Any tips on saving for a house and/or house hunting?

[zoebartlett]

I've been combing through house listings for the past two days and becoming more and more frustrated. We currently own a condo that we bought and moved into 2 years ago. It's been fine and there's no urgent need to move, but the square footage and layout is driving me nuts. It seems that the only things we can afford are either another condo (which we don't want) or a really small house (most of which are fixer uppers). We're not ready to move yet but we wanted to get an idea of what was out there in our price range. The styles we don't want also happen to be the ones that we can afford.

For all the real estate pros out there, what would you recommend in terms of saving for a house and beginning a search? How long should someone stay in a place (and build equity), typcially? I know this may be tough to answer without seeing the property, but I'm trying to get an idea of where my thoughts should be right now.

Thanks in advance!

 

[MoonWater]

Oh I want to know this too. I''ve been looking at houses for about 2 years now and have become so frustrated at the idea of getting stuck with a tiny place that won''t work for our needs.

 

[Hera]

I'm looking right now too but I'm still kinda sitting on the fence waiting to see if the prices drop like they say they are going to (I'm in San Diego). It's really important because I'm borderline too in that tricky area between condo and home. We're closer to a detached, but we'd like a nice area and some of the areas we're seeing right now are a little sketchy.

A Mortgage broker I know told me that one investment group (I believe Goldman Sachs) predicted some more double digit drops in some areas and that I could buy now but he really wanted me to know that I may need to stay in the house for 5 to ten years. That might depend on the area as well.

I hope some pros will chime in so I can hear from them too.

 

[mintve]

I really like financial people like Dave Ramsey www.daveramsey.com he offers great advice on how to buy a house and not let the cost of it eat you alive (repairs, taxes, HOA, insurance, etc). He does advise to have 20% down and a 15 year fixed mortgage. That is tough, but it you can do it, more power to you!!

I am actually in the "I want to sell my house" stage. Its been on the market for 9 months and I spent all weekend re-staging my hosue for my new real estate agent. It is defninetly a buyers market right now, so you have a lot more options at really good prices!

 

[Tacori E-ring]

Well you should stay in a house for at least two years (so any profit you make on the sale is tax free). I know mortgages are COMPLETELY different now. When I bought my first home I did an 80/20 loan (4.5 years ago)and it was a foreclosure. The first thing I would do would be to call a broker and see how much you can get preapproved for. Then figure how much you can afford (nothing worse than being house poor). Then find a good agent. Then keep an open mind (paint is cheap, carpet can be changed, etc...)

 

[Patiently_Waiting]

I bought my first house nearly a year ago and spent nearly two years looking prior to that. First, I completely agree with Tacori E-ring regarding the steps of first calling a broker and seeing how much you would be pre-approved for. It is so important to make sure you are reasonable with estimates for the cost of owning a house, as there is so much more that goes into it besides just the mortgage and taxes (i.e. repairs/upkeep, utilities, etc.). If you don''t already have one, I would suggest starting an automated high-yield savings account a la ing direct and hsbc. Having a steady amount transferred from each paycheck directly into such an account will force you to pay yourself first and the account will build up in no time with interest rates of 4-5%.

Know that after the initial pre-approval, you may feel a bit dejected as to the reality of what you can afford. I''m not sure what area you live in (I know some areas would be nearly impossible for someone just starting out to afford a single family home), but I know I felt a bit taken back at first. But the key is to find an agent that you feel comfortable with and who will be patient with you through what could be a long search. Be realistic, but know that there are options out there. I was determined to get a single family home, and I was purchasing it by myself, which made things a bit more challenging. But also, as someone else said, it is a decent buyer''s market out there right now. Know that you have the option to offer less than the asking price (within reason) and something that fits more into your budget. I put in an offer for quite a bit less than the asking price and ended up getting my single family home for about $25k less than asking price, so it is possible. Good luck - I know you''ll find just the place for you two!

 

[LaurenThePartier]

I live in Texas, so sometimes I feel a bit guilty posting in threads like these. Starting out, I bought a 1344 sq. ft. home built in 1962 (3/2/2, engineered hardwoods throughout, updated kitchen and bathrooms) in a great little neighbourhood for $109k. Because of the cost of it, I had a down payment, but I ended up keeping the 20% and putting it into some high interest savings accounts and some mutual funds. I sold the house about 2.5 years later for $115,500, but because it sold so quickly (5 days), I really think I should have asked for more. I learned from that whole experience though. I will never sell a house that quickly again, and I will always have stipulations written into any contract getting me out of any deal if I''m not "happy" with the circumstances.

