OT: Home Buying Advice

[HailtoPitt]

A 15 year mortgage on a $250K home will save you over $100K compared to a 30 year mortgage. Yes, you can pay more per month for the 30 year option, but you will also be tempted to use that money for something else. You will hit financial freedom sooner and more saved for retirement. When your kids stick you in a nursing home, they inherit more.

 

[Dan1911]

Never get an ARM. Adjustable rate mortgages are there to screw you and they eventually will.

 

[TheChair]

Never get an ARM. Adjustable rate mortgages are there to screw you and they eventually will.

ARM's are good if you have a lot of money/see a liquidity event during the first few years of the ARM and just want to lock in a lower rate for a set time period. A lot of the folks that I know that have used ARMs have that situation and/or decide to refi the ARM at some point in the future. There are good TVM/planning reasons to use ARMs at times.

For the regular Joe, I can concur that an ARM usually is not the right financing vehicle for them.

I see some above advocating the 15 year mortgage and it is somewhat similar. You really need to adjust for TVM and expected income to see what makes more sense over the long-term.

If you have great credit right now, the rates are so low that I have a lot of issues passing on a 30 year mortgage unless your finances are such that your cash will not be terribly effected by paying things off over a shorter term.

I know someone that received a 2.2% 30 year last week; that is basically risk-free money over the term. Very, very hard to pass up.

 

[HailToPitt1985]

My only advice is this; if it is even remotely possible, lock yourself into a 15 year fixed rate. Rates are so low right now, they are not likely to go lower and if you can find a way to swing a 15 year payoff, you will be very very happy in the long run.

Cruzer

Definitely. Always get the 15 year. Even getting a 30 yr. and paying it twice a month doesn't give you the advantages of a 15 yr. fixed over the term of the mortgage. Get the damned thing paid off ASAP and be totally debt free.

I realize that some people say they can't afford the higher mortgage payments or a higher down payment. Then don't buy the house until you can! Don't waste your money giving it away to some bank just so you can have a house. The higher the down payment and the shorter the mortgage term, the better. The ideal is to pay cash for the house.

 

[SoufOaklin4Life]

Definitely. Always get the 15 year. Even getting a 30 yr. and paying it twice a month doesn't give you the advantages of a 15 yr. fixed over the term of the mortgage. Get the damned thing paid off ASAP and be totally debt free.

I realize that some people say they can't afford the higher mortgage payments or a higher down payment. Then don't buy the house until you can! Don't waste your money giving it away to some bank just so you can have a house. The higher the down payment and the shorter the mortgage term, the better. The ideal is to pay cash for the house.

Frankly there is no greater advantage
The interest is amortizatized either way -
So as principle is reduced so is interest
Your out of pocket is the same over 15 years

the 15 gets you a Mildly better interest rate .

that’s the only advantage

But losing that payment flexibility in the event of a loss of employment , health emergency , Major house repair etc -
Is taking a gambLe

 

[pitt90seven]

1. don't buy a new build. we did that and i'd never do it again. they go cheap on everything.
2. kitchens and bathrooms: the price tag to redo them is way off the charts. you can fix most things in the house w/out much financial problems. but not kitchens and bathrooms - the costs are absurd. if the kitchens and/or bathrooms aren't good, move along. HVAC as well - if that thing is over 10 years old, you have to consider that it will need replaced in the not too distant future, which isn't cheap.
3. if there's a basement, you need to check for any flooding or foundation leaks or repairs.
4. i don't know your kid situation but if you have or plan on having, you have to move into the best school district you can afford.
5. don't worry about granite countertops and stainless steel appliances. no one cares.
6. outdoors: do you care about gardening? think about the yard. does it have an area to sit outside, either in the front or back? i'm assuming you're young - you'll want to have friends over or even just a place to sit outside to read a book on a nice day. you want a good place to sit, have a grill. think about mature trees in the backyard - they're a delight, if possible.
7. if you have kids, you run out space REAL quick. going from 1 kid to 2 was like exponential shinkage. that was our first house and it got tight, quick. if you're going to be there for a long time, and have kids or going to, think about the house being filled with little guys on a series of rainy days - those days are not great with limited space and little guys screaming and fighting all day.
8. walking: everyone likes to go on a nice walk or run. can you go outside your door and find a nice little place to walk or run? i don't mean a half mile away. i mean, outside your door step. if it's all busy roads around you, you won't take the walks, which is sad.
9. check the roof, gutters, etc. and any slopes. you don't want flooding. flooding sucks.

