Novice Home buying questions

ublguy

Hello once again - I really appreciate all the good lucks you guys gave me in my last thread. I am now engaged!! Whoo Hooo! And we are looking for a house to buy!

One question that has been bugging me and I haven't been able to find a answer too, would love to hear your thoughts.

What are the differences when you purchase a new home (to be built or pre-built) compared to an already existing home. Do the lenders require more of a down payment? Or a higher credit score? Or is a $250k loan just a $250k loan and I can use it for any type of home?

Feel free to ask questions if you need more info, it would be nice knowing this before speaking to a realtor who wants me to buy a house/any house.

Thanks again everyone!

madmax

I bought mine from a builder before it was built. That seemed pretty easy, 5% down with an FHA loan and no one but the builder to deal with other than visiting the loan people. Often times the house will cost less if it is not built yet. For some it is better to buy a house they can see. Also, most existing homes already have a lot of yard improvements. That is about all I know on the subject.

madmax

Edit: The 5% on FHA was only good up to a certain amount depending upon your income and was good for 1st time homebuilders at the time. At $250K you would probably have to put up some more cash.

ublguy

madmax wrote:

Edit: The 5% on FHA was only good up to a certain amount depending upon your income and was good for 1st time homebuilders at the time. At $250K you would probably have to put up some more cash.

Just a quick glance the FHA has a max loan amount of $170k - $200k near me (Milwaukee, Wisconsin).

steveinaz

Different builders have different terms. Really depends on who you're dealing with, just keep in mind with most lenders and a conventional loan, you'll need 20% down to avoid mortgage insurance. Of course VA (and VHA I think) don't require this "protection" but their rates are usually .25% higher to make up the difference.

There is so many varibles, what I will tell you is if you're building, get your own realtor. Alot of people don't realize it, but when you sign the little book at the display homes, you've just agreed to use an "in-house" realtor--by default.

Having your own realtor ensures that your best interest is being protected. Remember, the developement realtors (wether they admit it or not) are in fact working for the builder, if you know what I mean...

thehaens@cox.net

MM hit it on the head. I also bought mine "in the dirt" before it was built. Took about 4 months to build and only had to put down a little while it was being built. By the time the second phase hit, my house had already appreciated 15%. And when the builder closed out after phase 5 my house was going for almost 25% more than what I bought it for.

In hind site I should of bought 2 and then sold it for a quick profit.....

Scott

Early B.

ublguy wrote:

What are the differences when you purchase a new home (to be built or pre-built) compared to an already existing home. Do the lenders require more of a down payment? Or a higher credit score? Or is a $250k loan just a $250k loan and I can use it for any type of home?

Short answer -- there are no significant differences between securing a loan for a new home and a pre-built home.

Good to see you're asking questions. You should learn as much as you can about the home buying process before you jump into it. Attend a couple of free home buying seminars in your area and talk to friends and family who have purchased homes. Clean up your credit (if necessary), save money, etc. make sure you take into consideration the additional costs that come with home ownership -- furniture, appliances, yard supplies, security system, maintenance, etc. The most important thing you can do is curtail your future wife's spending habits. When you're ready to work with a real estate agent, make sure you get a referral from a trusted source that has worked with this individual.

RuSsMaN

steveinaz wrote:

...just keep in mind with most lenders and a conventional loan, you'll need 20% down to avoid mortgage insurance...

OR, you do an 80/15/5 if your credit is up to snuff, and still avoid MI.

80% first, 15% second, 5% down + closing costs.

Cheers,
Russ

masanz1

We bought our home when it was 1 year old. You may lose a choice of carpet, tile, etc you get with a new home but my yard was done, we had drapes and a fence. Both have their advantages. As far as loans, check out all the new buyer programs in your state, some loan companies will not reveal these to you. Personally I would avoid a any of the 3 year fixed then variable type loans unless you plan on moving within the 3 years. The 80/20 loans are OK but I have found the 20 was at a higher rate. Some states require inspectors some don't, get one regardless. Good luck in your search and don't forget to think about the sound quality of the home you're putting your speakers in.

HiPerf360

GET A GOOD REALTOR, on the buying side you pay nothing, the commissions are all paid by the seller.

They EARN their money, if you want new construction find one that specializes in this as it is a totally different transaction than an existing house.

Jonathon

ublguy

Thanks for all the tips and information.

I work for a company who handles MI (yes, evil!!!) And it looks like we will either have to pay MI or go with a piggy back loan (80/20).

I have about 15 realtor referrals I will be talking to in the next few weeks, do find one that meets our qualifications.

What resources did you use when looking for a home or a lot? Obviously we will speaking with a realtor fairly soon, and the local newspapers don't show to many.

---

As a first time home buyer what do you recommend? Buy a house that we can easily afford but might not fit our needs in 5 years? Or buy a house that in on the higher end of our budget that has a higher chance of fitting our needs in 5 years. (5 years, kids, schools come more important.)

And yes, i can't wait to turn up my system as loud as I want as late as I want

PolkThug

RuSsMaN wrote:

OR, you do an 80/15/5 if your credit is up to snuff, and still avoid MI.

80% first, 15% second, 5% down + closing costs.

Cheers,
Russ

This is exactly what I did, avoids throwing money down the drain for mortgage insurance.

Demiurge

Going to be interesting when the bubble goes pop.

