# First time home buyer advice?



## acidlittle (Jan 24, 2012)

I'm a 28yr old single male with a little dog. that makes under 30k a year, any advice for me in the realm of buying a house?


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## Plissken (Dec 29, 2011)

I'll give you the same advise that was given to me some years back:
Make sure your credit is in good standing.
Have some money in the bank for at least 10% down payment.
Speak with a real estate agent as soon as you can, they will be able to calculate for you what your qualified to buy based on your income and other factors. Their advise will give you a goal or benchmark to reach for if your not quite there.. 
Right now with the way the housing market is in most parts of this country (a buyers market) .... You should be able to buy one heck of a nice place cheap with a good interest rate. 

I hope this helps. I wish you well


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## survival (Sep 26, 2011)

I've purchased 4 homes in my lifetime. I lived in about 30ish odd apartments/condos. Here is the scoop.

I agree with everything pliskin has said and I'll go over some things.

With the new rules of the government, they have more strict guidelines now for buying a house. Don't let that scare you, but they don't want $ in the hands of criminals (which is a very smart idea and should had done this a long time ago), thus here is a guidline of some of their new rules.

You have to show where your downpayment has came from. Reason why is because they don't want drug money buying a house. Start today with having a direct deposit if you don't already. Banks need to track this income. If you sell a car for say $1000 bucks, make sure to get a bill of sale or something to show proof where you got that money.

Also, they check back three months to show that you had that money in there and is stable. Meaning that you don't blow it all at once until next payday. They take a median average of the three months and decide that this is what you live on, therefore a underwriter at the bank sees that you are responsible.

Be sure to not use credit cards. IMO credit cards are evil (trust me, they about ruined me). Others that are responsible have no issues. If you don't have any credit, then get a gas card and pay it BEFORE the bill comes out. Wait a few months and your credit score will be high. After you get the house, cut the card in half. Your monthly payments on your new home will build your credit up as long as you are on time with your payments. Be sure that you pay your payments a month ahead of time (think of being in the hospital for a month and no way to gather payments).

Check bankrate.com for the latest APR's out there. Right now a 30 year fixed is 3.95%. When they say "Fixed" they mean that your payment will not go up. This is very important so that your house payment wont go from $275 one month to $475 the next. Stay away from "Balloon rates", "adjustable rates" "Jumbo", "ARM" rates. These typeo of rates "adjust" like I just said. The number of foreclousers (can't afford the house and go bankrupt) are from these types of loans.

Go to your local bank, not a bank that is in a different city. Go to one of the local branch offices. Stay in their face (thats what they are there for and their business is to provide loans). Ask tons of questions. If they say you can get this or that rate with "points down" and you don't know what points mean, ask the question.

More than likely you will get a FHA loan (First time homebuyer), which is a great loan with speical discounts and less strict guidelines. Read up about FHA loans. Mainly they are for low income (less than a 100k house). It will be your only chance of getting this the first time around because if you buy a second home in the future, you will not be eligible for a FHA. Thus the benefits of a FHA are very good for first time homebuyers.

If you go with a 30 year fixed, which I recommend, then don't let people talk you into a 15 year. Reason why? Because a 30 year payment will be half of that of a 15 year. Yes, you will get a better rate with the 15 year, but your payment will be higher. You will have less interest build with a 15 year also. For example, if you get a 40k house, with a 30 year fixed, then you will be paying over the 30 years interest of around $21k on it. So your 40k house will really cost you 61k when you are done with the loan. With the 15 year fixed your interest paid will only be 10k, so your 40k house will only be 50k when you are done. Your question will be "why not get a 15 year?" Because of two things. #1. A 30 year payment will be 142/month. A 15 year will be $221/month. IF you get in a bind, then that extra money will be there and you won't be stressed for making the extra up. Also, you can control your 30 year rate by making extra payments on the "principal" of the loan. This means that if you pay your monthy 142, add an extra 100 bucks on it and you will pay it off in 13 years instead of 30!!!! So you see why I recommend a 30? If you do make extra "principle" payments, then make sure you tell the bank or write it on your slip "100 extra for principle", otherwise they will just add it to the "interest" which is a crazy thing and they way they make money! They want people to drag it out 30 years because the bank makes more money that way. Two things to remember about a bank home loan, there is a "principle" and there is a "interest". The principle is the original ammount of the loan. In this case it was 40k. The interest was the 21k.

Now, for finding a home. Look on realtor.com and craigslist. Before I get to this part, I would go with what Pliskin said about going to the bank to see how much you can get. When they tell you "how much you can get", don't assume you HAVE to get that ammount. Thats the cap they give you and trust me its hard. If they say you can get a 50k house tops, then figure you will be buying a 30 or 40k house. The trick is to find a 60k house and talk them down to 40k. Yes, they do go down and if they don't then walk away. I've done this tons of times. Don't make offers on homes in writing until all your fact are in place, and you have throughly looked over the home. I'll go into that more when you get the first part done (bank). Don't choose a real esate person as of yet because I have tips that you can go in and get the house cheaper. For instance 99% of the real estate brokers say their commission is 6%. Thats bullhocky! I tell 4 or 5% if they want me as their client. Think about this... You are THEIR boss! They provide a service for YOU! Thus you tell THEM what you will pay them. Very important.

