first time homebuyer in need of some general advice

[Aharami]

update 1 03.31.08
we got together with a realtor that our friend used and recommended and we've been looking at places the last 3 weekends. I think we've seen close to 15 places so far. Well we saw a place that we really liked this past weekend and we want to put an offer down on it.

The place is listed at $320K. We want to use the current market to our fullest advantage and we're thinking of putting our first offer at ~10% below asking - or $285K. Does that seem like a really low ball offer, or is 10% below asking a normal initial offer?

/update 1

my fiance and I want to buy a condo or townhouse together this summer but we're generally clueless about the whole buying process. Since there are a lot of homeowners here who've been thru the process once or more, we thought we'd pose some questions here.

1. Where to start off looking for a condo or townhouse? We live in central NJ and we're looking to buy in somerset or middlesex county. We've been looking at sites like foxtons.com or remax.com, but are there other sites out there that are better?

2. do we have to hire a Realtor? I know sellers usually go thru realtors to sell their property but do buyers also usually hire their own realtors? Wondering if we're gonna get duped if we dont hire one.

3. How much do realtors charge and who pays for them? Do their cut comes out of the sale of the house like it does for the selling realtor? Or do we have to cut a separate check for our realtor?

4. How do we search for homes that are being sold by owners? Those wont be listed on sites we've been looking in.

5. whats the process for acquiring a mortgage? We both have excellent credit (~800 FICO) so we hope we can get a good interest rate. Do we have to wait till we find a property till we start looking for mortgages? Or can we do both simultaneously? We want to find out what kinda interest rate we would get, but would banks even entertain the idea w/o a firm mortgage amt in hand?

Thats all I can think of for now. But if you want to add anything, please do. Thanks

 

[rival]

5. find out how much a bank or lender will give you before you go finding your dream home, but also find out what you can afford before you go to a bank or lender

3. when i bought my home the seller paid all the fee's and crap to both realtor's and closing costs (not sure if those are included in closing costs)

 

[mcvickj]

Some good questions. I have also been looking into the home buying process. I'll add another question. Say you are pre-approved for $135,000. You find a place that you love and after it is all said and done you your mortgage is $100,000. Is it possible to borrow some extra above the $100k to furnish the place or do any minor improvements right off the bat? Perhaps this varies between the different lenders.

 

[kt]

1. Enlist a real estate agent to work for you. You may want to interview a couple before settling for one who you can trust and believe will actually work for you. An agent will have access to a lot more listings than you can find on website, etc. And they will have the more recent listings as well.

2. See answer to #1.

3. How much they are getting paid is usually negotiated between you and them, but they usually have a minimum percentage of the selling price in mind. Their cuts (seller and buyer agents) come out of the escrow.

4. I would usually stay away from sold by owners listing because most of the time it's a lot more headache than it is worth. Sure you would get away with not having to pay for the commission fees, but for such a large purchase do you really want to skim?

5. You should find out from lenders how much you are pre-approved for and how much you really can afford then start shopping accordingly. You have a better chance of having your offer accepted if you have a pre-approved letter from a lender.

 

[MikeyIs4Dcats]

There is nothing wrong with a For Sale By Owner.

Don't confuse what you are preapproved for with what you can afford. Figure out your budget for yourself.

ALWAYS have a home inspection done yourself.

 

[MikeyIs4Dcats]

Oh, and if you are able to find a property on your own wkithout a realtor, you may be able to negotiate a lower price based on that. The sellers agent has to split the commission with a buyer's agent, so if they don't have to give up half, they may be willing to work harder to get a better price for you or even rebate you some of the commision.

 

[Aharami]

good points. my mom works at a bank and she will set up a meeting with the mortgage dept for us this week. We can check out a couple other banks as well to see what we get preapproved for.

One more question about hiring a realtor. Lets say we talk to one but we continue our independent search simultaneously and end up finding a place we like on our own. Are we obligated to buy a place thru the realtor after we've started talks with that realtor?

 

[beer]

Originally posted by: Aharami
good points. my mom works at a bank and she will set up a meeting with the mortgage dept for us this week. We can check out a couple other banks as well to see what we get preapproved for.

