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Advice for a First Time Home Buyer
Posted on 3/19/19 at 9:43 am
Posted on 3/19/19 at 9:43 am
Any financing advice for a first time home buyer in their early 20's? Just started looking into buying my first home instead of continuing to rent an apartment. I think a house note would be close to the price of renting an apartment, or a little more a month. Putting money into owning something seems like a better option.
21
Posted on 3/19/19 at 9:44 am to JohnDoe00
quote:
Putting money into owning something seems like a better option.
Yes. How long do you plan on staying in the home? How much do you have saved for a down payment?
Posted on 3/19/19 at 9:47 am to HailToTheChiz
I would be in it until I started a family I believe, which I am in no rush to do so 5+ years.
I have always been told to try to put 20% down, but that just seems like an unpractical amount of savings to have this early in life. I'd hope to put around 5% down possibly once I factor in closing costs and other fees.
I have always been told to try to put 20% down, but that just seems like an unpractical amount of savings to have this early in life. I'd hope to put around 5% down possibly once I factor in closing costs and other fees.
This post was edited on 3/19/19 at 9:48 am
Posted on 3/19/19 at 9:52 am to JohnDoe00
If you don't put down at least 20%, you will be paying Private Mortgage Insurance (PMI), which is expensive and essentially giving your money away.
Posted on 3/19/19 at 10:00 am to JohnDoe00
Something that I don't think most first time homebuyers account for are property taxes and homeowners insurance. I hear people all the time saying "it will be cheaper than renting". Maybe for just principal and interest, but property taxes, homeowners insurance, and PMI (if only putting 5% down like you mentioned) will be added into your mortgage. So your mortgage will actually be at least a couple hundred more per month than what you probably think it would be by just looking at online mortgage estimates like on Zillow.
Posted on 3/19/19 at 10:03 am to GeauxPack81
quote:
Something that I don't think most first time homebuyers account for are property taxes and homeowners insurance
That and annual upkeep and maintenance. Wife and I were guilty of all the above when we bought our house. Luckily we could afford it, but we certainly didn't account for it.
With the new tax law, and near elimination of itemized deductions for a lot of filers, I don't think home ownership is as attractive as it used to be. Of course, the rental market is ridiculous in a lot of markets, so you have to weigh that as well. I absolutely would not buy right now if I didn't have at least 20% down.
Posted on 3/19/19 at 10:36 am to JohnDoe00
quote:
Something that I don't think most first time homebuyers account for are property taxes and homeowners insurance. I hear people all the time saying "it will be cheaper than renting". Maybe for just principal and interest, but property taxes, homeowners insurance, and PMI (if only putting 5% down like you mentioned) will be added into your mortgage. So your mortgage will actually be at least a couple hundred more per month than what you probably think it would be by just looking at online mortgage estimates like on Zillow.
Yep. If you buy a $220,000 house w/ 5% down, your monthly payment (Mortgage, PMI, Property Tax, and Homeowners Insurance) will be around $1,800 -$2,000. I doubt you're paying that much in rent right now.
Posted on 3/19/19 at 10:38 am to JohnDoe00
quote:
I would be in it until I started a family I believe, which I am in no rush to do so 5+ years.
I have always been told to try to put 20% down, but that just seems like an unpractical amount of savings to have this early in life. I'd hope to put around 5% down possibly once I factor in closing costs and other fees.
Well, if you go lowest down payment possible for the first home (like I did), then you are looking at an FHA loan, where the PMI will stay on for the life of the loan - meaning you would need to refinance to get it gone
My PMI is around $100 or so bucks a month. So that is money essentially being thrown away but I plan on moving in a few years
Posted on 3/19/19 at 10:44 am to JohnDoe00
Do not let a realtor rush you into a decision. Seems like they magically have another offer when you get interested in a house so you need to hurry up and submit one. Do not listen to that crap and walk away if you don’t feel comfortable
Posted on 3/19/19 at 11:10 am to JohnDoe00
How stable is your job? Will promotional opportunities require relocation?
--PMI is throwing your money away. If you can't afford 20% down, then rent a cheaper place/get roommates so you can save more aggressively.
--consider a duplex or triple, so that your "first house" can become your first rental property. When you're ready to upgrade to a family home, you should be sitting pretty.
--don't buy too much house. Favor location over size/amenities. You can always renovate/add on, but you can't do anything about the location.
--PMI is throwing your money away. If you can't afford 20% down, then rent a cheaper place/get roommates so you can save more aggressively.
--consider a duplex or triple, so that your "first house" can become your first rental property. When you're ready to upgrade to a family home, you should be sitting pretty.
--don't buy too much house. Favor location over size/amenities. You can always renovate/add on, but you can't do anything about the location.
Posted on 3/19/19 at 11:24 am to JohnDoe00
Check with you realtor or mortgage officer about 1st time buyer programs. When we bought our 1st home, the state had a program that put 5% down for you so we essentially had no down payment. Once we got 20% equity we refinanced and dropped the PMI which was about $100 per month like everyone else has stated.
Posted on 3/19/19 at 11:26 am to JohnDoe00
Don't forget, there are a bunch of additional expenses that'll be a pretty big hit right when you buy the house. So make sure you have some change in your pocket when you are ready to pull the trigger.
