1
   

First time house buyer who knows nothing

 
 
Reply Tue 3 Apr, 2007 09:30 pm
I'm 33 and my wife and I have always either rented apartments, done short term sublets, or lived full-time in an RV. We never figured out where we wanted to settle until we came here. So now we want to buy our first house... in Los Angeles... while the market is, well, the way it is.... yup, I'd call that jumping in cold turkey.

So, I've started enlisting the help of a friend who knows LOADS about real estate, but bless his heart he is a terrible teacher and I'm more confused now than I was before.

We've sat down and figured things out and I think we're looking for a $450k-500k house. I've decided on two neighborhoods that seem relatively affordable and I'm exceptionally handy having worked for a contractor for several years. I don't mind a fixer, but it has to be live-able while we fix.

-So can someone walk me through the process like I'm a 3-year old? I really mean like a child... I know nothing. I don't even know what an escrow is. I keep hearing the phrase, "we just closed on our new house" and I say congratulations but I don't know what it means.
-What is the order of things? Do I get approved for a loan first? Should I do one of those pre-approvals? I've already checked my credit and its in the very high 600s, so I should be good there.
-Should I just walk into a realtor's office and let them walk me through it, or are they shady like used car dealers? Will they take advantage of us or is it safe to let them do the helping?
-Am I money ahead to buy a cheap house that's mostly renovated, or buy a worthless basket case and fix it? Either way it seems like the same total investment, but will one be more valuable in the end than the other?
-One friend of mine suggested that I can't go wrong buying the worst house in the best neighborhood. Is that a wise idea or is he full of poop?

thanks in advance for helping this poor guy out Smile
  • Topic Stats
  • Top Replies
  • Link to this Topic
Type: Discussion • Score: 1 • Views: 1,659 • Replies: 19
No top replies

 
ossobuco
 
  1  
Reply Tue 3 Apr, 2007 09:35 pm
I'm not a real estate smartie but I'm an LA person and once bought in a neighborhood that was what they called, then, redlined, or mostly so. Only one or two lenders would consider it. My old house is now worth zillions. Not that that is why we bought (and too bad we don't still own it).

I post by way of bookmarking the thread.
0 Replies
 
curtis73
 
  1  
Reply Tue 3 Apr, 2007 09:44 pm
Good advice. We currently have a loft in Lincoln Heights which is a sorta rough area. For the first two years it was cleaning up fast, but now it seems to be going in the wrong direction. We want to at least move to a better neighborhood than here.

We're considering Silver Lake/Echo Park and Eagle Rock as our first choices. Glendale and Burbank are distant second choices. We wouldn't mind WeHo, westside, Santa Monica, or other surrounding (northern) neighborhoods, but they are PRICEY.

... but if you have a suggestion of a relatively clean area that is somewhere between redlined and Burbank, I'm all ears Smile

Thanks for the reply.
0 Replies
 
dagmaraka
 
  1  
Reply Tue 3 Apr, 2007 09:47 pm
i, too, am just bookmarking. hopefully i'll be a first time home buyer within a year or two, so i hope to learn along with you.
0 Replies
 
CalamityJane
 
  1  
Reply Tue 3 Apr, 2007 10:23 pm
Hi curtis, and welcome to a2k Smile

I am not a realtor but I have bought and sold quite a few houses.
So let's try to make this simple:
First and foremost, get preapproved for a loan of $500,000.
No sense in looking at houses in that price range, if you won't find a lender.
Second, location. A shack in a good neighborhood is better than a good house in a bad neighborhood. So, if you're handy, and can do some
remodeling yourself, do it!

When you're settled on the area, choose a realtor. I've always looked for
an experienced realtor with a large sales volume who doesn't waste your time. If you could pre-select the houses through online sources, it would save you all some time.

Once you've found the house of your dreams, go to zillow.com and
look up the estimated prices in the neighborhood and make an offer
that is accordingly. If the sales price is reasonable, don't push the price
down too much, you want the seller to cooperate with you later on.

