So, I'm buying my first house

[Riggswolfe]

I'm nearly 40 and finally taking that plunge. It's about $350 more than what I currently pay but it'll be mine and it's also somewhere in the neighborhood of 600 more square feet, which isn't bad for the increase.

It's a little scary I guess. I'm losing a safety net I have here while also increasing my money commitment and I  HATE moving. Still, it's a great deal and maybe it's just...time.

[Abagadro]

Congrats. Home ownership is both highly gratifying and significantly maddening.

[Riggswolfe]

Congrats. Home ownership is both highly gratifying and significantly maddening.

Thanks! My wife is alternating between extremely excited and stressed and we've just started the whole process.

[Abagadro]

I've found that it helps if you don't get too wrapped up in the stuff you want changed/fixed. I really, really want to redo my master bath but don't readily have the cash it would take. You need to just let that kind of stuff go (or make long, long-term plans for it) and focus on stuff that truly affects your enjoyment of the place on a day-to-day basis.

[Ironwood]

I'm confused;  Why WOULDN'T you want to rent ?

 

(Congratulations.  Keep one thing and one thing only in mind;  improving a property takes TIME.  Don't get too stressed when it doesn't all just happen at once.)

[DraconianOne]

Well done.

Only tip I can give you is get a really good DIY book - not because I recommend doing DIY (unless you're particularly handy) but because a good book will give you a damn good idea of what needs doing and help understand what anyone you get in to do a job is talking about. Also, I reckon it might help you suss out the cowboy builders too.

Second tip is: once you find a good plumber/electrician/whatever, keep hold of them - they're like gold dust.

[apocrypha]

I'll second all the congratulations! Only bit of advice I'd add (cos you asked for advice from all us random internet peoples, right?) is be careful you don't overstretch yourselves financially. First house I owned was just a bit too much for us to afford and it was a bad, bad time.

That said we doubled the value of the property in 2 years so in the long run it worked out OK 

[Numtini]

My advice based on our first house. The crack you will find in the wall next to the mirror in the guest bathroom you never use? NO it does not mean the house is unstable and about to collapse into a sink hole. The vague movement you feel in the floor when you're in that room? No, it does not mean the floor is about to collapse and the house is unstable. And that minor thing thing you're going to get to, but it's a pain and you just haven't done it? Just call someone, you're not going to get to it.

And congratulations!

[slog]

Here is my recommendation that I give to everyone that 95% of people ignore but 100% of people agree with me a year later:  Don't buy any furniture, make any improvements, or anything else until you have made 2 mortgage payments.

Also Every home repair/improvement costs twice what you think it will and will take twice as long when you do it yourself.

[Nebu]

Congratulations!  I hope that you enjoy the experience and make the place somewhere you're happy to come home to.

Also Every home repair/improvement costs twice what you think it will and will take twice as long when you do it yourself.

I once told a friend: "Doing your own home improvements is an admission that your time has no value."

[01101010]

For the love of god pay attention to the roof. Those god damn things are expensive as shit. And like other people have said, get a good DIY book. I think the best thing about a house is all the stuff you can do to it yourself. Get to know some home improvement people and glean as much info as you can from them and this way you also have a contact in case you need to do something outside of your abilities. I did a bunch of new home construction jobs back when I was in high school and first two years of college and the stuff I learned there has paid off over the years. I have been getting into the electrical stuff as of late and this book was recommended by all the electricians I personally knew (thank god for a part time job at Home Depot). You can also pick up the Ugly's electrical book but this one is much more practical. I'd also suggest for the first few of those type of projects to have an electrician inspect it - it costs, but much less than having one do the project for you.

And remember, big box home improvement stores are now a destination, but some of the locally owned places will have better deals and more unique stuff. Get the staples (wire, pipes, cleaning supplies, generic hardware, etc.) from your local Lowes/Home Depot, but the other stuff from a local place.

Congrats, btw.

[Selby]

Enjoy!  My first house was a great experience until I got fired and had to move ;-)  Too bad there is no such thing as affordable housing up here.

As far as home improvement?  Resist the temptation to tear shit apart like all the idiots do on TV.  Leave all alone for at least 6 months unless it is outright broken to get an idea of what needs fixing and what you can afford\tolerate to repair.

[bhodi]

Presumably, you're almost completely tapped out and put as much of your savings as you could afford into the down payment, so craigslist and ikea are your friends for the first few years. Don't buy all new stuff since you'll be changing the interior gradually.

One of my friends can't speak highly enough for some sort of broad insurance coverage - something on top of homeowners insurance that will replace your appliances, furnace, water heater, and other, random bits if/when they break. Depending on your house and it's condition, this can be either a good deal or a waste of money. It may be worth looking into, however.


As for taxes, if you're in the US, you'll want to start keeping track of all housing-related expenses, and you'll start doing the non-EZ so you might as well start keeping track of your donations and such for itemization. Expect to get large checks every year back from your mortgage interest deductions and put that money back into the house if possible.