A decent house in TX (2,000 sq. ft, 3/2/2 with standard options) will cost around $160k in most of the metroplex, and if you want to go a bit more upgraded, you can have a granite/SS kitchen, with wood floors in a 2,400 sq. ft. 3/3/2.5/office/media room for ~$250k. Again, with this home, we did an 80/20, because I saw how my little 20% had grown with the original purchase, and I felt the interest I was earning far outweighed the opportunity cost of putting the cash down on a home, which may or may not appreciate in the next 5-10. I think if I had put the down payment down initially with my first home, I would have lost out on some serious interest being as how my home only gained $7k in 2.5 years - I never saw a penny of that when I sold it.

However, I agree with everyone else''s advice - find a mortgage broker you trust, to find out what you realisitically can afford. It''s very important to not lie to yourself during that stage, or you can get yourself too far in over your head. Build a budget, and find out what you''re spending money on now, and what you can reasonably cut out, but remember, things come up when you''re a home owner - a new AC or furnace, stove, or fridge are expensive items that realistically become your problem once you buy a home.

The way I saved money for my first home was for every commission or bonus I made, I put directly into a savings account that had a 5-6% return. I lived on my base salary, and saved all of my extra income. I also stopped getting my pink and whites done every 3 weeks, switched from highlights every 6 weeks to full colour every 10 weeks, and ate out only once a week. It took me ~3 years to save the 20%, but as I said, I live in such a cheap area that you''re better off with the cash on hand, than to sink your entire cash flow into a home that may or may not pay you back.

I found a realtor I trusted through friends to start searching for homes for me. He did an excellent job of showing me options, and was very straight with me. He never once suggested I not offer less than asking, which is a problem I had with my first realtor. When I sold the house, I used the same realtor. Because a buyer''s agent automatically gets 3% in TX, I also asked him to split his commission with me, and I would take him into the purchase of our new home - and he agreed. We ended up buying a new construction home from a home builder, and with our contract amedned to include that we would walk with our earnest money if we weren''t happy with ANYTHING, we ended up getting nearly all of our options for free, and they paid our closing costs, and a point.

Good luck - it''s a constant learning process, and you will learn just as much about the buying process when you sell a house, as you do when you buy it.

 

[mirre]

Lauren, If I'm understanding your post correctly you had a down payment but you didn't actually put it on the home you put it into a savings account instead? So if you're looking to buy a home you wouldn't have to put money down on it but it's a good idea to have it set aside in the event that things come up with the new home?

 

[Haven]

Lauren--WOW! I''m shocked at how affordable homes are in Texas. To be honest, I''m downright jealous.

We''re trying to buy a tiny little townhouse for 230K, we can''t even get into a modest sfh for less than 400K. I''m in the suburbs of Chicago.

Anyway, Zoe, I don''t have any good advice since all I did was just ferret away every single penny I could save in order to purchase my first place. I just wanted to wish you good luck! I hope you two can find something wonderful that feels like home!

 

[ladypirate]

Wow, I''m jealous of all of you!

I live in Los Angeles, and while we''ve been throwing around the idea of trying to buy a home, the cheapest condos are still around 300K and that''s for <700 sq ft. At this point, we''ve decided to keep renting and save as much as possible in a high yield account so that we can afford a house in several years. Even with that, we''ll still probably have to move somewhere much cheaper to make that a reality.

 

[Fancy605]

You def. want to stay in a house at least 2 years. And hopefully by that time the market will be a bit better. Right now though, you can get some great incentives for buying a home because the market is down. My husband and I received nearly $25,000 in incentives when we purchased our home. We didn''t search very long because we knew what we were looking for, and we found a pretty good deal I think. We are planning to live in our current home for 3-4 years before we "upgrade"

I think the 2 most important things in shopping for a home are: knowing what you want and knowing what you can afford.

