Question for first-time homebuyers?

Question

My husband and I are tired of living in apartments, we really want to get a house. The rent for apartments keep going up and we just want a place of our own. We don't have money saved up yet for a down payment. We were thinking about using his pay checks to pay the bills and I would put mine in a savings account. We were thinking that we could probably save up a few thousand in a few months, but we don't know if that would be enough, or should we wait a year before we buy a house? Did you have money already saved up before you started looking for a house? How long did it take before you bought you first house? What steps did you take on getting prepared for buying a house? What mistakes did you make and what advice can you give us?

Answer 1

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Answer 2

There are programs available to offer downpayment assistance for first time home buyers.  With the tighter lending criteria in place these days you will need decent credit plus a downpayment.  These programs are offered by the county or the city and a Realtor will be able to guide you towards these programs.

The biggest mistake people make when buying a house is to let some banker/mortgage broker tell them how much they can afford.  Just because you can get a $250,000 mortgage does not mean that you should.  The formula that will allow you to still be able to buy groceries is 1.5 x gross annual income = maximum house you can afford.  If you have other debt such as credit cards, student loans, car loans, etc. you should lower your maximum to allow for those expenses.  If you find that houses in your area cost more than the 1.5 x gross then you should wait until you have a sizable downpayment.

Other things to consider are property tax, home owner's insurance, and maintenance.  You should have a cushion in the bank to allow for major repairs.  It can be expensive to own a house.

I was 32 when I bought my first house, making decent money for my area, and still struggled financially.

Answer 3

Hello there. My wife and I were in the same boat as you were. We didn't have much savings built up, but we wanted a house, and to stop renting. To be honest, in this market where homes are selling for much less than usual, you may not want to wait a year. We were able to buy a house through Ryan homes, with nothing down. The only way that you're really going to get much out of a down payment is if you put 20% or more down on the house. We were able to go through the whole process of purchasing a house in 1 month. The advise I would give you, is to start looking, and then check  with a local bank or credit union to have them pre-approve you and they can tell you how much you qualify for. Our mortgage is through National City Bank, and they were great to work with. The only mistake we made, was settling on a house before we looked at everything else. Just make sure the house you choose is right for you, because you could be in it for a while. Hope this helps!

Answer 4

We didn’t specifically save up for a house. As soon as we got past the point of living paycheck to paycheck, we started a savings account to cover us in case one of us suddenly lost income. At the time we bought our house, our savings account had enough money to cover us for four months of living expenses.

We happened to buy when no money down was still an option. We took this route only because we were able to buy our home for about 14% less than its market value so it isn’t as if we have no equity. No down loans are hard to find unless you qualify for VA benefits. At minimum, you should plan on a 3% down payment for an FHA loan. I’m not personally a huge FHA fan because they can be really picky about things. More conventional loans might require 5-10%.

Rather than guessing on what you need, why not talk to a few lenders now? Find out what their loan programs require, and they can prequalify you for a certain amount so you know you have an idea of what dollar amount that 3 or 5 or 10% actually equals. Pre approval doesn’t involve running your credit. You just answers some questions and the lender gives you an estimate on what you’ll be able to borrow.

As for your questions:

We started looking in mid-September, meaning to close on a home in December since our lease was up at the end of that month. We found the house we wanted within a couple of weeks and we ended up closing the first of November so we had to pay two months of rent in addition to the expenses with our home.

To prepare, we met with a recommended mortgage broker and buyer’s agent who walked us through the process. We also did some reading on our own. There are tons of websites that will address concerns of first time homebuyers.

I really don’t feel like I made any mistakes because I worked with trusted professionals instead of faltering along alone..  I never had any questions about what I needed to be doing or what was happening at any point. They were there to answer my questions and advise me.

One thing my agent did that I don’t think all of them do is to remind me that all of my expenses would go up with a bought a house: more property taxes, higher utilities, maintenance costs, etc. There’s a big difference between apartment expenses and house expenses.  

Answer 5

Check w/ your bank and see if they still have "no down payment for first time buyers" loans.  Those used to be very common.  Your first step would be to get approved by a lender.