Home Buying Headache

A Shortened guide to home buying.

Why Buy? Johnny and I have lived rent free since we got married with his parents. When we finally decided that we were ready to move out we were faced with the decision of do we rent or do we buy? At first we were leaning more towards renting because we weren't sure if we were ready for the responsibility of buying a home and having a mortgage. We searched for apartments on craigslist and even went to see a few. We only had one condition - we wanted a two bedroom apartment. After searching for a while we couldn't find a decent 2 bedroom apartment for under $800 and that cost didn't even include utilities. With an apartment you are also required to put down first, last and a security deposit which means up front we would have to come up with $2400. That's when we realized that renting wasn't such a great idea. For that price and in this economy we could own a home for just a little bit more. And that's what we decided to do. Our down payment was $3315 and our closing cost was covered by the seller. Our monthly mortgage is going to be $818 a month and we know our money is going towards an investment rather than out the window.

I thought it might be helpful to have a post on some tips and steps to the home buying process seeing as I have learned so much.

1. First Time Home Buyer Certificate. If you are a first time home buyer make sure you take the course before looking at houses because if one comes along that you like you will have to cram the class in during the month that you are closing. The first time home buyer course teaches you the basic things you need to know about purchasing a home. Also try to do some research about the incentive programs in your area. A lot of first time home buyers are approved for tax credit programs, down payment assistance, or closing cost assitance. There are also incentive programs if you need to upgrade your home such as the insulation, windows, or if you have to change from oil to gas.

2. Choose a bank and get a preapproval letter - My mother is awesome. She works for a bank so she helped us with out mortgage. You will need the preapproval letter to determine the price range that you can afford to buy in. You also need the preapproval letter because without it you can't place a bid on a house. The bank is also going to require a lot of other paperwork that you will need to gather together such as your past four paystubs and tax information. I'm glad I'm an organized person and keep that information in one area.

3. Form a wish list. Get a list of things you would like to see in your future home. For example my wish list included hardwood floors, at least 2 bedrooms, hopefully 2 bathrooms, a nice neighborhood, a yard but not a large one so I don't have to do a lot of yard work, a walk in closet and a master bedroom. You will have to sacrifice some of the wishes on your wish list but if a house has a lot of your desires then it could be a keeper. I sacrificed a master bathroom and a walk in closet. The trade off was that we got an extra bedroom and a large attic for room to grow. The other advantages to our home was the updated heating system and the new wiring.

4. Find a realtor (or do the work yourself). Johnny and I have been looking at homes on and off for over a year now so we have done both of these. It's best to find a realtor to represent you. They have access to all the MLS listings (an amazing program that I wish I had on my own computer.)

There are quite a few other options for doing the work yourself. One option is to search the internet. I always looked at homes.com and realtor.com The only issue with this is that a lot of the websites are not up to date and you can very easily miss out on a good opportunity that gets scooped up immediately.

The newspaper is a very reliable source of information because it includes homes for sale, foreclosures and auctions.

 If your not in a huge rush and your willing to deal with the migraine then you can go on bank websites such as bankofamerica.com and find the bank owned properties. Another website to find bank owned properties, preforclosures, foreclosures and short sales is hud.gov. We dealt with a preforeclosure last November and it was very messy. It went on for over three months without any progress. We finally backed out of the deal and I will never go through it again. You have to deal with the person that is getting foreclosed on and its very sad and not to mention difficult because they are very unaccomadating. Ours wouldn't let us see the house, then he wouldn't let the inspector in and he refused to sign the paperwork. He even bought two kittens and put one in each unit (it was a two family) of the home and they destroyed all the floors. He figured he had a few more months to ride it out without paying a mortgage. In the end, the house ends up going to auction and the people are literally paid to move out.

One other option that you have is to go to an auction. Check your local newspaper for auctions in the area. Any that your interested in drive by and see if you like it. You usually have to bring a bank check for $5000 to an auction and your license. Most times with auctions you don't get to see the inside of the house, so this really hinders your bid. You also need to do some research to make sure that the previous owner didn't have any liens on the house because at an auction you inherit the liens. You can find this information out by looking up the deeds.

Your last option is to do a lot of sight seeing in the areas that you are interested in. As you drive by homes that are for sale you can take down the information on the sign.

How we found our home:

As I mentioned - Johnny and I basically did all of these techniques for looking for a home. The most recent technique we tried was to go to an auction. It was our first auction and when I got there I was pleased to see that there was only one other bidder there. We weren't allowed into the house but we could tell from the outside that the house had a good foundation and a nice structure. We were willing to bid up to $100,000 without seeing the inside of the house. The auctioneer finally began his spiel. Once he was through he said I am going to open the floor to bids but that first bid that I am going to ask for is the bank. (Apparently the bidder that showed up was representing the bank) The lady representing the bank said $169,616. I was shocked. I started laughing and said I guess I won't be bidding! What I later learned is that its very difficult to get a good deal at an auction. The bank usually buys the house back for what is owed on it. They then in turn sell it to Fannie Mae for that price. Once Fannie Mae buys it they then put it on the market for a lower price. This particular house was put on the market for $109,900. So what about the extra $60,000? Well wouldn't you like to know - that's what your tax dollars are going to! Everyday I went on the internet to check if this particular house went on the market and finally it did. Again you could understand why I was stunned by the asking price especially since I knew what the bank bought it for. Immediately I called up the listing agent, told him I want to see the house ASAP, placed a bid on it and the rest is history. Fannie Mae even updated the heating system for us and paid most of our closing cost.

5. Go to some open house, request showings, visit auctions, do drive bys.

6. Place a bid on a home that you like. This is kind of like a game. Most people bid lower than the asking price. In our case we bid a little higher than the asking price because we were afraid of losing the house and we didn't want to risk it.

7. Find an attorney to represent you and make sure they review all paperwork before you sign anything.

8. Sign the purchase and sales. You will be doing a lot of signing of paperwork including the purchase and sales, bank paperwork and at closing. Once the purchase and sales is signed you are under a short time frame to get the isnpection and appraisal done if you choose to back out of the deal.

9. Home inspection. Find a local agency that does home inspections.

10. Appraisal - the bank will send out an appraiser for you to evaluate your property and approve your loan.

11. Find a home insurance. Do some shopping around for home insurance. I find that insurance companies like to rob you of your money. I did some research and found the price range that I wanted my home insurance to be in. I got three quotes and the difference was almost $170 between all of them. I ended up choosing one that was in the price range that I want but it wasn't the lowest one. The benefit was that it reduced my auto insurance because it was on the same policy. Remember, in most cases, especially if you're a first time home buyer you will have to pay your first year of home insurance up front.

12. Sign papers with them. This took about two full hours but I was thrilled when I got the keys!