Here are some things I WISH We had done:
1. Researched the HOA in our neighborhood. As it turns out, our HOA is completely controlled by the builder until the neighborhood is 100% full. I wish I had understood what sort of implications this would have.
2. Looked a little more into the area surrounding the neighborhood. I really like the people in my little corner of the neighborhood, but sometimes our neighborhood doesn''t feel safe. We weren''t familiar with the town we moved to other than that we drive through it a lot, and so we didn''t really know a lot about the reputations of the different neighborhoods/areas when we were looking. We met some of the residents and talked to them about the neighborhood, and they seemed to like it. People walked around a lot with small dogs and everything seemed very nice by day...but we never visited the neighborhood at night, and it''s a little bit different then. I love my house, but sometimes I wish we could move it elsewhere.
3. (This is a nit picky one) Avoided hardwoods in the kitchen. I REALLY wish we had tile or slate or laminate even...anything but hardwood. Hardwoods look beautiful, but it is just hard to keep hardwoods in the kitchen looking nice.

 

[LaurenThePartier]

Date: 1/7/2008 3:29:20 PM
Author: mirre
Lauren, If I'm understanding your post correctly you had a down payment but you didn't actually put it on the home you put it into a savings account instead? So if you're looking to buy a home you wouldn't have to put money down on it but it's a good idea to have it set aside in the event that things come up with the new home?

Right - the opportunity cost of putting that much cash into an asset that maybe will appreciate, but not by much because it's in TX and our market is fairly flat, is too much, IMO. This is obviously not the standard advice most people give, and it's only with a bit of bias that I even mention it. There are lots of other states where the appreciation is at or about 1-2% a year, and IMO, with a $30k - $50k down payment, you're better afforded the possible income a good investment will bring you over a tiny appreciation that doesn't become a reality until you sell.

I've earned on average 7-8% year over year on my investments, and my house MIGHT appreciate by 1.45%. IMO, TX is way too flat to sink your cash into, when you have a tax deductable loan for 15-30 years and the opportunity to earn 5-10% year over year on your nest egg.

 

[LaurenThePartier]

Date: 1/7/2008 3:53:34 PM
Author: Haven
Lauren--WOW! I''m shocked at how affordable homes are in Texas. To be honest, I''m downright jealous.

We''re trying to buy a tiny little townhouse for 230K, we can''t even get into a modest sfh for less than 400K. I''m in the suburbs of Chicago.

Anyway, Zoe, I don''t have any good advice since all I did was just ferret away every single penny I could save in order to purchase my first place. I just wanted to wish you good luck! I hope you two can find something wonderful that feels like home!

Yeah, it''s heartbreaking to me to know what people pay in other parts of the country. *hug*

But, the benefit of it is that you will more than double the appreciation on your home over a similar home in TX. We just don''t have the kind of crazy appreciation here that''s happened in other areas of the country, so my cash flow is better invested in a fund that''s doing well or in a high yield savings account.

It''s obviously not the case in an area where homes START at $300k.

Hence, my guilt.

 

[LaurenThePartier]

Date: 1/7/2008 5:30:42 PM
Author: Fancy605
You def. want to stay in a house at least 2 years. And hopefully by that time the market will be a bit better. Right now though, you can get some great incentives for buying a home because the market is down. My husband and I received nearly $25,000 in incentives when we purchased our home. We didn''t search very long because we knew what we were looking for, and we found a pretty good deal I think. We are planning to live in our current home for 3-4 years before we ''upgrade''

I think the 2 most important things in shopping for a home are: knowing what you want and knowing what you can afford.

Here are some things I WISH We had done:
1. Researched the HOA in our neighborhood. As it turns out, our HOA is completely controlled by the builder until the neighborhood is 100% full. I wish I had understood what sort of implications this would have.
2. Looked a little more into the area surrounding the neighborhood. I really like the people in my little corner of the neighborhood, but sometimes our neighborhood doesn''t feel safe. We weren''t familiar with the town we moved to other than that we drive through it a lot, and so we didn''t really know a lot about the reputations of the different neighborhoods/areas when we were looking. We met some of the residents and talked to them about the neighborhood, and they seemed to like it. People walked around a lot with small dogs and everything seemed very nice by day...but we never visited the neighborhood at night, and it''s a little bit different then. I love my house, but sometimes I wish we could move it elsewhere.
3. (This is a nit picky one) Avoided hardwoods in the kitchen. I REALLY wish we had tile or slate or laminate even...anything but hardwood. Hardwoods look beautiful, but it is just hard to keep hardwoods in the kitchen looking nice.

