House Buying.....

[mcvickj]

Ok guys. Just recently I caught the bug to move out. A buddy of mine is looking to move as well and we were talking for a while. Afterwords we had some questions and I thought maybe some of you could answer them.

First off renting it pretty much outta the question. I just don't like the idea of paying $600 bucks for a place and be told what I can and can't do with it. If I am dropping that kind of cash I want to see some kind of return.

What kind of costs are involved with house buying? The only thing I can think of is a house payment and utilities. For some reason this just does not seem right. Wouldn't I need some type of insurance? What about taxes?

If you had a chance to go into a land contact with someone would you do it? It is possible that an opportunity might present itself shortly. From what I have been reading a land contact is kinda like a rent to own. I just pay the owner of the house directly. There wouldn't be a need for a mortgage.

I realize there will be a cost to furnish the place.

That is it for now. I am sure there will be more questions to come. Any input would be great.

 

[SLiNGER]

Hi mcvickj,
I don't know anything about land contracts, but I bought a new house in February 2002. With a home, you need to pay title and escrow fees, along with other closing costs, such as appraisals and credit check fees.

As far as ongoing payments, you need to purchase property insurance which will either renew annually, or every six months. That typically increases every year. Depending on the area you live in, you may be offered hazard insurance (fire, earthquake, flood, etc), but that is usually optional. You will also need to pay property tax, and in some cases a supplimental property tax. Each is broken up into two payments per year and are roughly about 1.5 - 2 times your monthly mortgage. That isn't a solid formula though. It all depends on what your county decides to charge for miscellaneous things.

By the way, I am in California, so I don't know if there is any difference in the state laws or if real estate is handled differently where you are. Hope this helps.

--
SLiNGER

 

[robriguez]

Be very glad you dont live in NJ. These days for the typical 1 bedroom apt with nothing special in the way of amenities and no utilities included will run you about $800. My GF and I have been looking for a 2-3 bedroom with garage access and laundry room or washer/dryer in basement type thing and the cheapest we can find around us is like $1500. In the nice areas they go for $2000+. The closer to Manhattan you get the more expensive they are. Apartments in the city can run $2500/month for a crappy little 1 bedroom.

From what I have heard from friends and parents of friends is that you want about 5% of purchase price for all fees and stuffs. As slinger said there are laywers, inspectors, bank people, and realetors that will need to be paid before the house is yours. If your looking at multiple places you will have to pay to have each one inspected.

Ongoing costs (As Slinger mentioned) also include water/sewage, Oil and/or Gas for heating and cooking, and if your in a closed community, the community charges fees to keep up the grounds and pay gate people and such. Then of course you have the everyday stuff like elect, phone, cable, internet, etc etc etc..... Oh and a sluch fund for repairs is always a good thing to have...the more the better.

 

[Rex2342]

I bought my house when I was 19 and it is a little confusing.When I applied for the loan the loan agent wrote it up as a Re-Finance.All my tax's,insurence,and escrow are all paid every month instead of every year.You should be able to get a good interest rate too.Mine is at 7% but now you might be able to find one as low as 4 or 5% if your lucky.Your going to have to pay school tax,property tax,escrow,and closing costs plus whatever else they'll need on the house.I had to have the house inspected by the county and I also had to have a di test done before I was able to complete the sale.Another thing to think about is your choice in roomates.I also have one of my freinds living with me and he's a real ass to live with.I've known the guy since 7th grade but he's just hard to live with and i'm going to be kicking him out soon.Just be sure everything is in YOUR name so if you have this problem he'll have no say so in the matter.

 

[lykan]

A "land" contract, sounds liek the same as an "owner contract"

Their are a few ways you fall in to an owner contract.

#1 you dont have the credit, but the owner wants to sell the house to you
#2 somone knows you and wants to sell you the house.

#3 There is something wrong with the house (maybe minor), but a bank wont finance it. (wood to earth contact, termite/etc)

#4 The owner has no need for a "cash out" and wants to make the interest himself.

The best way to get an owner contract going is to go through escrow. "scrow" is a middle man.

