Buying a real home

[likescarsz28]

25 years ago, I bought a house on a contract for deed and signed a quit claim deed when I failed my relationship. Since then, I have been a renter until 2004 when I bought a really nice mobile home. For the first time in my life, I have the opportunity to buy a real house with a conventional mortgage and I would be sincerely appreciative of any wisdom that the members would care to share with me about some of the common pitfalls.

I am good with finding the right house, making sure it is sound, negotiating a fair price and not getting in over my head. My main concern is the financial part of the mortgage transaction. Specifically, what is the range of closing costs, and how do I avoid making a mistake in closing or paying to much for the costs?

 

[Tall Paul]

Apparently you are 102 years old so i would sugest not buying a house at that age just piss your money away on hookers and stogies... :laugh:

On a serious note my wife and I bought our house 3 yers ago. I was 25 and the wife was 24 very young in my book for it and it was alot of stress. We did FHA morgage and with that we had to put down roughtly 3.5% and then pay closing cost. I was told by many people that in this market esspecially you as the buyer should not spend a DIME on closing costs. We put in our offer that the buyer should pay up to $8000 of the closing and they did. I belive the home owners bank paid $6532 it was a short sale so his bank was running the show. I am no professional but This was just my experiance. So good luck old man and dont break a hip moving... Damn 102 thats old!

Paul

 

[engspot]

When you get pre-approved ask the bank what the typical closing costs are for your price range. Also, when you put a bid on the house you can negotiate that the seller pays some or all of the closing costs. If you don't have 20% to put down, the PMI will cost you much more than the closing costs. You can buy points, but that will also get expensive and they tack that onto the closing costs.

A mortgage is a big expenditure and shopping around is a wise idea. Ask what percentage of mortgages the bank sells, interest rate, and closing costs. Try to lock in a 90 day interest rate if a bid gets accepted. You'll have more time to gather the mounds of paperwork, get proper inspections, and do whatever needs to be done without rushing and having to start the whole process over again.

It can get overwhelming fast, but take your time and sleep on any decision before signing papers. Good luck!

 

[Pipe Smoker]

I was caught off guard by the escrow - a quarter of my monthly mortgage payment doesn't actually go to my mortgage. The Realtor didn't think to warn us of that back when we bought our house.

 

[likescarsz28]

Thanks for the advice guys. I am not big into asking forum brothers for help on personal stuff, but so far, the process has been a bit overwhelming. I have been members of cigars forums for more than 8 years and been blown away by the depth of knowledge, and the willingness to share info (unless you are a douchebag, but the jury is still out ).

I have the 20% between cash and equity on the selling price, not including closing costs. I live in BFE so shopping around isn't much of an option. Am I looking at $6,000 including inspections and valuation on a $155,000 house? Are any of the closing costs "sucker fees" that are negotiatable?

Sincere thanks for those that have opined so far, and those that might in the future.

I was caught off guard by the escrow - a quarter of my monthly mortgage payment doesn't actually go to my mortgage. The Realtor didn't think to warn us of that back when we bought our house.

Where is it going, property taxes?

Apparently you are 102 years old so i would sugest not buying a house at that age just piss your money away on hookers and stogies... :laugh:

On a serious note my wife and I bought our house 3 yers ago. I was 25 and the wife was 24 very young in my book for it and it was alot of stress. We did FHA morgage and with that we had to put down roughtly 3.5% and then pay closing cost. I was told by many people that in this market esspecially you as the buyer should not spend a DIME on closing costs. We put in our offer that the buyer should pay up to $8000 of the closing and they did. I belive the home owners bank paid $6532 it was a short sale so his bank was running the show. I am no professional but This was just my experiance. So good luck old man and dont break a hip moving... Damn 102 thats old!

Paul

Buying a home at 24 IMHO is financial genius

Thanks for the advice guys. I am not big into asking forum brothers for help on personal stuff, but so far, the process has been a bit overwhelming. I have been members of cigars forums for more than 8 years and been blown away by the depth of knowledge, and the willingness to share info (unless you are a douchebag, but the jury is still out ).

I have the 20% between cash and equity on the selling price, not including closing costs. I live in BFE so shopping around isn't much of an option. Am I looking at $6,000 including inspections and valuation on a $155,000 house? Are any of the closing costs "sucker fees" that are negotiatable?

