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Buying Homes The Right Way

All About Home Loans and Mortgages In General

  1. Understanding Home Mortgages Work
  2. Disadvantages of ARM Mortgages
  3. Exactly, What Is a Mortgage Down Payment?
  4. Home Equity Loans & Home Equity Lines of Credit
  5. How to Calculate the Type of Home You Can Afford
  6. How Can You Avoid Being Overcharged by a Mortgage Broker?
  7. How Can You Identify an Ethical Mortgage Broker?
  8. Paying Your Taxes With Escrow Funds: The Pros and Cons
  9. Should You Pay Your Mortgage Biweekly, Bimonthly, or Weekly?
  10. Should You Use Retirement Funds To Pay Down Your Mortgage?
  11. Venturing Into Home Loans With First Horizon
  12. What are BAC Home Loans?
  13. What Do Mortgage Brokers Do?
  14. What is a Balloon Mortgage?
  15. Disadvantages of Balloon Mortgages
  16. What is a Reverse Mortgage?
  17. When Is an Adjustable Rate Mortgage Right for You?
  18. Why You Should Never Use a Mortgage Broker
  19. Why You Shouldn't Trust Mortgage Rate Predictions
  20. When Should You Take a Second Mortgage?
  21. Will Your Credit be Damaged if You Miss a Payment?

Man, is this where just about everybody gets hosed the first time they purchase. Buying a home for the first time is all smoke and mirrors. If you are an old X-files buff, you'll remember the line "Trust no one!". In real estate, this is absolutely true.

Even the people who a supposed to be your advocates are really working against you. Your real estate agent (buying or selling) is just looking to make a quick buck. Your mortgage broker / sales person is always trying to make a fast buck. Your lawyer doesn't want to be bothered with you at all.

Homes are excellent investment and I have yet to see this area get less than 6% per year in my area. Example my first home was $129,000, which at the time I thought was a great deal of money. 4 years later, I turned around and sold the house for $225,000. Of course my real estate agent pocketed 6%, but that was the best investment I ever made. I most likely will not ever have an investment that matches it.

My second homes was $398,000. Two years later it assessed for $585,000. Of course these were ideal times for real estate, but if you are planning to own a home for more than ten years, it will always pane out for you.

Through my one sale and two home purchased, I can tell you that buying a home is simple and selling a home is the literal equivalent to hell. My purchases were quick and clean. My sale took 9 months even though it was only on the market for a total of 4 weeks. I had four buyers work towards a contract with me.

Let me share my little bit of hell with you.

Buyer 1- The first day the house was on the market, it was sold. Four weeks later we come to find out that the buyers couldn't qualify for the mortgage. We put the house back on the market.

Buyer 2- House is sold one week later. Everything proceeded well here 80 days to close. We got 2 weeks from closing and the buyer demanded that we make our neighbor move there fence two feet back. We ask the neighbor, who was more stubborn than the buyer. They refuse. The buyer drops it.

Buyer 3- House is one the market for two weeks. The buyer drags us along for 90 days. 1 week prior to close, the buyer demand that we lower the price 10%. At this point, we can't afford to do this with the next home we chose. We had to deny there demand. They got out of Dodge.

Buyer 4 (Finally sold) - 2 fantastic people that loved our home purchased it within 60 days. They take great care of the house, I'm glad they got it.

Buying A Used Home

You would be surprised at what little you need to put down to get started on new home these days. My main advice is to make sure you have at least 15% saved before you go purchasing a new home. 10% of that will go to the downpayment. The remaining 5% goes to closing costs.

Here is some of the serious considerations you need to make before you even start looking at buying a house. Nobody ever things about these:

1. Are you buying a starter house, a for now house, or your dream house? How long will you be living in this thing?

If it's a few years, you can live without a few things. If you're 30 years old and you expect to die in this thing when you're 85, it better have a great deal to offer.

2. How many people will be living in this mother?

Is it just you? Do you and your spouse expect kids? Will your deadbeat brother be crashing often? You have to thoroughly plan that out.

