The Home-ownership Thread

[darksabre]

This forum is always good for advice on topics outside of hockey and I bet this will be no different. I know Bio has regaled us with stories of her house nightmares, so maybe others have things to contribute?

Although home-ownership not in our immediate plans, Josie and I talk frequently about our desire to stop throwing money into the apartment rental void. Our lives are still a little too unpredictable at the moment, but I think within the next two years I want to take a stab at it. 

Now, I'm no stranger to making hasty and risky financial decisions, but I've lived in enough rental homes and done enough of my own work in those homes to know what I'm getting in to, and I know that preparation is key. I don't want to go into this without knowing what I'm doing. 

Things I'm curious about:

1. The process of home buying. How did you go about finding, inspecting, financing, etc? I spend a lot of time messing around on Zillow and stuff, but I've never spoken to a realtor or anything. 

2. Financial incentives. What is out there for young adults, first time home buyers, people who don't make a lot of money, etc.?

 

3. What improvement jobs have you tackled yourself? What were your results? Tips? 

 

4. Foreclosed homes and short sales. Ever bought one? How did it go?


Obviously this is just an open thread. These are just my conversation starters. 

 

 

[Eleven]

1-2.  The first home I bought was financed with an FHA mortgage.  There are programs for first-time homebuyers that can lower the cost of borrowing and reduce down payments.  Any realtor or banker would be happy to spend hours talking to you about this stuff because they want your business!  The second and third homes were easier to finance because I had proceeds from sale to put down.

 

3.  Interior, I have one rule:  If water or electricity runs through it, nope.  I can do just about anything else.  I'm not even that handy; just patient.  Exterior, nope.  I have had to hire a roofer once; it's expensive, but that's really not the type of job I'm equipped to tackle.

 

4.  No idea.

[Drunkard]

I can't speak to all of your questions but I would start by getting your credit score in order and talking to your bank or (hopefully) credit union and getting pre-approved for a mortgage. They'll look at your income, credit, and debt to decide how much house you can afford so you'll have a upper limit number in mind before you start looking. Inspections I suspect would vary from state to state and you live in NY where I live in NC so I'd let someone else field that for you, although I suspect you can pick your own guy and if you don't have one I'm sure the bank/credit union has a list of ones they recommend. The financial incentives can also vary depending on who you get your loan through but I'm sure there are also government programs that you can possibly qualify for and I've never done the short sale or foreclosed home thing since my place was a new construction.

[Samson's Flow]

I'm sure that my process was a-typical, but I just randomly went to an open house one day and met the realtor there (who happened to be a family friend). The house was in the neighborhood I liked, but wasn't very compatible with what I was looking for. That day went home and did some internet research on one of the realty companies sites. After a few more showings I found a house with the bones I was looking for in a first home/renovation project.

 

What surprised me most is I didn't save up much money at all before deciding to buy, and was able to get a minimal down payment as a first time homebuyer. I should have used one of those first time home buying savings accounts that banks were offering at the time (2013) but like I said it was sort of an 'impulse' buy.

 

I have been doing renovations ever since, including building a new front porch, gutting and renovating two upstairs bedrooms and totally redoing the kitchen/dining room area. Working on the 1st floor bath and entryway at the moment.

 

The mrs. is very patient with my renovations and absolutely loves the new kitchen.

[MattPie]

This forum is always good for advice on topics outside of hockey and I bet this will be no different. I know Bio has regaled us with stories of her house nightmares, so maybe others have things to contribute?

 

Although home-ownership not in our immediate plans, Josie and I talk frequently about our desire to stop throwing money into the apartment rental void. Our lives are still a little too unpredictable at the moment, but I think within the next two years I want to take a stab at it. 

 

Now, I'm no stranger to making hasty and risky financial decisions, but I've lived in enough rental homes and done enough of my own work in those homes to know what I'm getting in to, and I know that preparation is key. I don't want to go into this without knowing what I'm doing. 

