How do we go about buying a house?

Question

My husband and I are in our early twenties, i've been renting since the age of 16, and i think it's time to buy a house. We are going to be starting a family asap, and a one-bedroom apartment won't cut it for three people and pets.

Since i'm completely clueless as to how mortgage's work, what's the first step? Do we discuss this with our banks, have to save up at least 20 grand? Take out a loan? How does a mortgage work?

We're both looking to getting a house within the next year, does this sound reasonable? We both have full time jobs, I bartend, he works $13/hr. With our income do you think we have a chance of buying?

I feel as if i've wasted thousands of dollars from renting, which could have just gone into a new house.

wow....you are all really helpful! thank you so much to every one of you...i can't choose a best answer, they're all so great...i'll leave this one up to the voters :]

thanks again!

Answer 1

Call a good agent to help you. They can tell you how much you can afford, and also show you houses within that price range.

Answer 2

Next year should be a good time as housing market continues to slump. By the way, it is a myth that renting is a waste of money.

People have this misconception that paying off mortgage bills are adding equities to houses. However, mortgage payment consists of two parts: interests and principal. Interests are like rent, which doesn't add to the equity to your house. It simply disappear as your pay it.

Therefore, could you stay away from interests-only loan or adjustable loans.

Most people who apply for interests-only loans are those who can't afford paying the principal. So, they can only pay the interests, which is like paying rent. The worst part is, in this housing market, the home are priced too high that the mortgage payment is usually larger than rent.

For example, let's buy a $500,000 condo with 0% down and apply interests only loan (just like renting a place). Mortgage payment would be $3250/month. It is a bad buy, because you can enjoy same property for $2000/month.

Please note that I assume the tax benefits from home cancel out fees from home association and property tax. For more accurate calculation, consult with your CPA or accountant. But NOT your realtor, whom will say anything to get the deal to go through.

Answer 3

Shop around!(for a mortgage) Never settle with your bank or the first mortgage broker that comes along. There's always a better deal out there.

You should check your credit first. It's free to do once a year if you go to the Experion, Transunion, or Equifax website. When you talk to mortgage brokers or mortgage bankers, have them give you quotes based off the credit you pulled for yourself, that way you don't have your credit pulled by each broker/banker. (bad for credit) Decide on a monthly payment that you're comfortable with.(try to have a range)

When talking with the mortgage guys let them know your credit score and the payment you're looking for. Then shop around looking for who's going to offer you the best rate and the most money, while keeping you at your comfort zone for a mortgage payment.

Once you've found your mortgage and gotten pre-qualified, or even better... Pre-Approved!, then you can get with a GOOD Realtor and start shopping for a home.

The best way to find a Good Realtor is to ask around. Talk to family, friends, co-workers. Try to find someone who has had a really good experience with one. After all, everyone knows a Realtor. We're a dime a dozen!

Good Luck!

Answer 4

I believe you could qualify for a mortgage loan, if you have enough for a down payment and closing costs. Whether it is the right move right now, depends on the housing market where you live. If you're in one of the areas that has experiences a housing "bubble" lately, like the Washington area, Phoenix, Las Vegas, Florida, New york, etc., you might be better off reneing and saving your money for another year or so, until the prices get better. If not, go talk to a mortgage lender and find out where you stand.

Oh, and listen to what biker said about fixed rate mortgages.

Answer 5

You have to first make a list of all your income sources and also determine how much money you can put down. The more money you put down the lower interest rate you will be charged. It is recommended that you put down at least 20% of the purchase price. Go to your local banker and see how much of a mortgage you can qualify for. That together with your down payment will be the amount of house you can probably afford to buy. Important: See if your banker will prequalify you before you start house hunting you will have a great advantage if you can do that because you will know exactly how much house you can afford and you can negotiate from a position of strength knowing exactly what you can buy at the outset. Also, ask what additional closing costs run in your area such as escrow and attorney's fees etc. Then you can start house hunting by reading newspaper ads, surfing homes for sale on the Internet and also visiting a real estate broker in the area you wish to purchase your home. I know all this because I used to be a Realtor.Good Luck!

Answer 6

Buying a house is possible for anyone. Make sure that your credit is good, and clear up any problems that might be on your report.

Start doing research now, check out finance.yahoo.com; money.cnn.com and smartmoney.com. There are some helpful articles in the personal finance section.

