Shopping for our first house

This is probably obvious, but pay attention to the age of various major systems.  Nearly all of them have a fairly predictable life span.  This information should be in the home inspector's report.  Stuff like roof shingles, kitchen appliances, heating/cooling system, water heater, plumbing, and electrical.  If some or most of these systems are bumping up against EOL (end-of-life), they could set you back a chunk of change in the near future.  If the house appeals to you in all other ways, try to use this information to leverage a better price.

Good hunting! Having been in the same house for almost 27 years, I sometimes have a desire for something with more land for a shop.  However, not having a mortgage makes starting over again a tough pill to swallow. 

Personally, I liked having a 15 year mortgage. It made adding some additional principle and paying it down fast easier. 

Home ownership is one of the most rewarding things you'll ever do.   There's nothing like putting that key in the door after the mortgage closing and knowing it's YOUR place.  It's a great feeling.  I'm excited for you guys! 

That said, when the roof needs replacement, or the A/C  or furnace takes a crap---- home ownership is ah....less rewarding!   As others have said, get an inspector you trust.   Many construction guys are also certified to be home inspectors.  See if you have a family friend that can help---and give you the straight scoop.

You're smart folks, even though you both need to obey each other, not just one way.  (sorry....I hate the term SWMBO)  

Finding a home in a good school district is important.  Not only do you want your future kids to go to good schools, the school district greatly affects home value.  (think of the difference in cost between Holly Hill and Ormond Beach--- the schools are a huge reason why Ormond is so much more expensive)   

Before you make a decision on any home, hang out in the neighborhood--- especially after dark.   Take the dog for walks around the area at different times of the day.   This is a good way to find out if your potential neighbors are crazed hillbillies who will be screaming at each other after happy-hour every night, or if you have bad-seed teens in the area and so on.   Neighbors can make or break a home-buying experience.   Check out their backyards, their cars, the condition of their homes.  Meet them if you can.   You do not want a crappy neighbor living next door---- especially if you'll be messing with cars / working in the shop late at night.   

Try not to stress out, or get too emotionally attached to the homes you look at.   It's very, very hard not to let emotion come into play----as you'll be imagining the changes you'll make, the future you'll have there.  Try to be as logical and sensible as you can be.  Also, don't be too discouraged if plans fall through---- -there are tons of "perfect" places out there.   (heck, I bid on 4 homes before I finally got mine!)    

Good luck!  It will all be worth it, when you finally insert that key!  

Good luck with the whole process! I'll be doing the same process as I am closing on my old house next week and starting the looking process myself starting next year. Enjoy the process. It'll be frustrating at times, fun at times. Just don't get in over your head and remember a house is a home and not an investment. 

The home inspector will probably come back with a massive scary laundry list of things wrong with the house. Don’t panic. It’s like buying any old complicated system - there will be a bunch of mild or unimportant problems that won’t cause you an issue and a few that might be a big deal. Just try to sort out which is which. 

Buying a house is like a lot of things in life; you can pretty much only really learn it by doing it. Listen to people’s input but the most important people are you and your spouse. 

I think holding off on buying in fear of a downturn is a bad idea. The properties that go down in price are the less desirable ones in the lesser areas. The kind of house you’re looking for probably barely went down in price in 2008. Not to mention it’s all a hypothetical anyway. 

Yeah, don't wait for economic downturn.  If you wait one year and then instead rent a house for $1k per month that would equal the cost of $12k to wait.  Will the house you want really downturn more than $12k? 

I put a condo up for sale in 2008 (the bottom of the economic turn.)  After 2 years on the market I sold the condo for 25% less than I paid for it.  Luckily I owned 28% of the house so I at least netted a little cash from the sale, but... Even though it seemed I got killed on this home ownership, I did the math and even with improvements factored in, had I rented the place for the 7 years it would have cost me more to live there.  

So, in that case, home ownership did not make me money but it gave me a better place to live with less cash outlay than renting.  

