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Ignorant first time home buyer

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  • Ignorant first time home buyer

    I am completely ignorant about the entire home buying process. Lets say I have completed step 0 and decided I would like to buy a home, what are the steps from here? I know I need a realtor and a mortgage. When do I go from a pre approval to actually settling on a mortgage lender and terms. When do I actually pay my down payment? When do I take control of the house? I would like to read something more specific than what I have found with a simple google search

  • #2
    Step 1 is to become a looky-loo. Seriously, start going to open houses on the weekends. You're not there to buy, you're there to get a gut sense of what $XXX thousand dollars buys you in your particular market, and (more difficult to figure out) what features you really like and really dislike about various home styles. Don't be in too much of a hurry!

    Once you have a general sense of what neighborhoods you might be interested in and what style of house you like, then it's time to go talk to a mortgage lender and get preapproved, and find a realtor and start looking for real. But you need to figure out on your own how much you're actually willing to spend on a house. Don't believe the bank's figures for what you can afford! They don't care if you end up so house-poor you'll spend the next 10 years eating rice and beans. Figure about 30% of your net monthly pay is the maximum you want to spend on a monthly mortgage payment.

    Once you make an offer on a property, you put down some earnest money (which will be returned to you if the deal falls through). You make the down payment when the sale closes (typically, you bring a cashier's check to the closing). You generally take control of the property only after the sale closes.

    Here's some books you may find helpful:

    https://www.amazon.com/Questions-Every-First-Time-Should-Fourth/dp/1524763438/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=1589498680 &sr=1-6

    https://www.amazon.com/Confident-Hou...qid=1589498680 &sr=1-7

    Happy hunting! (I'm not sure why the links aren't clickable - but you can copy-past them into your browser and they'll work.)
    Last edited by artemis; 05-14-2020, 06:16 PM.

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    • #3
      I just want to second the statement of do not believe what the bank says you can afford. Too many people see a big number on the preapproval paperwork and the next thing they know they’re looking at houses in a completely different price range that they initially started.

      Learn what type of house costs in your area. Figure out your comfortable price point. Then get preapproved and stick to your price point. Don’t let the bank or realtor try to push you into buying more house than you should.

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      • #4
        Step 1: Drive around and find a house you like.

        Step 2: Go inside and claim the house as yours by urinating in a corner and licking the remote.

        Step 3: Celebrate your new house.

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        • #5
          Rule of thumb:
          20% down , Mortgage not over 2x gross.
          The goal is probably not to buy the nicest house. The house that meets your needs for 5-10 years.
          Many Times, less is better. The above are intended to point you to how to trim down what you are looking for rather than the banker or realtor.

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          • #6
            I'd get your annual free credit report and scores. Mortgages typically use FICO 8. They go with your middle number out of the 3. If your spouse is on the loan, they go with the middle number of the person with the lower credit score. If you ask someone who bought a house 4 months ago (i.e. pre COVID) their experience was probably pretty easy when it came down to getting a zero down jumbo loan. Don't expect the same currently.

            A good rule of thumb- cheapest house in the best neighborhood is usually good for resale value. If you're getting a good deal because it's in a bad school district, realize you'll also run into issues during resale.

            Also, maybe make friends with whatever nursing staff or techs are around that own homes and discuss it with them. It gives you a better idea of what normal people live in. By many standards, physicians live in luxury homes... just not multimillion dollar homes.

            Aim for 20% down. People doing 0 down jumbo loans are kinda crazy right now. Personally, I think housing will be pretty stable except for the ultra fancy homes. But if I were wrong and there were deflating prices across all home price ranges, I wouldn't be surprised. Given the fact that this pandemic has shown that even physician job and wages aren't safe, it wouldn't take much to go underwater (mortgage is higher than the home value).

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            • #7
              Originally posted by artemis View Post
              then it's time to go talk to a mortgage lender and get preapproved
              Does it require a hard credit pull to get pre-approved?
              Do you get pre-approval from multiple different lenders to see who will offer the best terms?
              Any tools for narrowing down which lenders you approach for pre-approval? Checked the WCI page (https://www.whitecoatinvestor.com/we...ortgage-loans/) which was helpful, but fairly time consuming calling all these folks up to get estimates.

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              • #8
                ^^^ My pre-approvals were hard credit pulls.

                There are no shortcuts unfortunately. You can try a mortgage "broker", but know they have to be paid as well, so their costs are in the closing costs... somewhere. Other than that you are contacting multiple lenders yourself. And each of them is/are pulling your credit.

                My mortgage was from the friend of my realtor. I'm sure the agent got a kickback from the friend, out of my pocket. But the friend pushed my mortgage through even though I should not have been approved. And overlooked some of my documentation that would have raised some questions. So cost of doing business.
                $1 saved = >$1 earned. ✓

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