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Paging all Real Estate gurus, need help planning to buy

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Paging all Real Estate gurus, need help planning to buy

Old 07-15-06, 12:01 PM
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Paging all Real Estate gurus, need help planning to buy

So this past year has been pretty good for me financially. I've managed to keep saving (by and large thanks to landing a better job last October and getting a sizeable raise) and by some other things (car insurance dropping a whole lot once I hit 25 for one). Anyhow, I'm currently in an apartment and I do not plan on renewing my lease when it's up at the end of of January. Between my apartment starting to irritate me and having the finances to buy something, I'm looking to do that. So, having never done this before, I have tons of questions.
First, what should my first step be? I checked my credit score last September and it was in the "excellent" range so I'm not worried about getting approved. I'd be a first time buyer and my income is below the maximum for most of those programs (someone told me it's 75k max household income) and I'm single so I think I could qualify for that but I need to look into mortgages in general. Since my lease doesn't expire until January, when is too soon to get preapproved? Doesn't the approval only last like 60 days? When is too soon to find an agent and more importantly how should I go about finding one? I've been looking around on realtor.com and it seems like there are quite a few condos and some homes in what my target price range is so hopefully I'll be able to find something but I just don't even know where to begin. Anyone want to help me figure out a gameplan?
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Old 07-15-06, 12:31 PM
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A lot of "first time buyer" programs, etc. are easier to get into, but the terms are not as good as a regular conventional loan. Your first step is to talk to a mortgage broker and get "pre approved" and not just "pre qualified." They start looking and dreaming, and assuming you don't want a double payment or are going to try to get out of your place early, start looking in November.

Figure out a price that you are comfortable with, as the banks will generally let you borrow more than you are comfortable with. Remember to include water/sewer, etc. in your plans as they are now your expense.

What else you need to know?
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Old 07-15-06, 12:49 PM
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Thanks for the info. So I could go ahead and get pre-approved around now and start seriously looking around October/November?
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Old 07-15-06, 01:05 PM
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In my experience, it only took a week to get pre-approved. If you did it now, I doubt the approval would be effective until you're actually looking.
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Old 07-15-06, 01:12 PM
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It won't be effective then, but do it now so you know if there are any speedbumps. Do it again later.
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Old 07-15-06, 01:33 PM
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I'm younger than you, and haven't gone through the home-buying process, but...

Wouldn't immediately be the best time to start looking for a home, if you know you'll want something lined up by January? Maybe you aren't picky, but personally I'd be willing to pay a few months of rent that I'm not using (and subletting is always a possibility, no?) in order to assure you get the home you want. Of course if you are considering a condo it probably wouldn't be a big deal, since a lot are basically cookie-cutter...but if you are looking for a home in a certain neighborhood, school district, etc., for my money it'd be worth looking ASAP in case the perfect house came available.
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Old 07-15-06, 01:46 PM
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While that's true, a few months of rent @ 755 a month adds up fast considering I'll only have about 10k to put down. I'm not super picky about where I live (I have basically four towns I'd live in and most of the areas in the towns are fine by me) and I am a single guy with no kids so I don't care about schools. Really the only way I'd go for something now is if an amazing property came on the market and was very undervalued. Even then I'd only do it if I could get out of my lease without having to pay a whole lot.
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Old 07-15-06, 01:46 PM
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Originally Posted by kvrdave
It won't be effective then, but do it now so you know if there are any speedbumps. Do it again later.
OK cool that makes sense.
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Old 07-15-06, 01:52 PM
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What are your end of lease options? In a lot of places, you can be "tenant at will" on a month to month basis rather than renewing for a year. If so, good insurance if you are not finding what you want. Knowing whether you have that option will affect what pressure you feel to find a place.
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Old 07-15-06, 01:59 PM
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Cardiff:

Your very first step is to check credit. "Excellent" doesn't mean squat. You need to know your median FICO score (the middle score of the three big bureaus: Equifax, Experian and Transunion). If you say it's excellent, it probably is. "Excellent" translated to FICO score means a score of 720+ --- if its below 720, it's not excellent.

Your second step, before you ever speak with a real estate agent, is to speak with someone regarding your mortgage. Not anyone will do. Get some referrals and make some calls. If you say you're buying in November and no one seems interested, it's a sign that you shouldn't deal with them. Another idea is to check to see if you have any CMPSs in your area; a CMPS is a certification for mortgage planning. Like all certifications, it doesn't guarantee anything but it's a good place to start. (Disclaimer: I'm a CMPS but I am not in New England, obviously).