I'll throw in a pitch for you to consider your local credit union as well.

 

[Capt Caveman]

A couple of good sites to search for properties:

ziprealty.com
realtor.com

bankrate.com is a good site to search for mortgage rates in your area and also lots of articles on buying a place, financing, etc.

 

[Greenman]

Weired info here.

Just talk to an agent. He/she will have access to all the home listings, will be able to hook you up with a loan broker, recommend what inspections you should have done on the home you find, and you don't pay them a cent, it all is paid by the seller.

 

[QED]

#3

Realtors are almost aways paid for the by the home seller, even if they represent the buyer. Rates are negotiable like everything else, but are typically between 2% and 4% EACH for the buyer's agent and the seller's agent.


#2

Using an agent for buying a home is completely optional.

If you go without a realtor, you can often negotiate a lower selling price since the seller won't have to pay your realtor and is thus saving about 3%. On the flip side, having a buyer's agent is nice (especially for first-time home buyers) as they do the searching for you, they can schedule viewings of homes much more easily than you could on your own, they can give you guidance on making your offer and accepting/rejecting a counteroffer, and can guide you through the rest of the whole buying process. Keep in mind, though, that its in their best interest for you to BUY rather than not buy, and you may find their advice to you is shaded that way.


#1

As someone else has mentioned, perhaps the best overall site for finding real estate is realtor.com, as it has complete access to most regional MLS databases-- meaning you only have to search one website instead of the website every major real estate agency in your area.

#4
Finding FSBOs (For Sale By Owner homes) is a bit tougher, as there are dozens and dozens of FSBO websites out there, and none of them contain a comprehensive listing of every available home. Craigslist has a good share of For-Sale-By-Owner homes listed, so its worth a look. Some other websites (off the top of my head)for FSBO homes include owners.com, fsbo.com, and byowner.com. Also, check your local newspaper, and grab a few of the local free home sales magazines located inside the exit lobby of your local grocery store.

If you have a particluare neighborhood in mind, just drive up and down through the neighborhood and you'll be sure to find a few homes with a For Sale By Owner sign in the year.

#5

This could almost be a topic unto itself.

Your best bet is to shop around and find a mortage provider BEFORE you go home shopping. Just go to any bank (don't forget your credit union, if you have one) and tell them you're thinking about buying a home. They will walk you through a process called "pre-qualification", where you fill out a short application and they will then process it and tell you what the maximum loan amount they will provide you, as well as their rate and terms.

A pre-qualification doesn't bind you to that bank, so if you don't like what the bank has offered you can head on down to the next bank. Don't look only at the interest rate. Keep in mind that different lenders will require differing amounts of down payment, have different closing costs (which you may have to pay for out of your own pocket), and may require the payment of points (a percentage of the loan amount paid) in exchange for a reduced interest rate. All of these things should go into your decision about which bank is making an offer that is best for you and your situation.

A second option is to find a reputable mortgage broker, who has access to literally hundreds of different lenders and loan programs. You will fill out just one application form, and the broker will use this information to match you up with a loan and lender that best meets your needs without you having to apply everywhere.

A broker will be able to answer your questions and guide you through the mortgage process, but as with using a realtor there are pros and cons. Usually a broker is paid for by the lender, not you (so using his/her service shouldn't cost you a penny), and since the broker isn't employed by a lender he can, in theory, find you the best offer out there from among many lenders. Unfortunately, some unscrupulous brokers are more concerned about closing a deal than making sure a particular loan is your best option-- so proceed with a little caution.

So whether you choose to go with a particular bank, or if you choose to use a mortgage broker, make sure you have a prequalification done BEFORE you start looking at homes so you know how much house you can buy. And like someone else on here posted, don't take the banks word on how much you can afford as it is in their best interest to offer you a larger loan than you really can afford.

Any other questions, feel free to ask away. In my former life, I was a real estate agent and mortgage broker.

 

[QED]

Originally posted by: mcvickj
Some good questions. I have also been looking into the home buying process. I'll add another question. Say you are pre-approved for $135,000. You find a place that you love and after it is all said and done you your mortgage is $100,000. Is it possible to borrow some extra above the $100k to furnish the place or do any minor improvements right off the bat? Perhaps this varies between the different lenders.