 

Things I'm curious about:

 

1. The process of home buying. How did you go about finding, inspecting, financing, etc? I spend a lot of time messing around on Zillow and stuff, but I've never spoken to a realtor or anything. 

 

2. Financial incentives. What is out there for young adults, first time home buyers, people who don't make a lot of money, etc.?

 

3. What improvement jobs have you tackled yourself? What were your results? Tips? 

 

4. Foreclosed homes and short sales. Ever bought one? How did it go?

 

 

Obviously this is just an open thread. These are just my conversation starters. 

 

 

 

In my experience, the first thing to know is: YOU ARE GOING TO SPEND MORE MONEY PER MONTH TO OWN THAN RENT. Some of that money comes back with tax breaks, but I still feel like I'm paying out way more than I way when I was renting. Partly with the mortgage itself, but also the other bills and costs that you're shielded from in a rental (trash collection, water, HOA fees, lawn maintenance, &c.). Long term, like 10-15 years, I think you start to get ahead (although I've owned my house 9 years and a don't feel like I'm ahead at all) but that's assuming your house stays stable in value or increases. Until recently my mortgage balance and home value tracked pretty well such that I'd just barely be able to pay off my mortgage if I sold my house. And I considered myself fortunate that I wasn't "underwater" at any point so I wouldn't have to pay into selling my house like the people I bought from. But if I sold today, I'd get roughly my down payment back (last I checked). All the money I paid into capital and interest (and property taxes, and fees)? Gone.

 

I don't want to be completely negative, I have a nice house that meets most of my needs. And I bought at a ridiculously bad time. But do your homework and be prepared to live in that place for a LONG time in case the market dictates that selling your house would be cost-prohibitive.

[Samson's Flow]

1-2.  The first home I bought was financed with an FHA mortgage.  There are programs for first-time homebuyers that can lower the cost of borrowing and reduce down payments.  Any realtor or banker would be happy to spend hours talking to you about this stuff because they want your business!  The second and third homes were easier to finance because I had proceeds from sale to put down.

 

3.  Interior, I have one rule:  If water or electricity runs through it, nope.  I can do just about anything else.  I'm not even that handy; just patient.  Exterior, nope.  I have had to hire a roofer once; it's expensive, but that's really not the type of job I'm equipped to tackle.

 

4.  No idea.

that's what I got as well. Only required something like 3% down which seemed really small. Also don't overextend yourself with mortgage payments beyond what you can afford. Usually the pre-approval number the mortgage companies give you is much higher than what you actually want to spend/look for.

In my experience, the first thing to know is: YOU ARE GOING TO SPEND MORE MONEY PER MONTH TO OWN THAN RENT. Some of that money comes back with tax breaks, but I still feel like I'm paying out way more than I way when I was renting. Partly with the mortgage itself, but also the other bills and costs that you're shielded from in a rental (trash collection, water, HOA fees, lawn maintenance, &c.). Long term, like 10-15 years, I think you start to get ahead (although I've owned my house 9 years and a don't feel like I'm ahead at all) but that's assuming your house stays stable in value or increases. Until recently my mortgage balance and home value tracked pretty well such that I'd just barely be able to pay off my mortgage if I sold my house. And I considered myself fortunate that I wasn't "underwater" at any point so I wouldn't have to pay into selling my house like the people I bought from. But if I sold today, I'd get roughly my down payment back (last I checked). All the money I paid into capital and interest (and property taxes, and fees)? Gone.

 

I don't want to be completely negative, I have a nice house that meets most of my needs. And I bought at a ridiculously bad time. But do your homework and be prepared to live in that place for a LONG time in case the market dictates that selling your house would be cost-prohibitive.

But if you had rented during that time you would have spent all that money (or a slightly lower percentage of it) and not had the opportunity to recoup the investment by selling the house. It would just be gone.

 

Home ownership isn't supposed to make you money, but it allows you to invest in capital rather than paying someone else for the right to live somewhere.