Did you buy recently?

We pretty much had the same experience - they were practically throwing jetted tubs and stone facades at us to get us to buy the house in the last Q of 2006. We ended up with about $45k in builder options for $15k, plus $5k for closing and $2,500 to buy a loan point due to a miscommunication on their part (where the contract amendments really saved us). Also, we scheduled to close on December 22nd, and as a sales person, I guess when one of your $8k commissions threatens to walk out the door because they''re upset about a financing miscommunication, you bend over backwards to help them apparently.

Also, I''m curious, how long have you had hardwood floors in your kitchen and at what point did you start to regret it?

We have cherrywood floors all over the 1st floor, including the kitchen, and I''m just wondering when I''m going to start hating them.

 

[Tacori E-ring]

Lauren, houses here are really affordable too. I got my first home 4 years ago for $98,000 (that included $3000 of closing costs). We lived there for a few years then made it a rental. Now it is on the market for $165,000. Of course we had built in equity (and A LOT of sweat equity) when we bought it since it was a foreclosure.

RE: HOA
That is a good point. Some are really expensive too so make sure you add that into your budget. Some are more "controlling" than others. Make sure you know their rules if you think you might run into a problem.

 

[LaurenThePartier]

Date: 1/7/2008 6:56:57 PM
Author: Tacori E-ring
Lauren, houses here are really affordable too. I got my first home 4 years ago for $98,000 (that included $3000 of closing costs). We lived there for a few years then made it a rental. Now it is on the market for $165,000. Of course we had built in equity (and A LOT of sweat equity) when we bought it since it was a foreclosure.

RE: HOA
That is a good point. Some are really expensive too so make sure you add that into your budget. Some are more ''controlling'' than others. Make sure you know their rules if you think you might run into a problem.

Wow, Tacori! That''s some reallly, really incredible appreciation!

Good luck on the sale!

 

[zoebartlett]

Date: 1/7/2008 9:59:29 AM
Author: Patiently_Waiting
I bought my first house nearly a year ago and spent nearly two years looking prior to that. First, I completely agree with Tacori E-ring regarding the steps of first calling a broker and seeing how much you would be pre-approved for. It is so important to make sure you are reasonable with estimates for the cost of owning a house, as there is so much more that goes into it besides just the mortgage and taxes (i.e. repairs/upkeep, utilities, etc.). If you don''t already have one, I would suggest starting an automated high-yield savings account a la ing direct and hsbc. Having a steady amount transferred from each paycheck directly into such an account will force you to pay yourself first and the account will build up in no time with interest rates of 4-5%.

Know that after the initial pre-approval, you may feel a bit dejected as to the reality of what you can afford. I''m not sure what area you live in (I know some areas would be nearly impossible for someone just starting out to afford a single family home), but I know I felt a bit taken back at first. But the key is to find an agent that you feel comfortable with and who will be patient with you through what could be a long search. Be realistic, but know that there are options out there. I was determined to get a single family home, and I was purchasing it by myself, which made things a bit more challenging. But also, as someone else said, it is a decent buyer''s market out there right now. Know that you have the option to offer less than the asking price (within reason) and something that fits more into your budget. I put in an offer for quite a bit less than the asking price and ended up getting my single family home for about $25k less than asking price, so it is possible. Good luck - I know you''ll find just the place for you two!

Thanks PW! We own the condo we''re in now, so we''re familiar with what goes into house ownership. Luckily, we haven''t had any major issues to deal with but it''s good to put $ in savings in case something were to happen. We live in New England, and maybe others from the area will chime in, but home prices seem a bit HIGH...at least to us. The houses we can afford are SO tiny and not the style we''d be happy with, so we''re a little bummed. The good thing is that we''re fairly close with the agent we used when buying our condo, and we''ll use him again when we decide to take the plunge the next time around.

 

[zoebartlett]

Date: 1/7/2008 6:36:41 PM
Author: LaurenThePartier

Date: 1/7/2008 3:53:34 PM
Author: Haven
Lauren--WOW! I''m shocked at how affordable homes are in Texas. To be honest, I''m downright jealous.