The realtor will write-up an offer to the seller on your behalf, and
it is customary to put a $ 5000.00 minimum deposit down to show your
good faith. If the seller accepts your offer (of which you have 3 days to rescind), the realtor will suggest an escrow company who will handle
both the sellers and your transaction.

THe escrow company acts as neutral party protecting buyer and seller
at the same time. Escrow will make sure that all documents are submitted in a timely matter and no funds will be distributed until all
stipulations are taken care of. For instance, if you have the property
inspected for any repairs, or termites and the inspection report submitted to escrow, states that such and such repairs need to be made by seller,
the seller has to re-submit a report after necessary repairs are done.

When there are no liens on the house, no other titles to the property
as the seller, when all documents are in escrow and both parties have
signed off, your lender will submit the payment for the house to escrow
who in turn will send a check to the seller, and "escrow is closed"
which means, the house is yours.

All closing costs pertaining to escrow are usually split 50/50 by buyer
and seller. Escrow will also hand you the keys to the property, the
deed and any other documents you need.

That's it!

So, make sure, that everything that you want to have repaired at the
house is submitted to escrow. Even if the house is sold "as is" there
are certain requirements the seller has to guarantee. In California, the roof has to be warranted by the seller for 1 year after close of escrow.

Right now, it is a buyers' market in southern California, so the best
time to get a good deal. Also, shop around with lenders, some of the
banks have higher loan cost than others.
0 Replies
 
Green Witch
 
  1  
Reply Tue 3 Apr, 2007 10:27 pm
Re: First time house buyer who knows nothing
curtis73 wrote:

-Should I just walk into a realtor's office and let them walk me through it, or are they shady like used car dealers? Will they take advantage of us or is it safe to let them do the helping?


My mother was a real estate agent for over 40 years and she loved helping first time buyers find the right home. All agents are different, you can shop around until you find one you like. There are also agents who work for the buyer instead of the seller, you might feel more comfortable dealing with someone like that. Many banks offer literature on buying a home and often there are special deals for first time buyers - just go in and ask. Remember to have any house you are seriously considering inspected by an independent engineer, so you won't have any expensive surprises after you move in.
0 Replies
 
ossobuco
 
  1  
Reply Tue 3 Apr, 2007 10:29 pm
We bought in Venice in early '76. It zoomed some time later. Venice, as it happens has always been - I think - an area of this few blocks or that few blocks with one neighborhood rally'd around by some families of different origins. As it stand now, the blocks vary by multiples of thousands of dollars. When I left the area, several neighborhoods claimed not to be venice, calling themselves marina del rey. The post office let them by..

Chuckle, just look at map, folks. They are still in Venice, and prices have soared.

I'll have to look up Lincoln Heights. I don't know enough to make a useful comment about that area. Maybe someone will show up who can.

I do have pals and former clients (I am/was a landscape architect) in Silver Lake and Echo Park, places that remind me of Venice in various ways.

Seems to me you need to do a bunch of interviewing of real estate types..
while not just folding with the first or second person.





Years ago, when I looked for another apartment, I drove up and down various streets several times a week. That was how I found a totally great place over a spanish-type house in Westwood, a place I stayed for about seven years without their raising my rent since they liked me, I paid on time. Bet it doubled when I did move.

Looking for a house could have some of the same elements... re figuring out the do-able neighborhood you like.
0 Replies
 
Green Witch
 
  1  
Reply Tue 3 Apr, 2007 10:30 pm
Check this out:Tips For Firt Time Home Buyers
0 Replies
 
JustBrooke
 
  1  
Reply Tue 3 Apr, 2007 10:31 pm
Hi there Curtis. So much can be said on this topic. I do consider myself somewhat of an expert because this is part of what I do all day long, though I handle mostly the bigger commercial accounts.

I don't know what state you are from, but I am sure that you have seen the problems in the marketplace with the increase in foreclosures. This is one of the reasons that property values are declining in certain states. Before I would put a bid in on a house right now, I would do some research to make sure that there have been no forclosures too close to the home I wanted to purchase. If there have been recent onces, you can expect a possible further decline in the value of the home you are purchasing. Just make sure that you allow for that when you put that bid in. You don't wanna bid 450,000 and have the value decline 20,000 the day after you sign.