That condo was my second house purchase.  My first house purchase was a 1950, post war, 1.5 story house which is ultra common in the Midwest.   My logic when buying this house was that I totaled up all my expenses (mortgage, taxes, insurance) and then asked myself, "would I be willing to rent this house for this amount?"  Still knowing that I too would need to make the improvements.  

I lived there for 8 years!  The first 4 years with a girlfriend/fiance that never worked out and the last 4 as a single guy.    I did make some money on the sale of this house which I sold by myself in 8 days.

Great feedback and advice everyone. Thank you. 

Definitely buy less house than you are approved for. You need to leave yourself some leeway to deal with layoffs and career changes that are a fact of life these days.

Whatever house you are interested in, call the tax assessors office yourself. Find out

1. What YOUR property taxes will be

2. How they are calculated

3. When they are due

4. How often they change and how that assessment is done.

My experience is they are usually happy to work with you. They have to deal with so many people in a some state of anger or panic because the tax bill is or due sooner than ws expected. Someone calling and asking all the questions upfront is welcomed.

Probably not possible in Baltimore, but if it is, the only thing I would suggest is to buy a home that you can afford on ONE income. 

That way if anything happens, no racing/vacation/fancy beer or dinners, but at least you won't have to worry about having a roof over your head. 

As has been said, use your own inspector. The guy that did ours appeared to have been quite thorough.  Lots of pics, seemed good. Except he missed at least 2 leaks in the roof. Looked back at his pics and he basically went into the attic, stood there and never went to the harder to reach spots which is where the leak was. One leak caused discoloration on the ceiling that had been crapily painted over. Jerk missed all that. 

I have a high end carpenter/woodworker in the family that does renovations small and large for lots of $. His attention to detail comes with a big price tag. He has hung out to help on inspections for friends and routinely has to show the inspectors major issues that they missed or were more than willing to ignore. Hes convinced they are all e36 m3. 

Also i had trouble getting insurance since there was doubt that the roof had been replaced. I found plenty of insurance co’s that would almost hang up(1 did hang up) once they heard the roof had nit been replaced in less than 10-15 years.  Newer roofs are great and will save a pile on insurance. 

Do NOT fall in love with the place until the deal is done. You will likely find the perfect house and find its already got offers or has sold. 

Cheap-ish houses rock. We could have bought more but this place checked the boxes with bonuses and was just $99,900. Actual mortgage is tiny, like under 3xx$ a month. But the whole deal with insurance and escrow is about 800$ a month. A rental house like this would be probably 1500+ a month. So its quite comfy having the financial wiggle room. Were far from “house broke”(that does not sound right.. house poor then). 

And good luck. Once you get past all the BS, its worth it to have your place. 

Research.  Know the neighborhood and if it is on the rise or on the decline.  Know the school district, even if you don't have kids, it matters to your taxes and your ability to sell later on. Know the traffic.  Know the municipality, is trash included? Leaf pickup? Recycling?  Gas or Electric? These all add recurring costs.  I'd rather fix up a house in a great spot than move into one in a bad location. 

Research your mortgage too. There are SO MANY options out there and so many providers. I have always used smaller, local providers with unique options that the big guys never have.  There is a school of thought to pay off as soon as possible, and other that says get the longest mortgage you can. Weight the pros and cons of each and see what fits your long-term plans.  Oh, know your long-term plans!  Is this a starter house, or the place they will carry your mummified corpse from? Do you see y ourself working an hour away forever or will you want to be closer to the office?  Will you work from home? Have pets? Want an alpaca?  All things to consider. 

Like it has been said, water in the low places is a run-away fast situation. If you want a bathroom off the bedroom, buy a house that has one.  You can remodel easily, but adding spaces that don't exist is more challenging.  Similarly, if the layout bothers you or lacks things you want, walk away. If you want to add a 2-car gage, do you have the space? Will it be allowed?

For a first house (I am on my 5th) I would make a list of priorities, and try to get as many as you can, knowing that you wont get them all.  As long as you get the things that you want most, you'll be OK. 

