Do you have some REALLY GOOD tips for someone buying a house for the first time?

Do not skimp and do not trust whatever the sellers are saying, get a high quality home inspector to fully inspect the entire property before signing, and use everything he/she finds wrong to help in your negotiations.

Pay at least 20% so you don’t have to pay PMI.

Don’t buy A) more house than you need and B) more house than you can afford.

Get a fixed rate 30 year loan and pay as much extra each month as you can afford. Print an amortization schedule to prove to yourself why this is a great idea.

Don’t use the equity in your home as an ATM.

Don’t keep refinancing your house just because the interest rates drop a tiny bit. Do the math. Factor in any fees.

@Snoopy Ha, you’ve read my mind! Yes, i agree with everything, and yes, i know how much interest you can save by putting even the tiniest extra money in the bond every month!
Just curious though, pay 20% deposit, you mean? And what’s PMI?

@dynamicduo Oh for sure, if there’s one thing i no longer do, it’s trust people. I think i’ll be bringing my dad along too, he might have a good idea of what to look for too to bring the price down. :)

PMI = private mortgage insurance. Paying 20% on the house allows you to not have PMI, which typically adds a point (1%) to your loan.

So, less than 20% down, on a 30 year fixed loan at 6.5%, for example….you would actually pay at 7.5%, until you reach 20% equity in your home.

@Snoopy Oh…..yes, i’ll have to investigate that then, i dunno if it works the same here in South Africa. Tnx! :)

Drive around and check the newspapers to look at some houses before you contact a realtor. They cannot be trusted to show you what you want. Additionally, don’t buy something that you barely qualify for with a lender. That’s an easy way to get into trouble, even with tighter credit.

@IchtheosaurusRex Oh yes, i want to try get a small a loan as possible – this will be the first time i get myself into debt… :S

As a licensed real estate agent, there is some sound advice above. I’m sure South African laws are very different than in Texas, where i practice, however, if possible, you DO want an agent who would represent you. IchtheosaurusRex’s coments above about not contacting a realtor seem odd. Realtors only get paid when they sell a buyer something they want to buy, so, why would they show you anything BUT what you want to buy?

Make sure you have at least $10,000 stashed in the bank that you can afford to spend to fix or add the “little things that make a house a home,” especially if you haven’t lived in a house before. You would be amazed at how much you may need to buy and how much it will cost.

The money will cover things such as tools for doing repairs (previously done by your landlords), cleaning supplies, drapes, blinds and curtains, extra furniture pieces, landscape repair, fixing the stuff your house inspector found but you couldn’t get the seller to fix, miscellaneous plumbing problems, holes in the fence, upgrading or replacing older appliances, and so on.

Also, if you don’t feel comfortable with your realtor find another one. It isn’t worth the hassle to try to explain what you want or need to someone who doesn’t seem to understand you – my third time buying a house I dealt with a realtor who simply could not believe that a single woman really wanted to buy a house. He kept insisting on showing me condos and townhouses – I have lived in condos, townhouses and apartments, and I never want to share a common wall with anyone else ever again.

@Darwin Oh yes, we have most of the necessary – actually, just about all except a proper dining room table and curtains – goodies for inside the house, but i’m willing to add those to the house (and even little non-urgen repairs) as we have some extra money to spend along the way – we’ve been collecting things for years now, so. :)
And, there isn’t a shortage on realtors here, so that should hopefully not be a problem!
Tnx! :)

And oh yes, sharing a wall is a pain in the ass – i’ve never done it, i’m renting a free standing house now, but i want privacy! :)

@pwyatt – You said “Realtors only get paid when they sell a buyer something they want to buy, so, why would they show you anything BUT what you want to buy?”

That should be true, but sometimes it just doesn’t work that way.

Realtors are human beings and have all the foibles, prejudices and opinions of that race. Most realtors I have dealt with have been intelligent and creative people, great at picking up on what I want. However, I have dealt with a few (such as the guy above, who is also a Texan) who simply could not see over or around their assumptions.