We''re trying to buy a tiny little townhouse for 230K, we can''t even get into a modest sfh for less than 400K. I''m in the suburbs of Chicago.

Anyway, Zoe, I don''t have any good advice since all I did was just ferret away every single penny I could save in order to purchase my first place. I just wanted to wish you good luck! I hope you two can find something wonderful that feels like home!

Yeah, it''s heartbreaking to me to know what people pay in other parts of the country. *hug*

But, the benefit of it is that you will more than double the appreciation on your home over a similar home in TX. We just don''t have the kind of crazy appreciation here that''s happened in other areas of the country, so my cash flow is better invested in a fund that''s doing well or in a high yield savings account.

It''s obviously not the case in an area where homes START at $300k.

Hence, my guilt.

That''s it -- we''re movin'' to Texas!

Unfortunately, the houses we''d like to be in are about 30-35K more than what we can swing. We''re not even looking to move into a very large house -- just your typical 3 bedroom, 2 bed/2 bath place. I don''t want the next place we live to feel like temporary housing, as this condo does. We bought it to get our feet wet in the real estate market, and I think it was the best decision we could have made, but it''s not home.

 

[zoebartlett]

Can you please explain HOA a little more?

 

[MichelleCarmen]

Zoe,

I live in a fairly expensive area (just outside of Seattle) and not to bum you out or anything, but the ONLY reason my husband and I were able to afford our house now, in a nicer part of the region, is by first buying a smaller, not exactly our style of home, that we could afford and we lived in it for two and built up equity and then we sold that house and again bought a house we could afford, but didn't like, but we knew would build up additional equity. While in the second home, we found our dream house and now are settled into that home and we love it. We paid quite a bit for it, as we knew we'd have to do for a nicer home around here, but it was worth waiting for.

Sometimes it's better to start out small especially in an unpredictable market and move your way up.

ETA We lived in the first home for two years, the second for 7 months and then rented it out when we moved to our current home, so it wasn't a long time sacrifice.

 

[zoebartlett]

Thanks MC! We''re not looking to move into the house of our dreams yet -- that won''t be for a VERY long time. I''m trying to be reasonable about searching and recognize that we may have to move into something that''s much more modest, and we''re fine with that. The only problem is that there''s modest and then there''s MODEST, know what I mean?

It''s funny, I never understood growing up why people moved into starter homes. Now I totally get it.

 

[Fancy605]

Date: 1/7/2008 6:40:43 PM
Author: LaurenThePartier

Did you buy recently?


We pretty much had the same experience - they were practically throwing jetted tubs and stone facades at us to get us to buy the house in the last Q of 2006. We ended up with about $45k in builder options for $15k, plus $5k for closing and $2,500 to buy a loan point due to a miscommunication on their part (where the contract amendments really saved us). Also, we scheduled to close on December 22nd, and as a sales person, I guess when one of your $8k commissions threatens to walk out the door because they''re upset about a financing miscommunication, you bend over backwards to help them apparently.


Also, I''m curious, how long have you had hardwood floors in your kitchen and at what point did you start to regret it?


We have cherrywood floors all over the 1st floor, including the kitchen, and I''m just wondering when I''m going to start hating them.

We did buy recently. We moved in a little less than 6 months ago. We ended up with all kinds of nice upgrades and $ towards closing etc. Apparently it is typical to be able to expect $20,000 in incentives now in my area when you buy a new home.

I think the thing that made me start disliking the wood floors is that we had a flood exactly 2 weeks after we moved in (It was caused by an error on the landscaper''s part, and so everything had to be replaced at their expense), but it completely ruined all the hardwoods in the foyer, powder room, and kitchen AND part of the carpet in the living area. Anyway, after seeing the damage the water did, I am afraid to spill anything on my kitchen floors. Of course, the flood wasn''t just a spill, it was a pretty significant amount of water, but still... The company says the floors are very durable and treated to be water resistant as far as minor accidents go, but still. I always wonder what the threshold is between minor and ruining the floor again. I guess anything can happen. I have read everywhere that it''s fine to have wood flooring in the kitchen as long as it is maintained, and I take pretty good care of it as far as I know, but I still worry. I don''t hate mine, but I wish I had researched it a little more. I would have tried to have something else. No matter, we''ll probably only be in this house for a few more years (while DH finishes law school) and the hard woods look very pretty for re-sale. I have already decided I want slate or some kind of tile in the kitchen of my next house. I LOVE the hardwoods in the other downstairs areas, they just scare me when I am cooking or hand washing a bunch of dishes. Some people love their kitchen hardwoods. I think I would still like them if we hadn''t had that bad experience with them.