You pay escrow, they record it, and then they send the payment on to the owner. They charge about $200 a year to do this. They also roll taxes and insurance into the payment. SO you make the payment, they do the little stuff for you and pass it on.

If you don't make the payment, they are the ones responsible for evicting you too.

All in all an owner contract can be a good deal, just go through escrow, and make sure you are the ONLY one on the contract. nothing is worse than having a friends blowout, and having to decide who gets to keep the house, and who has to buy the other out, or figureing out how to sell it with both of you owning a chunk.

Good luck, I can tell you the best thing you could ever do is get into any type of contract rather than throw your money away.

I was renting a condo for $800 a month a nice one. I bought a (yick) trailer for 25k, five years later it is paid off, and its still worth 25k.. now when I sell instead of having jack, and lots of rent, ill have 25k in my pocket to buy a reall house

 

[FastEddy]

Buy a House and buy it now.
If you want to get one there are very creative ways to get into one. Just contact an agent and a good mortgage company.

Don't worry about all the costs involved in purchasing a house, they can fold it into the loan. Look for the cheapest house in the most expensive arias of town. The surrounding houses will help inflate the value of yours over time. If your young, under 35 or so, get the most expensive house you can. Don't worry about the payments, rent some rooms out or start a brothel. If in 3-4 years you decide you can't handle the payments any more, sell it and take the profits for a down payment on another one to lower your payment.

Real estate is a great investment and most of the time you can't go wrong. Its worth the sacrifice now to gain the rewards in a few years.

Short story,
I purchased my not so fancy house 9 years ago for 230,000.00. I'm my aria it was the cheapest house in a nice part of town. 3 months ago, my neighbor sold the same exact house that we have for 530,000.00. Do the math not bad. We weren't going to get it because it was to expensive for us at the time. I can sell it now and retire if I wanted to. Hmmmm.

My humble opinion.

 

[lykan]

Wow, prices must be inflated there. Here in Yakima where I live. For that kind of money (250k) you could get a house with 10 acres on a creek in the best area in the valley. Did I mention the house would be brand new? Wow.

I know a lot of california people sold their houses, and came up here and bought mansions cash out, from selling a terrible house in a terrible part of town down there.

Now their house is pad off, and they only work part time to pay for their taxes insurance and their toys.

Real estate/houses are the best investment ever. Interest rates are also down. And he's right, cheapest house in the best neigborhood, you can never go wrong with that.

**edit** if you find out in a year you odont want the headache of a house, rent it out for $100 over the mortage and have someone else pay off your investment :w00t:

 

[wilsoncat]

Well, just thank God you don't live in NY or Long Island. The taxes alone can run between $5000 - $20000 a year, depending where you live.

I purchased my home in May 2002 (3 Bedroom Ranch, 2 car garage, 2 bath) for $240,000. That was the cheapest home I could find that wasn't a pile of horseshit. I just refinanced (to 5.8% from 7%) and the house appraised for $300k. Not too bad for a year! I was also able to take some extra out to do some improvement (roof, siding, windows, skylights).

Buying a house is a great investment no matter where you live. It sounds like it wouldn't be as bad as we have it here on Long Island, so I say go for it!!!

By way of comparison, before I moved into the house I was paying $1340 a month for a 1 bedroom apartment. It was in a gated community, but still. The going rate for a 1 BR here is between $1000 - $1400.

Good luck!

 

[mcvickj]

Wow. Thanks for all of the responses. Is it possible to ask for some extra money to furnish the house and just roll that into the mortgage as well? Does this depend on the mortgage company I choose?

 

[FastEddy]

You never said you wanted furniture.:whistle:

Unfortunately, they wont lend you more than the house is worth. You may want to put less down if you were planing on doing so. If not, Goodwill has some great stuff to help get you started.

One thing that wasn't discussed was a down payment. If you put less than 20 % down you will have an added amount included in your payment for Foreclosure insurance. Once you have 20% equity in your home you can contact your bank and have the additional payment removed. The equity doesn't mean you have to pay off 20% of the lone it means that if your loan amount is less than 80% of the value of the house you no longer need to pay the insurance.

