Buying a House

[MWil23]

My wife and I are looking at some plots of land and weighing the pros/cons of building a home, complete with hidden costs. It's honestly startling, but could be worthwhile if it's our "forever home" for us and our kids. The more research that I do, the more depressed that I get.

Ø  Land Pricing

Ø  House Pricing

Ø  Septic

o   $12,000

Ø  Well

o   $6,000

Ø  City/Township/County Water

o   Water Tap ($3,000)

Ø  Electric

o   Road vs. Transformer

o   $2,000

Ø  Driveway

o   $2,500

Basically $25,000 to $30,000 in "hidden costs" not even taking into account the land or the house. 

[AFlaccoSeagulls]

Haven't read through this but my girlfriend and I just closed on a house a week ago - our first home as well.

1) I highly recommend using Redfin as a home finder for you in your specified area. It's the only site that accurately projects your mortgage costs because it includes insurance + HOA dues (if applicable) + taxes and anything else. No other site (Zillow, etc.) does that. This allowed me to very accurately estimate how much I would have to pay, and when I relayed those numbers to our loan officer, I was almost always exactly on point. Our agent was super cool in that we basically found the homes we liked, sent her a list and she setup the tours and everything for us.

2) It's important to know what your loan APR will be. Mine was 4.75, but Redfin doesn't automatically set this for you, so you have to do it manually. Failing to do so results in you looking at nicer places with the belief you can afford it, when in reality you can't.

3) We always had our agent setup weekends to go tour and we'd hit about 5-7 houses a day, and then at the end of each day we'd eliminate all but 1-2 of our favorites. It's also a nice tip to take pictures and take notes as you tour, because little things you won't remember a month later when trying to look back and remember the tour. 

4) Have your finances in order BEFORE buying your house. I didn't really have the opportunity to do this, and it made the loan process (not getting pre-approved, but actually getting through the closing process with the loan company) a pain. So if you can move all the down payment funds into your account beforehand, I would do that and then make sure to not make any large purchases during anything.

5) Set aside at least $5,000-$10,000 or so for closing costs. This includes inspections (general inspection, sewer scope, etc.) and closing costs to cover the loans.

6) Once you actually decide on a home, we found it SUPER helpful to write a letter to the home owner just giving them information about you and talking up their home. We used a template thing online where you could create your own letter. If you're interested in this, I can do some searching when I get back home and let you know how we did it and what ours looked like. Ultimately I think that got us the home we just closed on. It was our 4th offer on different homes.

7) Keep in mind that those "About to be built" places might just be template homes where you start with a "base" and you have to add customizations and stuff that all cost money and drive up the price.

8) ALWAYS REMEMBER LOCATION. Location trumps all. You might find a nice house in a garbage neighborhood, and I can't tell you how many times we saw this, only to drive up to the house and drive away because of the neighborhood.

9) When you close, give yourself enough time to gradually move out and make the transfer. I thought 2.5 weeks was going to be enough for us to move out and get everything figured out, but it's just not. We're having painting and flooring done and 2 weeks isn't enough time when we couldn't get inside the house to do estimates, measurements or anything until we closed. So I would recommend give yourself like a month.

Let me know if you have any other questions. I literally just went through this so everything is super fresh. Good luck!

[AFlaccoSeagulls]

1 hour ago, MWil23 said:

My wife and I are looking at some plots of land and weighing the pros/cons of building a home, complete with hidden costs. It's honestly startling, but could be worthwhile if it's our "forever home" for us and our kids. The more research that I do, the more depressed that I get.

Ø  Land Pricing

Ø  House Pricing

Ø  Septic

o   $12,000

Ø  Well

o   $6,000

Ø  City/Township/County Water

o   Water Tap ($3,000)

Ø  Electric

o   Road vs. Transformer

o   $2,000

Ø  Driveway

o   $2,500

Basically $25,000 to $30,000 in "hidden costs" not even taking into account the land or the house. 

We considered buying land to develop into a house as well. But our budget was $300,000 and land here in the Portland area by itself is $150,000 so that was a quick nope from us.

