Help with home buying basics (first timers)

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IndexMD
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Help with home buying basics (first timers)

Post by IndexMD »

We are purchasing a home in the upcoming four months after years of renting and are hoping to locate resources for the "what to dos" for first time home buyers. Especially regarding topics that previous first home buyers didn't know or appreciated knowing.

Topics ranging from how to bargain, how to best structure a mortgage, how locate a quality independent inspector, to does the specific realtor matter, etc.

Any books, comments, or websites would be greatly appreciated.

Best

IndexMD
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Watty
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Re: Help with home buying basics (first timers)

Post by Watty »

That is a wide topic and you would likely get a better response with more specific questions.

A few things I can think of are;

1) Understand the difference between a traditional real estate agent and a buyers agent(which may be called different things in different areas)

2) It is usually best to use a home inspector that is not recommenced by your real estate agent. That way the inspector will not have a conflict of interest in bringing up problems that could kill the sale.

3) Get pre-approved for a mortgage, not just pre-qualified.

4) Buying a house in a high cost of living area can be a bit different than and affordable area so in your posts it would be good to give a general description of your situation. For example I am in Georgia and I know areas where you can get a very decent modest house in a decent area for the low 100's or even less. Buying one of those would a lot different than some of the posts you see about people buying million dollar fixer-uppers in California.
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IndexMD
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Re: Help with home buying basics (first timers)

Post by IndexMD »

Thanks for the quick response, Watty.

1) What is the best way to determine the difference between the two?

2) Any advice on locating good home inspectors other than word of mouth?

3) In the process now of getting pre-approved

4) General description of our situation:

As indicated by the name, I'm a physician completing my residency. Finishing up in a high cost of living area on one of the coasts to relocate back to an area 30 mins from my hometown in a low cost of living area (my fellowship itself will be a moderate drive away in a significantly higher cost of living area).

Our combined salary is about 125K a year (will be relatively stable for 3 years), increasing to about 220K-425K a year when I complete training (depending on if I enter academic practice or PP). We both have superb credit; partner with zero debts, myself a handful of student loans in the low 100s from medical school.

A high quality, newly built 3 Bed, 2 Bath home in our area of interest starts in the 170s-250s depending on amenities. We intend to stay in the home for the foreseeable future (10 years at least) as it is near family and in an area with plenty of opportunities for me in academia, private practice, and industry when I complete my fellowship. We have decided to place an emphasis on staying close to family as kids come along, my career starts, etc.
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Lafder
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Re: Help with home buying basics (first timers)

Post by Lafder »

If you are looking to buy a newly built home in a subdivision it is a slightly different process than going to look at lots of used homes and finding one right for you.

There is no perfect house. but once you start looking in your price range you will see some stand out as much better for you than others.

I like the "For Dummies" books, and there are other books linked here that may be of interest. I think reading one would be useful, more than one would be over preparing :) http://www.amazon.com/Home-Buying-For-D ... 0470453656

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Playmaker79
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Re: Help with home buying basics (first timers)

Post by Playmaker79 »

The real question- why are you going to buy a cookie cutter 200k house when you alone should make 300k at least in a couple years? Buy someing very nice(greater than 600k). If you a worried about paying the mortgage as a fellow, be a hard working fellow and pick up some moonlighting work during your fellowship to make another 60-70k and be able to pay your mortgage.
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IndexMD
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Re: Help with home buying basics (first timers)

Post by IndexMD »

The real question- why are you going to buy a cookie cutter 200k house when you alone should make 300k at least in a couple years? Buy someing very nice(greater than 600k). If you a worried about paying the mortgage as a fellow, be a hard working fellow and pick up some moonlighting work during your fellowship to make another 60-70k and be able to pay your mortgage.
Because:

1) Just say no to lifestyle creep
2) If I enter academia and my starting salary is in the high 100s that'd be way too much house
3) Who wants to be house poor
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Playmaker79
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Re: Help with home buying basics (first timers)

Post by Playmaker79 »

Just because you buy a nicer house in a nicer neighborhood than 200k doesn't mean you gave to engage in lifestyle creep. That's a separate choice. The reality is a 200k house(even in a low col area) is going to be in a neighborhood where you won't have much in common with the other residents as you grow older. It's very unlikely you would want to stay there long term
livesoft
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Re: Help with home buying basics (first timers)

Post by livesoft »

I made a list of some home location ideas with criteria that I would use in selecting a home:

viewtopic.php?p=2437197#p2437197

The list will eliminate 98% of homes from consideration which makes home shopping easy.
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poker27
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Re: Help with home buying basics (first timers)

Post by poker27 »

I bought our first home a few years back. Figuring out a budget, area, and type of house (condo, townhouse, ranch, ect) are all tough things to figure out. We ended up purchasing a place that would fit our lifestyle for a minimum 5-7 years, hopefully 10+ years. We are a few years away from thinking/ having kids, so seeing young families walking around was a plus that we could eventually grow into. For our current lifestyle, there are probably 50 bars and restaurants within a .mile walking distance.