-Ed

 

[robmob]

There are some loan programs for first time home buyers that offer decent rates and only require 10% down without having to pay PMI (private mortage insurance or foreclosure insurance). I got one of these loans when I bought my first house. Also, if you do end up paying PMI, it will be up to you to get it removed once you passed the 20% equity mark. Your mortage company will not do anything about it and will gladly leave the insurance on your loan. One thing I am not clear on is what value the loan company uses to establish the 20% when you try to get it removed. The price of the home when you bought it, or the current market value at the time you are trying to remove it. At any rate, try to avoid paying PMI if at all possible. Paying money for PMI is like flushing it down the toilet. The insurance is not for you, it is for the loan company, and only benefits them.

 

[Nitroaddict]

Eddy mentioned the exact thing that i was going to. At your age, and with your new credit history, the bank is either going to require a substantial down payment, or want a cosigner. plus, closing costs will need to be considered as well. Bottom line - expect to need approx 12K - 20K for an initial investment. As for the land contract, it does sound like a sellers mortgage. i would shy away from this, as there are too many variables, and unless u live there for the next 30 years, the seller usually keeps the equity. basically - u pay on the house for 10 years, and want to sell it, if u do - he gets all the equity not u.

 

[gutterboy]

I purchased my house in April 2002 in Indiana. I paid 136,000 for it. I went with whay they call neimiah program. After everything was said and done I only paid close to 2000 out of pocket and that was for taxes and stuff. My interest rate starts at 4% for the first year, 5% for the second year, and 6% for the third and it locks at 6%. My house is a 1720 sq ft ranch and I upgraded alot of stuff like the best carpet, cathedrial ceilings, extra shower in the master bath, the best linolim, and ever blinds which was a great investment for what I paid for them. It is like FastEddy said, all the other houses in my addition are 2 story ranging from 2300 sq ft to 4200 sq ft anf they are in the 200,000 range or better. I will think that my house will appraise for alot more since it is in a nice neighborhood with nice big houses. It is kinda funny seeing my house campared to all the others. If you are close to a lake or a body of water that can flood your insurance will be higher, or if you are 75 feet from a fire hydrant, your insurance will be lower. You just have to find you a good and trustworthy real estate person that can help you out. That is what I did, and the guy that I used saved me alot of money in the long run.

 

[lykan]

You know if you truly are looking for a house, the internet is a great place realtor.com among many others. If you go to a mortage company, you will find that 90% of the loan writers (guys who try to get you a loan) will help you with all the papers you need to buy a house without the realtor.

Keep this in mind when choosing a realtor

#1 if your realtor is also listing the house, then they are representing you and the seller. They may not always have your best interest at heart

#2 You say you want a house in the 100k range their job is to locate a house for you. If they have an investment guy they look for too (another client besides you) who buys houses 5 times a year, when they find a decent house at a decent price, they may not call you first. They are going to call the client who has given them the most commision in the past.

My friends did this. He picked neighborhoods that he wnatewd to live in and knew he could afford. Then he looked for vacant houses. He found one he thought was vacant. He watched it for a month or two.

After he foundd it was completely vacant, he aked the neighbors who owned it. It turned out, that the people who owned it had bought it brand new. Their parents got sick so they moved in with them.

They left this house as is, without having time of the effort to sell it. He asked if it was for sale, and they said sure. They just didnt want the payment anymore. So he bought the house from then at what they owed on it (60k). After he bought it he had it appraised and it appraised at $120k.

Just by looking for a vacant house, he picked one up at 1/2 of market value. People leave their houses for various reasons, death in the family, moved out of town etc. 90% of the time they jut want out of the house and dont want to bother with it. So if you see a vacant house, ask around, you might get a killer deal.

 

[gutterboy]

lykan has a great point about realtor.com. My mom and dad has been looking at houses that are on that website. They live in Kentucky and they find great deals. They are looking at this one house that has 14 acres, 3 bed 2 bath and it is in great shape. The people are asking 90,000 but the only bad thing is that it is on a sistern, sorry for the spelling. But the ole man is going to see about getting a well dug or maybe city water if it is available. Do like lykan said that is a great place to look.