Another Texan realtor kept lecturing his client, a single female friend of mine, about how wasteful she was to have two vehicles. She had a sedan for commuting to work and a truck for camping and hauling stuff. It was none of his business what vehicles she had! Little does he know that now she has three vehicles and a trailer. She took up motorcycle riding and built a trailer to haul the bike in and to camp in when going to rallies where the weather is expected to be less than ideal. He also insisted she needed an apartment, a condo, or a townhouse.

I also have run across a very few who were outright crooked.

@JellyB – In my experience, the $10,000 is still vital – I needed that for my first house, and I needed that again for my second and third houses.

If you don’t need to spend it, great! But I have found it is really good to have it.

@pwyatt Actually, so far, we’ve only been looking at estate agent brochures and magazines, simply because it’s so much easier to find a house that way! I still want to look on the net at other options too, if they are viable.
Tnx! :)

@Darwin Well, yes, it would be a good idea, it’s ALWAYS a good idea to have something extra! :)

@JellyB – Do you have things like good ladders? You would be surprised how expensive they are, as well as how often you need them both inside and out. And you will need things such as yard maintenance tools.

And decent paint is not cheap either – you might think you can live with those bright blue walls, but it may turn out you simply cannot.

As you say, for inside the house you need a dining set and curtains – that can add up in a hurry, unless you can find secondhand goods that will work.

In my experience, I have found $10,000 covers what you need to make the house not only livable but yours.

Look for any “First Time Homebuyers” Taxbreak – In Canada there is such a thing anyway. But you have to have lived in the specific province for a couple years already to get the deal.

@pwyatt, no personal offense intended, but you are in a business in which your compensation is based on commissioned sales. I would make the same remarks about insurance agents, stockbrokers, and just about anyone else who works on commission. I am certain that many realtors are honest, but there are enough who aren’t that neophytes to the housing market should be wary.

When my wife and I were house shopping, the realtor we worked with continually pushed us towards properties that were out of our price range, even though we qualified for financing. We wanted something that we could carry on one income in the event one of us lost our job. However, she flat-out lied to us about one of the houses we were interested in, stating that it had been sold, even though no one had even tendered an offer on it. We wound up buying it, after my wife’s mother called the listing agent to enquire about the property. She just happened to drive by, and wondered why the sign didn’t say “Sold” or “Under Contract.” Our realtor gave a very lame explanation about the “error,” but we did not believe her.

My tip? NOW is the perfect time. (And use a realtor. The seller usually pays for them)

I totally agree with @Darwin, many of us buy as much house as we can afford and don’t think about living expenses (fixing things, remodeling, etc.), so if you are able to save a bit for that, it’s a nice cushion to have.

I think the general rule is that your house payment shouldn’t be more than 40% of your take home pay, I would encourage you to try to go even lower because that has always been a tight number for us…maybe as low as 25–30%, if possible. I’m not sure how realistic or possible that is for you.

Also, definitely put 20% down if you can, like @Snoopy said, but I would say if you can handle a 15 year loan, fixed rate, try to get that and then paying extra on top, if possible.

If you don’t like your real estate agent, get a new one, you are in no way bound to them just because you saw a few houses with them.

Definitely get a home inspection and a pest inspection (we have termite problems here), those are well worth the money spent.

And remember that everything is negotiable! Have fun and enjoy the process. :)

Oh, try to get prequalified for a loan right now while you are looking.

The best advice our home inspector gave us is that we should expect to spend an average of $5000 per year to keep the house up (it’s just over 100 years old). Wow! Was he right! If you’re getting a new house or a smaller house, you could adjust the number down, but build it into your budget.

And, speaking of loans: one more payment to go! After May 4, we own the whole damn thing!

@miasmom One thought about the 15 vs 30 year fixed.

Even if you can afford the payments of a 15 year fixed, it is worth considering getting a 30 year fixed and paying as if you had a 15 year fixed (or pay even more) each month.

If you have a sudden change of financial fortune, you can always (hopefully temporarily) fall back to the basic monthly payment of the 30 year fixed.

