1st time home buying tips
 

I'm trying to get as many opinions as I can.. I am new to the real estate market and trying to learn as much as I can.

I am 22 and am getting ready to buy my first home. I am looking for something cheap (under $150k) and I don't mind a fixxer-upper. Infact I found one last weekend and by the time I was ready to make a move on it, it was under contract.. bummed me out. My agent said I should have made an offer first, then get started on the loan process, inspections, etc.

I am looking in the Pocono area of PA which is about 80 miles from where I live now but I work all over NJ so some locations will be closer, others further. I really want to get away from all the traffic and congestion of this area and live in a quiet, relaxing place. Looking for an acre or more of land.

As with any field, there will be people looking to take advantage, just like the auto business.. I'm trying to be one step ahead of them. My questions are what are the steps to take after you find a home you are interested in. Also if anyone has knowledge of mortgages that would be helpful.

I am a parter in a business.. I "live" off the business and don't show a large personal income on my tax return. I understand this may be a problem come loan time. I am thinking of getting a "no document" loan.. I am prepared to put down 20-30% so I don't think I should have a problem.

Any and all input and suggestions are appreciated!!

If you can put that much down, you may find someone who will hold a mortgage for 3-5 years...by that time appreciation should make it a snap to get a mortgage.....

Congratulations.... that is quite a feat for a 22 year old....

Make sure you get a home inspection....and not from a person recomended by the seller. And follow them through the inspection to make sure they are thourogh..

Avoid anything with a termite infestation, or foundation problems......ir with a real midew/mold issue...Those can be ungodly expensive to correct or repair.

And Make certain you get Title insurance.....

Have a parent come with you..someone disinterested that can offer opinion from their perspective......why? Becasue buying a house can be a very emotionally driven thing....take my word on that....having someone not involved is a good way to counter things you may miss in your entusiasm..

Get a credit report, I think there's three credit reporting companies, there may be surprises, there was for me.

Get pre-approved for a mortgage.

Look into home owners insurance. Mortgage companies require fire insurance.

Keep track of the flood rating for the areas you're looking to buy.

Preapproved is important........not prequalified...which means nothing...

I've owned 12 houses over the years and have had my share of experiences with real estate brokers and the purchasing process.

The first thing you must do is to get a sense of value in the area that you are looking. This must be a rather confined area, because values can change significantly if you travel five miles one way or the other. While you can look in multiple areas, getting educated in valuations is difficult, especially when you don't live nearby.

If you find a house that you are very interested in, you can make an offer instantly. Have no fear in this regard. Simply put the following on the offer:
"Subject to approval by the buyer's attorney". This allows you to exit the deal at any time in the future, however, it ties up the seller until you can get to a formal contract. You leave $100. with the real estate broker, and, if the offer is accepted, the seller is tied up until you decide what to do. You can go forward to a formal contract, or you can get an engineer to go through the house to pick up things that it needs that you might not notice. In any case, the ball is in your court. If something comes up that you don't like, your attorney simpy rejects the deal for you and you are out.

Since you don't show much income on a W2 statement or a tax return, you will probably have to go with a "no income check" loan. While they will check your credit, the interest rate and terms are not quite as onerous as a "no-doc" loan. On the no-doc loan, they basically check nothing and allow 25% down payment to cover themselves. I believe that you can get a no income check loan with 20% down.

Be careful regarding the points on the loan. They can add up fast and cost you a bunch of money up front. You must decide how long you will be in the house. If you will stay there for 7 years or more, it does pay you, in the long run, to buy down the interest rate on the loan by paying more points, up front, provide you have the cash. A typical loan of 6.5% may drop to 6.25% with two points and would drop to 6% with four points. Again, if you plan to stay in the house for longer than 7 years, it is to your advantage to pay the points up front.

When comparing lenders, watch what they call "points". Sometimes points are hidden in things called "origination fees" or "loan fees". Be absolutely sure you know all the fees that the bank wants to charge you, BEFORE you plunk down the application fee for the loan (non-refundable for any reason).