 

[pitt-girl]

1. don't buy a new build. we did that and i'd never do it again. they go cheap on everything.
2. kitchens and bathrooms: the price tag to redo them is way off the charts. you can fix most things in the house w/out much financial problems. but not kitchens and bathrooms - the costs are absurd. if the kitchens and/or bathrooms aren't good, move along. HVAC as well - if that thing is over 10 years old, you have to consider that it will need replaced in the not too distant future, which isn't cheap.
3. if there's a basement, you need to check for any flooding or foundation leaks or repairs.
4. i don't know your kid situation but if you have or plan on having, you have to move into the best school district you can afford.
5. don't worry about granite countertops and stainless steel appliances. no one cares.
6. outdoors: do you care about gardening? think about the yard. does it have an area to sit outside, either in the front or back? i'm assuming you're young - you'll want to have friends over or even just a place to sit outside to read a book on a nice day. you want a good place to sit, have a grill. think about mature trees in the backyard - they're a delight, if possible.
7. if you have kids, you run out space REAL quick. going from 1 kid to 2 was like exponential shinkage. that was our first house and it got tight, quick. if you're going to be there for a long time, and have kids or going to, think about the house being filled with little guys on a series of rainy days - those days are not great with limited space and little guys screaming and fighting all day.
8. walking: everyone likes to go on a nice walk or run. can you go outside your door and find a nice little place to walk or run? i don't mean a half mile away. i mean, outside your door step. if it's all busy roads around you, you won't take the walks, which is sad.
9. check the roof, gutters, etc. and any slopes. you don't want flooding. flooding sucks.

Agree with most but aren't #2 and #5 contradictory?

I do disagree that no one wants granite or stainless steel.

 

[pitt90seven]

Agree with most but aren't #2 and #5 contradictory?

I do disagree that no one wants granite or stainless steel.

thanks. i don't think so, though. you don't want to buy a house that will need new kitchens and/or bathrooms(s) in the next 5 years. but some people get hung up on granite and stainless steel but i don't think that should be a deal breaker at all. you can have a decent kitchen with other countertops and and appliances.

 

[pitt-girl]

thanks. i don't think so, though. you don't want to buy a house that will need new kitchens and/or bathrooms(s) in the next 5 years. but some people get hung up on granite and stainless steel but i don't think that should be a deal breaker at all. you can have a decent kitchen with other countertops and and appliances.

Totally agree it shouldn't be a deal breaker.

We took the gamble and bought the "bad" house in the great neighborhood and knew what we were in for - we did it in steps (and on 1 salary). When it was all over - even though it never really is lol - we had basically gutted our home. But it IS a gamble.

 

[pitt90seven]

Totally agree it shouldn't be a deal breaker.

We took the gamble and bought the "bad" house in the great neighborhood and knew what we were in for - we did it in steps (and on 1 salary). When it was all over - even though it never really is lol - we had basically gutted our home. But it IS a gamble.

yeah i'd pick neighborhood. our first house had less than perfect appliances. but they worked. just replaced one every year.

then the HVAC crapped out completely. that's a fun surprise!

 

[HopeandChangeforAntoons]

1) do your best to put 20% down to avoid PMI. The least I would consider is 10% down.

This is true. PMI is a racket and they have relaxed the standards where the lender is forced to remove it.

One thing to think about is tapping a retirement account to use the first time home buyer exemption that avoids the penalty on early withdrawal. We’ve had a decent bounce from March but could see more volatility. Taking that gain may make sense if say you need cash to close in a month, but you know you’ll get a bonus later this year or early next. The distribution will be taxed as income, but you may be able to use that bonus cash as for an IRA contribution before next April as a deduction to offset the additional income. Caution: I would run this by your tax preparer or advisor first just to make sure it is right for you.

