Buying a House

[AeryFairy]

Husband and I are starting to look at buying our first house! Super exciting, but also incredibly daunting - there's a lot to consider, and it's a huge financial commitment.

So I thought I'd make a thread where people could share their buying stories (whether first time or not), as well as any tips/advice/whatever they think might be useful. I'm in the UK, but posts from anywhere are welcome (although it would be good if people could say where the advice is relevant to!)

 

[RascalsMom]

Im in the US, and I bought my first house a couple months ago. It was a whirlwind! I'm not sure exactly what type of advice to post. I would say look at your finances and talk to a lender. He took how much I wanted to put down, and how much I wanted my mortgage to be (including escrow & taxes) and have me a price range, so I knew what I could afford and what my mortgage would be before I even went and looked at places.

 

[Second Summer]

We're in the same situation - finally. We've been renting for ages, and it's just such a rip-off. Insane money out the window.

Looks like we might be able to scrape together just enough for a cardboard box house.

Around here (Oxfordshire) a "cheap" two bedroom "semi-detached" house (sharing one wall with one neighbour) or a terrace house (sharing two walls with two neighbours) costs around £210K. So that's what we're looking at.

There is a 3 bedroom house at the same price in a dodgy part of town which looks really nice, though it says it "needs a little modernisation/updating" ...

We'll be paying on the mortgage until I retire ... 26 years ...

 

[AeryFairy]

We're in the same situation - finally. We've been renting for ages, and it's just such a rip-off. Insane money out the window.

Looks like we might be able to scrape together just enough for a cardboard box house.

Around here (Oxfordshire) a "cheap" two bedroom "semi-detached" house (sharing one wall with one neighbour) or a terrace house (sharing two walls with two neighbours) costs around £210K. So that's what we're looking at.

There is a 3 bedroom house at the same price in a dodgy part of town which looks really nice, though it says it "needs a little modernisation/updating" ...

We'll be paying on the mortgage until I retire ... 26 years ...

Holy crap! The same thing around here (Manchester/Salford) is less than half that... Between 60k and 120k for most of them, depending on the exact area... I'm definitely staying put up north

We've only been renting for a couple of years, but we have enough saved up now, so renting for much longer seems like a waste of money really.

 

[RascalsMom]

I rented for about 2 years, and it does just seem like all that money tossed away!

 

[Mr Crunchy]

Don't buy the biggest house you can afford. Figure out how much space you need and target homes in that range.

We made a windfall on our first house, then moved to a more affordable area and bought a 2600 sqft, 5-bedroom home. We eventually divorced and I was stuck with this huge house and all the expenses that it incurs. Part of the reason we split up was the stress of maintaining the McMansion.

My first house was 3 bedrooms and only 1200 square feet (~112 square meters). It was an adorable place and I still miss it. It would be perfect for me, my son and the dog.

 

[Andy_T]

Indeed. Don't overspend. Never consider your current financial situation only, make provisions for unforeseen challenges.

View a lot of houses before making your final decision, it helps you build knowledge and getting a better feel for the price level in the area.

Best regards,
Andy

 

[Calliegirl]

This pertains to the U.S.

I bought a house right after getting my real estate salesperson license, but it turned out I didn't know anything. I was talked out of getting an inspection and ended up making costly repairs after buying it. Here's what I learned as both a buyer and a salesperson.

Always get a home inspection and make sure all repairs are done BEFORE closing. I worked with too many r.e. agents that promised to have repairs done after closing, but never followed through once they got their commissions.

When you find a house you like, visit the neighborhood during different times of the day and different days of the week. It may look peaceful midday during the week while everyone is at work and school, but become party central on the weekends. If you see someone outside, ask what they think of the neighborhood.

I agree with not buying the maximum you are approved for. The payments will put you in a tough place if you run into even a small financial problem. Leave yourself a cushion.

Make sure you are buying a house you want, not what the realtor talked you into. I was told that when I had a client that couldn't decide on a house, I was to pick one for them and talk them into it. That's one of the reasons I didn't renew my license, I wasn't going to talk anyone into something they didn't want, especially a major purchase.

Generally, neighborhoods with a higher ratio of owner occupied properties than renters, are better maintained. I don't know if this is true now, but in the past you could get a better home owner's insurance rate in those areas.

If it's in an area that gets snow, check to see if the house is on a street that gets plowed first or last, if that's something that will matter.