The primary factor isn't your prequalification amount, but how much is the home worth versus how big your first mortgage is.

If ithe home's value is close to the $100,000 you own on it, you'll have a hard time finding a bank willing to provide a loan over that amount as it is essentially an unsecured loan.

If the home's value is a bit higher, you might be able to get a second mortage or a home equity line of credit (HELOC). For instance, if the home is worth $120,000, you could easily get an 89.9% HELOC at or just below prime rate-- which would equate to an $8,000 line of credit at prime rate.

 

[Aharami]

wow thats some really good info. Thanks QED! We made an appointment for tomorrow with a realtor that a friend recommended. We're just gonna go talk to her and see what she has to say. We were playing around with some mortgage calculators and we decided that it might be better to pay less than 20% down. monthly mortgage payment only goes up by like $90 by reducing down payment from 20% to 14% ($15K difference between the two). Only thing I dont like is PMI. Is there any way to avoid paying PMI when paying less than 20% if we have very good credit?

Also I was under the impression that the better the credit, the better the interest rate we'll get but my friend just told me that's not true. He told me banks require a min credit score of around 670 to give their best interest rate which is currently at ~6%. So anyone above that credit score gets the same interest rate which kinda disappointed me a little bit since we were hoping for a better rate. He mentioned that smaller independent lenders are more likely to give better rates, but not sure which ones to trust.

Also im not too familiar with credit unions. can someone explain how they differ from banks and what are the pros and cons from borrowing from them?

 

[HeroOfPellinor]

You made the right decision. Your realtor will handle everything for you.

As far as putting 20% down, I believe unless you put 20% down you will have to pay PMI.

 

[nageov3t]

just a fair warning about somerset county... stay the hell away from anything near a river. lol.

 

[Aharami]

Originally posted by: loki8481
just a fair warning about somerset county... stay the hell away from anything near a river. lol.

thanks. will look into that

 

[Aharami]

found some townhomes that we like from the pics but they're all built in the mid 1980's. Not sure if buying a property built 20 yrs ago is such a good idea...

 

[HeroOfPellinor]

Originally posted by: Aharami
found some townhomes that we like from the pics but they're all built in the mid 1980's. Not sure if buying a property built 20 yrs ago is such a good idea...

Um, odds are it was built better than anything built today.

 

[boomerang]

Originally posted by: HeroOfPellinor

Originally posted by: Aharami
found some townhomes that we like from the pics but they're all built in the mid 1980's. Not sure if buying a property built 20 yrs ago is such a good idea...

Um, odds are it was built better than anything built today.

I second that. The home inspection should turn up anything you need to know about. After 20 years, the mechanicals are the concern. Furnace, A/C, Hot Water Heater. Also, take a good look at the roof. In a townhouse situation, I'm not sure how that's dealt with. Is there an association? If there is a contiguous roof spanning across units, check into how roof replacement needs to be dealt with.

25 year shingles usually need replacement before 25 years.

 

[smack Down]

My advice pick your condo wisely because you will be their for the next 10 years. Do you really think now is a good time to buy consider it is just after one of the largest housing bubbles.

 

[boomerang]

Originally posted by: smack Down
Do you really think now is a good time to buy consider it is just after one of the largest housing bubbles.

Not to speak for the OP, but I'm curious as to your reasoning in regards to that statement.

Are you saying it's better to buy high? I can't imagine a better time to be getting into the housing market than now.

 

[smack Down]

Originally posted by: boomerang

Originally posted by: smack Down
Do you really think now is a good time to buy consider it is just after one of the largest housing bubbles.

Not to speak for the OP, but I'm curious as to your reasoning in regards to that statement.

Are you saying it's better to buy high? I can't imagine a better time to be getting into the housing market than now.

Right now might not be the peak, but you sure as hell are buying high if you buy now.

 

[Gunslinger08]

Originally posted by: smack Down

Originally posted by: boomerang

Originally posted by: smack Down
Do you really think now is a good time to buy consider it is just after one of the largest housing bubbles.