3. Do you want your kids to go to school in that school district?

If you have to buy a house, could possibly live there for 20 years? When you're young, you never think about this. But, stuff happens all the time. You may be 25 and not even have kids in your hemisphere of thinking, but you should ponder this. Also, school districts lead to resale value. If you know your school district is headed for the crap-er because a drunken sailor is now superintendent, consider your other options.

4. How are the neighbors?

Are you buying a house next to the next Manson family. Knock on some doors. Do respect these people or are they going to drive you nuts?

5. Why are they selling the house?

9 times out of 10 they never tell you the truth. Bother the Realtors to get you the real story. Do a little research, in some states ask them to fully disclose this to you in writing.

 

Buying A New House

When you first want to buy a house, you have no idea what you are doing. You'll act like everybody from the Realtor to the seller is doing you a favor. I should know, my first home purchase was a big lovefest and in the end I could have gotten a much better deal.

Here are the steps you should take care of prior to buying a home:

1. Watch out for Realtors. Never ever take their advice on anything. They don't care if they sell you a pile of poop or a mansion. If it's in the same price range, they get paid the same. They always want a quick sale and will always tell you what you want to hear.

2. Never ever show your cards. Let everyone know as little as possible about your finance. Don't tell them what you even do for a living. Once they peg your financial situation, they will leverage it at the sale.

3. Look at the cost of taxes first and foremost. Mortgages eventually go away, but taxes never do.

Take this for example:

Scenario A: I buy a house for $250,000 with $4,000 annual in taxes.

Scenario B: I buy a house for $200,000 with $5,700 annual in taxes.

Case A & B will end costing you roughly the same.

4. Mortgage companies suck and are always look out for themselves. Always demand that you not pay PMI (Personal Mortgage Insurance). PMI it sounds like something that would bail you out, if you were in trouble, right? Wrong, it pays the bank if you default on the loan. Not only are you paying the bank, but if you don't pay the bank the insurance company pays them for you.

5. Inspect every inch of that thing. Pay a professional, but get in there and do it yourself too. If you don't like something, tell them to fix it.

6. If you want to bail at any point, just do it! It will cost them about $50,000 to ever see anything from a lawsuit. No one will waste their time. If they win, they could only hold you to the original contract anyway.

First Time Home Buyers

Here are some things I learned the hard way as a first time buyer:

1. Never trust anything a mortgage broker tells you-

Read over every little detail. These people try to bury in paperwork to hide mini-details that can save you hundreds of dollars. Best yet, be your own mortgage broker.

2. Taxes (not home costs) are the main concern when purchasing a home-

Alot of people rent or live with relatives prior to purchasing home. They have no idea the importance of taxes in the whole equation. See home purchase price eventually goes away, if you found your dream house and live there for 15 - 30 years. Taxes never go away.

Many first time buyers never even factor in taxes when buying a house. The know there budget, they know the can afford a $2,000 a month payment. So, they punch that into number into a mortgage calculator and say "Yeah, we can afford a $315,000 house at 6.5% for 30 years." Not even close! Let say the taxes on this home are a modest $6,000 a year. Well that's $500 less a month you can afford. You finally realize, you can afford a home for a maximum of $240,000. This mistake cost me 3 months of my life as a seller. The first buyer I had on my house made this mistake. Just prior to closing, they realized this and the mortgage company disqualified them for our house.

3. Realtors are out for themselves-

They get paid for getting you to buy. Never take any advice that directly influences your purchase from a Realtor. When you key in on a particular house, your Realtor will begin telling you everything you want to hear to close the deal. As a buyer, they are just there to tell you the features of the home and property.

Danny
I'm worried in this day and age when it comes to buying houses. I know the market is selling houses for lower prices these days, but even then I'm scared. I plan to purchase a house one of these days, just not sure when exactly.
Danny at at 10:20AM, 2011/07/17.
Danny
I plan to purchase a house very soon, thing is I'm worried still. I know the market is quite low since this recession we're in, but It's hard to just go out and buy a house.

And yeah, I have to live in a good neighborhood.
Danny at at 10:21AM, 2011/07/17.
Lonitra
Check that off the list of things I was confused about.
Lonitra at at 06:55AM, 2011/09/02.

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