Ok, there is tons more of stuff and I can help you with. Tell me your steps as you go and if there is anything private you want to discuss please pm me.

Good luck with the bank. Ask any question on here like 'whats this or whats that with APR's etc. We'll answer them.

Forgot to say, go to this link to figure how much your house payment will be. Its dead on. You have to know what your APR is going to be so go to bankrate first to get the "daily" APRs that are out there. It goes up or down depending on the economy so I always put a point or two on it to be on the safe side. For instance it is 3.95% today. Tomorrow it can be 4.00% Put 4.00% in the calculator.

Dave Ramsey's mortgage calculator: click the launch calculator for it. BTW, I would actually get his book (10 bucks) and read it first before buying a home. Very simple easy to understand stuff explained in 8 "baby steps". I highly highly recommend this book first before thinking about a home.
http://www.daveramsey.com/article/mortg ... realestate


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## survival (Sep 26, 2011)

I wanted to say, you can figure out what the bank will "allot" you by figuring 32 to 33% of your "monthly" "take home pay". 

RECOMMENDED (by Dave Ramsey), so that your not house poor (where you can't afford the heat, water, couch etc), is to buy a home that is at or below 25% of your monthly take home pay.

Lets say your monthly take home pay is $1500.00 per month. This is after taxes (take home). Lets say you go by Dave Ramsey's advice of 25%. That would be a house payment of $375/month. (1500 x .25). 

Lets say your take home pay is 1000 per month. Your recommended house payment would be $250 according to Dave Ramsey's advice.

Now, lets take those same numbers and do what the bank allots. (remember they will give you max ammount, thus make you house poor).

Lets start with 33% and 1500/month take home.

.33 x 1500 puts you in a 495/month house

Now 1000 bring home pay:

.33 x 1000 puts you in a 330/month house.

Now, here is a very important part. Taxes and Insurance. Taxes and insurance are figured into your loan when you buy a home. Technically you agree to "finanace" over 30 years estimated taxes and insurance. This can range up to $150 to $200 dollars per month on top of your home payment! So your home that you thought you were calculating a 300/moth payment becomes 500/month at the time of buying the home!

Here is how to avoid "financing" taxes and insurance. Put 20% down on the home. Yes, thats a lot, but you avoid having to finance taxes and insurance. You still have to pay for them, but put an envelope aside and put a little in it a month for this. This keeps your home payment back down to 300 instead of 500/month.

20% is the lowest you can put on a home to avoid financing taxes and insurance (PMI Personal Mortagage insurance is what they call it).

Let me know what your take home pay is for that 30k you mentioned and I can figure what price on the house for you and different scenarios for you. Also if you want to post it, if you have any down payment to put down.


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## acidlittle (Jan 24, 2012)

I was sort of talking more along the lines of what to look for in a house.

I won't lie, I have bought a house before with an ex and she took care of all the crap. She had a job that allowed her to get away for a few hours at a time, and I did not so she ended up getting all the financial stuff gathered and houses. I just got to do the walk throughs.

I understand that when they give you an amount you can afford, usually you can't afford that, or it's stretching you pretty thin on income dispersion. I know what I want to spend. Living at my parents house I put 800 bucks a month into my savings account to simulate living on my own expenses. That is my comfort zone. (that's all inclusive with utilities too)

I do need to get my credit report because I did drop 14k into the house that I had purchased and it was all put on credit cards, then I got laid off, defaulted on that and my student loans (that was 3 years ago). Since that happened, I got my debt consolidated by a local company and have paid off all 14k, and currently have one card with no balance on it. I got my Student Loans back on track and have been paying them consistently for the past 2 years. I'm hoping this has helped my credit score rebound.

I'm looking for things that will be money suckers if they are broken. I know I want to learn and do updates and repairs myself, but I don't want to have to do foundation work, or structural crap. Just the basics.

I do appreciate the novels of info you have given me and I will use the advice!


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## survival (Sep 26, 2011)

Ah, ok..... 

Here are some thoughts. Kitchens and Bathrooms are going to be your biggest, even though they look easy to do, they are money consuming. To test ciruit breakers, take a toaster and a small microwave into the home and run both on the same wall (same circuit) and see if it blows the switch, usually the kitchen is biggest issue for this. Take in consideration for gas and what it runs if its equiped with a gas stove. Propane costs me $600/year on top of things, but heats my home as well as my stove.

