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Questions, Questions, Questions...
Hello!
My DH and I are starting to play with the idea of buying our first house next summer. I feel like it is such an important decision, and I'm nervous about being in over our heads.
A little background: We recently paid off all of our debts. This in includes Credit Cards, and Car Loans. We will roughly have about 20K in savings when we begin searching for a house. Our emergency fund is also included in this amount. Both of us have steady full-time jobs and do not plan on going anywhere for a while. And, we both have a 401K through work.
I do have a few questions. First, are we ready? If so, what do we do next?
Right now we are renting, and our lease is up in June. How soon should we start the process of house hunting? I'm worried that we will not find a house right a way, and will not have a place to live once our lease is up. On the other hand, I don't want to find a place and end up paying for mortgage payment and rent for the last few months.
Also, do we buy a house based on our current needs? or do we plan for the future? For example, right now it is just the two of us and our small dog. We really don't need a big place. But, we do plan on starting a family within the next 2-3 years. So, should we look for a larger place?
I hope you don't find these to be silly questions! We really do feel clueless with this whole process. Thank you, in advanced!
Re: Questions, Questions, Questions...
I don't have much to say except that if you can swing the higher cost of purchasing a larger home to grow into, I think it'd be worth it. If you're planning on expanding your family within the next 2-3 years, it's not a great idea to purchase a home with just the two of you in mind. So, when you're looking at houses, think of how the house will fair in the next 5 years or more.
Also, believe it or not, it sounds like you're as ready as most anyone is when purchasing a home. My husband and I just closed on our first home a few weeks ago, and it's hard to believe we're finally living in our own home! We didn't house-hunt very long before finding our home, but some people search a long time before they find a place. It just depends.
On another note: keep saving money! Every little bit counts. Consider making a budget (a real budget that truly critiques every last cent you and DH spend) and try to find as many ways to save as possible. That way, when you finally close on your house, you'll have a little more cushion in the bank.
Good luck on your upcoming search!
Sounds like financially you're in a good place.
You might want to check and see if you can extend your lease month to month once it is up in June.
Personally I would not invest money into a home that would not work for my family for more than a couple years. I'd be thinking more in the 5-10 year run. Sounds like you need a little bit more than for just you and your H.
And good luck! P.S it took me two years to find a house.
Congrats on paying off your debt, $20K sounds good, keep in mind FHA loans require 3.5% down payment plus closing costs (around $7-8K). It took us 4 months to view houses, submit offer and close but it can take longer for others. We are still paying the last 2 months of our apartment lease since we didn't want to break lease. We want children so we bought a 4 bedroom because we don't have plans to be moving anytime soon. If your lease expires in June, I would get a pre- approval from bank around January to see how much they lend you. Afterward, get a realtor and start house searching. Good luck!
Congratulations on the debt pay off and having saved 20K.
Now - a house.
First - do not buy a house unless you plan to live in it for at least 7-10 years. It takes that long to recoup your buying and selling costs. Make a list of needs and wants, prioritize as you most likely will not get it all. Know where you are willing to compromise. Keep your housing costs to no more than 25-28% of your TAKEHOME pay for housing (mortgage+PMI+insurance+taxes+utilities+HOA) The larger the downpayment the better IMO to eliminate PMI and reduce your monthly payment. More than that amount often makes people house poor.
Check your FICO scores .
You want to still have a good emergency fund in place AFTER you have closed and moved in. You need to save for downpayment, inspecction, closing costs, moving costs, start up costs, repair/renovation expenses, decorating/furnirutre/appliances, yard items, ladder & tools etc. Establish the amount that would apply in your situation and continue to save --- then enjoy the hunt to find your new home.
Home Buying for DUmmies and Mortgages for Dummies have great information.
I agree that Home Buying for Dummies is a wonderful tool. A lot of your questions depend on the market you are in so I would start doing some research into that now. For my area, $20,000 is definitely enough to buy a house and still have a good sized emergency fund left over but in others that won't even cover 5% down. We were in a very similar place where we wanted to buy a house, had a good amount of money saved and had a lease that was up the following summer. The first thing we did to determine if now was the time to buy was to check out the market. I knew that we should be looking for a house that would not only fit us now but also in 7-10 years (basically with kids). The question we needed answered was if what we could afford right now would get us what we needed (3+ bedrooms, 2+ bathrooms and a nice neighborhood). Using online calculators as a guide to our monthly payments we settled on a range we knew we could afford currently and then started looking online at houses in that range. We even went to a few open houses to get an idea of the house we could afford now. Had we not felt these houses were something we could raise a family in, we would have waited another 2-3 years until we had more saved and more student loans paid off. But fortunately where we live you can get a lot of house for not much money. And the bonus of going to the open houses way before we knew we should start the hunt is that we found a great realtor who sat down with us and walked us through the process even before we decided we were ready to buy or knew we were going to use him. So start checking out your house market and see if the houses that are out there in your range is something you can grow into and live for the next 7 years or so.
When you should start hunting is also dependent on market. Some areas houses quickly sell and there isn't much inventory and others like ours there is tons of inventory and most houses sit for months. The best thing to do is talk to realtors and they can give you and idea of when to start looking for your market to move in the summer of next year. For us our realtor said for a July move we should start looking in April/May. We sort of jumped the gun on our own by browsing open houses in Feb/March (just to get ideas of what we did and did not like) and we ended up stumbling upon "the one" in March and we wanted to move in July! We probably could have ended up waiting on it but the spring housing rush was beginning and we noticed more people at showings and looking at the house. We didn't want to lose it so we put in an offer in April. Fortunately the sellers were agreeable to a 60 day close which put us in June. Sure we had the apartment for an extra month but the nice things with mortgages is you get one grace month (basically if you close in June your first mortgage payment isn't until August 1st) so we didn't get to save money by having one month with no payments but we didn't have any months where we paid both mortgage and rent.
So it really all comes down to your market and the best people to ask about that is realtors. You can also do some research yourself online with zillow or trulia. It gives you a good idea of what's for sale in your market, in your range and also how long houses sit on the market. Get an idea of what you want now and don't be afraid to just browse at open houses. You never know what you may find
Good luck and enjoy the process, we had a lot of fun with our hunt!
Great work!
I would start with Home Buying for Dummies. It provides detailed info about the process and what to do budget-wise.
Also, plan on buying a home that is reasonable, but fits your needs for the future. So many ladies on here end up wishing they had bought a home with more square footage, or one more bath, or one more bedroom.
Plan on checking your city's or county's zoning maps both current and 20-30 year plans. This maps will show you the development plans for your area and help you know what to expect - maybe a freeway expansion is planned for your area, etc.
Next, you can get on to the register of sex offenders. There is debate on here as to whether or not that is important data, since many sex offenders aren't registered yet or many are registered but live in diffrernt locations than where they are registered. Anyway, it's helpful.
Plan on finding a home inspector - highly rated on the BBB and also ASHI certified. Don't use the inspector your REA recommends. Do your own research. And, be sure they take pictures in teh report. IF you buy new construstion, still get an inspection done. Personally, we built our first home - had an insepction and he found the roof was missing some flashing. He saved us thousands of future dollars. The $400 out of poacket cost to him for this inspection was worth it.
Pay attention to the neighboring homes. Care of homes' exterior, yard maintenance, junk piled up, etc. And, focus on a home's structural things like roof, windows, furnace, water heater - the big ticket items that are costly and annoying to replace. Cosmetic stuff can be altered in time and easily. If you find a home with newer mechanicals but dated lighting that would probably be a better choice than old stuff and brand new doorknobs and lights.