Happy April Fools’ day!
No one else is going to tell you this so I am going to have to do it. It is quite possible to pay too much for a house. Both by paying more than the house is worth and more than you can afford to pay for housing.
First-time homebuyers who pay too much for their first house may have to wait longer to “move-up” to larger houses. Sometimes people believe they will stay in the same house forever but plans can change because of a job, marriage, death, or divorce.
Home prices are still climbing but many of us remember the great recession. Prices stalled and then went down. People had a hard time coming up with the money they needed to fill the gap between the money they got for the sale of their house and the amount they owed on the mortgage.
Going over budget on a home purchase can also lead to trouble. There are people who are house poor. They don’t have much disposable income because of their large house payments.
Just keep in mind that owning a home is a long-term commitment and it will have an impact on your life and maybe on the lives of others if you have a family.
There is a good chance that neither your lender nor your real estate agent will try and talk you out of spending too much. It is up to you.
Now that the days are a little longer it is easier to view houses in the early evening. If you are interested in buying a house that
is on the market it might not be on the market when the weekend rolls around. Don’t wait for the open house. The vast majority of homes that are on the market are never held open.
Houses can often be shown during the week, after work, before work, or during lunch hour. People who have jobs that don’t have rigid hours have an advantage.
Consider asking your employer for some flexibility if you are house-hunting this spring.
I read an article about Millenials who are giving up on homeownership. I remember feeling that way myself back when interest
rates were in the double digits. Houses were less expensive back then but those mortgage payments were killer.
Wages have not gone up as much as houses have and housing is more expensive than it was when I was a first-time homebuyer. We wanted a house very badly. We never gave up and eventually, we were able to buy a house.
We got some help though. We were able to get down payment and closing cost assistance. That is why I have a link over the right to a resource for various grants and loans for cash-strapped home buyers. There is money out there and the site will help you find it. Click here to see if you are eligible. I have worked with numerous clients over the years who have used the programs on the site.
Also, ask your lender about programs for first-time homebuyers.
Don’t give up.
People who rehab houses know exactly how to make them the most appealing to a first time home buyer. They put in some nice
countertops and trendy backsplashes in the kitchen, and shiny new fixtures in the bathrooms.
They paint the rooms using colors that are currently popular and then do some staging and hang up some “live laugh love” signs and a cookbook and bottles of wine, or fancy vinegar in the kitchen.
When I go into some of these houses and open the plastic door with fake wood grain and go down into the basement I am likely to see an ancient water heater with some rust on it. The furnace or boiler may also have rust on it and in many cases will be older than the home buyer I am showing it to.
A complete home inspection will reveal numerous ungrounded electrical outlets and that the roof is older than the furnace or boiler, which of course are older than the home buyer.
When looking at old St. Paul houses it is wise to start in the basement and work up from there. Sometimes I can smell the basement from the front entryway, which is never a good sign.
After decades of touring old houses in St. Paul, I have seen everything . . . or that is what I say until I see something I haven’t seen before.
When you buy a house there shouldn’t be any hidden charges, but there might be some surprises during the homebuying process. Here are a few that catch some home buyers off guard.
Closing costs can come as a surprise. Your lender will ask you to get and pay for a year’s worth of homeowners insurance upfront.(the national average for home owners insurance is $2305 a year) Lenders will collect one 12th of the amount of property taxes and homeowners insurance and pay the bills the next time they are due.
You will pay real estate taxes from the day that you close until the end of the month. You may also pay a partial month of mortgage interest and if buying a condo you may pay a partial month’s worth of association dues.
If you work with a real estate agent from one of the larger real estate companies you will pay a fee of around $500 dollars to the real estate company. There is usually a fee for the closing and there are fees for title searches and credit checks too. Some lenders will charge for the appraisal upfront before the closing.
Most home buyers are well aware that they need a down payment which is also usually due at closing. Mortgage lenders include closing costs in their good faith estimates. Borrowers are given a full list of charges before the closing. There should never be a surprise charge at the closing.
Once you buy a house there may be some more unexpected costs. I always tell people who are buying older homes to start an emergency house fund. Things break and they wear out too. Start the fund with $500 and add $25 a month to it every month.
There are programs that provide funds for down payments and closing costs. I have had a few home buyers take advantage of these programs. There are other options too. Let your lender know you are a first time home buyer.