Sincere thanks for those that have opined so far, and those that might in the future.

I was caught off guard by the escrow - a quarter of my monthly mortgage payment doesn't actually go to my mortgage. The Realtor didn't think to warn us of that back when we bought our house.

Where is it going, property taxes?

Apparently you are 102 years old so i would sugest not buying a house at that age just piss your money away on hookers and stogies... :laugh:

On a serious note my wife and I bought our house 3 yers ago. I was 25 and the wife was 24 very young in my book for it and it was alot of stress. We did FHA morgage and with that we had to put down roughtly 3.5% and then pay closing cost. I was told by many people that in this market esspecially you as the buyer should not spend a DIME on closing costs. We put in our offer that the buyer should pay up to $8000 of the closing and they did. I belive the home owners bank paid $6532 it was a short sale so his bank was running the show. I am no professional but This was just my experiance. So good luck old man and dont break a hip moving... Damn 102 thats old!

Paul

Buying a home at 24 IMHO is financial genius

I am 45 but since I went the hard way, sometimes I feel 102

 

[Tall Paul]

It was nice to buy at 24-25 but it was a finacial struggle in the begining that was very hard. In the last year we have finally started to see the light! The day we sighned papers and paid our end our checking and saving had a total of $120 in them.

 

[jfields]

The escrow is for taxes and insurance.

Call around to get the best quotes possible for insurance. It will make a difference in your monthly payment. A lot of companies offer discounts when you get your car, home, etc all through them. Let them know you're shopping.

Shop for your lender. We went through three last October before settling with Suntrust Mortgage. Wells Fargo and Bank Of America sucked!!! They seem to have such a large portfolio, and are so gun shy from the past crisis that they just didn't seem to care whether we did it or not.


Tell your lender you don't want to be charged that "appraisal fee" until he or she is 100% sure you are approved with them!!!!!! I had to file a charge back on my CC for almost $600.00 after BOA denied us because they stated my wife's "commute to work was going to be too far." I didn't have an appraisal, nor a loan, but they debited my bank and refused to refund.

Get a home inspection from a home inspector with a good reputation. No matter how handy you think you are, you have not been trained like a good one has to look at things like foundation issues, etc. You'll have to pay out of pocket more than likely, but could very well save you big time. Make sure he has been trained formally by the likes of ASHI (American Society of Home Inspectors) or something comparable and is not just some Joe Blow. Should be able to find something on the internet if a realtor doesn't know.

Some realtors will want you to use one and genuinely care that you are protected. Others see it as a possible threat and a cause to hamper the deal they stand to make money off of. Remember that!

Use those closing cost you should be asking for to ask for a home warranty..... Best Piece of mind you can have. I used American Home Shield (Realtor picked them not me) and already have had a large ticket item with a pipe rupturing inside a wall. Cost me a $60.00 copay for the plumber and drywall/insulation restoration total.

Doesn't cost you a dime as a buyer to have a good realtor in your corner if you don't already. Let them do all the work and make all of that overwhelming stuff seem easier. That's what they get paid the big bucks for on these transactions.

 

[Pipe Smoker]

I was caught off guard by the escrow - a quarter of my monthly mortgage payment doesn't actually go to my mortgage. The Realtor didn't think to warn us of that back when we bought our house.

Where is it going, property taxes?

Yeah property taxes and insurance. I knew about each before we went in, but when we were discussing what we could afford and deciding which homes to look at we were using the amount of the mortgage alone, so when that final number showed up it was a bit of a shock.

 

[likescarsz28]

Home Inspection? Damn Right and I am not using one hired by the realtor. I live in BFE, but surely I have choices.

The appraisal after the approval - Great advice and duly noted.

I am including taxes and insurance in my payment estimates, I just don't know how much the closing costs are and the lendor won't tell me until I am approved.

I trust my realtor, but only so far. She is trying to come off as a fiduciary, but I understand she has a selfish motivation. Until it is time to negotiate, I only trust her as far as to turn the key to get me so I can get into the houses.

No offense intended to any realtors on this forum.

 

[bfisher88]

Home Inspection? Damn Right and I am not using one hired by the realtor. I live in BFE, but surely I have choices.

The appraisal after the approval - Great advice and duly noted.

I am including taxes and insurance in my payment estimates, I just don't know how much the closing costs are and the lendor won't tell me until I am approved.

