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Day 8 - Buying a Home
By JLP | February 8, 2006
This is a huge topic and probably should be given several days worth of posts. However, since I’m doing “24 Days…” I will limit this to one day.
Buying a home is probably one of the biggest purchases you will ever make. I know from experience that the process can be intimidating for first time homebuyers. The experience is something you should not take lightly. Back when we bought our house in 1999, there were no blogs available to offer advice. We did, however, read a couple of books on the subject.
How Much House Can You Afford?
Probably a lot less than what a lender will offer you. Just because a lender will finance a $250,000 purchase (remember, they usually get a cut that is based on the size of the loan. For them, the bigger, the better!) DOES NOT mean you should buy a house that costs that much. The first thing you should do is go through your budget and see how much you can afford. You don’t want to saddle yourself with a high monthly payment. You don’t want to buy a house that you can’t afford to maintain or enjoy. Also, don’t be impatient. Nobody says that you have to buy your dream home the first time. There’s nothing wrong with buying a modest home and then trading up later.
Which Type of Mortgage is the Best?
By far, the safest, most conservative mortgage is the fixed 15 or 30-year mortgage. Why? Because you know what your payment will be. As long as you keep the loan, your payment will be the same month-in and month-out. However, it is important to note that a fixed mortgage isn’t always the cheapest route. There might be other cheaper loans but you must be careful to read all the details for each mortgage. Usually when a lender quotes a really low payment for a mortgage, it is most likely an adjustable rate mortgage whose rates can change dramatically from what you are initially quoted. All I can say is BE CAREFUL!
You might want to check out MortgageProfessor as he has lots of mortgage-related information. I wrote a post a while back titled Which is Better: A 15-Year or 30-Year Mortgage?, which talks about the math behind the mortgage. You might want to read it. Also, two books that I can recommend for first time homebuyers or for anyone who wants to brushup on buying a home are Jane Bryant Quinn’s Smart and Simple Financial Strategies for Busy People
Places to Shop for a Mortgage
Here’s a list in alphabeticial order of places online where you can go to shop for a mortgage, none of which are endorsements:
BankofAmerica
Bankrate
Chase
Citibank
Ditech
eLoan
Interest.com
Lendingtree (my wife and I used their service once and weren’t impressed. We also ended up getting a lot of junk email)
Suntrust
USBank
Wachovia
WashingtonMutual
Wellsfargo
QuickenLoans
NOTE: I don’t receive any commissions or compensation from any of these companies.
Okay, so now you have some basics about buying a home. Hopefully this post will be a great starting point for you. I plan on blogging more about this topic in the future. For more information than I have offered, you might want to check out these posts from other bloggers:
FreeMoneyFinance:
The Hidden Costs of Homeownership
Why It’s Smarter to Buy than Rent
It’s Your Money
Money and Investing:
Chief Family Officer:
FiveCentNickel:
The Three Worst Reasons to Buy a House
40 Year Mortgages Going Mainstream
Home Values, Appraisals, and Fraud
Pay Down Your Mortgage With ‘Found’ Money
CanadianFinancialStuff:
If you buy an older home, some possible expenses
The Smith manoeuvre, (very Canadian)
How much to actually buy a home?
MyOpenWallet:
Real Estate Cost Analysis Part 1
Real Estate Cost Analysis Part 2
Boston Gal’s Open Wallet:
How Could I Afford My House? By Renting Out the Basement!
PoliticalCalculations:
Investing in Real Estate for Cash Flow
Pacesetter Mortgage:
Housing Bubble Booms and the Herd Mentality
Will Americans Spend the Wealth Created From the Housing Bubble Boom?
How to Avoid Predatory Lenders
The Truth About Online Mortgage Rates
How to Handle a with a Mortgage Lender
Stated Income Loans are Bad for America
Mortgage “Pre-Approvals” are Causing Problems for Realtors
How to Pick the Right Real Estate Agent
Credit Score Test Could Save You Thousands
The Secret to Selling Your Home in a Buyer’s Market
Young Professionals Financial Blog:
Topics: Mortgages |
February 11th, 2006 at 11:35 pm
Weekly Roundup - 02/10/06
Heres what went on this past week around the MoneyBlogNetwork (and beyond)
February 27th, 2006 at 11:17 pm
JLP,
Hey, I noticed that your link to the Mortgage Professor site isn’t working. I believe you have your t and g backwards. Thought you might want to know.
Clint
September 6th, 2006 at 4:44 pm
How do you know if you’re ready for buying a home?
If you can answer “yes” to most or all of these questions, you are probably in good shape for buying a home:
• Do you have steady income (i.e. a job)? Is this income reliable? Have you been employed on a regular basis for the last two or three years?
• Do you have the ability to pay a mortgage every month, plus the additional costs of maintaining a home?
• Do you have a good record of paying bills?
• Do you have few outstanding long-term debts?
• Do you have money saved for a down payment?
• Have you been pre-qualified by a mortgage bank or broker?
If you are ready to buy, you can get connected to a top Realtor in your area through the Real Estate Chamber Of Commerce (http://www.realestatechamberofcommerce.com). There is no charge for uysing the RECC network.
September 14th, 2006 at 11:43 am
My husband and I just bought a beautiful home and I must say it is a lot of work especially for first timer. There are a lot of things to consider and even after the buying process; there are still a lot of problems waiting to be solve.
Here is a link which I think is really helpful for first time buyer. It summaries the things that you need to consider before you make that final decision.
http://mortgageratesplus.com/article-buying-a-home-329.html
Hope it helps!!!
November 16th, 2006 at 8:17 pm
When I buy my first home I would like to purchase it without making 30 year payments on the house. If it takes me 30 years to pay off the mortgage, the home is not really mine. It belongs to whoever I’m paying.