Start Saving as much as you can, as you really want to have atleast 20% down payment, which will allow you to avoide PMI. (PMI is private Mortgage Insurance - which ONLY covers the bank if you walk on the house. This ensures that they will get all of their money back.)

Decide what you want out of a house, size, neigborhood. Try to get into a good school district so you will be able to sell it easily down the road.

Finally, and this is 100% my pure opinion. STAY AWAY FROM VARIABLE MORTGAGES. They are very attracitve as they provide you with the ability to to purchase more of a house than you would be if you went with a fixed loan. It can be very costly in the long run if the interest rate increases, and then your mortgage does as well.

One more thing.....EVERYONE is in the game to make money. Ask lots of questions, challenge everything (this is the biggest invesment that you will ever make) and read everything before you sign it.

Good Luck.

Answer 7

I'm a mortgage specialist. I'll break it down in a few steps so that you won't get taken advantage of. Some of this info may go against the thought process of many in my field but I like to work with informed consumers as I've been in the biz a long while and have maintained customers by giving them info that is normally hidden from them. You may have some unique problems because of your employment but here's the basics, You DON'T have to go to a realtor or mortgage person first....
1. Get a copy of your credit report yourself and review it. Get a tri-merged report (transunion, experian, equifax) and find the middle credit score. That number is what lenders will judge you on. You get this online. This is important so tha that you know what type of lender, broker, etc... to search for. I've seen too often people with good credit dealing with subprime lenders because they don't know. If your score is in the mid to high 600's or more, typically you shouldn't be dealing with a subprime company. Look at the 30 year average rates for the same loan type you need at bankrate or some other site and compare to the lender you're looking to work with, if it's close, to the average in terms of rate and fees, then you should be o.k. May not be better but you want to be in the ballpark atleast. If your credit is lower it get tricky but subprime may be your only option (try to avoid if possible, as most bad situation start with a subprime loan). Fannie Mae, Freddie Mac, FHA have some good programs if your scores aren't the greatest, make sure whom ever you work with has access to these programs

2. After you know what rate range you should be in based on your credit, then shop around for the best lender, give them your credit score, don't let them pull credit, just give them the info interms of verifiable income, assets, job length, verifiable income or not, etc... They can tell you how much you qualify for and corresponding rates. I've heard other brokers tell clients with scores over 700 that their credit was so so, and they believed the broker!!!

3. Once you know how much you qualify for, you still don't have to run to a realtor yet, do some research on the areas and properties individually. You can get an agent after that and to search and find homes in your price range. Bid on what you want to pay, the agent can advise but remember they're sales people also.

On a personal note, most bartenders, get paid tips, and don't report most of these tips on taxes which may make it hard to prove your real income. Their are alternative doc programs that us no income verification, bank statements, etc... as an alternative. You will get worst rates but it may be the best route.
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Answer 8

It depends on where you are buying and what location. Go get your credit scores run to see how "high" you are. Then, you need to try to find a good lender to help. Try to avoid the normal banks as they try to get every last dime from you, but then again, don't get Mama's Bank Loan either.

When you buy a house, you get a tax deduction on the interest you pay, so you want me to see if you can get an interest-only loan, which will keep your payments lower at the beginning with the premise that in the future, you will both be making more money.

Answer 9

If you both have fair to good credit you will do fine.
The thing to do is get a fixed interest rate.
The variable rates can come back and screw you when they hike them way up, that makes the monthly note go higher.
You might want to look into how much you can both afford now verses when the baby comes.
Sit down with a lender and ask a lot of questions.
Right now is a buyers market with the interest rates being low and people looking to sell.
Good Luck and do not be shy asking quetions of bankers and realtors.

Answer 10

I will preface my answer by telling you that I am a Realtor® in Arizona.

You will need to speak to a lender or two to find a loan product with a payment that you are comfortable with. You should be able to find a loan product. There are also programs through HUD and other agencies that may help you with a down payment. Or you might opt for 100% financing. If you don’t like what you hear from one lender find one that you do like.

When you find out what you can afford then talk to a Realtor®, who can help you find a home in your price range without driving all over town.

Then be patient, it will take time to find out what you like and want. You may have to look at a town home or condo at first. This will allow you to build equity so that you will be able to move up and out later.

Feel free to contact me with any other questions that you might have.

Answer 11

You don't say what your gross income is, so it's difficult to tell if you would even qualify for a loan. Unfortunatley, $13/hr isn't very much money. Don't know what you make. You will probably need to start out in a condo or townhome and work up from there. Visit a real estate agent first and go from there.