Installment 7: Home Buying Facts & Fiction

July 23, 2017

In preparation for this piece, I have interviewed a real estate associate, who has been in the industry for 10 plus years, and a first-time home buyer, 1 year after her purchase. Think of the questions you would want to ask your future self 1 year after you bought your home. Would you be screaming at your past self to not make the same mistakes you did? Were there regrets? Lessons learned? Warnings unheeded?  Or would it be a picture-perfect scene of the decisions you made right for your situation? Well let’s talk to someone who’s already been through it, and another who has guided and helped numerous first time home buyers.

 

I’d like to first provide you with the expert advice from our resident real estate associate. Here are the questions and answers from our conversation.

 

 

WCDTU:               

 

What is the most common mistake you see from first time home buyers?

 

 

 

REA:                      The one mistake regarding 1st time home buyers is they don’t give themselves time to see what their bills are like before they start shopping for their home. I caution my buyers to give themselves at least a year after purchasing their home, so they can get an idea of the cost to live in their new home. They don’t realize there are more expenses, such as utilities. They’re higher than in an apartment. Especially electric, water, HOA fees, homeowner’s insurance and maintenance. (In addition) they purchase a home using both incomes, if it’s a couple.

 

 

 

WCDTU:               What is the question you get asked the most from home buyers?

 

 

 

REA:                       “Can I get everything I want in my price range and area of choice?”

 

 

 

WCDTU:               Percentage wise, how much of the list price should one save for buying a home? Down payment? Closing costs? Etc.

 

 

 

REA:                       That’s hard to say. At least 20% of the purchase, if you’re planning on only putting less than 5% down payment. The rest can be used for closing costs, moving expenses, repairs and maintenance. Also, it’s good to have at least 2 months of mortgage payments saved.

 

 

 

WCDTU:               HGTV has become a common Millennial guilty pleasure. Is the fixer upper dream realistic? How often have you seen home repairs getting out of control?

 

 

 

REA:                       If you know someone or if you’re handy, (then) the fixer uppers can be great. A lot of times you do run into surprises, but if you have the right people in place it can be very rewarding. On the other hand, there are contractors that can take advantage of a homeowner that’s why it’s important to shop around and get references. I also think sometimes the job is too big. I would suggest not taking on a large job with your 1st home. I personally haven’t seen too many where the repairs get out of control.

 

 

 

WCDTU:               What piece of advice would you want to give first time home buyers?

 

 

 

REA:                       Be patient!!! Don’t be house poor. When you’re not patient you acquire disappointment. That can range from purchasing the wrong home, getting into debt to either furnish or repairs etc.

 

 

 

Now that we’ve recapped the conversation with our expert, let’s check in with our first-time home buyer who was willing to share her experience. Her name is Stephanie, and she bought a 3-bedroom townhouse for her family of two. Below are the highlights from our conversation.

 

 

 

WCDTU:               What do you wish you knew before you bought your first home?

 

 

 

Stephanie:          I wish I knew somebody who was going to be able to fix my house for a reasonable price, and that were a legit master carpenter.

 

 

 

WCDTU:               What most shocked you about the home buying process?

 

 

 

Stephanie:          What shocked me the most on that was How easy it was. It was easy for me because I already had a decent credit score of about 789. And I didn’t have any debt except for school debt which didn’t affect it as long as you’re making payments. And I was making payments based on a cheap payment plan, which helped me build my credit. When you go to apply for certain loans like FHA loans, they want you to already be established paying back loans. No matter how much it is. So it was easy for me because I was paying back my student loans, I had a credit score, and all I had to do was save up the amount that was required by the FHA to be eligible for the loan.

 

 

 

WCDTU:               How much did you have to save?

 

 

 

Stephanie:          They ask you save up $2k of your own money. I had about $5k. (…) I got a $5k grant, and used maybe about $600 went having the inspector come out, and $100 for a sort of testing. I asked my seller for 6% seller’s assist, and then I had the grant. At closing I didn’t have to put anything down on my house. I also got a $2k check for minor things that were wrong with the house.

 

 

 

WCDTU:               What made you decide to buy as opposed to rent?