If you have, or plan to have children, check out the school district.

I'm sure there's more, but that's all I can think of at the moment.

 

[Andy_T]

Find out about the traffic situation.

Once you have a house that you are really interested in, it might be a good idea to visit it on a workday at 7:00 and go to your workplace from there, or home to it during rush hour in the evening, to find out whether there are any challenges in that respect. Might not be an issue, or it might be a huge challenge.

Best regards,
Andy

 

[Amy SF]

You may feel overwhelmed by this, since you would already have a lot to think about when you look at houses, but I as well as my parents have had to deal with the following issue.

If you expect to grow old in the house you buy, look at it as if you were elderly and have more limited mobility than you actually have now. Can the house be easily modified for improvements? (For example, stairs with railings or a ramp added to the front or back of the house, and grab bars in the shower.) Will it be comfortable for you to move around in or are the spaces very narrow? What if you were in a wheelchair? Is everything, from the entrances to the kitchen cabinetry, easily accessible to you? Consider how much improvement the house would require to make it more livable for you as you get older. The heating system may have to be fully replaced at some point (and definitely once you're older, you'll want it to work properly), so consider all the costs of repairs and improvements the house will need as you age along with it.

 

[Moll Flanders]

^ All very good advice!

The MoneySavingExpert site has lots of helpful information. That forum is the first place I go when I need any type of financial advice. Obviously make sure you are getting the best interest rate on your mortgage and work out if you want to fix and for how long.

House Buying: Important Threads - MoneySavingExpert.com Forums

When we bought our first house (the one I'm in now) I bought lots of furniture and knick knacks on credit cards to make it look really nice and I wouldn't do that again. Freecycle is around now so you can look on there as you can often get good quality furniture that someone might be getting rid of because they are buying new. Charity shops are good too or some charities often have specialist second hand shops just with furniture. See if family or friends want to get rid of stuff too as it all helps.

I would always make sure you have an emergency fund (of around £1,000) so that money is set aside for a repair that your insurance might not cover if it is a smaller job.

House maintenance also has to be factored into your annual budget, having the windows/gutters cleaned etc... can cost about 1% of the value of your home.

Can I also say I'm jealous of the prices of houses in Manchester! We are thinking of moving house this year and I'm balking at the amount of mortgage debt we would have to take on.

 

[AeryFairy]

So much awesome advice

Find out about the traffic situation.

Once you have a house that you are really interested in, it might be a good idea to visit it on a workday at 7:00 and go to your workplace from there, or home to it during rush hour in the evening, to find out whether there are any challenges in that respect. Might not be an issue, or it might be a huge challenge.

Best regards,
Andy

This is great advice in general luckily, in our situation, it's not such a big deal. Both my husband and I work from home. However, we will have to check that the area isn't really noisy during the day. It's one if the reasons we're moving now - in the next year or two, a huge block of flats is being built right next to our lovely, quiet, private apartment. The construction noise will be awful to work through, and when it's done, people will be able to see straight into our living room I'm really gonna miss this place.

^ All very good advice!

The MoneySavingExpert site has lots of helpful information. That forum is the first place I go when I need any type of financial advice. Obviously make sure you are getting the best interest rate on your mortgage and work out if you want to fix and for how long.

House Buying: Important Threads - MoneySavingExpert.com Forums

When we bought our first house (the one I'm in now) I bought lots of furniture and knick knacks on credit cards to make it look really nice and I wouldn't do that again. Freecycle is around now so you can look on there as you can often get good quality furniture that someone might be getting rid of because they are buying new. Charity shops are good too or some charities often have specialist second hand shops just with furniture. See if family or friends want to get rid of stuff too as it all helps.

I would always make sure you have an emergency fund (of around £1,000) so that money is set aside for a repair that your insurance might not cover if it is a smaller job.

House maintenance also has to be factored into your annual budget, having the windows/gutters cleaned etc... can cost about 1% of the value of your home.

Can I also say I'm jealous of the prices of houses in Manchester! We are thinking of moving house this year and I'm balking at the amount of mortgage debt we would have to take on.

Money Saving Expert is the first place I went it always is, it's such a useful site.

Good advice on the furniture - we have some hand-me-downs from our parents stored away, and we're tying to budget our savings so that we've got a chunk of cash left over for furniture and redecoration

 

[beancounter]

One word of advice, buy a house that's at least 30% below your maximum. So if the bank says you can afford $200,000, look for a house that's around $140,000. If the bank says you can spend $300,000, look for a house that around $210,000, etc.

