First time home buying advice

[Cascadia]

We built our home 2 years ago. Rates were still high and our lot was way high because we bought it to flip 6 years ago but the market died. Not everyone can build their home but since we could we did. Our mortgage was for 215k and we put nothing down. Even with the higher rates our payments is only 1180 a month. Even though the lot kinda screwed us, we got in our house for 215 and it appraised for 335. Some new construction homes are going cheaper than you'd think. I will definitely go for more garage next time though.

 

[DerekM]

My wife and I bought a Duplex for under 200K. It was a dang good move too. Her mother is a realtor and found our duplex before it was on the market. Our rate is locked in at 4%. We bought it and rented out the top half for about 3/4 of our monthly mortgage payment.

 

[ozzy702]

My wife and I bought a Duplex for under 200K. It was a dang good move too. Her mother is a realtor and found our duplex before it was on the market. Our rate is locked in at 4%. We bought it and rented out the top half for about 3/4 of our monthly mortgage payment.

We've been looking for a duplex. If we could find one that isn't super far from work we would do it in a heart beat. Renting out a portion of a home or having a duplex has been part of our plan the entire time and I think it's a great option for couples starting out. I think I may have given everyone on here the wrong impression when I said "up to 250k", we're certainly not looking to have an anchor around our necks.

 

[DerekM]

As tough as it is, it sounds like you need to find a good realtor that is willing to keep a close eye out for you. I think it's worth your time to buddy up with a realtor that knows your area, and get pre-approved so you can make a quick offer as soon as the right place is available.

 

[Houndoc]

I'll take a different stand on HOA/CC&Rs. While we had some significant contention for awhile (and it never goes away completely as some think rules don't apply to them), using the tools they give has helped a lot of keeping a nice place to live. I have served as HOA president and board member and still favor them.

Just read them very close before buying. Most the rules are pretty darn reasonable but some can have surprises.

I agree with the advice on keeping cost down- but at the same time realizing in a year or two you are in the wrong house or wrong place can be even more expensive. There are also some relatively small expenses that in the long term are worth it. As an example, every time I have to stain my deck I kick myself for not spending a little extra for trex.

Depending on where you are looking, I can offer suggestions on agents. But we are in Tooele County (and happen to have a house for sale).

 

[jeep-N-montero]

We bought our home in March of last year and had an amazing realtor and mortgage team, we closed 10 days after our wedding and they made the entire process easy and painless. I grew up with our mortgage broker who is just finishing his MBA, and our realtor is a friend of his. Some people say to not do business with friends or family and this is usually true, but it turned out to be the best decision we ever made.

Our realtor, Gary Jones, is an honest straight shooter originally from Texas and even still rides bulls on occasion. He gave us full access to the MLS to look for homes and make a favorites list, then he would call each listing agent to check the status of the homes on our list. If there was any question on the status of a home we moved on, and if there was anything wrong with a home we went to look at he was very good at pointing things out. He even talked us out of a few homes entirely and was in no rush to take our money until we were completely happy. As a matter of fact he never even asked me to sign a contract with him as our agent, we just shook hands and agreed to be honest with each other. Gary lives in Payson but knows all of the valley very well, he drives a newer Jetta Tdi or a JK depending on the weather. He even drove up from Payson to drop by our reception when we got married and we still talk every other month or so. I would trust him with everything I have and that is saying a lot. He is with Remax and his number is 801-787-1376

Our broker, Todd Libby, is a great guy and I have known him since I was about 12. He made the entire process very easy and did most of the footwork and running around for us. Since we were backed by the VA it made things very easy with getting approved and the seller paid all of our fees except escrow. A few months ago Todd called and said we could refinance from 4.75% to 4% and they would pay our costs, so now we are saving almost $100 a month that we are just adding to principal. Todd is with Solarus Lending and his number is 801-319-3502