 

[recruitsreadtheseboards]

More advice. Careful with these. While they say "mobile", they just really aren't. And pay attention to storms.

 

[recruitsreadtheseboards]

also, some of the builders are unscrupulous. They build cheap homes too close to each other.

 

[lilspainishflea]

Put me in the camp that says a 15 year note is not smart

Money is historically cheap. The spread between 15 and 30 is not much at all.

But more importantly, a 30 year note with an option to increase payments is the way to go.

I took a 30 year. Certain months, I pay more into principal. Summer months, I make the min and take the family on vacation. In the winter, if the furnace needs repaired or replaced, I have some extra dough.

And if nothing else is going on in my pathetic life, I pay down the principal.

But I'm not locked into it.

Agreed. Borrowing is crazy cheap right now. 30 year rates are slightly north of 3%, 20 year rates are about 2 and 7/8. So you don't get that much savings by doing a shorter term. You're better off doing the 30 year and putting the extra $300 per month into an index fund for 10 years.

 

[Cavalier Panther]

Agree that rates are so low right now that it's worth doing a 30-year. You're talking about a 40 or 50 basis point difference. You want to own your home by the time you're 60, or about to retire, so down the road paying extra is OK. But the compounding effect of investing in your 20s and 30s is so powerful I wouldn't want to be throwing money at 3 percent debt.

Don't spend more than 25% of your gross monthly pay on Principal+Interest+Home Insurance+Taxes+PMI. Banks will approve you at 30% easy, even 35%, but it's no fun being house poor.

Expect a reassessment when you buy. If you can barely make the monthly payment work, and it goes up $150-200 due to reassessment, you're in trouble.

 

[superstein61a]

A 15 year mortgage on a $250K home will save you over $100K compared to a 30 year mortgage. Yes, you can pay more per month for the 30 year option, but you will also be tempted to use that money for something else. You will hit financial freedom sooner and more saved for retirement. When your kids stick you in a nursing home, they inherit more.

It depends on if one is disciplined or not. If you are disciplined and can stick with making the extra payments, then going for the 30 year option but paying extra every month to make it like a 15 year mortgage makes more sense because you have flexibility if something happens.

Now if you are not disciplined, the answer may be different. But don't overlook the flexibility factor as you never know what can happen

In today's environment, do not get an ARM. Rates are at historic lows. Lock in that fixed rate

As to house hunting:

1. Decide what you want in a neighborhood, commute, etc
2. Then pick areas with the best school districts that fit that criteria. Even if you don't have kids or plan to, school districts impact resale
3. Determine how long you plan to be in your home. That can change your thinking on what is important if you are someone who is planning on moving again in 5 years versus looking for a longer term home.

 

[pitt-girl]

yeah i'd pick neighborhood. our first house had less than perfect appliances. but they worked. just replaced one every year.

then the HVAC crapped out completely. that's a fun surprise!

Oh I know that - we replaced our entire HVAC in May. The installers said we went from a broken down 1980's Ford to a Tesla. It was $$$$$$.

 

[Panther Parrothead]

Three points, none original:

*Choose your neighborhood first, then find something that you can comfortably afford there.

*Never underestimate the importance of a school district. This determines the pool of young'uns whom your child/children will pick from as "friends", and it with probably influence whom your future friends will be, too. (Ignore this if you're 100% certain that they'll be going to private schools.)

*Immediately create a home improvement fund, and deposit money into it regularly. Being a home owner means that there's always something to buy, fix, or replace, and there's comfort knowing that you can pay for it outright, rather than incurring more debt.

Good luck!

 

[Cincinnati Kid]

Put me in the camp that says a 15 year note is not smart

Money is historically cheap. The spread between 15 and 30 is not much at all.

But more importantly, a 30 year note with an option to increase payments is the way to go.

I took a 30 year. Certain months, I pay more into principal. Summer months, I make the min and take the family on vacation. In the winter, if the furnace needs repaired or replaced, I have some extra dough.

And if nothing else is going on in my pathetic life, I pay down the principal.

But I'm not locked into it.

Dave Ramsey would disagree with you.