Ask or check to see if any ice dams have happened on the house. Usually they will happen on older homes that are not heated right and water will flow into the walls. This causes mold and mildew and be thousands to fix. Usually when you walk in, if you can smell mold/mildew, then walk back out without seeing it. Sellers will tend to cover up this with air fresheners and paint.

Check under the house for any water or if there is plastic (usually a sign that there was water). Or if there is a sump pump. I would stay away from homes like this.

If you get a log home, be sure that the outside is sealed good and has a protectant on it (this will cost mega bucks). 

Of course check the shingles to see how many more years are left on them. That will run you a good 3-5 grand for a new roof. 

I just replaced ALL of my appliances this last year because they went out, including my HVAC. All of them were not used that much and when I started using them, all the parts started shutting down.


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## acidlittle (Jan 24, 2012)

http://ames.craigslist.org/reb/2772256262.html

this is the Place I'm looking at, it NEEDS new siding and a roof I think from the get go...


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## survival (Sep 26, 2011)

I wished I lived in Iowa! Thats a damn compound dude! I love it! Esp for the price. I noticed that it said 100k, but then in the real listing it had like in the 80's? 

For the age 1929, they have done some upgrades to it to modernize it it looks like. I would pull out that PINK carpet though! LOL Otherwise love the size (think about your heat though) and love the land, buildings. 

One thing to note, the bank will inspect it and appraise it, so when they find something wrong, then tell the seller/real estate person that THEY need to get this fixed so that your bank will approve the loan. If they say no, then say good luck, because someone elses bank will say the same thing, unless someone has cold cash to buy it (which is rare). Awesome find!


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## acidlittle (Jan 24, 2012)

yeah the size is enormous for a house in the 80's. But if my budget is 100k then i can hopefully use the extra 15 to re-side and re roof it. That'd probably shoot that 15k real fast, but if there was anything left over, I'd immediately try and get solar panel or two up.

BUT, I got some poopy news from State Farm, they wouldn't insure it if the roof and siding aren't done... So there is a small issue I will have to look into...


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## acidlittle (Jan 24, 2012)

Oh and that pink/magenta carpet, is going to be put throughout the house  That'd be my gun room/reloading room! Kidding yeah I would rip that crap out, hopefully it has some hardwood under all that gross carpet.


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## survival (Sep 26, 2011)

acidlittle said:


> Oh and that pink/magenta carpet, is going to be put throughout the house  That'd be my gun room/reloading room! Kidding yeah I would rip that crap out, hopefully it has some hardwood under all that gross carpet.


HAHA! Well, they do make pink guns now, sooooo.... LOL! Yeah, its gold when there is hardwood under stuff like that.


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## acidlittle (Jan 24, 2012)

If mother nature doesn't shit 12" of snow on us this weekend maybe I'll try and get out there and look at the house...


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## ratherbpreppin (Jan 31, 2012)

Nice place, good price, would consider the heating though for such a big house as others said.


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## acidlittle (Jan 24, 2012)

I'm going to drive by the place today and see what shape the land/house really is in after work. Heating will suck in there! Maybe it's on electric heat and I can throw up some Solar panels eventually to run it more efficiently..?


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## survival (Sep 26, 2011)

Hopefully it will be on electric heat. And hopefully it will have a good functioning fireplace as well. If there is areas that you can do a drop window (Like a skylight), then that would be natural heat of course. Don't get discouraged if its not as you thought, its a process as you know.


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## acidlittle (Jan 24, 2012)

It definitely needs work. I drove by and the Roof is poor,needs new windows, and siding...could be a money pit, maybe I'll get a realtor to show it to me on saturday...


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## survival (Sep 26, 2011)

Well, don't get discouraged, I always start taking the $ off the top of the price they are asking when I see a home like that. I say to myself 100 grand, and when I get there if the roof is bad say 90 grand (Although it should only cost 4-5grand), and so forth. From there I have room to neg with the realtor and make an offer then.

BTW, you never did say what kind of little dog you have.


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## acidlittle (Jan 24, 2012)

yeah, my worry is that the house is already at 85k. The insurance company said the replacement cost would be (if they insured it) $244,000. SO to me there is room for a reno and vastly improve the property value. Problem is, I don't have too much of an income to afford a huge reno....

I have a Mini Dachshund! He's a beast!


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## thomasdangerpowers (Mar 2, 2012)

I would say the housing market is still being propped up so they WILL come down when interest rates go up to counter the high levels of inflation that are just starting to show. Either buy silver, let the silver rise in value as the housing prices come down or bet against the dollar and do a 30 year fixed. If things get really bad the stamp you buy to mail the check might cost more than the fixed price of the house itself  in Zimbabwe a can of coke cost about 350 billion Zimbabwe dollars. it the same happens here the soda will cost way more than your home. but also buy silver for the taxes, during the Depression people lost houses that were fully paid for because they couldn't pay their taxes


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## acidlittle (Jan 24, 2012)

yup I have my silver collection started and growing within my means of purchase power.


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