Thinking of buying a house - a little overwhelmed
August 9, 2012 3:10 pm at 3:10 pm #93172
I have been living in Columbus since I graduated from OSU about 6 years ago. I have been renting in Grandview the entire time. I had thought I would leave Columbus after graduated but I like it here.
I have recently started getting the itch to buy a home. I make about $38k a year and have been told you should not spend more than 2.5 times your income on a house. That would make my budget about $114K. I have about $6k in savings to put down.
I am wondering what are the pitfalls of buying a house and also if anyone has anything to say regarding areas etc. I feel like a fish out of water as there seems to so much to choose from and so many pros and cons. I am sure many of you have seen both the good and bad.
I attempted to purchase a foreclosed HUD house in Old Town East recently but was out bid. I was really bummed by that as it was in really nice condition. I am thinking HUD or foreclosed homes will have the best value, but they vary widely in areas and condition.
At my price range I am thinking I may want to purchase in an up and coming area as I do not think my budget would get me much in Clintonville or Grandview. I really am looking for a house and not a condo.
As I am sure many of you have started in similar situations I would greatly appreciate any advice or insight you could share!
Thank you!August 9, 2012 3:13 pm at 3:13 pm #509643
Make sure you have enough money left over for a major repair within the first year. While you can get away with as little as a 5% downpayment, I’d recommend saving until you have a full 20% and can avoid private mortgage insurance payments.August 9, 2012 3:20 pm at 3:20 pm #509644
I hate to discourage you, but I would wait and save some more.
1. You need that $6k in case something happens to YOU. $6K alone is not enough for a downpayment. Don’t believe what a realtor tells you.
2. Expect the unexpected. For seven years, I was a homeowner but am now a happy renter. Although I had plenty for a downpayment, I was surprised at the unexpected expenses ($7,000 to replace windows, $5,000 for a new heater/ac, $500 for garage door and installation) in the first three years.
3. Remember a house is a financial and emotional commitment. Although I was able to save plenty of money on the side and afford my home, I was thrilled when I sold my place. Although I could still easily afford a place now, I like knowing I am saving more money and have the flexibility to travel and relocate.August 9, 2012 3:24 pm at 3:24 pm #509645
Your very first step is to sit down with a mortgage lender, gain an education about what programs or incentives are available to you as a first time home buyer. There’s all kinds of grants, down payment assistance and special programs out there most people never bother to learn about or apply for.
After you’re comfortable with that, I would get a realtor who will work for you in the buyer’s agent capacity. It’s best to have someone representing your interests vs. you calling random realtors from signs you’ve seen, etc.
It can be an overwhelming process but if you start off the bat with a good education from a qualified mortgage lender, become pre-approved and sign up with a good buyers agent it makes it all a lot easier.
If you need a good mortgage lender, let me know I’ll PM who I use.August 9, 2012 3:26 pm at 3:26 pm #509646
If/when you do buy a house, you’ll get letters about making more frequent mortgage payments to help pay down your mortgage faster (so instead of making monthly, they would offer biweekly or weekly payments). You don’t need to pay for those services. You can do this on your own if you wish (and if you can). Take 1 month’s mortgage, divide it by 12, and add that amount ontop of your monthly. You’ll take years off your mortgage. (so I’ve been told)
I can say over by the west side where I’m from near roberts road there are properties that are probably around the 3 bedroom/2 bath range around the 110-120k range. (not sure how many beds/baths you’re looking for).August 9, 2012 3:32 pm at 3:32 pm #509647
A couple of things.
Now is a great time to buy a house. Interest rates are low and prices are down.
Personally you should have a cash reserve at any given time. I like to have one years mortgage payments in the bank(s) just in case.
If you haven’t already, get your financing in order. You don’t want to rush that part of the buying process.
Make sure when budgeting to include real estate taxes and homeowners insurance.
If you listen to geoyui, and it is pretty good advice, I would make that extra payment an automated ACH monthly. When it is automatic you tend to adjust your budget accordingly. When you write the check, you look to other purchases.
Pay close attention to the home inspectors report. It will give you a road map as to what to expect wrt repairs and maint.
If you can get an electric and gas estimate from the seller.