As for location and price, we started looking in the Murray and Sandy areas but ended up in Bountiful. Our price range was similar to yours and our criteria was we absolutely did not want any HOA or CC&R crap to deal with, 2 car garage, and we had to have a lot of mature trees around the house with a fenced yard. We ended up in a beautiful home that underwent an $82k remodel in the 90's and met our criteria. We paid $185k for it and the little things we have done increased its value $19k since we bought it last year. Our lot borders homes worth much more than ours so it will help our home value increase as well. We like living up on the bench and when I leave SLC I actually feel like I am coming home and can't wait to see the tall buildings in my rear view. I can leave tools in the yard and trailers unlocked without worry, and neighbors who check on you if you are sick or just need help moving a big rock in the yard. There are many privately owned shops and places to eat that we enjoy with easy access to fishing and camping. The extra drive to live here is worth every penny.

 

[rondo]

My gut feeling is you will be house rich and cash poor. in this economy a guy is wise to plan on 1 income in case something happens and have a healthy emergency fund. My wife and i started out in a duplex where we rented the other side. It paid 80% of the mortgage.
A 3 car garage is nice if you want to fab stuff and work on your 4x4 though!
Another thing to consider is a big house with big yard means more $ out of your pocket-you have to heat it and cool it and water the grass. You are probably young but as you get older humping up and down stairs becomes less fun and dangerous for the toddlers. Consider a 1 floor house.
You are very wise to consider the price of gas in your home search. The $ saved in gas/wear/tear could add $$ to your bottom line every month.

 

[cannoncrawler]

Eric, I doubt you will have a hard time with the loan approval. Our home was around that same price and when we sat down to sign, we discovered they approved it on my wifes income alone (less than yours) My incomes were not even listed and we were approved at 4%. In addition, our down was less than yours and our scores were only in the low 700's. I would be surprised if you have any trouble. Good luck.

 

[Cody]

Rent for 25% less than you would spend on a mortgage, and invest the difference in something that grows faster than real estate....which is pretty much anything (historically).

In 30 years, buy 2 houses with cash from your investments (one in the location you want to live, the other as far away as possible so that you can stick your in laws in it), and use the rest of your money to travel the world in your also-cash-purchased Earthromer.

 

[ozzy702]

Eric, I doubt you will have a hard time with the loan approval. Our home was around that same price and when we sat down to sign, we discovered they approved it on my wifes income alone (less than yours) My incomes were not even listed and we were approved at 4%. In addition, our down was less than yours and our scores were only in the low 700's. I would be surprised if you have any trouble. Good luck.

Good to hear Chad and THANKS! Hopefully you'll have a place to crash in Sandy whenever you need.

 

[ozzy702]

Rent for 25% less than you would spend on a mortgage, and invest the difference in something that grows faster than real estate....which is pretty much anything (historically).

In 30 years, buy 2 houses with cash from your investments (one in the location you want to live, the other as far away as possible so that you can stick your in laws in it), and use the rest of your money to travel the world in your also-cash-purchased Earthromer.

That sounds great in theory but in practice here it doesn't figure. Renting is the same price as buying right now. Rents will only go up over time while the cost of a mortgage is fixed. At around a 3.6% interest rate it just doesn't make sense to rent when the market is slightly depressed and interest rates are at history lows. My rent right now for a crappy 2 bedroom apt is $825 a month which is the LEAST I would be spending for housing, an added three hundred a month is not a big deal.

Now if I could find a home to rent for $800-$900 relatively close to work (south Salt Lake for my wife and Sandy for me) I'd consider it and save everything else but unfortunately that's just not the case. Rent on a crappy two bedroom apt is $850 and for a nice one is almost $1000. I can easily buy a home for $1250 and after PMI drops $1150, and that's for a 225k home with 20k down. Hoping to find a home for under 225k that works out but we've allowed ourselves a budget of 250k if it meets the right criteria (already setup with mother in law basement, or a duplex, fairly close to work, in a decent neighborhood, 2200sq/ft or larger). Not to mention the rental component to buying which if we pull off will offset at least 1/3 of the mortgage.