[MKnight82]

1 hour ago, MWil23 said:

My wife and I are looking at some plots of land and weighing the pros/cons of building a home, complete with hidden costs. It's honestly startling, but could be worthwhile if it's our "forever home" for us and our kids. The more research that I do, the more depressed that I get.

Ø  Land Pricing

Ø  House Pricing

Ø  Septic

o   $12,000

Ø  Well

o   $6,000

Ø  City/Township/County Water

o   Water Tap ($3,000)

Ø  Electric

o   Road vs. Transformer

o   $2,000

Ø  Driveway

o   $2,500

Basically $25,000 to $30,000 in "hidden costs" not even taking into account the land or the house. 

Costs have been way up, that was before the new tariffs.  They're about to go up even more.  Especially steel.  

[Dome]

@AFlaccoSeagulls what area did you end up in?

Our budget was similar. We looked at a few places in Portland, but they were just too far south for us. Everything farther north was either out of our price range or in the “nightly car theft” neighborhoods. No middle ground up north when we were shopping.

[Dome]

We just had construction begin on a new elementary school across the street from our house. One of the highest rated schools in the area will be moving into the new facilities in 2 years.

Our neighborhood was already jam packed with families with school aged kids, and I think it’s about to get even wilder lol kids just run amuck in the streets at night already. If there are too many more I’m actually worried about a mutiny. 

How does stuff like this affect home value? I can only imagine the cities best elementary school setting up shop across the street is a good thing? Especially in an already family oriented community?

Edited October 20, 2018 by Dome

[TVScout]

23 hours ago, theJ said:

my question to this kind of analysis is always this: have you shorted (or will you short) the market?  Because if you're so sure, you will make a fortune.

I would but my money is tied up in dividends. Over the medium term shorting would cost me more money than it would save.

[Forge]

On 10/16/2018 at 11:58 AM, BayRaider said:

They stopped that years ago for FHA, whole loan no matter what now. Conventional im not sure. 

Technically, the lender designated servicer is supposed to contact the MI company once the loan reaches 78% ltv based on the amortization to cancel the MI. But you're depending on them to do that. This is required by law, but you know how big company and bank servicing companies are. Also, this is based on the initial amortization schedule at the time the loan funded - this does not account for fluctuations in the property value through market volatility. The borrower can also request, in writing, MI to be removed once the property hits 80% loan to value (whenever that is, even if it's a year down the line based on market fluctuations). 

That being said, I'm a big supporter of just paying the MI up front. It limits your options with regards to refinancing a bit (you probably wouldn't want to refinance until you have 20% equity in the home or you're going to get double hit on the MI or at the very least not for a few years when the amount of the monthly MI premium would match or exceed what you paid upfront), but I like just having it over and done with. Monthly MI can certainly be a boon in rapidly increasing markets (Seattle, Denver, Vegas, some areas of TX spring to mind) as some people probably got close to 20% equity in their home over the last 18 months just because of the crazy increasing markets there, and so they could be pretty close to done with their MI if they wanted to at this point with a minimal overall cost. But in the end, if you're going to sit tight for 4 to 5 years, up front is probably the way to go in my opinion and your market isn't going crazy. It's just cheaper. 

Take my home for example. 95% ltv conventional loan. Won't go in to the total specifics of my loan, but Monthly MI would be $226/mo for the first 10 years of the loan unless I had it canceled early. If I just made the standard payments, the lender would be required to cancel the MI at 78% ltv, which I would hit in about 9 years, 4 months based on my specific loan terms. So the total MI paid would be in excess of 25K. 

Or I can just pay $8800 up front and be over and done with it. 

Now, as I said, there are circumstances in which Monthly is a good idea. If you are going to refinance in fairly short order, you probably don't want to pay it up front (since it would take about 39 months on the monthly to get to what you paid for th single in my case). You can't really predict the market, so I hesitate to make any recommendation on that, but yeah, if your market is going crazy (there are a few of them right now), its possible you'll get your equity in fairly short order (my previous primary residence, purchased in 2016 w/5% down, has already increased in value through the market to the point that I have 30% equity in the house). 