[Stormwaltz]

We just bought our first in June. Two kids, long-term relationship, college loans about to be paid off... it's almost like I'm a grown up now that I'm 36.

It's a good time to buy if you can. Try for an FHA-backed loan if there are still funds available, and remember the additional monthly costs that renters don't pay, like property/achool taxes (usually escrowed as part of your mortgage payments), sewerage fees, and garbage pickup.

[rattran]

DIY can be enjoyable, and it's nice to know things are done right, not just done. Plan stuff out, only do things inside your knowledge area, or it will cost more and take more time than hiring some shmoe. I've done everything from windows to wiring here, but pay professionals to do stuff like roofing and anything to do with gas lines.

Otherwise, I agree on most else. Don't do jack until you have a bit of a cushion saved back up.

[shiznitz]

Congrats! 

A few pointers:

1) The first time you get a big rain, scour your basement and attic for leaks.  Water damage is pervasive and expensive to fix.
2) Realize you don't have to be good with your hands to fix a lot of the basic things in a home. Just do some reading and get the right tools. I personally avoid anything related to wiring, but you don't have to.  Almost anything a plumber can do (other than adding pipe) a person with an IQ of 90 and two hands can do.
3) You should try and keep 1% of the house's value in a maintenance/repair fund. You will need it.

[Samwise]

My advice based on our first house. The crack you will find in the wall next to the mirror in the guest bathroom you never use? NO it does not mean the house is unstable and about to collapse into a sink hole. The vague movement you feel in the floor when you're in that room? No, it does not mean the floor is about to collapse and the house is unstable. And that minor thing thing you're going to get to, but it's a pain and you just haven't done it? Just call someone, you're not going to get to it.

Quoting this because it's important.

Here is my recommendation that I give to everyone that 95% of people ignore but 100% of people agree with me a year later:  Don't buy any furniture, make any improvements, or anything else until you have made 2 mortgage payments.

This advice confuses me.  Is it because after 2 mortgage payments you're suddenly going to realize you can't afford to keep paying them and you're going to have to sell the house?  I think there are better solutions to that problem...

[WayAbvPar]

I think it is more for the reality of the change in your budget. Knowing more money is going out is one thing; actually living with the remainder once it is gone is another.

[Riggswolfe]

Thanks for all the advice and stuff guys. I have no urges to do any remodeling/new furniture etc.

As for down payments, increased bills, etc:

Well, for one, it's actually the house my mother is moving out of. She can't afford it anymore but my wife and I can due to 1) I just got a $4k a year raise which will account for a big chunk of the increase and 2) I just paid off some credit cards and in May my car is fully paid for.

The house is worth something like $155k-160k. But my aunt is giving it to me for $115k which is what she has left on the mortgage. Now, the down payment and closing costs are coming out of a gift of equity. My understanding from my stepdad, who is a realtor is that basically, the profit my aunt would get is not going to her but is instead my downpayment and closing costs. So, she's essentially giving me 30 grand or so and I basically have built in equity when I move in since my total loan is for $122k on a $155-160k house.

With my raise, after taxes I should be getting something like $200 extra on each paycheck. That takes care of over half of the increased mortgage and with a 4.5% interest rate and a loan with no penalties for early repayment and such it just seems like I need to take the plunge.

So, it's basically a perfect storm of circumstances. Good loan. Great deal on the house. My aunt doesn't want to pay even one more month on the mortgage. I got a raise and interest rates are lower than my stepdad has seen in his 30 years of realestate experience. I was worried my aunt would be ...hmmm....holding the 35,000 loss of profit for her over my head (that's what family is for right?) but she told me last night that it's helping her because she can't afford to keep paying the mortgage and if it sat there for several months before it sold she'd have major problems.

[Lantyssa]

Make sure that if you do escrow, you take into account all taxes and insurance costs.  (PS, do Escrow.)  My first place didn't take out taxes the first year, so for my second I had to pay double the estimated taxes.  A $600 a month jump hurts when you've had a year to settle in to not having it.

If you don't do escrow, (Why are you not doing escrow?), make sure you set aside the necessary amount for tax and insurance time.  Do not touch it until paying these items.

[Abagadro]

You might want to talk to an accountant as you may have a gift tax issue there (there are ways to structure it and account for it to avoid it, but 30k is over the yearly limit on tax-free gifts).

[Riggswolfe]

Make sure that if you do escrow, you take into account all taxes and insurance costs.  (PS, do Escrow.)  My first place didn't take out taxes the first year, so for my second I had to pay double the estimated taxes.  A $600 a month jump hurts when you've had a year to settle in to not having it.

If you don't do escrow, (Why are you not doing escrow?), make sure you set aside the necessary amount for tax and insurance time.  Do not touch it until paying these items.

The taxes and insurance are factored into the monthly mortgage payments.

You might want to talk to an accountant as you may have a gift tax issue there (there are ways to structure it and account for it to avoid it, but 30k is over the yearly limit on tax-free gifts).

Hmm...I didn't think of that. I'm not real sure how this all works to be honest since it's my first house and I'd never heard of a gift of equity before now.