I trust my realtor, but only so far. She is trying to come off as a fiduciary, but I understand she has a selfish motivation. Until it is time to negotiate, I only trust her as far as to turn the key to get me so I can get into the houses.

No offense intended to any realtors on this forum.

Hey watch it!

Kidding, get your realtor to refer you to multiple inspectors, and to multiple lenders. I do the same for my clients and most appreciate a few different options to choose from. Definitely get the home warranty included in the offer and paid for by the seller if you can. Pretty cheap expense and most of the time they will not care if they have to pay for it.

 

[likescarsz28]

You can get a home warranty on a home built in 1963? What is the range for the cost on something like that?

 

[jfields]

You can get a home warranty on a home built in 1963? What is the range for the cost on something like that?

I think ours was around $450.00 for a 3k square foot house built in 73. Good for one year.

The seller paid for it out of closing costs.

 

[StatHaldol]

We like in a small cabin on a lake. When we bought the place there was a fair amount of cosmetic work to do on the place (paint, carpet, etc). Also, the home inspector found a few other minor things that needed to be repaired. My wife and I did most of the work ourselves.

Instead of dickering on the price of the cabin, we told the seller we would pay asking price if he would write us a check for the incidentals (which came to about $5,000).

I would rather have $5,000 today than pay $5,000 less on the house amortized over 30 years.

Just my 2 cents. Good luck, and I think you are making a wise decision.

 

[Light this!]

Everything is negotiable in this market. It doesn't hurt to ask and don't be afraid to. Hire a pest control company to do the pest inspection portion of the home inspection. This will run you about $100. The WDI (wood destroying insect report) is going to be required by the bank. I have a pest control company and often find that some home inspectors even though they are good often spend more time on the major components of the house. A pest control company is going to focus strictly on the pest inspection. They can tell you if it's old damage, any previous treatments performed or if it's active damage. If termites or wood destroying insects are found - the seller is required to pay for the treatment which usually runs anywhere between $1000 - $2500 in our area.

 

[likescarsz28]

A sincere thanks for the help. $450 for a warranty? Cheap peace of mind.

I live in South Dakota. I am surprised that with the winters, there would be wood destroying insects! Surprised they are in New Hampshire too!

 

[Nihon_Ni]

Unless you have contracted for a buyer's agent, be aware that "your real estate agent" is actually working for the buyer, representing his needs (best selling price) not yours (lowest selling price). And rightfully so, the buyer pays the commission, not the seller. At some point in the process, likely at closing, they'll have you sign a statement saying you understand that.

A home warranty, like any extended warranty, might give you peace of mind but it's an expensive way to get it. Common sense tells you that a company who sells any extended warranty has to factor in the average cost of repairs, then add admin costs and profits on top of it. The reason they sell them to buyers is because they are profitable. You'd be better off just budgeting for your own repairs and calling a handyman directly when you need something fixed, thus cutting out the middle man and pocketing the savings. There's alway the case of someone who had a big repair that was covered for pennies by the policy, but for everyone of them there are hundreds who don't get any repair benefit from the policy. If the warranty company is going to stay in business, the claims have to be less than the premiums, so they have to charge you more than the average repair costs. But a house is a big expense, and if that helps you sleep at night then get one. Just realize what you're paying/overpaying for: you're paying for peace of mind, and overpaying for repairs. If that is okay with you, then buy it.

As for closing costs, once you settle on the purchase price a lender has to give you a Good Faith Estimate. A GFE must be within a certain percentage of the actual charges or the lender will have to make up the difference. (I think it changes by state, but you can ask your lender about how close their GFE is required to be by law, and what happens if the under estimate.)

 

[jfields]

Unless you have contracted for a buyer's agent, be aware that "your real estate agent" is actually working for the buyer, representing his needs (best selling price) not yours (lowest selling price). And rightfully so, the buyer pays the commission, not the seller. At some point in the process, likely at closing, they'll have you sign a statement saying you understand that.