I had upped my original budget by nearly 100k after I kept seeing what 25k more could buy us. I stopped at a # I felt comfortable with, and am happy we raised the budget. We have enough room that if child # 1 or 2 were to come sooner then we were originally planning we would be fine. The local schools are horrible, so we would most likely move before sending them off. I think a good balance in terms of price is that if you sometimes wish you bought a nicer more expensive place, and other times wish you bought a cheaper place, you did good.
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Watty
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Re: Help with home buying basics (first timers)

Post by Watty »

IndexMD wrote:Thanks for the quick response, Watty.

1) What is the best way to determine the difference between the two?

Using Google would be the best way to research this since I am not an expert and my information is more than ten years old. Be sure to look at the situation in your state since the state laws and customs vary so much. The big problem with the traditional real estate agent model is that are both technically being paid by the seller so "your" agent may be limited in what opinions they can give you about the house. One time when I was using a buyers agent she spend the better part of a hour playing devils advocate trying to point out the bad points in a house.

2) Any advice on locating good home inspectors other than word of mouth?
Even if it is just a five minute phone conversation be sure to "interview" several inspectors. To me an ideal inspector would be someone that has worked in construction for several decades and is now semi-retired.

3) In the process now of getting pre-approved
Good, Ignore the high number that they will say you can afford, that is with the assumption that owning an expensive house is all you want to do in your life.

4) General description of our situation:

Be sure to see the white coat investor web site. It is run by doctor that is a regular poster here and I have heard a lot of good comments about it.

It sounds like you can get a very nice house for $250K or less so there is no need to stretch and buy a "forever house" now. If you buy a huge house now it will also be expensive to furnish or even buy curtains for all the windows. Until you have owned a home you will not know what is important to you so if you buy a more expensive house now there is a good chance that you would want something else in ten years.
adamthesmythe
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Re: Help with home buying basics (first timers)

Post by adamthesmythe »

The mechanics of buying a house is very state-dependent. For example, in some states you need to be very careful to put contingencies in an offer; in some other states you have an inspection period in which you can cancel for any reason or no reason. In some states you NEED a lawyer, in other states they are rarely used. You need to learn the customs and legalities in your locality. A buyer's agent can help with this but may not tell you everything you need to know.

Also- read and understand everything. If there is an HOA make sure this works with your personality and lifestyle. And if you are in a state where you might end up in an HOA without knowing it- be very careful.
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IndexMD
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Re: Help with home buying basics (first timers)

Post by IndexMD »

Thanks, everyone, for the helpful responses. This board is the best and has been helpful for me in terms of keeping my financial house in order through residency.

lafder, I have cruised through much of the "Home Buying for Dummies" book this weekend. Very helpful book. My partner is flying through Nolo's Essential Guide to Buying Your First Home and really enjoying it. We're going to finish the books by Wednesday and then swap, haha.
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Re: Help with home buying basics (first timers)

Post by whatusername? »

IndexMD wrote:
The real question- why are you going to buy a cookie cutter 200k house when you alone should make 300k at least in a couple years? Buy someing very nice(greater than 600k). If you a worried about paying the mortgage as a fellow, be a hard working fellow and pick up some moonlighting work during your fellowship to make another 60-70k and be able to pay your mortgage.
Because:

1) Just say no to lifestyle creep
2) If I enter academia and my starting salary is in the high 100s that'd be way too much house
3) Who wants to be house poor
:sharebeer

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Re: Help with home buying basics (first timers)

Post by barc0040 »

Having owned 2 houses, here is the wisdom I think might be helpful to you, in no specific order:

1) buy what matters to you, not your parents. In other words, housing wants are generational. We bought a big yard because it's what the previous generation valued. However, we HATE yard work. What we actually wanted was a good entertaining space, not a big yard. Another example. People LOVE their double sinks in the master bath, but my wife and I have found 1 sink with more counter space way more valuable. Follow what you value, not what others necessarily, as long as it won't be so odd it devalues the house.

2) use a second mortgage to avoid PMI if need be. New PMI rules in 2014 work against the buyer, and prices for PMI have gone up. Avoid it

3) Be prepared that the home inspection will surprise you with lots of stuff that will scare you. In other words, you fall in love with a house, you make an offer because it's "perfect" for you. Then the hyper conservative inspector scares the crap out of you by finding 30 things wrong with the perfect house. This is normal, don't let it get you down.