Between now and November, a few things will change, among them property prices, mortgage rates, and your credit. The good news is property prices are not likely to be shooting up how they were 2 years ago so it's not like houses will cost $40,000 more in 6 months. The other good news is that you can (hopefully) save a bit more money. And finally, rates could be at a lower level at that point, depending on when the Fed tightening cycle ends.

As far as your lease, you should be able to give 2 month's notice and break it without a penalty - state laws vary of course. So if you find a great, undervalued place now, ask to buy it in September, give two month's notice so you pay August and September rent, move into the place, and your first mortgage payment is in November (almost ways the second month after you buy).

Pre-approvals usually only last 30-120 days but if you do everything now it just becomes a matter of getting in touch with your broker/banker once a month to get an update on the rates and programs. It will make it much easier down the road.

Good luck!
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Old 07-15-06, 02:42 PM
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It was 790 as of last September. I plan on checking it again before I do start this whole process. I have no debt and all of my CC and car loan payments have been paid on time so I'm guessing it will have only gone up since then. I'll have to look into what the law is here in CT with breaking a lease in case I do find something that is a great place and price. Thanks for all of the tips!
Originally Posted by The Bus
Cardiff:

Your very first step is to check credit. "Excellent" doesn't mean squat. You need to know your median FICO score (the middle score of the three big bureaus: Equifax, Experian and Transunion). If you say it's excellent, it probably is. "Excellent" translated to FICO score means a score of 720+ --- if its below 720, it's not excellent.

Your second step, before you ever speak with a real estate agent, is to speak with someone regarding your mortgage. Not anyone will do. Get some referrals and make some calls. If you say you're buying in November and no one seems interested, it's a sign that you shouldn't deal with them. Another idea is to check to see if you have any CMPSs in your area; a CMPS is a certification for mortgage planning. Like all certifications, it doesn't guarantee anything but it's a good place to start. (Disclaimer: I'm a CMPS but I am not in New England, obviously).

Between now and November, a few things will change, among them property prices, mortgage rates, and your credit. The good news is property prices are not likely to be shooting up how they were 2 years ago so it's not like houses will cost $40,000 more in 6 months. The other good news is that you can (hopefully) save a bit more money. And finally, rates could be at a lower level at that point, depending on when the Fed tightening cycle ends.

As far as your lease, you should be able to give 2 month's notice and break it without a penalty - state laws vary of course. So if you find a great, undervalued place now, ask to buy it in September, give two month's notice so you pay August and September rent, move into the place, and your first mortgage payment is in November (almost ways the second month after you buy).

Pre-approvals usually only last 30-120 days but if you do everything now it just becomes a matter of getting in touch with your broker/banker once a month to get an update on the rates and programs. It will make it much easier down the road.

Good luck!
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Old 07-15-06, 02:44 PM
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Originally Posted by OldDude
What are your end of lease options? In a lot of places, you can be "tenant at will" on a month to month basis rather than renewing for a year. If so, good insurance if you are not finding what you want. Knowing whether you have that option will affect what pressure you feel to find a place.
I can do month to month here but they raise the rent by about $100 when do you that. I'm fine with doing that for a few months if I haven't found something by the time the lease expires but I wouldn't want to do it for too long.
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Old 07-15-06, 06:27 PM
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Originally Posted by The Bus
As far as your lease, you should be able to give 2 month's notice and break it without a penalty - state laws vary of course. So if you find a great, undervalued place now, ask to buy it in September, give two month's notice so you pay August and September rent, move into the place, and your first mortgage payment is in November (almost ways the second month after you buy).
In my experience, the landlord has always required a 1 or 2 month penalty for breaking a lease. Obviously, laws vary, but I would lead him to expect to break it penalty-free.
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Old 07-15-06, 06:45 PM
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I'm pretty sure there are terms outlined in my lease about breaking it. I'll have to check but they include forfeit of security deposit ($500) and relisting fees (which I'm sure they just make up some arbitrary number even if they don't have to advertise at all!).
Either way though, I'm looking forward to getting out of this place and into something that's my own and quieter. The constant slamming of doors and the way that the caliber of other tenants has slid down hill is really getting me eager!
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Old 07-30-06, 06:07 PM
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ok well i did a preapproval through ING today. Good news is I was preapproved. Bad news is, it's for less than I was hoping. Some of the places that really interested me are probably not going to work now since they cost quite a bit more than I was preapproved for, and unless I got lucky with a really lowball offer I don't think it would work out. However, there are a few decent condos in my range so I think I can still get something. My question is, with the amount of money i have saved up, i would be able to cover closing costs and have a few thousand left over. For figuring out if I can afford a place, should I subtract the entire amount I have saved from the purchase price (say it's listed at 152k and I have 7k saved) or would I simply subtract the amount left over after my estimated closing costs? The reason I ask is because realtor.com seems to give a pretty inaccurate picture of what the monthly payments would be so I'm trying to figure out the best way to get a rough idea for a monthly cost.
Edit-Also on a side note, some of the places that are in my range are condos with other units either above or below them while others do not. Assuming It was built originally as a condo complex, the noise levels shouldn't be too bad hopefully. Has anyone had experience in a setup like this? My previous 3rd floor apartment was pretty quiet (carpeting helped alot in this regard I think) but my current apartment with hardwood floors if really loud (I can hear people in the unit below talking or the damn dog barking). I just don't want to end up buying a place only to find it's noisy too.