Finally, there is no such thing an insultingly-low offer.  Don't try to be a mind-reader and guess what the seller wants/needs. There is no harm in trying to make a deal, I went against my realtor's advice every time, and each time my offer was accepted. For the ones that weren't, the houses sat empty and sold for even less most of the time. 

My two pieces of advice:

1 - Make sure the garage has 10.5'+ ceilings.  Barring that, make sure you are happy with the shop space you have.  No, you will not get to build your amazing shop there, so the one you move in with better have enough room for your lift now.  Yes, I know there's "plenty of room for the perfect shop!"   Too bad.  You won't build it there.

2 - Show up and walk through with the home inspector.  Obviously, clear it with him first, but both times I've bought, I've got to trail the guy, and he was able to give me a lot more advice than just is written in the report.  Plus, you get to see his immediate reaction to things.  

I suggest going a little further in depth on your must have / nice to have / nogo list. You both make your own list and come together on questions that you need to answer about every house you visit. Keep a notebook that you fill out while you are looking at a house. Take your own pictures of the house and make sure you take the same pictures of each house and keep them organized. One person is in charge of the notebook and pictures and the other helps make sure it gets done. Have a meal and talk about your notes afterwards.

Hire a good home Inspector, I went with a locally recommended guy who sucked, missed a bunch and almost got my family killed. Good news is housing is so cheap here and we purchased in 2012 so even with the stuff he missed it's been affordable. We purchased using a solo income as our budget and it's worked fantastic for us. 

I'll put my two cents in here. As others have said do your own budget, not what the mortgage company says you can afford. I like the Dave Ramsey rule, not more than 25% of your take-home pay for the mortgage, property taxes, and insurance payment on a 15-year loan. You can do the math on that all yourself. Even if you decide on a different term mortgage, this will keep you from being house poor. I did not follow this advice on my first home and that was a mistake, took almost 5 years for my income to grow enough that everything that went wrong was not a crisis, and things will go wrong.

+10 on the get your own home inspector, the one the agent recommends job is to make sure this deal goes through, not to protect you from harm. Most of the fine print on the inspector's reports will say they are not responsible for missing something that later proves to be a problem.  So inspections are important but don't assume they are a guaranty.

The other advice I will echo is to remember your agent gets paid more the higher the sales price is, so it is not in their best interest to get the lowest price. Also in this kind of deal, everything is negotiable, price, closing costs, closing dates, what's included in the deal, I like to ask for the world up from with ideas on what I am willing to give in on. I have been surprised every time the number of things sellers would give in on. Remember they want to sell at least as bad as you want to buy.

Good Luck

In reply to Ed Higginbotham : Location, location, location. 

Buy the worst house in the best neighborhood you can find.  Don’t worry about condition color or features  they can be added or fixed later  

 What can’t be changed is the location.  If you can fix a car then a house is so much easier. 

If I had spent the same amount on a nice house in the wrong neighborhood/ location I wouldn’t be living in a very expensive house in a extremely upscale neighborhood.  

In 2 moves I went from $27,800 to this place which I paid $107,000 but it now approaches 2 million  Almost all due to location  

Property increases at the rate of inflation  ( unless in high demand) while the house itself depreciates.  

In high demand places due to  view, waterfront, access,  schools, etc can easily beat inflation many times over.  

Styles and trends in building designs and feature go in and out of fashion with stunning regularity 

With regard to taxes.  Do not fear taxes,  expensive neighborhoods with expensive  property right next to each other actually lowers your rate.  Normal taxes are roughly 2% of the value.  In poor neighborhoods they can easily approach 4-5%  while rich neighborhoods can be under 1% 

1988RedT2 said:

John Welsh said:

In the same vein, all Realtors are used car salesmen. The jacket may just be gold rather than plaid. 

So much this.  They may claim to represent your interests, but their only goal is to make the deal go through.

In my experience, it seem that in addition to the small minority of 'bad apples' out there, most of the rest of them are well enough intentioned but have simply been basically trained/indoctrinated/brainwashed into believing that 'negotiating' and avoiding confrontation are synonymous.

