Buying A Home
slpankuch
member
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Pre-approved but what range do I look in?
Hi Everyone,
I am pre approved for a $175,000 home but I do know that houses are not sold at their asking price. Does that mean I can look at a $200,000 home and bid for my pre approval amount? I just don't want to be looking at homes that are out of my range. My realtor is helpful but he seems to dance around this question.
Thanks for you help.
Re: Pre-approved but what range do I look in?
A lender will still give you a mortgage that you cannot really afford - or at minimum make you house poor.
First of all you need to sit down and look at your budget. Cold hard facts about what comes in and what goes out. If you do not have a budget - spend the next 2 months tracking every dollar.
How much can you afford for a monthly payment - while keeping your total housing costs no more than 25-28% of your TAKEHOME pay (after you decide if you are financing this based on one income or two) That must included mortgage+PMI+insurance+taxes+HOA+utilities.
Now add more for basic maintenance that is always ongoing.
Have your 6 month's expenses in an emergency fund - you NEED that with a home. (job loss, illness, and assorted other of life's unexpected happenings.
Kids - do you plan to continue to work (did you add day care costs to your budget?)
Plan to stay at home (did you allow for loss of your income?)
Do you have other debt?
In addition to your 20% down payment, have your closing costs in hand, moving and utility deposits, repair/renovations, decorating, additional furniture and appliances, tools, ladders, etc, yard items, deck?
You need the assistance of a good realtor to inform you as to what comps are selling for (in my area it is close to asking, or slightly over - occasionally a slight but under - but never what you are proposing.
Before you get too into the house scene - read these 2 books.
House Buying for Dummies
Mortgages for Dummies
A house is sooooo much more than the monthly mortgage payment. Arm yourself with information first - then examine your needs - separate from wants. Prioritize them, BEFORE you even step foot in a house for sale.
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All of the above and then this.....
Don't forget, even with a fixed rate mortgage, property taxes and insurance normally only go up, so your escrow payment and thus your monthly mortgage payment can go up. So you don't want to be at your max and then have your city/county up your taxes or the insurance company up your rate.
Oh my goodness, yes! I got my yearly escrow statement a few weeks ago and my mortgage payment is going up $200 next month, because I bought much better insurance in May of last year. So now I have to both make up for my escrow shortage PLUS the additional monthly cost of the insurance. Granted, insurance is super high where I live, but still.
Agree 100x what the other PPs said about YOU deciding for yourself what your preapproval should be. Typically that number is much less than what your bank will say. There are free mortgage calculators online you can use to determine if you buy a house for $X, your mortgage payment will be $X...but then PMI (if putting less than 20% down), taxes, and insurance will need to be added to that amount as well. Look at what you can afford for housing, per month.
As to your original question, it can really vary by both market conditions and area you are buying in. It will also vary by the property. If a seller already has their home listed around what it appraises for and they aren't "motivated", they probably won't take much off. If you are in a pretty tight, hot market, you can generally expect to pay whatever the list price is.
That might be why your agent is being dodgy. If you show him a specific property, he is more likely to have an answer than if you are just asking him a general question like, "What percent can I knock off a list price and have my offer considered?"
Once you decide on what house price is best for you, I think it would be a good idea to also look at houses that are 10-20% higher than that. That will hopefully put some houses in your radar that could be negotiated down a bit...especially if they look a bit overpriced to begin with and/or have "issues", like repairs needed, ugly paint colors, clutter, etc. Or if there are trigger words in the ad like "must sell", "make an offer", etc.
What you need to do is figure out what you can actually afford. Look for houses in that range and when you find one that you like, have your realtor run the comps on it. That will tell you what a fair value for the house is and what a good offering would be. Sometimes houses are priced high, sometimes low, sometimes spot on.
A lot of factors play into this answer. If the house has been on the market a long time, then you may have more leverage in getting the price lowered. But, the best place to look will be in the comparison sales in the area for the same or similar square footage of home. If you're looking at a 4 bed, 2.5 home with an attached 2 car garage on a .25 acre lot and these types of homes have recently sold for $160k, then offering around the comp amount makes sense.
It really isn't a buyer's market in many places anymore. So, seller's aren't looking for low ball offers. But your REA will have the best advice on this.