A home warranty, like any extended warranty, might give you peace of mind but it's an expensive way to get it. Common sense tells you that a company who sells any extended warranty has to factor in the average cost of repairs, then add admin costs and profits on top of it. The reason they sell them to buyers is because they are profitable. You'd be better off just budgeting for your own repairs and calling a handyman directly when you need something fixed, thus cutting out the middle man and pocketing the savings. There's alway the case of someone who had a big repair that was covered for pennies by the policy, but for everyone of them there are hundreds who don't get any repair benefit from the policy. If the warranty company is going to stay in business, the claims have to be less than the premiums, so they have to charge you more than the average repair costs. But a house is a big expense, and if that helps you sleep at night then get one. Just realize what you're paying/overpaying for: you're paying for peace of mind, and overpaying for repairs. If that is okay with you, then buy it.

As for closing costs, once you settle on the purchase price a lender has to give you a Good Faith Estimate. A GFE must be within a certain percentage of the actual charges or the lender will have to make up the difference. (I think it changes by state, but you can ask your lender about how close their GFE is required to be by law, and what happens if the under estimate.)

I disagree.

I think they factor in selling large amounts of these warranties and a good percentage of those purchasing them will never make a claim. Yes, of course they would not be in business if they did not intend to make profits. I'm on my fifth home purchase in fifteen years and all have had home warranties included. This past purchase last October was the first I ever made a claim on.

Had I had to pay out of pocket, I estimate the total with all the water damage to have been around 3-4k easily. They took care of everything. Claim it on your homeowners insurance and you'll be looking at premium hikes down the road.

I've never paid out of pocket for any of them as far as I can recollect, and whether paid by the seller, or rolled into the loan. To me it's a small amount of money I've never missed for the peace of mind.

 

[CigarAl]

I disagree with Nihon about the home warranty, especailly with an older home. What he states about home warranty companies is true for any type of insurance companies. But very basic in his assumptions. Home warranty companies do not payout pennies on the dollar for repairs or replacements. How many people pay out thousands of dollars in health insurance premiums per year (through your employer or private) and dont get the benefit of what they paid out.

I first learned about home warranty companies while working with FIL who is an electrician, he did/does work with several of them. The are several that have been in business for a number of years. As a result I purchased one and have had it on my house for almost 10 years (they renew annually). In addition to many service calls and repairs, they have paid for a replacement dryer, two stoves, hot water tank and most recently (within the last month) replalced my furnance.

My total out of pocket cost on the furance replacement (not including monthly premiums) was $95. This included two emergenecy service calls after hours.

The policy costs me $45 month and I have a $95 deductible for service calls. It will cost you $95 minimum to have any type of technician walk into your house, before they do ANYTHING.

My policy is very thorough. Covers full replacement on most things. Becareful becuase some companies only cover repair. It covers everything from plumbing, to heating. electrical, appliacnes, garage doors, etc. They also do not come out and do any "pre inspection" of the house before they issue the policy, and yes they will cover house built in 1963.

If you are buying an older house, where things like the furnance, central a/c, water heater are getting close to the end of their life cycle, you may want to consider it. I am hoping my a/c unit goes this summer (it has been having problems) and then I will probably get rid of the policy.

In full disclosure, I have had some aggevation with getting them to send people here in a timely manner, but if they cannot get someone within their network (all their companies are licensed and insured) they will authorize you to use whom ever you want.

Likescars, if you have any questions or want to know the company I use, PM and I will be glad to answer questions you have. Anyone else for that matter as well.

Just my $.02 from actual experience.

 

[MadMonk]

I don't know how old the house is, but if the roof, or the HVAC is over 15 years old, you want to make sure that you will be able to afford replacing these.
Don't max out on your mortgage payment, and then have no available credit to finance a fix. Better yet, work real hard to get 5K to 10k in a home repair fund.

 

[likescarsz28]

I have often thought to myself, people who post too much personal stuff are indescreet. However, given the advice you guys have taken the time to give me, some facts:

Home built in '63
Roof in 2011
Furnace in '97
Central air in 2011
Closing costs roughly $3,000
I will still have 15K cash after closing
Considering purchasing from my best friend, a second father and a partner on the dragster. 25K under market value, he does not need the difference because he wants the deal done.
For sale to me without a real estate agent so the bank tells me the is no warranty available (it comes from the realtor?)
I want he warranty for peace of mind and could care less if I ever use it.
I would do a 30 year, but could evry easily pay it in 15 so cashflow is not a problem.
The inspection is $265 aand I have seen samples from friends and the look very good, he is thorough and certified.

I screw up about 25% of every big decision I make, what am I missing?

Thanks to all that took their valuable time to opine.