Last edited by Cardiff Giant11; 07-30-06 at 06:12 PM.
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Old 07-30-06, 06:12 PM
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Try a preapproval somewhere else. Maybe ask a mortgage broker as it will mean money to them to get you a mortgage you want.
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Old 07-30-06, 06:16 PM
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Originally Posted by X
Try a preapproval somewhere else. Maybe ask a mortgage broker as it will mean money to them to get you a mortgage you want.
Thanks I'll do that. I was actually very suprised at the figure I got, since as I said before my credit score as of last September was very good and I've only kept paying things on time, etc.

Last edited by Cardiff Giant11; 07-30-06 at 06:31 PM.
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Old 07-30-06, 06:18 PM
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agreed also you can get good leads from www.compareinterestrates.com
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Old 07-30-06, 06:20 PM
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If you can avoid buying a condo, do it.
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Old 07-30-06, 06:30 PM
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Originally Posted by X
If you can avoid buying a condo, do it.
that's my gut feeling as well but prices on single family homes here are insanely expensive. Condos are pretty high as well but there are a number of them in my price range. Like I said before, my old apartment was quiet and some of my friends who live in townhouses don't have any noise issues but my current apartment can be very loud. It wasn't so noticeable before when I had a med student doing his residency living below me (i.e. not here alot) but now I've got this annoying family with a dog that barks even if you tiptoe up the stairs. The hardwood floors are probably alot of the reason it's so loud in this place though.
Basically my philosophy is I'd rather have a decent house than a great condo but I'd rather have a decent condo than a shitty house.
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Old 07-30-06, 06:39 PM
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Originally Posted by Cardiff Giant
Thanks I'll do that. I was actually very suprised at the figure I got, since as I said before my credit score as of last September was very good and I've only kept paying things on time, etc.
The amount of your pre-approval is based more on your income and other debt obligations than your credit score. Your credit score is what they use to determine whether to lend to you at all, and if so, at what interest rate.
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Old 07-30-06, 06:58 PM
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Originally Posted by X
If you can avoid buying a condo, do it.
But depending on the market, getting into something is the most important part. If you get that hurdle jumped, then the next step up is easier to make.
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Old 07-30-06, 07:24 PM
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I did say "if you can avoid". From what I've seen and read of condos they're much riskier than single family homes.

Given their past performance and considering monthly costs and realtor fees I think you're taking a much bigger risk of ultimately losing money on them unless they're the major housing type in your area. Even around here, with only a mildly slowing market, condos are getting hard to get rid of.

The number of single family homes sold here are down 3% from the same period last year. Condo sales numbers are down 22% and their appreciation over the same period is only half of what single family homes was.
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Old 07-30-06, 08:02 PM
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Originally Posted by X
I did say "if you can avoid". From what I've seen and read of condos they're much riskier than single family homes.

Given their past performance and considering monthly costs and realtor fees I think you're taking a much bigger risk of ultimately losing money on them unless they're the major housing type in your area. Even around here, with only a mildly slowing market, condos are getting hard to get rid of.

The number of single family homes sold here are down 3% from the same period last year. Condo sales numbers are down 22% and their appreciation over the same period is only half of what single family homes was.
Yeah. But look where he lives. I'd imagine single family homes are fewer and far between than the areas that we live. I do agree, that condo's run the risk of little or no appreciation, but that always varies by market.
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Old 07-30-06, 08:31 PM
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Originally Posted by Deftones
Yeah. But look where he lives. I'd imagine single family homes are fewer and far between than the areas that we live. I do agree, that condo's run the risk of little or no appreciation, but that always varies by market.
Or depreciation.
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