Possibly buying a home, what are the hidden costs?

[spaceace12]

I am looking at home and was wondering what on top of the cost of the home should I expect. The home is listed at 42,250 and I plan to submit an offer of 35k so I can get more on the loan and pay off my current debt or most of it. We currently rent an apt. and we pay 600 a month for it and I figure it will be cheaper to buy this place as opposed to paying someone elses home loan.

[Hercules]

Google "closing costs".

[Emiroo]

1. Average closing costs are $2-3K. (Be very suspicious of any bank deal that offers free closing costs or a price substantially less than this. They are getting the money (and probably more of it) out of you elsewhere.)

 

2. Don't forget a home inspection (do NOT skip this). They run $100-200.

 

3. Don't forget a termite inspection $50-100.

 

4. You will have to show proof of (i.e. pay) a year worth of homeowners insurance UP FRONT at closing. Find out how much that is from your insurance agent.

 

5. Ask for a listing of average utility bills. An energy-inefficent house can suck your wallet clean.

 

6. Go to the courthouse and find out what the annual property taxes have been. It usually comes out to 1-2% of the assesed value of the home And you can guarantee they will never go down even if your home value does. Though if you escrow those taxes into your loan, you don't have to worry about having the cash on hand when the taxes are due. Doing that will make your monthly payment higher though. Either way though, it has to get paid annually.

 

7. Do your absolute best to avoid PMI. If you are putting at least 20% down, this is not an issue. It's basically "insurance" you pay to the bank assuring them that they are going to recoup their loan. The rub is that you will pay them the same amount monthly no matter how much you owe on the loan. I'm not the most eloquent at explaining the concept, but definitely ask your banker about it. I've always put 20% down on all my homes just to avoid it

 

8. If there is something you don't like about the home and want fixed BEFORE you buy, write it into the contract that the current owner must fix it BEFORE closing.

 

9. If it seems too good to be true, it is.

 

10. There's always something broken in a house. Start budgeting for monthly trips to Home Depot.

 

11. The first trip to Wal-Mart after you buy a house is a real killer. You have to buy a ton of stupid stuff like trash cans, brooms, shower curtains, etc. Budget $300-500 for that.

 

I know what I've typed might seem scary, but let me tell you that it has been easier buying my homes than it has been buying any of my cars. If your agent isn't making the process as easy as you think it should be, ask for a new agent.

 

Good luck and if you have specific questions, feel free to ask.

[spaceace12]

I figured on the inspection, I am not too worried. This was my great grandma' home before she died. It has a newer roof and furnace, along with all the appliances. I know the property taxes run about 400 (like 390 something) according to the paper I got from the real estate person I am talking to. As for down payment, I won't have one. I am hoping that because of my income and being a first time home owner, I can get help on that. As for the trip to Walmart, my mom and sister are moving into it with me and all our furnishings go with it.

[Emiroo]

Well good luck to you then. Don't lose any sleep over the PMI. It sucks, simply because you're basically paying the bank a small monthly fee for the loan but if you don't have the 20%, you can't avoid it. No biggie.

 

As long as you have a steady job and a resonable credit score, you'll be okay.

 

Hope it all goes through for you and don't forget to apply for your $8K tax credit when you file next year if it does. Thank you Mr. President!

[spaceace12]

Job wise....I am good because I been at my f/t job (counting the p/t years) since 2001 and at my p/t sinc 05. As for the tax credit, it is up to 8k, 10% of the sales price. As for the credit score....lets not go there. That is why I hope to get more and pay off my current debt and only have the home loan as my only debt after (credit cards, a personal loan and student loans total about 15k) and improve it (get rid of most, if not all of my credit cards or pay it off every month like I should).

[Emiroo]

That credit score may kill you on this. That and pretty much that alone is what the bank will use to decide if you can get the loan. Having roomates (and possibly a co-signer) will help as does the fact that it's a smaller loan, but if that number is super-low you're probably screwed. And they will not consider that you are going to get a loan over 100% value to fix that score. They'll just look at it the day you walk in...and the score does change every day depending on what you've been up to.

 

Also, remember that you won't get that $8K tax credit until next year AFTER you have purchased the house so it cannot directly be used as a down payment. (Unless your bank works up something special.)

[spaceace12]

It is going to be my mom and sister moving in with me since it is cheaper to buy than pay 600 in rent a month. And I am differentiating (is that even a word) between a down payment and the tax credit. I heard that is help for first time home owners on down payments.

[Hercules]

^^ Exactly. Don't expect the tax credit to be a help right away. If you are factoring that in to your funds right now, don't. That is going to be something you will see a year from now.

 

I have completely agreed with everything Emiroo has said so far - right on target.

 

The main concern is definitely the credit score. If you don't have a score of at least 620, I don't even think you will be considered. I know that is the case with refinancing at least. I would assume the same stanards would apply, if not harsher. You may have to consider a co-signer, but even in that event, I think everyone would have to have the minimum credit score.

[ParkTrips]

Also, remember that you won't get that $8K tax credit until next year AFTER you have purchased the house so it cannot directly be used as a down payment. (Unless your bank works up something special.)

I got an email recently about FHA splitting loans into two to effectively use the credit as a down payment. Kinda sketchy.. that's our new government

 

I thought 20% down was needed to avoid PMI? Are some banks more lenient?

 

I think you should have a score comfortably above 700 to even be considered. I mean you may get a loan at a lower score, but how much more money will you be wasting on interest?

 

I am hoping that because of my income and being a first time home owner, I can get help on that.

Down payment assistance programs have pretty much vanished dude, cause these are the folks who f'd us up

[Hercules]

^ An FHA loan only requires a 3% down payment, thus, the PMI is pretty much inevitable as many people won't consider going as high as 20% when they can put down that little. Is it a little foolish if you can pay more than that? Sure. However, it can help people out.

