2 Year Plan

[GT3 Tim]

My wife and I have been Realtor's for over 10 years.

Pretty much all of the advice you got above is good....

I am in California and the market is very competitive....we have low inventory, low interest rates, and people are lining up to buy property.

At least where I am, and the market around here, CASH IS KING.

My recommendation would be to save as much as you can so you can make a large down-payment, if not pay cash for the property.

We are having an issue with appraisals at the moment (the last 9 months). Values have been climbing very rapidly and the appraisals can't keep up. Appraisals are typically based on similar homes that have sold in the area within the last 6 months or so. Being as there is so much competition, multi offers, etc, the appraised values are not reflecting what people are willing to pay (which is, after all, what a home is really worth). Thus, sellers are favoring cash offers as no appraisal is required. Many buyers with financing are willing to pay the difference between the offer price and the appraisal (a lender will not lend more than the appraised value). I could go off on a rant about appraisals and how truly non-reflective of the market they are, but I digress.

All that being said, save as much cash as you can and get your credit score as high as possible to get a loan with the lowest rate. Best of luck to you.

[SAM135iAM]

Originally Posted by GT3 Tim

My wife and I have been Realtor's for over 10 years.

Pretty much all of the advice you got above is good....

I am in California and the market is very competitive....we have low inventory, low interest rates, and people are lining up to buy property.

At least where I am, and the market around here, CASH IS KING.

My recommendation would be to save as much as you can so you can make a large down-payment, if not pay cash for the property.

We are having an issue with appraisals at the moment (the last 9 months). Values have been climbing very rapidly and the appraisals can't keep up. Appraisals are typically based on similar homes that have sold in the area within the last 6 months or so. Being as there is so much competition, multi offers, etc, the appraised values are not reflecting what people are willing to pay (which is, after all, what a home is really worth). Thus, sellers are favoring cash offers as no appraisal is required. Many buyers with financing are willing to pay the difference between the offer price and the appraisal (a lender will not lend more than the appraised value). I could go off on a rant about appraisals and how truly non-reflective of the market they are, but I digress.

All that being said, save as much cash as you can and get your credit score as high as possible to get a loan with the lowest rate. Best of luck to you.

Thank you sir! I'm pretty good at saving and my debt to income ratio is relatively low. I only owe on my school and my car. My car should be paid for in three to four years. I think my best bet is to up my savings from 15% of my gross monthly income to maybe 20% or even 30% if I can swing it. I'm just tired of spending money on rent and knowing I will never see that money ever again. Once again, thank you for your input.

[secretsquirrel]

This is one of the best threads on the whole sites. I've spent too much time looking at car crap. I need to build some wealth so I can enjoy my later years. Real estate is the best way IMO.

[JLed79]

Originally Posted by secretsquirrel

This is one of the best threads on the whole sites. I've spent too much time looking at car crap. I need to build some wealth so I can enjoy my later years. Real estate is the best way IMO.

+1

[xtac]

I just got pre qual'd , hoping to buy a house by Aug. Going to take the FHA route 3.5% down. Looking for a decent house now - tis not easy!

[SAM135iAM]

Originally Posted by xtac

I just got pre qual'd , hoping to buy a house by Aug. Going to take the FHA route 3.5% down. Looking for a decent house now - tis not easy!

Awesome man! Good luck!

[Judge]

Originally Posted by secretsquirrel

This is one of the best threads on the whole sites. I've spent too much time looking at car crap. I need to build some wealth so I can enjoy my later years. Real estate is the best way IMO.

Seriously, I spend too much time on Ebay Motors and car sites looking at used luxury vehicles I want to buy when I should be thinking about real estate.

[secretsquirrel]

Originally Posted by Judge

Seriously, I spend too much time on Ebay Motors and car sites looking at used luxury vehicles I want to buy when I should be thinking about real estate.

Yep. But don't stop looking at that crap. Use it as a dangling carrot to reward yourself when you get your real estate situation together. That's what I'm doing.

[bosstones]

My humble thoughts/opinions based on what went through my head and what I did before I bought my first place several years ago.