If and when you buy, don’t eff around with water payments. Typically late/non payment of water is a quick way to get the boot. Really.
edited to include below
Finally, while you can expect a tax break on your federal taxes going forward, it won’t be as big as you might think or as much as the banker, and RE agent will lead you to think. The tax break is based not on your interest, RE taxes, etc… but on the amount that those items exceed the standard deduction.August 9, 2012 3:34 pm at 3:34 pm #509648
Make sure YOU hire your home inspector – don’t leave it to your real estate agent.August 9, 2012 3:37 pm at 3:37 pm #509649
Yes a Home Inspection is a 30+ page report where the inspector goes over the house with a fine tooth comb, literally checking everything out down to every electrical outlet, detailing meticulously every minute detail about the home’s condition. If you combine a termite inspection with the home inspection they can run about $350.August 9, 2012 3:42 pm at 3:42 pm #509650
Something I found handy with today’s tech, video record all your visits with your smartphone (assuming you have one). You’ll see a lot of homes, and I found it really easy to just record and review afterwards. That way you also record what the realtor says about the space, price, back story, community, etc.
And this also works with the inspector. After my inspector was done, he talked to me about some things he saw and also gave tips on maintenance. Having those recorded on my phone was great.August 9, 2012 3:46 pm at 3:46 pm #509651
Speaking as a former home owner, now renter —
On the plus side
Prices are low & I think they’ll continue to fall. If you think you’ll be in Columbus for at least 5-10 years, buying can be a wise decision. Especially as it has become a landlord’s market in the most popular areas/neighborhoods. Interest rates are also super-low so that works to your advantage, too.
In this market, be fairly picky about what you want. There’s lots of houses out there, priced much more cheaply than even a year or two ago.
On the minus side
How low will prices go? Will you buy only to see the market get worse & your investment lose major value? (Also, try not to think of your house as a major investment).
There are many hidden & unanticipated costs for first time home buyers. $6K is your down payment. But how will you pay for an inspector, closing costs, moving costs & all the little nickel & dime fees & costs? Budget at least another couple grand, based on your price range.
If you spend all that money, will you have money left for travel, purchasing stupid stuff, going out, etc like we all like to do? Just as important, will you have money left to buy things like paint, new furniture, lawn care supplies, etc? When you buy your own home, there’s constant temptation (and sometimes necessity) to want to constantly tinker with your new toy. That adds up quick, especially when you live 1/2 mile from Home Depot, like I did. In other words, will you be house-rich, cash-poor?
Previous advice about having money for major home repairs & expenses in other parts of your life is very wise.August 9, 2012 3:50 pm at 3:50 pm #509652
Look into the FHA first-time homebuyer program. FHA only requires a 3% down payment.August 9, 2012 3:53 pm at 3:53 pm #509653
Thank you, this is some good information. The $6k would solely be for down payment and I could grow that quickly if needed. I will aim to have 20% by the time I buy if some ‘must buy’ property does not come up. I have a $5k emergency fund at a separate bank which I will never touch unless it is an emergency. I am talking with banker at Huntington and he is very positive about getting funding if I keep to that range.
I am really not looking for too much to start with at first, just a starter home. The HUD house in Old Town was listed at $35k, but it probably would have needed work in the near future as the mechanicals were older.
I was really disappointed that I missed out on that one. I assume that there is no such thing as the perfect house and that I will have plenty of other missed opportunities in before my search is over. I was more hesitant about it until it ‘got away’.
I love living in Grandview, but that area seems way out of my price range. I am looking for an adequately safe area that I could grow with.
Thank youAugust 9, 2012 3:53 pm at 3:53 pm #509654
FHA changed to 3.5%.August 9, 2012 3:56 pm at 3:56 pm #509655
Agreed re: home inspections. Wish I would have done more research on reputable inspectors.
Also, this may not apply to you, but some more general advice I got that was very very helpful was to think about what my financial situation would be in the future and take that into consideration. Some people may anticipate a jump in income later in life, but in my case, eventually having two kids and budgeting an extra 1000 per month in childcare would have been really difficult if we would have borrowed what the bank said we could afford at the time we were buying. We probably could have afforded it then, but no way after having kids.August 9, 2012 4:00 pm at 4:00 pm #509656
Location location location. Makes most of the difference in values, whether in good times or bad.
I bought a house in Grandview that had new windows, new furnace, new siding and roof all done within 3 years. If you can find something like that, anywhere, it’s doubtful you’ll have some surprise huge repair bill that crushes your credit card (or savings).
I looked for 7 months before buying. Saw lots of houses but since we knew where we wanted to live (Grandview) it made things pretty simple.
Good luck, hire a good/trustworthy realtor, get a good home inspector, etc.
Just keep updating us on CU, I’m sure people can steer you towards good people!
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