 

There really is no assistance at this point, as Joe very bluntly said. Banks won't budge, and don't expect any kind of help. Based on the information you have given, I wouldn't expect that house at this point - I'm sorry to say.

[Emiroo]

I thought 20% down was needed to avoid PMI? Are some banks more lenient?

 

You're right it is 20%. I wasn't thinking correctly. (I've fixed my previous posts).

 

But again, a no brainer if you have the cash.

[Emiroo]

The main concern is definitely the credit score. If you don't have a score of at least 620, I don't even think you will be considered.

 

Hercules is probably right here. I bought my current house 4 years ago before all of this economic trouble. I needed a loan for $125K and went to the bank by myself to get the loan. The loan officer looked told me that my wife needed to be there to co-sign because I would have to need a credit score of 700+ to get the loan by myself. I told her it wasn't a problem and to check the score. I was just over 800 as was my wife's. She was shocked and said that almost nobody my age comes in with numbers like that, let alone both people. Loan approved! I can only imagine that things are even stricter now with the credit crises.

 

I will say that at times it's not much fun doing the right things when it comes to finances, but it pays off in the end.

[BelizeIt]

Good Luck on getting your home, it's definitely better than throwing away your money on rent.

 

$42,000 for a house? Wow what state do I have to move to in order to get that deal? You couldn't even rent a room at someones house here in Orange County, CA for $600.00 per month.

 

Hope it works out for you.

[monsterfan99]

Good Luck on getting your home, it's definitely better than throwing away your money on rent.

 

$42,000 for a house? Wow what state do I have to move to in order to get that deal? You couldn't even rent a room at someones house here in Orange County, CA for $600.00 per month.

 

Hope it works out for you.

75k will get you 3B, 2 B home in central IL if you can deal with the winters and being away from big cities. Heck, I've seen them as low as 40k near colleges for 6B 3B homes in great shape and giant yards, just lot of noise.

[BeemerBoy]

I hear you can buy a house for the price of a VCR in Cleveland.

[thrillerman1]

I was able to buy a house back at the end of January, and have already received my tax credit. Barack rocks!

 

One thing I would suggest is getting the seller to include at least a one year home warrenty to cover anything that breaks after you buy the house. My HVAC went out back in April, and I was really thankful I had the warrenty to cover costs!

 

It was quite a process as I started looking for a house last August, found one by the end of October, started negotiating with the realtor and seller in November, and finally closed in January. It can be a painful ordeal but is totally worth it in the end. I wish you the best!

[Carnage]

One thing I would suggest is getting the seller to include at least a one year home warrenty to cover anything that breaks after you buy the house.

 

I would think that only someone who was desperate to sell would agree to that no?

 

If I was selling my place I would never include a clause like that. Once the person takes possession it's their problem. As long as the house is in the same condition it was when the person agreed to buy it.

[Xpress]

Oh yeah, don't forget the cost of gathering new neighbors. When I moved to my new home about 3 months ago, the neighbors were giving us nasty looks, simply because me and my brother were the only teenagers in the neighborhood (no kids, no nothing under like 28).

 

We apparently played our cards right, because we're now friends with a few of the neighbors, although there's one lady that still hates me, and I can see it everytime she looks at me

 

Good luck with getting your first home!

[thrillerman1]

^^ Think of it like anything expensive you buy (car, computer, etc.) that comes with a warranty. I don't know about you, but if the seller of the item didn't offer that, I'd be less tempted to buy.

[mcjaco]

With no down payment, and a poor credit score, I wouldn't get my hopes up for a bank loan. They just aren't giving money away like they were two and three years ago.

 

A 20% down payment will rid you of PMI, but most banks will offer two loans. Like an 80% loan, and a 10-20% loan (depending on your down payment) to avoid the PMI. Either way, PMI is only a small percentage each month.

 

As for hidden costs, there aren't any. Do your research, and nothing will be a shock. "Buying A Home for Dummies" was a great help for my wife and I, and we still refer back to it, as we start looking to jump up the real estate ladder.

[ParkTrips]

You're right it is 20%. I wasn't thinking correctly. (I've fixed my previous posts).

I do know some banks are trying to compete with the FHA now that they have such a huge market share. For instance, I think it is Bank of America who offers a lower 5% down payment loan to first time buyers, in an attempt to steal customers from the government.

[spaceace12]

I am not sure if I will even be buying a home now. Went to the house to look at the one I posted about. It is not in any immediate needs to fix, but was just too small for all of us. I am going to the bank on Friday to see even if I can get pre approved for a loan. If I can get a loan, then I might continue to look depending on how much I can get a loan for.

 

As for down payments, there is help out there for first time home buyers.

[Justin]

We got pre-approved before we went shopping for homes.

 

Know what you can afford, by go and getting pre-approved, then contact a Buyer's Agent and a real tor's office and start looking!

 

If you're clever enough you can word the contract to where the seller pays for the majority of the closing cost. *WOOT*

 

J

[Carnage]

^^ Think of it like anything expensive you buy (car, computer, etc.) that comes with a warranty. I don't know about you, but if the seller of the item didn't offer that, I'd be less tempted to buy.

 

Yes, if I was buying a new car, a new computer, etc then I would expect a warranty.

 

And likewise if I was buying a new home, ie having a new home built, then I would expect a warranty. I think it's even law around here.

 

But if I was buying a used car, a used computer, or a used home, then I would not expect a warranty.

 

If I were to try to sell my house and someone made an offer that included a warranty clause I'd tell them to get lost. Once they take possession, it's no longer any of my concern. Including a warranty clause would open me up for abuse.