One additional way to conserve cash, is to pay the full asking price for the house, but have a clause where the seller contributes "up to $5,000" to pay for closing costs. Since your closing costs will be more than $5K, you have effectively borrowed another $4K from the lender for your closing costs. This tactic can be pushed up to about $7K, but, you run the risk of the appraisal coming in too low. While this rarely happens, especially if you find a the house at an attractive price, it will cause you to need more money to complete the purchase.

Rather then write a documentary on here, just e-mail me with any questions or issues that arise. I've probably been there and done that.

Thanks for the tips.

Just to make clear, I work extremely hard for what I have (girlfriend says I work way too much) Nobody has given me any handouts or financial help in my life as one might expect thier parents to do, to some extent. I don't want to give anyone the impression I am some over-privlaged snot nosed kid.

Never got that opinion....Buying a house at 22 makes good sense...far better sense than drinking , partying and wasting it on cars like a lot of people your age do...

A few years from now you can laugh at them when the shock of housing prices in the future hits them square in the face. And they wish they had done what you plan to do now...

Seems that most of the homes I am looking at in this area (Monroe County, PA) all have electric heat. Yet, it gets very cold there in the winter. Any experience with electric heat vs. gas/oil/propane? I plan on having a fireplace or two to save some cash.

Oil is expensive....my mom has it..gas is far better. Electric is very pricey too.

Conside a wood burning stove insert......far more efficent than a fireplace which in itself is very innefficient. In your area Firewood is probbibly cheap.

You're making a good move. I also bought my first house up in Chicago back when I was 22; saved up and worked hard to pay my own way without any handouts. It was one of the best financial moves I ever made. Lived in the house for 7 years, then sold it last year for nearly 60% more than what I originally paid for it!!! I took the final sum and bought a house down here in a Dallas suburb/Collin county for next to nothing (owner built 2nd home and was over a barrel paying 2 mortgages). I got to put a big chunk of money in the bank even after putting 25% down on the house. So nearly 9 years later, my net worth has improved vastly.

Keep in mind any points you pay on the mortgage are tax deductible. They must be listed as "points" and not simply be other fees or closing costs, etc. Also, the mortgage interest and real estate taxes are deductible. Best of all, you will get equity and a steadily improving net worth.

I know it sounds cliche, but you really will be 30 before you know it. Making sound decisions at a young age will really pay off down the road.

Points on an initial mortgage are deductible that tax year...however any points paid in a refinance must be spread over the term of the loan making it a very bad thing in a refinance.

This is an area of concern.

See if you can get the electric rates in that area. We are paying $.12 here and electric heat is out of the question. It would cost over $600. per month to heat a small house in the dead of winter.

Oil was always our mainstay in the northeast, but, it has nearly doubled in price this year. Gas has taken a climb as well, so the two of them are now comparable.

However, I'm not sure of the availability of natural gas where you are looking.

Propane is typically expensive here as well. Nobody heats with it due to the cost. But, if it is common to the area, the price might be less.

Most fireplaces are grossly inefficient. They pull warm air from the outer reaches of the house and leave those rooms very cold. A wood stove (or coal stove) is a far better choice.

I think that is the problem.. it is too rural for natural gas lines. Pike & Wayne counties are a little too far for me.. I'm trying to stay near Stroudsburg area so I'm close to 80 and NJ.

Before you get into a fixer upper make sure you have the cash on hand before you start fixin uppin. Normally if a house has superficial flaws it has much bigger problems down deep, like bad electrical, plumbing, rotton roofing.

Unless you know exactly what you doing get a home inspection and home warranty AND my threshold for fixer uppers is at least a $40K profit once it's completed. Fixer uppers are a dime a dozen make sure you real estate pro knows what they are doing. It won't hurt to hire an appraiser to act on your own behalf. Salespeople are for selling and most of them are ****** morons. If they make any promises see if they will put that in writing for you, I'll bet you a paypal $100 that they won't make any of the guarantee's they make in writing.