Source: I'm a senior underwriter for a mortgage insurance company and I spend all of my days underwriting mortgage insurance while posting here. 

[Forge]

3 hours ago, Dome said:

We just had construction begin on a new elementary school across the street from our house. One of the highest rated schools in the area will be moving into the new facilities in 2 years.

Our neighborhood was already jam packed with families with school aged kids, and I think it’s about to get even wilder lol kids just run amuck in the streets at night already. If there are too many more I’m actually worried about a mutiny. 

How does stuff like this affect home value? I can only imagine the cities best elementary school setting up shop across the street is a good thing? Especially in an already family oriented community?

If it's literally across the street from your home, it could adversely affect the value of your home, but it really can depend on what your market will tolerate. I'm not an appraiser, just have to look at them all day, and I can tell you that I have seen negative adjustments on properties for these things. When you're directly across the street / adjacent to something like commercial properties, schools, rail road tracks, located on well traveled thoroughfares, the appraiser will negatively adjust the subject, usually under the "view" row or "location" row. Most of the time, a property's view will be "N; Res", or neutral residential. After that, you could have differences such as "A; commercial" or "A; apartments" or "A; school". These are typically negative adjustments that decrease the value of the property. You also could have "B; Lake", "B; Woods", etc, which are beneficial locations that increase the subject property value against other similar homes. 

If the road you are on becomes well traveled due to the school, this can also lead to a negative adjustment. This is typically under the location row, and will show something such as "A; busyroad" as opposed to "N; res" similar to the view row. 

So being in such close proximity to the school could detrimentally impact the value of the property, though this is not guaranteed. It depends a lot on the market if this is a big deal, whether there is sufficient data, what the actual location is (IE, are you being hyperbolic when you say that it's across the street and it's really across the street at the other corner of the block or something) 

Now, if it's one of the best schools in the state or something, and it's something that makes the area highly desirable, it also could increase the value of the property in that school district as a whole through supply and demand, but that would affect your immediate market as a whole while your proximate location to the school could adversely affect the value of your home on an individual basis. 

[ramssuperbowl99]

3 hours ago, TVScout said:

I would but my money is tied up in dividends. Over the medium term shorting would cost me more money than it would save.

Not only does this not make sense as an explanation, you don't own a dividend or have money tied up in dividends. You own a share of stock which may pay out a dividend. If you want to act like you're somehow the 0.001% of people who are smart enough to actually predict the market accurately, you might want to consider using correct basic terminology.

Edited October 20, 2018 by ramssuperbowl99

[AFlaccoSeagulls]

4 hours ago, Dome said:

@AFlaccoSeagulls what area did you end up in?

Our budget was similar. We looked at a few places in Portland, but they were just too far south for us. Everything farther north was either out of our price range or in the “nightly car theft” neighborhoods. No middle ground up north when we were shopping.

We're in South Hillsboro now - way outside of Portland. I looked around in the St. John area but it was just too far of a drive for me, and none of the neighborhoods looked good.

[vike daddy]

31 minutes ago, ramssuperbowl99 said:

Not only does this not make sense as an explanation, you don't own a dividend or have money tied up in dividends. You own a share of stock which may pay out a dividend. If you want to act like you're somehow the 0.001% of people who are smart enough to actually predict the market accurately, you might want to consider using correct basic terminology.

he could mean his investment capital is tied up in dividend bearing stocks, that he doesn't want to sell. that's how i took it.

[ramssuperbowl99]

2 minutes ago, vike daddy said:

he could mean his investment capital is tied up in dividend bearing stocks, that he doesn't want to sell. that's how i took it.

Me too. But the explanation that he's simultaneously expecting an imminent market crash and doesn't want to sell the stocks he has makes no sense. The poor wording was just the cherry on top.