• Know your finances before you go to a mortgage broker (or bank, if you really prefer). From stories friends have made when they bought their home (house, condo, townhouse, etc...) AFTER the housing market crashed it seems that there is still a prevalence of stupidity/dishonesty in the mortgage world. I know when I got my first mortgage, the broker only wanted to know what revolving and 'contractual' debt I had (i.e. credit cards and loans). Those are what were considered 'mandatory' debt and what was used in his calculations. Liability insurance (car insurance) is mandatory in my state....yes was not considered 'mandatory' debt to him. He also did not include my cell phone bill. So....know what you pay each month and pay attention to how much is factored in by whoever you go to for a mortgage. Assume they will try to up sell you in the amount you qualify for.
  
• Know your debt to income ratio (as others have already stated) and credit score as well. If you need to correct anything, do it know and worry about home buying later.
  
• People say to pay off large credit card balances a few months before applying for a mortgage to better their debt/income ration and improve their credit score. While true, since you want the best rate you can get, also look at your spending habits. Where did that large credit card debt come from? If it's leftover from, say, college and your card use has tapered off a lot since then, okay. If you are always racking up large bills because you're not living within and/or below your means, you may have some lifestyle adjustments to make.
  
• Know what you pay each month for everything (including food/groceries, entertainment/leisure, pets etc...).
  
• Factor in extra for utilities if you current rental property (for those renting) includes any of them in with your rent. If you have friends/family that own, poll them for what they pay each month in utilities.
  
• Factor in home size versus the size of your rental (it can make a big difference with heating/cooling).
  
• This is very important.....know property tax rates for the area(s) you're looking at. This can make a HUGE difference in what you can afford. You should be able to get the actual tax amounts paid for existing homes. For new construction, you can get an estimate but also look at similar, existing homes as well. Also, for new construction and if you have to use escrow, they may bill you for a small amount (monthly, bi-annually, or annually) until you get an actual property assessment and property tax bill. Realize that is just 'something' for purposes of your escrow account. When the bill hits, expect a huge increase. Better to budget in for an estimated real amount early on. If nothing else, to get used to having to pay it. Worst case, you have a nice chunk of change to do something with. This bit a lot of first time home buyers in my area.
  
• Know if there are any HOA fees. If there is a HOA, ask for a couple of their rules/regulations. You will want to know if you the place you are looking to buy is in a mini-police state.
  
• If you have to use escrow for property tax, know what their minimum account balance is. Also, keep some scratch on the side for when their 'estimate' for the following year's tax bill results in an escrow shortage and they increase what you pay.
  
• Very important.....determine what you want to be able to save each month. Don't see what you can afford to pay and base what you save off of that.
  
• If the place you buy is not furnished, keep some money on the side for appliances and, if needed, furniture you need (no need to furnish everything at once).
  
• If you buy an older place, know the age and condition of some of the major cost hitters (e.g. roof, water heater, HVAC system, etc...). If there is an HOA, exterior items like roofing and siding may be taken care of by the HOA.
  
• Don't feel the need to buy a larger or more expensive place than you're told you can afford. In the end, the one with the bill is you; not the mortgage broker, friends, etc...
  
• Know how the value of the area you're looking has been fluctuating in recent times. If nothing else, for curiosity purposes.
  
• Put down at least 20% (cash). Avoid PMI.

That's all I can think of for know. Just my thoughts/opinions.

[SAM135iAM]

Originally Posted by bosstones

My humble thoughts/opinions based on what went through my head and what I did before I bought my first place several years ago.

• Know your finances before you go to a mortgage broker (or bank, if you really prefer). From stories friends have made when they bought their home (house, condo, townhouse, etc...) AFTER the housing market crashed it seems that there is still a prevalence of stupidity/dishonesty in the mortgage world. I know when I got my first mortgage, the broker only wanted to know what revolving and 'contractual' debt I had (i.e. credit cards and loans). Those are what were considered 'mandatory' debt and what was used in his calculations. Liability insurance (car insurance) is mandatory in my state....yes was not considered 'mandatory' debt to him. He also did not include my cell phone bill. So....know what you pay each month and pay attention to how much is factored in by whoever you go to for a mortgage. Assume they will try to up sell you in the amount you qualify for.
  
• Know your debt to income ratio (as others have already stated) and credit score as well. If you need to correct anything, do it know and worry about home buying later.
  
• People say to pay off large credit card balances a few months before applying for a mortgage to better their debt/income ration and improve their credit score. While true, since you want the best rate you can get, also look at your spending habits. Where did that large credit card debt come from? If it's leftover from, say, college and your card use has tapered off a lot since then, okay. If you are always racking up large bills because you're not living within and/or below your means, you may have some lifestyle adjustments to make.
  