 

[Mikefln]

Dave Ramsey would disagree with you.

I am a big Dave Ramsey Guy, with that said I do not agree with everything he states and the current conditions are such a rarity that they may not apply at this moment like they did for most of his career.

 

[Cavalier Panther]

I am a big Dave Ramsey Guy, with that said I do not agree with everything he states and the current conditions are such a rarity that they may not apply at this moment like they did for most of his career.

Dave Ramsey is good for people who are deep in debt and need a plan to get out. But a lot of his advice is overly debt averse and his investment advice is outdated. I've watched many of his videos, but there are better content creators in that space.

I think this is a fair analysis of his program, and where people who are a little more savvy could differ:

https://www.moneyguy.com/2019/07/dave-ramsey-baby-steps/

 

[pitt90seven]

Oh I know that - we replaced our entire HVAC in May. The installers said we went from a broken down 1980's Ford to a Tesla. It was $$$$$$.

i remember our sales guy. he was a pretty good due. said it's more about who installs the system than the system itself. you pay more for the job to be done right. like you say, it doesn't come cheap.

 

[RaleighPittFan]

i remember our sales guy. he was a pretty good due. said it's more about who installs the system than the system itself. you pay more for the job to be done right. like you say, it doesn't come cheap.

My heat pump (heat and A/C) is original to the house - 1988.

Maybe I just got lucky, but I'm sticking with it until it dies. I've paid a couple hundred bucks for a module or something that went bad about 5 years ago. And, other than having a guy clean the coils out in the air handler every couple of years, I've not spent anything else on it.

I've also set aside enough to take care of it when it does turn to poop, but I'm hoping that's still a ways off.

I'm not a fan of electric heat, so about 10 years ago I installed a wood stove insert in my fireplace that provides a lot of heat, so the heat pump doesn't work as hard in the winter, now, but it does get a workout in the summer.

Unlike PA, there are a lot of neighborhoods here that don't have gas lines, so I was stuck with the heat pump. I guess I could have added an external propane or gas tank.

 

[recruitsreadtheseboards]

Dave Ramsey is good for people who are deep in debt and need a plan to get out. But a lot of his advice is overly debt averse and his investment advice is outdated. I've watched many of his videos, but there are better content creators in that space.

I think this is a fair analysis of his program, and where people who are a little more savvy could differ:

https://www.moneyguy.com/2019/07/dave-ramsey-baby-steps/

Sounds like the CEO of my former company. Did a fantastic job of basically taking us into solvency out of the verge of bankruptcy, made alot of tough decisions, and then at the end was the benefit of the economy exploding in the mid late 2000's. Then came 2008-09. His desire was to have us move from what is considered an industrial company to a technology company. And that was his downfall. He was risk adverse and lacked the aggressiveness, when we were in such a cash rich, low debt position, to purchase some technology companies to add to our portfolio of markets/products.

 

[levance2]

I'll take this in a different direction: If you don't currently own a house, don't bother investing in furniture when you move in.

Lots of people who upgrade to more living space with more rooms feel compelled to fill them with all new furniture. Let yourselves grow into those rooms organically. You may end up using rooms for different things you'd never even considered when you bought the house. Sometimes you really need to move around in space to understand where you want things to be. There are always friends and family trying to get rid of older furniture, or scout out garage/estate sales (maybe not an option right now). Once you've gotten some cheap couches, tables, etc. and really figure out what your wants and needs are, then go out and invest in quality stuff that will last. The only thing I'd really recommend investing in early is the bedroom. Lots of people underestimate how important good, comfortable sleep is.

Likewise, I wouldn't recommend putting a lot of money into replacing faucets, appliances, etc. just because you don't like the way they look. Things break all the time. There will be plenty of things you have no choice but to replace. As long as you've saved some money, you can use the opportunity to get real upgrades instead of having to cheap out just because you need a refrigerator ASAP. If there are things or appliances you don't like, then start doing your research into models and styles that you would want. You can really sit back and wait for sales when you aren't shopping out of need.