This is important, because the formula used by banks to determine what you can spend doesn't take a lot of things into account. Furthermore, buying a house at the edge of your ability to afford, puts you at a greater risk of default, should an unexpected life event occur. Also, you'll have more money to put away for retirement, college, vacations, etc.

 

[beancounter]

Also, another method used to determine affordability is to calculate what the ratio of the total mortgage payment is to your monthly income**. The current recommendation is 28%, but the recommendation seems to have slowly increased over the years. When I first looked at buying a house, the recommended ratio was 20%.

** Example: Monthly gross income $5,000. Monthly mortgage payment: $1,500. To calculated the ratio: divide $5,000 by $1,500. In this example the ratio would be 30%...which is too much (1,500/5,000).

Important: Use your total monthly mortgage payment in the calculation!!! This includes interest, principle, property taxes***, home owners insurance, and anything else that is included in the total monthly payment (they will also include the cost of default insurance if you don't meet certain criteria). Do NOT make the mistake of assuming your payment is solely principle and interest.

***Property taxes can be a significant piece of the total mortgage payment depending on where you live.

 

[KLS52]

I'm going to forward all of this information to my daughter.

 

[Dedalus]

This is not really practical advice from an expense perspective, but if I could afford it - I would hire not 1 but 2 different inspectors and then compare their reports. I have always found things that they probably should have told me about (that ended up costing me) and that they also pointed out things that never turned out to be a big deal.

Also - though a general inspector can give you a good overall idea of things - if you are worried about one thing in particular: IE: electrical, roof, foundation etc, then hire or ask someone directly from that field to come out and have a look. Much of the time these trades will offer to give you an estimate of repair cost and will come out to have a look for free. Don't let the seller's realtor balk at this request. You have a right to do your due diligence, but they won't want you or an inspector in the house more than you have to be.

Be sure when you write up your offer that your realtor gives you and your bank enough time to secure finances. Check with your bank to see how long it will take them. Even if you are pre-approved, lenders will have to inspect the house as well - and do their paperwork, etc. If you don't allocate enough time and don't have your finances approved and in order by the agreed upon date, you could lose the house. Our rookie realtor only gave us 2 weeks and that was a nail-biter.

Regarding the disclosure on the house you are interested in - don't be afraid to ask clarifying questions as many times as you need to. Just because the sellers may have marked 'NO' to there not being any water in the basement - doesn't mean there really wasn't ever water in the basement. Sometimes homeowners either incorrectly fill these out or worse, are coached into giving mis-leading answers. Any question with a choice of N/A selected definitely needs further inquiry.

 

[ledboots]

Such great advice!! My dad always said to check the roof and the furnace out well. $$$

 

[Amy SF]

Oh, nearly forgot, very important, with any house you are seriously considering, you should have it checked for the presence of asbestos. If it turns up in an inspection, that may be a deal-breaker for you, or, if you really want the house, it will have to be removed.

 

[flyingsnail]

Does the UK have a mortgage interest deduction? The US subsidizes homeowner with the mortgage interest deduction and this significantly effects, especially for higher income households, the recommendations for affordability and lending so some of the financial aspects may not translate well between countries.

As far as buying a home, I would try to remove your emotions from the choice as much as possible and be skeptical of anything sales people (e.g., real estate agents, mortgage brokers, etc) tell you. Look at homes as much as you can online and look at them, as much as you can, without any sales folks around. Inspects are good at telling you whether the house is up to code, major systems are in working order, etc....but they don't tell you the whole story. Look for signs of negligent in places where most people won't look, for example, under sinks.

While not advice on home buying, I would make sure buying is actually the better option financially. In many areas its cheaper to rent, of course, some people prefer to buy regardless of the financial details.

 

[Moll Flanders]

^It is usually better to buy than rent over here as house prices have been increasing dramatically in recent years in certain parts of the UK. My house would be almost double the cost if we were renting it.

The successive UK governments haven't seemed to have much of a cohesive housing policy and we are building far less houses than we need as a country so demand is outstripping supply. I would actually love a house price crash but people over here have been predicting it for about a decade now.

Just a general point but one thing I would do if I was buying a smaller house is to get a builder or carpenter in to build some storage as a lot of the more modern or new build houses in the UK can have inadequate storage.