Definitely get pre-approved. Make sure that the approval process is taken all the way to approval of income docs, etc. Obviously you won't have a purchase contract for the title work to be done on or an appraisal but everything else can be taken through underwriting to make sure there is nothing in your credit or any surprises in your debt ratio.

With the passage of SB185 and other bills, there have been so many changes that it is hard for me to keep up with and I am sitting in the middle of the ring so to speak. A huge shake up in the subprime market that has begun to trickle into the A- side and affecting even those with good credit. Guidelines are changing all the time. That being said, there are still some fantastic programs that are fannie mae backed for purchases. Though the max you can go is 417,000 before it then becomes a jumbo loan.
Are you putting any money down? I have written loans as of late with poor credit scores but compensating factors such as reserves or job time, etc, ........ @ 6.75% and no money down. Not bad on 100% deal. Only I have required the escrow of taxes and insurance into the payment and this particular deal also requires PMI (private mortgage insurance) unless you have 20% to put down.

I can say a lot about Real Estate Agents but I'm heading off to bed right now. One thing I will say.....go to your local bank as soon as possible and get your financing squared away before you slip in any bids. And even then put a contingency clause into the contract saying that it is only good with an acceptable appraisal , a clear title, and loan approval.

Hope I didn't confuse you too much. Smile SO much more I could add if it wasn't so late!

G'nite
0 Replies
 
dagmaraka
 
  1  
Reply Tue 3 Apr, 2007 10:31 pm
Cities and banks both often have special deals for first time home buyer. City of Cambridge here will give you $130,000 towards the market price of your first house, but then they put a cap on how much you can sell it for. They keep it in their list of affordable housing afterwards. That's the route I'll be taking for sure. bank of america also has deals, affordable mortgages, or even zero down payment plans... sit down with an expert at your bank first and let them walk you through various plans they have.
0 Replies
 
ossobuco
 
  1  
Reply Tue 3 Apr, 2007 10:37 pm
Wow, so different from my experience, where banks never answered...

good, then.
0 Replies
 
CalamityJane
 
  1  
Reply Tue 3 Apr, 2007 10:39 pm
No more dagmar, banks are hurting - especially here in southern California.
We have too many foreclosures right now, and it seems that most banks,
the larger ones anyways, look at potential buyers twice before they hand
out loans. Impeccable credit rating, and a larger down payment are a prerequisite now.

As I said previously, California's homebuyers and sellers are protected
through escrow companies who will do the title search for liens etc.
and no transaction will take place, until all stipulations are met.
0 Replies
 
dagmaraka
 
  2  
Reply Tue 3 Apr, 2007 10:53 pm
Hm. Probably depends on location. Our house prices just plummeted. They are lowest they've been in many years, and it's a great time to buy. Probably also means that there are too many buyers, not enough sellers. So maybe the scrutiny is stricter.
I was asking around a year ago. Before my whole visa mess started. Now I have to postpone by about 2-3 more years. Thanks, Department of Homeland Security.
0 Replies
 
curtis73
 
  1  
Reply Tue 3 Apr, 2007 11:05 pm
Wow... great info. I'm familiar with Zillow.com, but they're server is undergoing maintenance tonight. A couple zillow questions... when I see the 'zestimate' price, am I to assume that its a guessed value based on the hard facts of the property and not is actual condition? Like two identical neighboring houses would probably show up the same even if one was freshly refurbed and the other had no roof?

To answer a couple questions some of you had; yes, I will be making a down payment. I can come up with about 20k on my own, and I can probably borrow about 100k from my family with no interest. I planned on looking at how the numbers stacked up with zero down, my 20k down, the family's 100k down, and a combined 120k down. Other than the obvious equity and monthly payment differences, are there major benefits to one or the other?