PhantomOG

I'm closing on my first house at the end of this month. I did the 80/20 piggyback loan. Paying PMI is a waste of money. Usually the amount you pay for PMI is about equal to what you would pay to a 20 loan. That way at least some of that payment is going towards equity into your house and not just down the tubes.

Good luck on your search. I considered pre-built and built homes and ended up buying one that is about 5 years old. In my area, in order to get a pre-built home I'd have to move further away from my job than I'm comfortable with. Besides, the home I found had brand new carpet and the previous owner kept everything in immaculate condition.

I actually would have preferred pre-built... just for that new feeling to everything and the probable rise in value. However, location turned out to be more important in my case.

Two weeks and six days till I close... I'm counting down the seconds!!!

unc2701

We're getting one built- 600 feet away in a finished neighborhood the same house would cost 25% more- we'll be about the 10th house finished in the new 'hood. The builder wanted 5% down, before all the options (5% doesn't include cost of upgraded hardwoods, kitchen, walkup attic, etc). We're going to try to hit the 20% down, but if you can't, the 80/20 or 80/15/5 options make the most sense. If you're close to the 20, if might make sense to go ahead with a standard loan, but make sure that there's no penalty to pay it off sooner (say, put down 15%, then scrape together the other 5% ASAP so you get done with the PMI faster).

We're lucky- in the RTP area of NC, the house bubble is going to keep on going for at least 10 years, but I keep telling my brother in N. VA to dump his house while he can...

Anyhow, keep your options open- If you're into DIY, you can make a lot of money fixing up an old place, or buying a new place with an unfinished basement or attic. When looking at used houses, always remember that paint is only $20 a gallon. Two busy weekends can make all the difference in an ugly house and I never understood why sellers get so lazy with that.

Most importantly- Make sure there's a room for the stereo!!!

ublguy

PhantomOG wrote:

I'm closing on my first house at the end of this month. I did the 80/20 piggyback loan. Paying PMI is a waste of money. Usually the amount you pay for PMI is about equal to what you would pay to a 20 loan. That way at least some of that payment is going towards equity into your house and not just down the tubes.

Good luck on your search. I considered pre-built and built homes and ended up buying one that is about 5 years old. In my area, in order to get a pre-built home I'd have to move further away from my job than I'm comfortable with. Besides, the home I found had brand new carpet and the previous owner kept everything in immaculate condition.

I actually would have preferred pre-built... just for that new feeling to everything and the probable rise in value. However, location turned out to be more important in my case.

Two weeks and six days till I close... I'm counting down the seconds!!!

Congrats - must be a great feeling!

markmarc

Having done both, I would never buy new again even though our builder allowed us some minor modifications. Yes, I saved on closing costs, etc. but putting in a yard, window treatments ate up a big chunk with doing the DIY drill. Plus, you don't know how the neighborhood is aging. Is it maturing nicely or becoming a rental or run down area.

With an existing home you can check out the neighbors, noise level, quality of how the home has held up. Plus the previous owner has done upgrades. I guess you can say fewer surprises.

ublguy

markmarc wrote:

Having done both, I would never buy new again even though our builder allowed us some minor modifications. Yes, I saved on closing costs, etc. but putting in a yard, window treatments ate up a big chunk with doing the DIY drill. Plus, you don't know how the neighborhood is aging. Is it maturing nicely or becoming a rental or run down area.

With an existing home you can check out the neighbors, noise level, quality of how the home has held up. Plus the previous owner has done upgrades. I guess you can say fewer surprises.

Those are some good points you bring up. As of right now, I would like a newer home (less than 10 years) but you are paying a premium. And as you said, usually those neighborhoods have some negatives.

PhantomOG

I didn't really think about it much but I guess buying a slightly used home does have advantages. I can tell my neighborhood is very nice and the owner did put in a few upgrades. I've got nice grass/landscaping in my back yard, a nice storage shed out back, solar screens in the windows, sprinkler system, blinds in all windows, shelves and peg boards in the garage, and new carpet.

Waiting to close is killing me!! Oh yeah, my living room is wired for surround too!! I knew it was the right house for me when I saw that

Pablo

I'm in my second home and they were both fairly old places (1940 & 1960). The 1940 one was a cotage that's gone through 100s of renovations since it's construction (I added 2 beds and a bath myself). My current house I'm constantly renovating, but I like that kind of things. If you enjoy that kind of thing, I would go with something old (then you can do what ever the hell you want to it).

I have know a couple of people with new constructions and they have ups and downs. The biggest up is that it's new, the biggest down is having to deal with the build. 2 new constructions I know had big problems with the house that the builder gave them a hard time about (but finially corrected). I guess it's "now that we have your money, we don't care" for some of them.

You may also want to consider modular homes. They can do a lot with them these days and the build quality is ussualy very good (ussually better than on-site construction).

Another down side to a new home, if you're married, is the choices. My old boss told me he would NEVER buy a new construction home again. It was just an argument on every dission that had to be made. (with something old, what you see is what you get).

As far as what you can afford; beg, barrow and steal what ever you can to get as much as you can. I spent more than I wanted on both my houses, and I am more than happy I did (better to have something you love for the next 10 years, than just something you can live with).

(And use the realator to death. Have EVERY question go through them, it's what they are paid for).

Either way, good luck. The best part about owning a home, is sitting back an just looking up at it and say "Wow!, I own that". It truly is the American Dream.