 

 

 

Stephanie:          First reason I decided to buy was because I couldn’t find anything I felt comfortable that was safe and affordable to rent. After I became educated on what a mortgage was I felt like a mortgage can be cheaper than rent, and was motivated to treat the money like an investment.

 

Usually people live in their first home around 5-7 years, and that’s my plan to be here 5-7 years, to be able to renovate it and use the FHA loan for my next home, use a conventional loan to pay off this home, and then use my basement as a one-bedroom apartment and use rent out the rest of the home as well.

 

 

 

WCDTU:               What did you find the most difficult about the homebuying process?

 

 

 

Stephanie:          The most difficult thing about the process was 2 things:

 

                                                             1.      Finding a realtor that understands your needs. My first realtor treated like a child because I was young. I’m buying a house which is a huge investment. She was serious about taking my money, but wanted to treat me like a child (paraphrase). My second realtor found house on first tour.

 

                                                             2.      If you don’t know any homebuyers, and everyone around you rents, then some people don’t understand your visions of buying a home, especially as a woman and as a minority. Sometimes those people bring doubts. Listening to nay-sayers, and will have you double thinking your choices. I would hear things like, “what happens if you can’t afford your mortgage?” (my response) Well what happens if I can’t afford my rent? “What if things break? You can’t call the realtor.” (my response) But at the same time, what if things don’t break? All those things are still concerns I have, but that’s why I have a savings to fall back on in case something does go wrong.

 

 

 

WCDTU:               What was the most rewarding about buying your first home?

 

 

 

Stephanie:          Peace of mind. Sometimes when you’re living with your parents, and our generation is living in with our parent until their 30s. After a while, it was like “I’m grown.” You want to do certain things and hang with certain people, and when you’re living with other people you can’t do what you want. You have to abide by their rules. The peace of mind of owning your own home to have that kind of freedom, from not only your family but also not being restricted from a landlord. If I want to paint all the walls black, or if I want to knock down all these walls, then nobody can stop me. It’s that peace of mind and that freedom that I really enjoy.

 

WCDTU:               How were your home repairs during your first year?

 

 

 

Stephanie:          Most of my home repairs were fairly cheap because I met decent people along the way.

 

My bad experience was, I had a leak from bathroom down into my dining room ceiling. it took almost 2 weeks to get someone to come out. He came out on Christmas Eve, and I had to give him a $100 deductible. He told me, that it would be cheaper to do a business deal with him on the side, as opposed to going through the home warranty because he could tell now that it would cost about $900, and he would do it for $600. Because he would have to break my ceiling, go into the pipes…and in my house we couldn’t take a shower for already a week. Like I have a child who can’t take a shower, and it’s not like a consistent leak, it only leaked when we used the bathroom. I gave him the $600. He did a half-ass job, and I still have a thing that needs to patched correctly in my dining room ceiling. He never came back to finish the job. It was a lesson learned, that you have to find people, maybe a family friend. I was naïve but I feel like anyone can make that mistake when you’re under pressure, but never give any body the whole payment. Give half at first up, and half later. I know people are probably like you should have known that but I didn’t. I trusted him, because he was from a legitimate company. He wasn’t some man off the street…After all was said was done, the problem was really a $20 fix. I just needed a new wax seal, and the part from Home Depot was about $5.99.

 

 

 

WCDTU:               What are some bills you have now that you didn’t have before?

 

 

 

Stephanie:          All of them. Water bill, gas, electric, my alarm system for my home, internet, buying food. Outside bills added on to everything else day care, tuition, transportation, clothes, student loans, credit card bills.

 

 

 

WCDTU:               What’s the scariest part of owning a home?

 

 

 

Stephanie:          Fearful of things breaking down, and how much it’s going to cost to replace and repair it. Not living with another adult, to not make life threatening decisions, like “Should we go downstairs, and check out that noise?” (laughter) That sort of thing. I’m still scared even with my alarm system.

 

My first week living here, my son stayed at my parents while I got the house situated. Solicitors stopped by the house, for security system, cable systems, cheaper gas, cheaper everything. Sometimes as late as nine o’clock in the evening. I’ve never been so scared to open the door. Now the ADT lady came to my door, and told me “I see you have the ADT sign in front, but that’s an old sign and we can tell you didn’t actually have the alarm system.” They can scare you into buying things. New home buyers get targeted. (…) Also when you buy your home, may want to ask the realtor to take down photos from listing websites (just for privacy purposes).