As I've mentioned before, I'm really not looking so much for advice on the cost of a home as I am the process of buying, attaining a loan without a bunch of extra points and junk fees, appraisals, home inspections, specific things to look for or avoid in a home, etc.

 

[Cody]

That sounds great in theory but in practice here it doesn't figure. Renting is the same price as buying right now. Rents will only go up over time while the cost of a mortgage is fixed.

Strange. Why has my mortgage gone up $100 in the last 7 years then?

Now if I could find a home to rent for $800-$900 relatively close to work (south Salt Lake for my wife and Sandy for me) I'd consider it and save everything else but unfortunately that's just not the case. Rent on a crappy two bedroom apt is $850 and for a nice one is almost $1000. I can easily buy a home for $1250 and after PMI drops $1150, and that's for a 225k home with 20k down. Hoping to find a home for under 225k that works out but we've allowed ourselves a budget of 250k if it meets the right criteria (already setup with mother in law basement, or a duplex, fairly close to work, in a decent neighborhood, 2200sq/ft or larger). Not to mention the rental component to buying which if we pull off will offset at least 1/3 of the mortgage.

Ok, well for shits and giggles, that $250 every month for the next 30 years, compounded monthly and adjusted for inflation, would turn into $765,260.51 in 30 years (which would be $365.5 k at present value). That's assuming the market grows at it's historical average over the last 100 years. You would put 90k into that and get what amounts to the current buying power of $365.5k. Since rents are typically related to mortgages, you could feasibly ramp that $250 up over time...but for sake of simplicity we'll keep it round.

Conversely 225k house at $1250 per month would have cost you 450k (actually, a lot more than that if you account for increases in property taxes, upkeep (roof, sprinklers, water heaters, etc etc)...most of which you aren't exposed to as a renter. At the end, you're basically at a zero sum there since the future value is roughly 450k (which equates to about 245k at present value).

So you could take your 765k, buy your now 450k house, and pocket $315k.

You're right though, with current rates as they are, the difference between a mortgage and rent on a comparable property isn't much, and in that situation the equation becomes essentially equal. Also, offsetting rental income does come into play, and if you can pull that off with a livable situation (i.e. essentially transparent renters, or renters you don't mind having close by), then you're ahead of the game. Trust me though, being a landlord isn't that awesome, and (this probably goes without saying), but don't "count" on that income to be able to cover your mortgage.

I get wanting a home and wanting your own space, and I have no problem with that as long as people are conscious of what that means for their financial goals. In my eyes a home is merely a reasonably stable savings account, and that may very well be what you are looking for financially. Some people's financial goals don't fit with that, and they may want to look at what the opportunity cost of that mortgage is when compared to other readily available investments.

Cody

 

[ozzy702]

Strange. Why has my mortgage gone up $100 in the last 7 years then?



Ok, well for shits and giggles, that $250 every month for the next 30 years, compounded monthly and adjusted for inflation, would turn into $765,260.51 in 30 years (which would be $365.5 k at present value). That's assuming the market grows at it's historical average over the last 100 years. You would put 90k into that and get what amounts to the current buying power of $365.5k. Since rents are typically related to mortgages, you could feasibly ramp that $250 up over time...but for sake of simplicity we'll keep it round.

Conversely 225k house at $1250 per month would have cost you 450k (actually, a lot more than that if you account for increases in property taxes, upkeep (roof, sprinklers, water heaters, etc etc)...most of which you aren't exposed to as a renter. At the end, you're basically at a zero sum there since the future value is roughly 450k (which equates to about 245k at present value).

So you could take your 765k, buy your now 450k house, and pocket $315k.