4) Not sure how old you are, but between the ages of 20-30, our housing wants changed drastically. Just keep in mind that what you want now may not be what you want in even 3-5 years.

5) Realtors are incentivized to rush you without you knowing. Don't let them. And they will always say "yeah, I actually heard there was another couple that was pretty interested too." Even the goods ones say that.

6) Know how the property taxes differ in the various cities you look in. Two cities that touch might have drastically different taxes that (to the tune of $200/mo!)

7) You will never have enough storage room! So your options are either 1)keeping buying homes with more storage, or 2) agree to be vigilant about not keeping things "just in case" you need them some day.

8) Note the age/condition of the roof/windows/furnace/water heater

Not a perfect list, but a good start :)
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Re: Help with home buying basics (first timers)

Post by hmw »

Playmaker79 wrote:Just because you buy a nicer house in a nicer neighborhood than 200k doesn't mean you gave to engage in lifestyle creep. That's a separate choice. The reality is a 200k house(even in a low col area) is going to be in a neighborhood where you won't have much in common with the other residents as you grow older. It's very unlikely you would want to stay there long term
I agree with Playmaker that the OP may want a nicer house, unless of course that the OP is uncertain if he will stay in the area after his fellowship training. Statistically, almost half of new attendings leave their 1st job within the first 3 yeras.
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Re: Help with home buying basics (first timers)

Post by TradingPlaces »

Playmaker79 wrote:The real question- why are you going to buy a cookie cutter 200k house when you alone should make 300k at least in a couple years? Buy someing very nice(greater than 600k). If you a worried about paying the mortgage as a fellow, be a hard working fellow and pick up some moonlighting work during your fellowship to make another 60-70k and be able to pay your mortgage.
This is just bad advice for several reasons:

1. All the incomes are "in expectation". That can change with accidents, recession, change in plans, willingness to work, etc,

2. If a $200K item gives the same conveniences, why reach for $600K item?

3. The $600K can always be purchased in 5-10 years, when expected income has been realized, the debts have been paid, and other needs have been met. However, buying a $600K house now can not be done, especially in a future adverse scenario.

Lifestyle creep has nothing to do with this decision. It would only be a lifestyle creep once the income goes up (so first sentence in point 3 I made has elements of lifestyle creep).
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IndexMD
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Re: Help with home buying basics (first timers)

Post by IndexMD »

This is just bad advice for several reasons:

1. All the incomes are "in expectation". That can change with accidents, recession, change in plans, willingness to work, etc,

2. If a $200K item gives the same conveniences, why reach for $600K item?

3. The $600K can always be purchased in 5-10 years, when expected income has been realized, the debts have been paid, and other needs have been met. However, buying a $600K house now can not be done, especially in a future adverse scenario.

Lifestyle creep has nothing to do with this decision. It would only be a lifestyle creep once the income goes up (so first sentence in point 3 I made has elements of lifestyle creep).
I agree although I do think it does count as (anticipated) lifestyle creep (or maybe just poor financial advice). Telling someone who is already going to be busy during fellowship (myself) to "just moonlight" to cover a mortgage I can't afford does not strike me as a prudent approach. And I completely agree with point 3 - right now the homes we are considering more than meet our needs (especially compared to what we are used to). We could literally pay the home down in its entirety within the first two years of my being an attending - if we like it and want to stay, perfect! If not, so be it - we have quite a bit of equity to use for the next place's down payment.
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Re: Help with home buying basics (first timers)

Post by 2tall4economy »

either buy the $600k house now and rent out some rooms or buy the $200k house now, progress in your career, then buy the $600k house and rent out the $200k house
You can do anything you want in life. The rub is that there are consequences.
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IndexMD
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Re: Help with home buying basics (first timers)

Post by IndexMD »

2tall4economy wrote:either buy the $600k house now and rent out some rooms or buy the $200k house now, progress in your career, then buy the $600k house and rent out the $200k house
:sharebeer

We'll be doing the second. Thanks!
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IndexMD
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Re: Help with home buying basics (first timers)

Post by IndexMD »

I was thinking about this thread the other day and wanted to update it 6 years later - we ended up buying the 200K house (although we splurged a bit and went up to 250K). 5 years later, we're still in the house, which was recently appraised at 380K which is consistent with comparables (not bad for a LCOL area), have refinanced to a 15 year mortgage, and have a happy family filling up the rooms. I've been an attending for a few years and the house has worked out perfectly! We browse Zillow every now and then looking at the 600K homes in the area but aren't planning on moving any time soon even as we see lifestyle creep setting in among our friends.

Thanks again to all the commenters here - you really set us up for success.
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