 

[LaurenThePartier]

Date: 1/7/2008 9:38:36 PM
Author: zoebartlett
Can you please explain HOA a little more?

A Home Owner''s Association, or HOA, is the governing body that makes decisions regarding the neighbourhood. Our particular HOA has owners on the board, and they approve anything you want to do with your home - from playsets in the backyard to cement pigs in your front yard.

In our case, our fees pay for front and back mowing, as well as a community park. My sister is in a similar community and her fees go toward a park, a bridge over a creek behind their house, mowing, and a pool and spa area.

 

[LaurenThePartier]

Date: 1/7/2008 10:30:18 PM
Author: Fancy605

Date: 1/7/2008 6:40:43 PM
Author: LaurenThePartier

Did you buy recently?


We pretty much had the same experience - they were practically throwing jetted tubs and stone facades at us to get us to buy the house in the last Q of 2006. We ended up with about $45k in builder options for $15k, plus $5k for closing and $2,500 to buy a loan point due to a miscommunication on their part (where the contract amendments really saved us). Also, we scheduled to close on December 22nd, and as a sales person, I guess when one of your $8k commissions threatens to walk out the door because they''re upset about a financing miscommunication, you bend over backwards to help them apparently.


Also, I''m curious, how long have you had hardwood floors in your kitchen and at what point did you start to regret it?


We have cherrywood floors all over the 1st floor, including the kitchen, and I''m just wondering when I''m going to start hating them.

We did buy recently. We moved in a little less than 6 months ago. We ended up with all kinds of nice upgrades and $ towards closing etc. Apparently it is typical to be able to expect $20,000 in incentives now in my area when you buy a new home.

I think the thing that made me start disliking the wood floors is that we had a flood exactly 2 weeks after we moved in (It was caused by an error on the landscaper''s part, and so everything had to be replaced at their expense), but it completely ruined all the hardwoods in the foyer, powder room, and kitchen AND part of the carpet in the living area. Anyway, after seeing the damage the water did, I am afraid to spill anything on my kitchen floors. Of course, the flood wasn''t just a spill, it was a pretty significant amount of water, but still... The company says the floors are very durable and treated to be water resistant as far as minor accidents go, but still. I always wonder what the threshold is between minor and ruining the floor again. I guess anything can happen. I have read everywhere that it''s fine to have wood flooring in the kitchen as long as it is maintained, and I take pretty good care of it as far as I know, but I still worry. I don''t hate mine, but I wish I had researched it a little more. I would have tried to have something else. No matter, we''ll probably only be in this house for a few more years (while DH finishes law school) and the hard woods look very pretty for re-sale. I have already decided I want slate or some kind of tile in the kitchen of my next house. I LOVE the hardwoods in the other downstairs areas, they just scare me when I am cooking or hand washing a bunch of dishes. Some people love their kitchen hardwoods. I think I would still like them if we hadn''t had that bad experience with them.

OUCH, you actually had a REAL flood! I''m so sorry - I know what a pain that can be. *hug*

Interestingly, when I was about 18 or 19, my family had moved into a new build home with wood floors on the first floor. They were in the foyer, entry hallway, laundry room, powder room, kitchen and family room. Apparently, when we had someone come and install our new washer and dryer, they hadn''t reconnected the hose correctly and after a few washes, it came loose. My sister and I were home alone, and I heard a shriek coming from downstairs. There was water - a good inch or so - all OVER the first floor, starting with the laundry room! My poor sister was just standing there, rolling up her jeans, and yelling "water everywhere!!!!!" I just remember our panic as we turned off the washer, and I started heaving armful of towels over the balcony down onto the lake growing in our laundry room and entry hall.

I can tell you, even after that experience, the laundry room is now the only area of our 1st floor that has tile.