And yes, finding better mortgage brokers, home inspectors, and pretty much any other service/contractor that are better than the ones recommended by most realtors, is just a few quick Google searches away.

99% of home inspectors got their license from a cracker jack box and are just there to get their $500

Presuming you’ll be escrowing taxes & insurance, just know that your payment will go up yearly. Maybe not much, but it could be significant some years. 

Go here to check out crime rates. They typically have a pretty big impact on property values. 

How long do you expect to stay in this house? If the market tanks & you didn’t pay a significant down payment in cash, you may find yourself upside-down on your mortgage. I know it’s been discussed here before, but IIRC if you’re not going to be there at least 4-years you’ll be money ahead by renting instead. 

bmw88rider said:

Good luck with the whole process! I'll be doing the same process as I am closing on my old house next week and starting the looking process myself starting next year. Enjoy the process. It'll be frustrating at times, fun at times. Just don't get in over your head and remember a house is a home and not an investment. 

I’ll take exception with the idea that a home is not an investment.  It’s not a bank balance or pile of cash rather a fundamental necessity ( Food Clothing & shelter ) 

Assuming  you live the 4 score & 10  the place you move into in your 20’s will provide you with 60+ years of shelter.  Look back at the price paid for similar homes 60 years ago.  Tiny in relation to their cost today.  That’s the effect of inflation.  The price you pay has 15-30 years of income inflation ahead of it before its paid off.  Plus hopefully years past the end of payments. Where maintenance,insurance, and taxes will be your only costs. 

One warning, like relations you cannot pick your neighbors. While most people are decent enough, There are the occasional neighbors from Hell. Just because you have decent neighbors when you move in there is no assurance they will remain . 

frenchyd said:

 

I’ll take exception with the idea that a home is not an investment.

 

Agree.  It's an investment and obviously much more.   My first house was easily the most lucrative investment I've ever made, in terms of greatest return in the shortest time frame.  This one is on track to be pretty good also. 

Keep some cash aside. 

Every house I have previously owned was close to the max I could afford. 

My current one was purchased with quite a bit of cash left in the bank. What a different experience!  It has given us the ability to do some of the repairs it needed without too much stress, and will give us the chance to enjoy the improvements. 

Previous houses we didn’t get to fix up until it was time to move- no fun. 

Let me quantify my statement of it not being an investment.

All of my houses did appreciate in value over time.  28% over 3 years for my first, 10% over 7 years on my second, and doubled in value over 12 years on my third.

On my third, I could have made 4X my cost by buying in a different neighborhood that was transitional at that time. With that, we would have lived in a higher crime area, had more construction, and lived in a smaller home. So by looking it as a home, we had arguably a better life. We looked strongly at both areas and I knew long term the transitional neighborhood would be worth more money because it was still early in the cycle. Since I was buying a home, we chose the bigger house in an established neighborhood with no construction and had no crime within 5 mile circle of my house 9 out of the 12 years I lived there and the crimes that did happen were petty in nature. 

The more one views their home purchase as an asset/investment, the more it also becomes a liability/risk. 

It seems to me that the more people tend to focus on the former, the more they seem to conveniently ignore the latter 

Investment, asset or whatever.  You need a place to live.  If you don't plan to move or relocate anytime in the near future, then buying is worthwhile. Personally, I would advocate buying what you can afford on 15 year mortgage. Then when it's done you'll hopefully still be in prime earning years and can really start socking away maximum savings for retirement. Besides utilities (which don't really change before and after a mortgage) then you just have to cover the taxes, which does take some saving discipline.

How much my house is worth is only a concern to me with regards to the other houses in the area and how much I could potentially spend on renovations and upgrades and not losing too much money if/when I need to sell.  But that said, as I don't intend to sell, I want upgrades that improve the house for ME while I'm here for the next 20-30 years. I don't care that much about the next owner as I'll likely be dead by that point.