1st years homeowners insurance
Flood insurance
Closing costs
Furniture, appliances (fridge, washer, dryer, etc)
Lawn care
Deposits on utilities
1st years homeowners insurance
Flood insurance
Closing costs
Furniture, appliances (fridge, washer, dryer, etc)
Lawn care
Deposits on utilities
Posted on 3/19/19 at 11:35 am to indytiger
quote:
1st years homeowners insurance
Flood insurance
Those two can be brutal, to someone who is used to merely paying rent. For any house OP considers, get a real quote on Homeowners ins and flood insurance BEFORE you make an offer. RE Agents will sugarcoat those things, downplaying the costs. But the fed flood insurance program is in deficit, and it is going to be overhauled in the next year or so. Right now, you're assigned a risk category and charged according to broad flood zones, rather than the actual flood history of your property. So a house elevated 3' can be paying the same amount as one built on grade, if both are in the same flood zone. This is likely to end, and some ppl are going to be hit hard.
Posted on 3/19/19 at 11:44 am to JohnDoe00
quote:
Any financing advice for a first time home buyer in their early 20's?
Something my wife and I were probably under prepared for was just the upfront cost. Pretty much everything that indytiger listed, but even before you purchase the house, the cost for the inspections can be higher than you expect. Especially if you go the route we did where we had to pay for multiple inspections when the first house we looked at had an issue we didn't expect.
Posted on 3/19/19 at 11:54 am to geauxfish24
quote:
If you don't put down at least 20%, you will be paying Private Mortgage Insurance (PMI), which is expensive and essentially giving your money away
My recollection may be a bit foggy on the issue, but when I became a first time home buyer 20 years ago, I took out a 2nd loan to cover the sum that would have triggered pmi. As I figured at the time, paying interest on a loan for another sum to prevent pmi was a lower cost than paying pmi.
I remember doing that, but I do not recall the numbers.
My credit score was well above average, so I ended up getting credit card offers for 0% interest on loan transfers for 6-12 months at a time, with little to no transaction costs. I ended up just doing a sequence of loan transfers for large chunks of that 2nd loan every 5-11 months to avoid interest on every card. The 2nd loan was paid off in a few years.
This post was edited on 3/19/19 at 12:38 pm
Posted on 3/19/19 at 12:05 pm to JohnDoe00
Another piece of “If I knew then what I know now” advice is don’t be immediately turned off if the inspection reveals foundation repairs.
Now that my second house eventually needed foundation repairs (piers inserted under half the house) to prevent further settling, I actually feel more secure in a house that has had foundation support piers installed than one that hasn’t.
It will turn off some buyers, so use that for leverage when making an offer. Get your bids on repairs but always include Olshan in the process, because their price will be the highest. Most companies offer lifetime guarantees on the work, but with Olshan, they are the largest company most likely to still be in business 20 years from now than most local businesses offering lower prices. So you can use that variable to suggest coming down on the price of the home in that amount, or an average of 3 bids- giving you the freedom to go with Olshan. But don’t. The reason they all offer lifetime guarantees is because the service and repair will last a lifetime. Go with a lower cost repair company with a reputation for quality work.
If I found myself in the market to buy another house, I might prefer one that either has had foundation repairs, or is in need of it. But that obviously will not be the primary criteria for home selection.
Now that my second house eventually needed foundation repairs (piers inserted under half the house) to prevent further settling, I actually feel more secure in a house that has had foundation support piers installed than one that hasn’t.
It will turn off some buyers, so use that for leverage when making an offer. Get your bids on repairs but always include Olshan in the process, because their price will be the highest. Most companies offer lifetime guarantees on the work, but with Olshan, they are the largest company most likely to still be in business 20 years from now than most local businesses offering lower prices. So you can use that variable to suggest coming down on the price of the home in that amount, or an average of 3 bids- giving you the freedom to go with Olshan. But don’t. The reason they all offer lifetime guarantees is because the service and repair will last a lifetime. Go with a lower cost repair company with a reputation for quality work.
If I found myself in the market to buy another house, I might prefer one that either has had foundation repairs, or is in need of it. But that obviously will not be the primary criteria for home selection.
Posted on 3/19/19 at 12:09 pm to JohnDoe00
People will tell you not to do it, but I bought my first home at 25 with a conventional loan and 5% down. I paid any extra money I had toward principal until I got rid of PMI.
My net worth is tens of thousands of dollars higher than it would have been if I decided to keep renting until I had a 20% down payment.
My net worth is tens of thousands of dollars higher than it would have been if I decided to keep renting until I had a 20% down payment.
Posted on 3/19/19 at 12:17 pm to JohnDoe00
At your age I would buy a triplex, live in one and rent two- then move to a house that I would turn into rental
Wash and repeat
Wash and repeat
Posted on 3/19/19 at 12:31 pm to 756
quote:
At your age I would buy a triplex, live in one and rent two- then move to a house that I would turn into rental
There are downsides to this approach...listing only the pros doesn't capture the full value equation.
Posted on 3/19/19 at 12:40 pm to nobigdeal69
quote:
If you buy a $220,000 house w/ 5% down, your monthly payment (Mortgage, PMI, Property Tax, and Homeowners Insurance) will be around $1,800 -$2,000.
Probably closer to 1300-1500 a month.
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