 

[JoseLind13]

My view and experience is contrary to most comments here, but the school district thing depends completely on your life situation for the years you intend to stay in the house. The notion that you won’t make money on the investment isn’t true for many neighborhoods in less desirable districts. We bought our starter home with intent of staying ~10 years. It was a beautiful house, in a very nice neighborhood withIn a convenient distance to everything we could ever need at that point in our lives. The same house would have been FAR out of our price range, at that point in my career, if located in a better school district. We lived there 11 years, did some remodeling, and sold for comfortably more than we paid and invested into it. The equity and margin we made on the first home gave a hefty initial payment to build our second, much bigger suburban home in that great school district that parents desire just as our first child was entering Kindergarten. I would not have gone a different route if I had to go back in time and do it over again. It worked out perfectly for us.

 

[Slick Manager of Champs]

The Fiancé and I have finally gotten our pre-approval letter from our lender after shopping around. What is some advice that you guys have for us and the entire process?

1) yards are over-rated. Too much maintenance. Minimize yard space and look for a house that is within walking distance to a park instead.

2) Boy, a house with a pool would sure be nice right about now.

3) a short commute is everything it is cracked up to be. But in this day & age, who commutes anymore?

 

[PA_Panther]

Some great stiff here, thanks to everyone again! The lady and I took off the next two day and split four areas into morning/night viewings, with more probably going into the weekend.

A lot of replies, but to whoever pointed out, “where you see what you will need in seven years,” really helped us out a lot in crossing some things out right now. Hopefully tomorrow, I’ll see some possible neighbors with some Pitt flags flying.

 

[TIGER-PAUL]

Do you need your own realtor when you are buying?

 

[Pitt1975]

My golfing partner is. VP with ML. When I asked him where is the best investment for my money, he said payoff your house. He said, “ I’ve never heard anyone say, that they wished they had a mortgage”. For those with zero debt on the board, congrats. Life is just a whole lot easier.

 

[Las Panteras]

1) yards are over-rated. Too much maintenance. Minimize yard space and look for a house that is within walking distance to a park instead.

2) Boy, a house with a pool would sure be nice right about now.

3) a short commute is everything it is cracked up to be. But in this day & age, who commutes anymore?

Yards are not overrated

Pools are

Even today

 

[lilspainishflea]

Do you need your own realtor when you are buying?

They can be helpful. Some are really intelligent about the local market and opportunities for appreciation. Good ones will also be honest with you about problems that they see in the house (e.g., rotting windowframes, mildew smell in the basement).

Anyway, the seller typically pays both realtors 3% from the sale price. So it makes little sense for the buyer not to have one.

 

[lilspainishflea]

1) yards are over-rated. Too much maintenance. Minimize yard space and look for a house that is within walking distance to a park instead.

2) Boy, a house with a pool would sure be nice right about now.

3) a short commute is everything it is cracked up to be. But in this day & age, who commutes anymore?

To your point #1: I absolutely love and absolutely hate my yard. We have tons of mature trees that keep the house nice and cool year round here in Georgia. But doing the leaves probably took me 20-25 hours of work last year. It's also a constant battle getting sticks off the roof and picking them up from the yard and the gardens. It's fine right now in my mid-30s but I wouldn't buy a place like this if I was retired and wanted to travel a lot, or if I wasn't physically able to do that work myself.

To your point #3: we moved because it put me 15 minutes from work...which gave me another hour per day to work on the yard lol

 

[Gunga_Galunga]

They can be helpful. Some are really intelligent about the local market and opportunities for appreciation. Good ones will also be honest with you about problems that they see in the house (e.g., rotting windowframes, mildew smell in the basement).

Anyway, the seller typically pays both realtors 3% from the sale price. So it makes little sense for the buyer not to have one.

I've bought two houses, didn't have a realtor either time. Both times, the selling realtor cut their commission to help us come to an agreement on price. They could do that because they were taking commission on both sides.

I had the same thing happen when selling my first house. The buyer didn't have a realtor. We were several thousand away from each other and I told my realtor, I'm not going lower. You provide the concession if you want to close the deal. She did.

So my experience is, if you know what you're doing and have some knowledge, a realtor for the buyer adds little value.