In short, a 30 year fixed gives you a little more breathing room if you need it….as long as you have the discipline to pay agressively when you can.

If you have questions, ask them. Do not hesitate. If you still have a question and feel like you are being rushed off the subject, keep asking.

When you start to get into the loan – know your loan! Understand how your loan works! It amazes me that some people just don’t take the time they should to understand their loan. They may not be aware of certain possible penalties. (pre-payment – late payments)

Know that if you are in an adjustable loan, it’s not a myth – it will adjust! I don’t say it like that to make it sound like you wouldn’t understand, but near where I live, there was actually a couple on the nightly news that acted like they thought it would never happen. When they couldn’t afford their payment, any longer, they plead ignorance. Eventually, someone worked with them, but please understand your loan!

@Snoopy hit it on the head – don’t buy too much house – or more than you can afford. You do not want to worry about whether you can truly afford your house or not.

Best wishes!

@Snoopy That is true, it can be nice to have wiggle room in case of unexpected things and if you plan on paying it off like a 15 year mortgage and discipline yourself to do that, then that’s good. Sometimes I see people say they want to put more to their mortgage, but then don’t do it, but would have if it had been in the payment to begin with.

@Snoopy – Actually that is exactly what we did. The lender was pushing us to take ARM, the realtor was pushing us to take a 15-year mortgage, and both were pushing us to buy a lot more house. Instead, we kept to our original comfort zone on amount/monthly payment, made sure there was no prepayment penalty, got a 30-year loan, and paid it off in 15 years.

@Judi Ha! I wish. The buyer always pays for the realtor here – their fees are added to the selling price of the house. :/

@JellyB ; I think that’s what I said isn’t it? It comes out of the sellers side? Some first time home buyers think they will save a ton of money if they don’t hire a realtor. It’s just not the case. They need a realtor to negotiate on their behalf.

@miasmom Well, i think the 40% thing might be possible, i think we save more than half our combined income anyway, for a house deposit. The bigger the deposit, the smaller the loan, the better, that’s the goal here! :)
Also, our idea was to get a longer loan period, because the interest is lower, but pay in more than the required monthy installments, to try to pay it off in under 20 years, or less, if possible. The quicker the better.
TY! I can’t wait starting to look around! :D
And tnx for the advice too! :)
Oh, and well done, what a relief that must be! :D

@Judi :D Well, the seller doesn’t pay for it, because they decide on a price they want for their house, the realtor tells them what their fees are going to be, and the seller adds that to the selling price, so the buyer ends up paying more! That’s what i’m trying to say. But, it is much easier and quicker to find a house using them anyway. :)

@JellyB; It doesn’t really work that way. (I’m a Broker.) The Broker/ Agent gives their best estimate of what they think they can sell the house for. They then tell the seller what their commission is. Some brokers have a flat rate, but usually it’s a percentage of the sell. The seller either accepts the value the broker has told them, or asks if the broker would be willing to list it for higher. Regardless of the list price, offers come in that are not always the asking price. In this market I would say they are probably LESS than the asking price. Then the seller has to decide if they are willing to accept the offer. The selling price is determined not by the seller, but by what the market will bear. I can “sell” my house for a million dollars all day, but unless a buyer is willing to pay a million dollars for it I am not selling anything. The BUYER determines the value, and the appraiser has to justify the sales price to the lender (which is a real hard job right now.)

@Judi Jelly is in South Africa (see Jelly’s post above and profile)...perhaps the fee set up is different down there?

@Snoopy ; I guess I should read better, sorry.

@Judi Oh, ok. Well tnx! :)

@Darwin Oh! Well, we have a ladder to borrow for now (hehe!) and we have gardening tools. Basically, i’m comfortable that we have the necessaries to get by, assuming the house doesn’t need maintenance, which it probably wouldn’t, since i won’t be buying a house in that condition (shouldn’t be anyway…..). But yes, i agree with you still, you never know what emergency may come up – leaking geyser or some such silly thing. :)