You're right though, with current rates as they are, the difference between a mortgage and rent on a comparable property isn't much, and in that situation the equation becomes essentially equal. Also, offsetting rental income does come into play, and if you can pull that off with a livable situation (i.e. essentially transparent renters, or renters you don't mind having close by), then you're ahead of the game. Trust me though, being a landlord isn't that awesome, and (this probably goes without saying), but don't "count" on that income to be able to cover your mortgage.

I get wanting a home and wanting your own space, and I have no problem with that as long as people are conscious of what that means for their financial goals. In my eyes a home is merely a reasonably stable savings account, and that may very well be what you are looking for financially. Some people's financial goals don't fit with that, and they may want to look at what the opportunity cost of that mortgage is when compared to other readily available investments.

Cody

Good advice and I agree with you completely. We're most certainly not counting on rental income or relying on it in any way but we are hoping to factor it in if all goes to plan. I too don't believe that a home should be seen as an investment unless you derive some form of rental return on it, that was the problem with the housing bubble, people were expecting their homes/investments to keep appreciating at rates that were several times the historic rate of appreciation (barely outstripping inflation).

The problem with the concept of renting vs owning right now is that there is no $250 a month saving to be had between renting a home and buying. They are literally the SAME price right now (or MORE expensive to rent) which is why we're planning on buying. We may even come out ahead after taxes with purchasing a home vs buying (which will be eaten up in maintenance cost).

Living in an apt for the next 30 years is not an option so unfortunately the renting and investing the difference example simply doesn't work for us. Given the above I would rather buy now while the market is somewhat depressed and interest rates are low. I can't imagine rates going much (if any) lower than 3.6% and if the economy does improve (possible in 2013) they will shoot back up, further decreasing our ability to own a home.

We will also be making extra payments, I doubt we'll be paying a mortgage for 20 years let alone 30.

 

[ozzy702]

Anyone have a good way to find the CC&R's for a property without spending a ton of $$$?

 

[JL Rockies]

Put as much down as you can and borrow for as short as possible. I put 50% down on my place in Ft Lauderdale and paid it off in 5 years. Taxes and insurances suck enough without 30 years of paying a mortgage too.

 

[Caleb]

A pretty famous man that was once a friend of mine once told me many years ago "You don't want to buy the best house in the worst neighborhood, you want to buy the worst house in the best neighborhood. So I bought a house in Sugarhouse, a fixer, and made a lot of money on it when I sold it later. Some other advice. Don't buy more house than you need, buy less house than you need. Then when the kids grow up you don't have to sell it cause its too big. Mortgages-pay it off as soon as you can and never get another. Back in the 80's I had a mortgage on my house and money in the bank. Well, the bank failed but the mortgage sure didn't (remember the thrifts disaster?) So as soon as I recovered from that I used every bit of spare money to pay down the mortgage and in a couple of years I had no mortgage. With no mortgage I saved a ton of money and bought the next house cash, also, nicer and in a better neighborhood. Real estate agents? Study the market carefully, call the listing agent, and don't be afraid to make low ball offers. Don't sign on with one agent. Do the due diligence and study the values yourself. Use the county website to search the values. Look at every house. Then you'll get a feel what homes should sell for in the area you are interested in. You can get a good deal on a house in any market, by the way. At the moment it looks like the market has turned for the better, but so what. Get yourself in a good cash position and you can make out at any time. I can't say my advice would work for everyone, but it sure worked for me.

That's great advice...in short, debt is bad. The only thing I would change is not put every penny towards your mortgage. Keep your cash liquid and not tied up in your home. When you have a large chunk (payoff, etc) then put it towards your mortgage. This makes it so if SHTF (major job loss, accident, etc) you aren't left with $100K in equity in your house but you have to first sell your house before you can handle your bills, day-to-day life if the need arrises. This does only work if you're good at keeping a savings, I know some people are not.