 

The other point is that with the interest rate market where it is now, at roughly 4%, it is a much better time than 10 years ago when rates were in the teens. The more money you can pay upfront and in the first year, the less you get killed with interest and the more you pay in actual principle on the mortgage. That's why you buy in a price range you are comfortable in and are able to make extra payments in (if possible).

[Iron Crotch]

In my experience, the first thing to know is: YOU ARE GOING TO SPEND MORE MONEY PER MONTH TO OWN THAN RENT.

 

You must live in New York state where property taxes are absurdly high.   :)   It is very much the opposite where I live.  I'm spending far less per month owning (+ getting the interest write-off + my home is appreciating at a ridiculous rate).  It is market-dependent for sure.

 

IMHO, the biggest difference between renting and owning is the amount of work and the incurrence of unexpected expenses that come up when you own.  As a first-time owner, my biggest difficulty was finding a good plumber, a good electrician, a floor guy, a handyman, etc.  There are a lot of lousy ones out there - finding someone who knows what they are doing took some time.  Knowing what you should pay for the work that is done (i.e. not getting ripped off) takes time as well.  I also had to learn how to fix a lot of basic things on my own, which again took time and effort.

[MattPie]

that's what I got as well. Only required something like 3% down which seemed really small. Also don't overextend yourself with mortgage payments beyond what you can afford. Usually the pre-approval number the mortgage companies give you is much higher than what you actually want to spend/look for.

But if you had rented during that time you would have spent all that money (or a slightly lower percentage of it) and not had the opportunity to recoup the investment by selling the house. It would just be gone.

 

Home ownership isn't supposed to make you money, but it allows you to invest in capital rather than paying someone else for the right to live somewhere.

 

The other point is that with the interest rate market where it is now, at roughly 4%, it is a much better time than 10 years ago when rates were in the teens. The more money you can pay upfront and in the first year, the less you get killed with interest and the more you pay in actual principle on the mortgage. That's why you buy in a price range you are comfortable in and are able to make extra payments in (if possible).

 

I don't want to argue too much since it really depends on the specifics of each situation, but if I had continued to rent (granted, a two-bed apartment and not a house), I'd still be paying $300-400 less per month than my mortgage. Over 9 years, that's a lot a money, especially if I had just taken my down payment and invested it in an index fund or something. And as I mentioned, if I sold today I *might* get my down payment back (my house's value has declined at least 10%, and for awhile it was closer to 20%). And I did make extra payments early on to try to get ahead. As for rates, mine is in the mid-4% range from 2010, the earlier rate was a little higher (maybe 6%, nowhere near teens). That was in the heart of the housing bubble where banks were practically giving money away.

 

I'm not saying don't buy a house, I'm saying be wary. There's a confluence of stuff that made my decision pretty questionable, although it seemed like a good idea at the time. As it is, if I ran the numbers I'd bet the house is one of the worst decisions I've made financially. The only other thing that comes close is buying a motorcycle.

You must live in New York state where property taxes are absurdly high.   :)   It is very much the opposite where I live.  I'm spending far less per month owning (+ getting the interest write-off + my home is appreciating at a ridiculous rate).  It is market-dependent for sure.

 

IMHO, the biggest difference between renting and owning is the amount of work and the incurrence of unexpected expenses that come up when you own.  As a first-time owner, my biggest difficulty was finding a good plumber, a good electrician, a floor guy, a handyman, etc.  There are a lot of lousy ones out there - finding someone who knows what they are doing took some time.  Knowing what you should pay for the work that is done (i.e. not getting ripped off) takes time as well.  I also had to learn how to fix a lot of basic things on my own, which again took time and effort.

 

My house started depreciating a couple years after I bought it, my bad luck (or lack of foresight). It's still worth less than I paid. My property and school taxes are more than my parents' place in Elma, so I don't want to hear about how bad NYS taxes are, either. Between PA state and local income taxes, I'm pretty close to NYS income tax too. (I'm checking out now, I'm getting too ranty)

 

Your second paragraph is spot on. Maybe if you look at just the mortgage+ vs. rent, you come out OK. But once you add in all the maintenance and improvements it starts to get dicey. Maybe some of that comes back when you sell, but something like the lawn is just a cost. And like tires on a car, you're never going to recoup the cost; you can only lose value if the lawn needs work when you're selling.