To those of you curious about Lincoln Heights; Its the neighborhood that is in the south east quadrant of the intersections of the I-5 and 110 freeways. Its east of Chinatown, bordered on the north by the 110, bordered on the west by I-5, on the east by mission blvd or soto st, and goes as far south as about main. Its 90031 if you want to look it up. Its almost all Hispanic with a notable Korean and Chinese population. Its a fine neighborhood and I'm accepted quite well here, but my PA wife and I don't sleep too easily with weekly gunfire Smile
0 Replies
 
ossobuco
 
  1  
Reply Tue 3 Apr, 2007 11:13 pm
In our early days in our house in Venice we had helicopters all the time...

The neighborhood sounds good to me, but what do I know...
0 Replies
 
CalamityJane
 
  1  
Reply Tue 3 Apr, 2007 11:30 pm
dagmar, yes, every neighborhood is different. Where I live - close to the
beach - prices are hardly dropping at all, whereas 5 miles away, the decline is quite sharp.


curtis73 wrote:
Wow... great info. I'm familiar with Zillow.com, but they're server is undergoing maintenance tonight. A couple zillow questions... when I see the 'zestimate' price, am I to assume that its a guessed value based on the hard facts of the property and not is actual condition? Like two identical neighboring houses would probably show up the same even if one was freshly refurbed and the other had no roof?


Right. Zillow will give you only an estimate, gathered from the data of homes that have sold previously. Naturally, if the bathrooms, kitchen
etc. is newly remodelled, it needs to be incorporated into the price.

Quote:
To answer a couple questions some of you had; yes, I will be making a down payment. I can come up with about 20k on my own, and I can probably borrow about 100k from my family with no interest. I planned on looking at how the numbers stacked up with zero down, my 20k down, the family's 100k down, and a combined 120k down. Other than the obvious equity and monthly payment differences, are there major benefits to one or the other?


I doubt that you get a house with zero down, and on a $ 500,000 house
the bank will make you pay 20 % down, that's 100k. So take the
family money and use it as a downpayment. Leave the 20k for rainy days.
0 Replies
 
jespah
 
  1  
Reply Wed 4 Apr, 2007 04:13 am
No time to really respond right now but you should start with the loan application process as it takes a while plus, once you're approved, that's your budget (you may find that you are approved for more than you originally would have thought). Plus, already having a loan approval in hand will help give you an edge if there is competition to get the house.

I'll be back later.
0 Replies
 
want2no
 
  1  
Reply Sat 5 May, 2007 07:58 pm
still deciding on financing?
I would definately go with a bank, preferrably the one you use. Your credit score is excellent enough for low rates and you won't be jerked around as some lenders will do. good luck!
0 Replies
 
ossobuco
 
  1  
Reply Mon 7 May, 2007 10:53 am
Curtis, you may have seen this article in the LA Times -

http://www.latimes.com/features/magazine/west/la-tm-hollister17apr29,1,5030534.story?coll=la-headlines-west
0 Replies
 
sozobe
 
  1  
Reply Mon 7 May, 2007 11:17 am
Do you have kids? Do you plan to have kids? Is this a "starter house" or do you plan to stay for a while?

If it's not a starter house and if you have or plan to have kids, pay close attention to the school district. LAUSD sucks. I'm sure you know that, but... For example, Silver Lake is a great area, but I'm pretty sure it doesn't have its own school district (it's part of LAUSD). Pasadena is supposed to be pretty good. Beyond that I don't really know much. (Moved away in 2000, before I had my kid.)

I know so many people who bought houses and then had kids and were faced with a bad school district or moving.
0 Replies
 
 

Related Topics

Where is the US economy headed? - Discussion by au1929
Debt consolidation - Question by rogers
Shopping Around For Loans - Question by Brandon9000
What is greed? - Discussion by Robert Gentel
bonds series h - Question by allen russell
Naked Short Selling - Question by optimus cubed
HOW TO GET WEALTHY - Discussion by farmerman
 
  1. Forums
  2. » First time house buyer who knows nothing
Copyright © 2021 MadLab, LLC :: Terms of Service :: Privacy Policy :: Page generated in 0.03 seconds on 05/08/2021 at 01:43:38