 

[Panther Holla]

Thanks for the advice everyone! Most of this is what we’ve heard from both her and I’s parents but is helpful to hear it from another source! We both work in the downtown area now, so it’s been kind of hectic narrowing down where exactly we want to live in the area.

If you really like a house, visit it soon after a good rain, if you can, and check the basement for leaks.

 

[PharMorNightStocker]

Other than the lousy 4.95% interest rate I got, here are some mistakes I made:

1) I didn't take real estate taxes into account. They constitute almost half of my mortgage payments each month. There are towns around me that are as nice or nicer than mine where I could have gotten a similarly-priced home and would be paying half as much in real estate taxes per year.

2) A big yard sounded like a good idea, but it's really just turned into a big pain in the ass. Same thing goes for all the landscaping I've done. But this is obviously a case by case basis, and you might use a big yard more than I have.

3) Being a corner lot kind of sucks. Less privacy, more of people's stuff blowing into your yard, and they've messed up my yard multiple times to access gas lines, drainage systems, the fire hydrant, etc.

4) For an extra 10K, I could have gotten a similar house in a nicer neighborhood. I choose mine because everything was new/clean inside. But a lot of it was done on the cheap. And if you're planning on staying long-term, you're going to have to replace things anyway. But the optics of it being vacant thing definitely made an impression. It wasn't a flip, but an empty house sure looked a lot better than having to see the current owner's stuff in every room. I'd advise to look past that. That stuff will all be gone by the time you move in (obviously).

5) Not sure if this applies to you, but I wish I had chosen to live near a trail. There is a main drag in my town where people walk their dogs on the sidewalks, but I much prefer nature. Unfortunately, I have to drive somewhere to get to nature, and my dogs do a number on my car (I'm constantly having to clean it out). I'd take them places anyway, because I still like to explore new areas, but sometimes it would be better to have to walk five minutes to get to a trail than have to hop in the car and drive 20+ minutes. This one is a little nitpicky.

And then lastly, I don't think you should do a 15-year mortgage if you can get a similar rate on a 30-year. Just make extra payments when you can, and you can pay the 30-year off in 15 years anyway. Plus you have an added security blanket if you ever can't make the extra payment amounts. Unless the interest rate is significantly better, I see no advantages to 15 years over 30.

 

[Las Panteras]

If you really like a house, visit it soon after a good rain, if you can, and check the basement for leaks.

That is terrific advice

 

[superstein61a]

2) A big yard sounded like a good idea, but it's really just turned into a big pain in the ass. Same thing goes for all the landscaping I've done. But this is obviously a case by case basis, and you might use a big yard more than I have.

Totally agree. Had a huge yard for my first house. It was a pain in the ass cutting it each week, maintaining landscaping, etc. When we built our current house , I wised up. Went with a much smaller yard, less maintenance and upkeep. BUT we built on a golf course. So I look out at a huge green area abutting my backyard that I do not have to maintain. The best of both worlds. Wide open green space without me having to take care of it.

 

[RaleighPittFan]

Totally agree. Had a huge yard for my first house. It was a pain in the ass cutting it each week, maintaining landscaping, etc. When we built our current house , I wised up. Went with a much smaller yard, less maintenance and upkeep. BUT we built on a golf course. So I look out at a huge green area abutting my backyard that I do not have to maintain. The best of both worlds. Wide open green space without me having to take care of it.

I didn't necessarily want a big yard, but I did want privacy. I bought next to a church that has a large wooded area, that won't be developed, behind it. I'm right across from the woods. When I'm on my deck, I can't see any of my neighbors.

I'm in the city limits with foxes and deer visible from my deck.

 

[pitt-girl]

I've bought two houses, didn't have a realtor either time. Both times, the selling realtor cut their commission to help us come to an agreement on price. They could do that because they were taking commission on both sides.

I had the same thing happen when selling my first house. The buyer didn't have a realtor. We were several thousand away from each other and I told my realtor, I'm not going lower. You provide the concession if you want to close the deal. She did.

So my experience is, if you know what you're doing and have some knowledge, a realtor for the buyer adds little value.

We did the same thing when buying our current home. Same relator handled our townhouse sale and the new house. We negotiated a rate of 3% on both.