[woods-racer]

D4rk I have one question...

 

Are you the type of person that loves doing something constructive with your own hands?

 

Whether it's fixing something you own, something of Josie's, or parents, good friends, doesn't matter to you just as long as your day was in your own way fruitful, you will absolutely love home ownership.

 

Because owning home gives you the ability to do something every day to make your world a little better than it was the day before, and exactly as how you guys envision it. It will be your man cave, Josie's art studio room. You can put holes in walls and windows in where you think there should be one because it's yours. 

 

But there's a price for this. Hard work, dirty hands, missed social events, and trade off's in the budget for home improvement stuff vs. fun stuff.

 

Other wise you have to be cold and truthful with yourself and look at it strictly as a financial matter. MattPie as out lined that rather well.

 

Good luck. 

[josie]

D4rk I have one question...

 

Are you the type of person that loves doing something constructive with your own hands?

 

Whether it's fixing something you own, something of Josie's, or parents, good friends, doesn't matter to you just as long as your day was in your own way fruitful, you will absolutely love home ownership.

 

Because owning home gives you the ability to do something every day to make your world a little better than it was the day before, and exactly as how you guys envision it. It will be your man cave, Josie's art studio room. You can put holes in walls and windows in where you think there should be one because it's yours. 

 

But there's a price for this. Hard work, dirty hands, missed social events, and trade off's in the budget for home improvement stuff vs. fun stuff.

 

Other wise you have to be cold and truthful with yourself and look at it strictly as a financial matter. MattPie as out lined that rather well.

 

Good luck. 

Honestly, that's half the appeal for both of us. I love customizing spaces, d4rk does too. 

 

And the whole house will be a man cave. I guarantee it. My choice :) 

 

We have a bundle of old wooden hockey sticks that I'm not sure will be kept for occasional playing use, but if not, those are gonna be wall ornaments or turned into a desk/chair/hutch/key holder/something. 

 

And I'll finally have an excuse to spend a few extra bucks on some memorabilia I've had my eyes on for a few years. 

But those are small idealistic cosmetic things. I'm mostly concerned with a house having a good roof, no basement flooding problems, and a little bit of land. House can be minuscule, an old farm house or cape cod would be great, as long as we've got at least an acre. 

[Eleven]

TBBoyes makes a really good point.  Don't "max out" with what a lender is willing to extend.  You don't want to be housepoor.

[Samson's Flow]

TBBoyes makes a really good point.  Don't "max out" with what a lender is willing to extend.  You don't want to be housepoor.

Just remember - its the poor people that the banks and credit institutions make all their money off of. If you max your mortgage payment, you can't beat the lending system.

[Doohicksie]

The process of home buying. How did you go about finding, inspecting, financing, etc? I spend a lot of time messing around on Zillow and stuff, but I've never spoken to a realtor or anything.

 

I've bought three homes over the years.  Realtor-wise, this is how it worked out:

 

1. Our first home in Fort Worth.  We used a friend who was also a realtor.  Unfortunately she was pretty new at it, so while she did everything correctly, she wasn't a very good adviser.  I'd give her a C+.  (After we settled, she mentioned that there were some things she learned during the process that could have saved us money if she'd known them earlier.)

 

2. Our home in Dearborn, MI.  We lucked out and found a realtor that both really knew his stuff and didn't try to oversell to us.  He bought his first rental property when he was 18 with money from his paper route.  His primary income was originally rental property and he learned enough through buying and selling to go into real estate as well.  He was a wealth of knowledge, both in terms of the little details of real estate transactions, and in terms of the neighborhood we were looking.... he knew streets and homes like the back of his hand.  And like I said, even though we qualified for much more mortgage than we were comfortable with, he didn't push more house on us than we wanted.  The only "up-sell" he did was that he steered us to a more desirable, and slightly more expensive (which he disclosed up front) neighborhood which really paid off when we sold that house.  Almost 20 years since we sold that house and he still sends us a calendar here in Texas to keep in touch, just in case we ever move back.