Not to speak for the OP, but I'm curious as to your reasoning in regards to that statement.

Are you saying it's better to buy high? I can't imagine a better time to be getting into the housing market than now.

Right now might not be the peak, but you sure as hell are buying high if you buy now.

I think that depends entirely on where you live. Home prices have come down roughly 50% in the past year around here. They're now lower than they were before the bubble.

 

[boomerang]

Originally posted by: joshsquall

Originally posted by: smack Down

Originally posted by: boomerang

Originally posted by: smack Down
Do you really think now is a good time to buy consider it is just after one of the largest housing bubbles.

Not to speak for the OP, but I'm curious as to your reasoning in regards to that statement.

Are you saying it's better to buy high? I can't imagine a better time to be getting into the housing market than now.

Right now might not be the peak, but you sure as hell are buying high if you buy now.

I think that depends entirely on where you live. Home prices have come down roughly 50% in the past year around here. They're now lower than they were before the bubble.

Same here. If you have the money, and qualify for the payments, it's a great time to own a home regardless of the market. Best of all, lenders aren't going to be making the mistakes they were of late and that means you won't be making them either.

Timing the market is impossible whether it's a home, the stock market or even waiting for the next generation of computer components to come out.

If it's comforting to sit on the fence and wait for the perfect time, then I won't begrudge anyone doing that.

 

[RagingBITCH]

I just went through buying a house for myself for the first time last year, closed on December 31st. I had no clue about it, this is my response to you:

1. Hire a realtor, hands down. You're looking for certain counties or areas - let them do the work for you. They should be able to setup a search using MLS (the "official" realtor's listing...think of it as a Google like index for home buying) All of the realtor's websites like Remax or Ebby or Keller Williams use a search based off of MLS listings...they do have a few that are non-MLS listings, but any good realtor will list their properties on MLS for maximum viewing.

2. Hell yes, get a realtor, as related to number 1. It isn't really going to cost you anything out of pocket - the commission they make as your "agent" comes out of the closing costs and will be paid for by the seller. (That's generally speaking) You have no idea what you're doing...anything in which you have no idea what you're doing...please get someone who does. They make it relatively easy and painless to buy a house, will give you all the info you need, and will make the search 1000000000x easier and more efficient, assuming you get one that really cares about you as a buyer.

3. Cut comes from the sale of the house, so if the house sells for $300K, they'll make some % of commission off that sales price. When you sign the papers at the title company, they'll receive their cut then. You normally don't have to pay them anything. (Least when I bought my house) It might be nice to buy them a drink or lunch or something when you guys go look at houses...or dinner once you finally buy a house. A token of simple gesture.

4. Again, most homes for maximum viewage should be listed with MLS. There isn't a central MLS search engine, but certain sites (like your realtor's main site) should use MLS as the engine powering it. (Realtor.com uses mostly MLS listings) A good realtor should be able to setup an automated search for you that gives you listings in your price range and emails them to you on a daily/weekly/monthly basis. You can also do a search yourself to see if there are homes you really like that aren't listed on there.

5. Before you can start to buy, you want to get pre-qualified with some lender. This lets the agent know that you guys qualify for a home up to $XXXK, like $500K. I was prequalified for a certain amount, but knew at that high amount that I probably couldn't live comfortably, so I set my maximum search range about $50K below that mark. They check your credit, ask you about your income, some other crap like that. Once you find one that you like (a house), you can go through the normal process of qualifying for a mortgage. (Will ask for pay stubs, statements of your investments/accounts with money like 401K, checking/savings/etc) My mortgage guy gave me an Excel spreadsheet with approx amounts of what I was looking to pay per month including Escrowed insurance and taxes, and what the final closing costs would estimated to be at. (Closing costs are pretty standard)

In regards to your mortgage - definitely look/ask around with different lenders...I didn't do a very good job of that. More than likely whomever you get your mortgage with (especially a smaller lender) will end up selling off your mortgage to some other company, at least from what I heard. (Mind ended up being bought out by Wells Fargo)

This is just my personal experience with the process. If you have any questions feel free to drop me a PM or ask here.


- Mel