 

[glockman]

I would work two mortgage brokers against each other. I have been burned twice by mortgage guys and once by a realtor that is now in prison. I fill out the loan app with two "good" brokers and wait for them to resond. It is amazing how shocked they are that you filled out a loan app with another broker. You aren't obligated to one broker just because you filled out an application with them. The last time I refied my house the first broker offered me 7%. The other guy offered me 4%. That is just rediculous. Mortgage brokers make money by selling you a loan at the highest rate they think you'll pay. Also, if you get locked in with a broker and the rate drops, make them drop your lock, if they won't go somewhere else. A lock isn't a contract that you will buy thier loan, it is a contract they will offer you the loan at no more than the locked rate.

As for the rent vs mortgage issue. One thing to consider is you don't have to pay taxes on the interest you pay on a mortgage. If you pay an equal amount of rent or mortgage, the mortgage is essentially like paying 90% of your rent with pre tax dollars for the first few years. True you are paying that amount in interest but how is that different than rent? Your renting the money right?

 

[jackjoh]

Right now we own two houses and rent out one of them. We have decided to take our money out of CD's and are buying two more houses to rent out. We do not like 1-2% interest on CD's and think that stocks are too much of a gamble. The newly purchased houses are both fairly new and were bought below market and even if they lose 10% to 20% more in value we will still have what I consider to be a good deal. All we have to do is worry about keeping them rented.
That said, buy only what you decide you can pay for which should only be about one fourth of your monthly salary for a mortgage including taxes, insurance, fees, utilities and upkeep. $45000 divided by 12 divided by 4 = $937.50 per month available. Taxes, insurance, etc. on a $180K house will be approximately $300 so using my figures you can only afford a $637.50 a month mortgage. Any thing above that means something else has to give.

 

[ozzy702]

I really appreciate all the responses. As of right now we're looking into places that will have rental income attached (duplex or worst case scenario mother in law basement). We're just starting our family so we don't currently need a lot of room to grow. If we had a garage we'd be perfectly fine living in under 1200sq/ft so I think we could handle a duplex if we can find one for the right price. We're trying to be creative and realistic with our planning and most certainly aren't looking to buy our dream home. If all goes well maybe I'll post back up in another 10 or 15 years on buying a dream home but for now we're trying to keep our want's in check and really just buy for our needs.

 

[NYCEGUY01]

At least to me it would make more sense to look farther out of the city.

Buy the 1200ft home and have half the payment...

I know in the valley its probably slim pickins.

I have been going back and fourth for 2 weeks negotiating on a forclosure. They accepted my offer yesterday.
It is 1400ft on just over 1 acre 2 car garage and plenty of room for a new garage out back ( shop build thread coming next spring...lol ). I
t sold in 2009 for 256k. It was listed at 179K and had been on the market for a bit. They tried to short sale it but they failed and finally just forclosed fully on it.
My initial offer was 100k, my realtor seemed a little embarassed to even submit it...lol I didnt get it for 100 but Im closer to 100K than 200K.
As you all know the market is wrecked right now.....

We were also looking at short sales but it was a joke. Most of the lenders wouldnt even respond to offers for 30 days min. Just last week we got a ridiculous counter on an offer we made over 3 months ago. They countered with more than thier initial list price...lol

If you could stand the commute to Tooele County there are currently some added benifits.
In Rural countys ( pretty much all of them in UT except SL, Weber, UT and Davis.) currently you can get a USDA Loan. 0 down and fixed 3.5% interest.
Tooele also has some pretty large grants for 1st time buyers ( 10K ). As long as you dont sell for 5 years its free money, they pro-rate it if you do decide to sell.
My mortgage guy also mentioned one in UT county for 20K but I dont know the details etc...
These grants are setup for you, if you can use it. Free money is free money. Someone is gonna use it and it might as well be you.
There may even be some for SL county. A good mortgage guy should know all of this right away.

At 3.5% with no down the payment is under $800 including taxes and insurance etc..., this is not exact as the taxes/ind differ on each home... This also does not include the possible free 10K grant.