• Know what you pay each month for everything (including food/groceries, entertainment/leisure, pets etc...).
  
• Factor in extra for utilities if you current rental property (for those renting) includes any of them in with your rent. If you have friends/family that own, poll them for what they pay each month in utilities.
  
• Factor in home size versus the size of your rental (it can make a big difference with heating/cooling).
  
• This is very important.....know property tax rates for the area(s) you're looking at. This can make a HUGE difference in what you can afford. You should be able to get the actual tax amounts paid for existing homes. For new construction, you can get an estimate but also look at similar, existing homes as well. Also, for new construction and if you have to use escrow, they may bill you for a small amount (monthly, bi-annually, or annually) until you get an actual property assessment and property tax bill. Realize that is just 'something' for purposes of your escrow account. When the bill hits, expect a huge increase. Better to budget in for an estimated real amount early on. If nothing else, to get used to having to pay it. Worst case, you have a nice chunk of change to do something with. This bit a lot of first time home buyers in my area.
  
• Know if there are any HOA fees. If there is a HOA, ask for a couple of their rules/regulations. You will want to know if you the place you are looking to buy is in a mini-police state.
  
• If you have to use escrow for property tax, know what their minimum account balance is. Also, keep some scratch on the side for when their 'estimate' for the following year's tax bill results in an escrow shortage and they increase what you pay.
  
• Very important.....determine what you want to be able to save each month. Don't see what you can afford to pay and base what you save off of that.
  
• If the place you buy is not furnished, keep some money on the side for appliances and, if needed, furniture you need (no need to furnish everything at once).
  
• If you buy an older place, know the age and condition of some of the major cost hitters (e.g. roof, water heater, HVAC system, etc...). If there is an HOA, exterior items like roofing and siding may be taken care of by the HOA.
  
• Don't feel the need to buy a larger or more expensive place than you're told you can afford. In the end, the one with the bill is you; not the mortgage broker, friends, etc...
  
• Know how the value of the area you're looking has been fluctuating in recent times. If nothing else, for curiosity purposes.
  
• Put down at least 20% (cash). Avoid PMI.

That's all I can think of for know. Just my thoughts/opinions.

Wow! Thank you sir for your time and input!

[bosstones]

Originally Posted by SAM135iAM

Wow! Thank you sir for your time and input!

No problem. Hope some of it is useful. It didn't take too much time to spit that out either....as is evidenced by the typos and grammatical errors.

[BayMoWe335]

Take whatever you think you need to save and double it or at least multiply by 1.5. Seriously, 20% down is one thing but you'll need appliances, furnishings, insurance, security, plants, flowers, decor, floor mats, bath mats, dishes, kitchen stuff, curtains, towels, and about a million miscellaneous things. If you're telling yourself you don't need extra stuff, you do and you'll want to get them to make the house nice.

If you have cash, everything is easy. Get a good house that isn't old and in need of repair unless you're a home buying veteran. Don't mess with a fixer upper or an old house. find something in a nice area where your house is one of the cheaper homes in a more expensive area. Get a 15 year loan if you can afford it too. You'll get 2.8% or better. Look the prospective home up on the county's tax appraisal website and get an idea of tax rates and what the county considers to be the value of the home.

I spent $25k just on the above items not including 20% down. Be prepared to spend a lot.

Make sure you have a 12 month emergency fund and no debt before you start this process. If you need more than 2 years to do this, take the extra time.

ok get your credit score above 720 for starters, secoond i wouldmakesure that i incorporate into my plan at least 12 months PITI, third dont just listen to what your real estate agent wants in terms of who you should use. Shop around like 3 people. Your real estate agent may suggest someone that they feel comfortable with. Theres a guy named rodney anderson that does a ton of businessin tx. I believe in differentlocations there are different taxes/guidelines/rates.

Also rememebr the bank will probably give you the highest rate but i would deal with a local company/lender close to you.

I would ask an expert like a competent loan officer or attorney. Also, I would deal with whoever I feel most comfortable with over an eighth of a percent I would not switch to a stranger. Always lock your rate for long enough, ie dont lock for 30 days when you have to close in 60.

There are ways to tweak your credit score. If you get a copy of your report you may be able to raise your score by doing little things, paying x bill down instead of the other.

I dont know the laws regarded mold and shit like that but i would suggest you read up on that too. a bmw in the garage thats key imo like a 3 car garage i would say thats important