talked to the inspector. It just got a pass and the bank then proceded on with the deal. I realy wish I could strangle the inspector for his half hearted inspection and myself for not knowing enough to hire my own inspector.

 

I have not bought a house as of yet, last time I tried though I went through Navy Federal Credit Union. I would absolutly never, and I mean NEVER, do business with them for home loans again.

The approved my loan, I went to buy a house, got out bid, so I went for another house and asked them to just change the address over to the new place for my paperwork. For some reason I was denied at that point. Then came questions about my health (I have income from the VA and the guy wanted to know what my injury was that got me medical disability, when I asked him if he was a doctor he said " so your refusing to say "). I went through the roof and said screw it as of then on buying a place.

I hope to get one with in the year though and will give USAA a try on the loan.

Edited: I am actually looking at maybe being in the Albuquerque area myself so we may end up neighbors!

 

most people's adjustable loans, are initially fixed for a period of time, usually 5 years (your choice), so if you went that route from the get go, you would have had a much lower rate than the 8% you were initially paying, and still could have locked in the 4.75% fixed. you could pay off your house in 15 or 30 years, having nothing but adjustable rate loans, and never leave the fixed term of the adjustable loan- meaning, just because you have an adjustable loan, doesn't mean you ever have to enter the adjustable part of it, as they are fixed for a certain length of time. btw, when you escrow, you're just earning interest for your lending company, instead of yourself.

 

adjustable vs fixed really depends on how long your going to be there and what kind of adjustable plan you get.

My initial loan was Adjustable with the first two years fixed at a nice low teaser rate. The first two years also had some serious pre pay penalties. The adjustable was prime plus a rate that went up every 5 years. Regardless of what intrest done, my rate was scheduled to go up about every 5 years.

I refinanaced after my teaser rate was up I refinanaced to a fixed rate that was a half percent above my adjustable rate. so it worked out ok.

 

that's what i was talking about. if you're smart, and stay on top of current rates, as well as not letting the fixed term of your adjustable loan expire, you can save a lot of money on interest. a friend of mine, who is a mortgage broker, gave me the BIG crash course before we bought our first house. he said that most people will take a 30 year fixed, so that they will never have to think about their mortgage after they close, but in reality, doing that will cost the average home owner thousands of dollars over the course of the loan. just make sure none of your loans have an early pre-pay penalty, so you can re-fi anytime you want.