 

3. Our second home in Fort Worth.  Our old friend that was just starting out the first time had left the business, but referred us to another realtor she had worked with.  The result, actually, was similar to the first home we bought:  The transaction was processed okay, but we really didn't get the quality of advice we did from our Dearborn realtor.

 

So realtor-wise, I think the thing to do is to maybe go through word of mouth, and maybe go to some open houses.  Get to know some realtors and see if you can find one who listens to you and does not rush you.  Be wary of newer agents just starting out.  Talk to a prospective agent about what you want in a house (everything, from the kind of location you want, how important schools are to you, whether you like new or old, how long you intend to keep the house, how you'll be financing it).  Listen to their advice and see where they're leading you.  If you feel a realtor is steering you to what he or she wants to sell versus what you want to buy, walk away and find another realtor.  But if they have an uncanny knack of showing you homes that you really like, then you know you're good.  

[woods-racer]

Honestly, that's half the appeal for both of us. I love customizing spaces, d4rk does too. 

 

And the whole house will be a man cave. I guarantee it. My choice :)

 

We have a bundle of old wooden hockey sticks that I'm not sure will be kept for occasional playing use, but if not, those are gonna be wall ornaments or turned into a desk/chair/hutch/key holder/something. 

 

And I'll finally have an excuse to spend a few extra bucks on some memorabilia I've had my eyes on for a few years. 

But those are small idealistic cosmetic things. I'm mostly concerned with a house having a good roof, no basement flooding problems, and a little bit of land. House can be minuscule, an old farm house or cape cod would be great, as long as we've got at least an acre. 

 

Then you've already won, no matter what you get you'll make it great!

[ubkev]

D4rk I have one question...

 

Are you the type of person that loves doing something constructive with your own hands?

 

Whether it's fixing something you own, something of Josie's, or parents, good friends, doesn't matter to you just as long as your day was in your own way fruitful, you will absolutely love home ownership.

 

Because owning home gives you the ability to do something every day to make your world a little better than it was the day before, and exactly as how you guys envision it. It will be your man cave, Josie's art studio room. You can put holes in walls and windows in where you think there should be one because it's yours.

 

But there's a price for this. Hard work, dirty hands, missed social events, and trade off's in the budget for home improvement stuff vs. fun stuff.

 

Other wise you have to be cold and truthful with yourself and look at it strictly as a financial matter. MattPie as out lined that rather well.

 

Good luck.

This is my experience.

 

Love owning my home. I love being able to regrout my shower, to do my own landscaping to make my yard beautiful. I've learned HVAC and plumbing. I built a fire pit. I get to park my car in a garage now. I can have not a care in the world that I'm not going to get my deposit back because my dogs chewed something, or my kid broke something. It's basically the freedom to do whatever I want, whenever I want and I don't have to ask a landlord (I just have to ask my wife.)

 

The realtor was extremely helpful. She walked us through every step of the process.

[tom webster]

A lot of good advice. One thing that I would add is that First Niagara had a program were first time buyers could set up an account before they were ready to buy and the bank matched funds toward the first purchase when you were ready to buy. You may want to check into different offers like that but as always, the proof is in the details and nobody is doing it from the goodness of their heart. 

[Doohicksie]

A lot of good advice. One thing that I would add is that First Niagara had a program were first time buyers could set up an account before they were ready to buy and the bank matched funds toward the first purchase when you were ready to buy. You may want to check into different offers like that but as always, the proof is in the details and nobody is doing it from the goodness of their heart. 

 

My nephew used that program.  I think it's actually a state thing, administered by the banks.  Also check into first time buyer incentives.  A decent realtor should be able to explain all these programs and how they work.  But if you're going to buy a couple years from now, it's an ideal time to set that account up now.