[MKnight82]

6 hours ago, Forge said:

If it's literally across the street from your home, it could adversely affect the value of your home, but it really can depend on what your market will tolerate. I'm not an appraiser, just have to look at them all day, and I can tell you that I have seen negative adjustments on properties for these things. When you're directly across the street / adjacent to something like commercial properties, schools, rail road tracks, located on well traveled thoroughfares, the appraiser will negatively adjust the subject, usually under the "view" row or "location" row. Most of the time, a property's view will be "N; Res", or neutral residential. After that, you could have differences such as "A; commercial" or "A; apartments" or "A; school". These are typically negative adjustments that decrease the value of the property. You also could have "B; Lake", "B; Woods", etc, which are beneficial locations that increase the subject property value against other similar homes. 

If the road you are on becomes well traveled due to the school, this can also lead to a negative adjustment. This is typically under the location row, and will show something such as "A; busyroad" as opposed to "N; res" similar to the view row. 

So being in such close proximity to the school could detrimentally impact the value of the property, though this is not guaranteed. It depends a lot on the market if this is a big deal, whether there is sufficient data, what the actual location is (IE, are you being hyperbolic when you say that it's across the street and it's really across the street at the other corner of the block or something) 

Now, if it's one of the best schools in the state or something, and it's something that makes the area highly desirable, it also could increase the value of the property in that school district as a whole through supply and demand, but that would affect your immediate market as a whole while your proximate location to the school could adversely affect the value of your home on an individual basis. 

I am an appraiser, I can tell you that it could go either way.  Some people like that their kids can walk to school and back.

A new facility couldn’t hurt it should draw some quality teachers but until some SOL scores come out and the place gets a reputation for the quality of the education it’s hard to determine whether its a positive or negative.  I would lean more towards positive though.

[MKnight82]

6 hours ago, Forge said:

Technically, the lender designated servicer is supposed to contact the MI company once the loan reaches 78% ltv based on the amortization to cancel the MI. But you're depending on them to do that. This is required by law, but you know how big company and bank servicing companies are. Also, this is based on the initial amortization schedule at the time the loan funded - this does not account for fluctuations in the property value through market volatility. The borrower can also request, in writing, MI to be removed once the property hits 80% loan to value (whenever that is, even if it's a year down the line based on market fluctuations). 

That being said, I'm a big supporter of just paying the MI up front. It limits your options with regards to refinancing a bit (you probably wouldn't want to refinance until you have 20% equity in the home or you're going to get double hit on the MI or at the very least not for a few years when the amount of the monthly MI premium would match or exceed what you paid upfront), but I like just having it over and done with. Monthly MI can certainly be a boon in rapidly increasing markets (Seattle, Denver, Vegas, some areas of TX spring to mind) as some people probably got close to 20% equity in their home over the last 18 months just because of the crazy increasing markets there, and so they could be pretty close to done with their MI if they wanted to at this point with a minimal overall cost. But in the end, if you're going to sit tight for 4 to 5 years, up front is probably the way to go in my opinion and your market isn't going crazy. It's just cheaper. 

Take my home for example. 95% ltv conventional loan. Won't go in to the total specifics of my loan, but Monthly MI would be $226/mo for the first 10 years of the loan unless I had it canceled early. If I just made the standard payments, the lender would be required to cancel the MI at 78% ltv, which I would hit in about 9 years, 4 months based on my specific loan terms. So the total MI paid would be in excess of 25K. 

Or I can just pay $8800 up front and be over and done with it. 

Now, as I said, there are circumstances in which Monthly is a good idea. If you are going to refinance in fairly short order, you probably don't want to pay it up front (since it would take about 39 months on the monthly to get to what you paid for th single in my case). You can't really predict the market, so I hesitate to make any recommendation on that, but yeah, if your market is going crazy (there are a few of them right now), its possible you'll get your equity in fairly short order (my previous primary residence, purchased in 2016 w/5% down, has already increased in value through the market to the point that I have 30% equity in the house). 

Source: I'm a senior underwriter for a mortgage insurance company and I spend all of my days underwriting mortgage insurance while posting here. 

This post is 100% accurate