 

 

 

Can I add something? Nothing wrong with buying a “used” home. I first didn’t want to buy a home that someone was living in. I wanted everything brand new, but my dream house was not in a good neighborhood. I recommend contacting local police stations, and know what you’re getting into. My dream house had a bigger yard, it had a guest house, but it was in the middle of a terrible neighborhood. Everything was brand new, but the police told me if you need to walk to the train station then you want someone to walk you, and it was a high prostitution area. Also, you want to talk to someone who isn’t afraid to tell you if the area changing. In 10 years, the property value in that area could be rising, but I don’t have 10 years of my life to risk for a 5-7-year investment.

 

 

 

 

WCDTU:               Based on your experience, what advice would you want to give a first-time home buyer?

 

 

 

Stephanie:          Save enough money so when you move you’re able to buy things to be comfortable. They (the financial institutions) are going to give you an estimate of how much loan you can afford, but you shouldn’t reach that max. You can get a nice home without maxing your loan approval. Don’t be house poor. Don’t have this fabulous wonderful house, but then you can’t live your everyday life.

 

In order to build a solid foundation in your house, there’s a lot of sacrifice, prayer…and you have to believe in your vision. You want take care of your credit your delinquencies. You want make sure you have job references. Have you been there (at your current job) long enough? When things go wrong in your house, you have a 30year mortgage, calm down. You have time. Rome wasn’t built in a day. If you don’t have a small loan of $1,000,000, then it’s okay. At the end of a day not everyone gets to own a home. Stay within your means, stay within your budget and have fun. I also encourage everyone to take a real estate class. Just to gain more knowledge, to understand where your taxes are going, and why you get taxed more being next to a school. All of these things a real estate class will help you better understand. (…)

 

Also, when you’re going forward to buying a home, you need some solid things with you, a phone and a phone charger. You need a home inspector and someone who knows a lot about houses. Make sure all the sockets work correctly., open and close each door, and look in the basement for mold, dark spots in the toilet, see if the toilet the drains correctly. If in the summer, see if you smell something funny, it will tell you about the house. See the house on 3 different days, morning, afternoon and evening. See the kind of neighbors you have. If things are nailed down then may not be a good area to live in.

 

 

 

The home inspector would look for some of these things, but they’re looking for major things like the roof, a termite inspection, if pipes need to be restored. But they’re not checking the sockets. They check the power box. They’re still trying to sell you things, so listen but be mindful.

 

 

 

If the seller still lives here, then it can’t hurt to ask if there’s anything they think  if anything needed to be fixed. Ask why the seller why they’re moving. They may even give you some inside tips, on what needs to. When you step into your home, you will know. They say that, but it’s true.

 

 

 

If you’re living a certain type of way, don’t downgrade. Keep saving after you buy a home, because everything needs maintenance during the average 5-7 year tenure.

 

 

 

For my single people who think they can’t own a home, I’m not making a minimum wage but I’m not making a crazy amount. If you’re working making over $12/hr at full time salary, then you can afford a home. My mortgage 650-720/ month. It can be done. I don’t have any subsidies. the biggest fear for people who have been in the system it’s a fear that you can’t live without it, but you can. But my anxiety was lessened not having to deal with the checkups that go along with that. Do what you have to do, and get the help you need. You don’t have to live in a bad neighborhood. There is more out there. You want know if it’s a buyers’ market or a sellers’ market. Bigger banks will offer some incentives, but the smaller grants offer the first front door grant. The money goes quickly so apply as soon as you can. If you plan on expanding or relocating then buy a 3 bedroom. Easier to sell.

 

 

 

(Last but certainly not least) Put your ADDRESS ON YOUR trash cans and recycle bins. They don’t care about your cans. People will steal them.

 

 

 

I hope you found this information useful, and a special thank you to my interviewees for their insight and knowledge on a topic that many of us are quickly approaching in our lives, and some are educating themselves for the future. Thank you to all my readers for allowing me to share some valuable information. What College Didn’t Teach Us will be on hiatus for few months, but as always budget consultations and speaking arrangements are only an email away.

 

 

Thank you and enjoy the rest of your day!

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