[Iron Crotch]

 

My house started depreciating a couple years after I bought it, my bad luck (or lack of foresight). It's still worth less than I paid. My property and school taxes are more than my parents' place in Elma, so I don't want to hear about how bad NYS taxes are, either. Between PA state and local income taxes, I'm pretty close to NYS income tax too. (I'm checking out now, I'm getting too ranty)

 

Your second paragraph is spot on. Maybe if you look at just the mortgage+ vs. rent, you come out OK. But once you add in all the maintenance and improvements it starts to get dicey. Maybe some of that comes back when you sell, but something like the lawn is just a cost. And like tires on a car, you're never going to recoup the cost; you can only lose value if the lawn needs work when you're selling.

 

It is highly dependent on the area that you live in.  In general, land is an appreciating asset while the structure on said land is a depreciating asset.  The rate of land appreciation varies greatly across areas.  And you can, of course, do things to the structure to abate or even reverse the rate of structural depreciation.  Personally, I always think of buying a home as an investment decision.  And, I think of every change I make to the home also in terms of investment value (e.g., "will putting in new floors for $X make me more than $X when I sell the home?")

 

I live in one of the hottest real estate markets in the country (Nashville) so my perspective is very different from someone who lives in western NY/PA.  We have no state income tax and very low property taxes, and rents here are sky high.  I gambled correctly on what I thought would be the next "hot area" of Nashville and built a unique home that sets it apart from others in my area.  Buying this house is easily the best investment I have ever made.

[darksabre]

Awesome stuff here so far guys. When I'm home later I'll address some of your thoughts in detail. 

[Iron Crotch]

BTW - I recommend saving 20% as a down payment if you have the means to do so, which avoids PMI. Paying PMI is basically a gigantic waste of money.

[woods-racer]

BTW - I recommend saving 20% as a down payment if you have the means to do so, which avoids PMI. Paying PMI is basically a gigantic waste of money.

 

Completely forgot about that.

 

Yah, what a waste. Unless your a bank exec looking for a bonus.

[Claude_Verret]

Not sure if it has been mentioned, or if I'd necessarily recommend doing it, but I think you're still able to take out 401k/IRA funds without penalty for a down payment on a first time home purchase.

[ubkev]

BTW - I recommend saving 20% as a down payment if you have the means to do so, which avoids PMI. Paying PMI is basically a gigantic waste of money.

 

PMI sucks! It was unavoidable in my case, unfortunately. It's an extra $100ish added to your mortgage payment until you have 20% invested into the home. I'll be paying it for at least 2 more years.

Not sure if it has been mentioned, or if I'd necessarily recommend doing it, but I think you're still able to take out 401k/IRA funds without penalty for a down payment on a first time home purchase.

Up to $10 grand.

[Samson's Flow]

BTW - I recommend saving 20% as a down payment if you have the means to do so, which avoids PMI. Paying PMI is basically a gigantic waste of money.

PMI is also automatically cancelled once you reach the 80% remaining principle on the mortgage value. But yes it is a waste of money and is only necessary when you can't save the requisite amount.

 

Here's a good informational link: http://www.consumerfinance.gov/askcfpb/202/when-can-i-remove-private-mortgage-pmi-insurance-from-my-loan.html

PMI is also why I went with a 15yr rather than a 30yr, so that I can reach that 20% threshold as soon as possible. That and buying a much cheaper house than I could afford were key in my situation.

[pi2000]

Lots of good advice on here wrt financing, so as a homeownwer, my advice when looking at a house you like would be to carefully inspect the plumbing.    Plumbing can be very expensive, have the main sewer line inspected with a camera to verify no roots are invading the line and the pipe is secure.    Ask the previous owners if they've had any issues with pipes bursting in walls, etc...   How old is the plumbing, etc..   It can be a real nightmare.

 

Other things a good home inspector should be able to point out, make sure you trust the guy and take notes.