Edit: Ok. Some brief research makes it look like things will be fine. It is over her yearly limit, however, there is a $1 million lifetime limit that would absorb the extra. To my knowledge this is the first time she's given any kind of gift like this so it's no big deal. This house is pretty much her only asset besides her car since she lives with my grandmother. Now, she will inherit my grandmother's house and I'm sure at some point it'll pass from her to either my daughter or I but even then it will be well below that lifetime limit if I'm understanding things correctly.

[Soln]

A hearty congratulations!  And congrats on taking the advice on home ownership and renting from people here ;)  This is a thread almost worth an f13 adulthood sticky.

My own two cents as a former owner and now probably long-term renter:

1) keep your home warranty handy -- make sure you know exactly what is still covered by the builder (if anything).  I would also put aside any warranties for the appliances (if any came with the house) including the furnace.  Also useful to have on hand are the manuals for things if only to have a service number to call.

2) keep your home owner's insurance handy -- make sure you know exactly how you are covered.  You don't have to remember everything, but if you know where the policy is at all times you can decide if you need extra or less coverage.  Flood and earthquake insurance, for example, are not Federally covered I believe.

3) keep your deed in a safe place.  Don't ask.  But yeah.

4) this is just personal opinion, but I would also have 1 or 2 mortage payments available in savings justincase.  Not always realistic I know.

5) maintenance inspection -- before or soon after you move in, when the house is still mostly empty, do a room by room, inside/outside, floor by floor inventory of things you and your partner may want to change.  Capture it now so it won't drive you crazy later.  If a room is fine, list it as fine.  No need for paint etc.  If there's a crack in a veranda footer, write it down now while you are still happy and juiced about the house.  You'll forget about that crack later and it could cause a problem.  Also, if you have a nice punch list of potential DIY's for the future, you can spot new problems as they occur.  "That crackstain wasn't here when we moved in..."

6) take security seriously -- if only once.  With your punch list of DIY down-the-road weekend chores, include questions about how secure is the house.  Your aunt may have been fine, but there may be basement windows that really need grills etc.  You do this once so it's not a long term worry.

And enjoy!

[Abagadro]

Yes, it can all sort out in the lifetime exemption on the 706 (assuming her estate needs to file one, most don't) but you need to remember that it happened way back when. Probably not a big issue, but thought I'd mention it.

[Arthur_Parker]

In the UK you have to have buildings insurance for your mortgage, contents insurance is an optional extra, but it's well worth investing in a good one, new for old and accidental damage.  I don't like to claim for things as it puts the price up but I had a fire once at the last house, lost an entire room, ended up with the whole house repaired & redecorated (smoke damage) and a hefty hunk of cash to replace lost contents.  Mrs does like to claim for things, her mother knocked our tv over while decorating, new tv, washing machine leaked, new carpet in hall, it matched the stairs, landing and 1st floor so they replaced it all.  I came well out ahead on all this even while being scrupulously honest with the insurance companies (I was surprised how many tradesmen offered to give me overinflated bills when they knew it was an insurance job, I'd rather sleep at night).

Fire alarms, you can't have too many.  Carbon monoxide alarm.

Before doing any decorating plan where any wires are going to go and get them down while you have the chance.  Also don't trust your Mrs when she says, "sure those speaker brackets look fine, I won't mind those being up" and plan accordingly.

[Khaldun]

I do not agree at all with the proposition that anybody can DIY plumbing issues that don't require two people. Here's why, speaking from experience: if you're going to find out that there are nasty surprises hidden in the infrastructure of your house, it's going to be plumbing or it's going to be electrical, most of the time. (Sure, there's the occasional dead body rotting behind the drywall or what have you.)

DIY manuals on plumbing help you do something 'normal' but if you take apart the faucet to fix the washers because there's a drip and you find out that the parts inside the faucet are all super-cheapo plastic crap from twenty years ago and that's why there's a leak, because they broke, you're going to be hunting for a complete replacement while the sink/bathtub/shower is completely disabled and then you're maybe going to find that there's an incompatibility between your planned replacement and the non-standard piping set-up, and...you get the idea. Plumbing and wiring so far strike me as the domain where you can yank on a thread and find out that you've unravelled the whole sweater.

OTOH, they are also the domain where the worst predatory businesses lurk waiting to demolish your bank account and those guys WILL exploit you to the limit if they sense for a moment that you're clueless about the issues you've called them to fix. Like folks said, if you find a good plumber or electrician, never let them go and never tell your friends about them and make sure to send them something nice at Christmas.

[Quinton]

I'm now starting on year two of home ownership and still loving it.  Potentially scary that things are my problem if they break, but nice that it's my choice as to if I'm going to fix it right (yes) or do a half-assed job of it (looking at you, some of my less awesome former landlords), etc.

[sinij]

You should factor into your decisions 2-4% yearly depreciation, 1-2% yearly upkeep and renovation costs, about 10-15% increase in property taxes over next 5 years and complete inability to sell the house for next 10 years, because it will be buyers market for next gazillion years.

All of this before deflation, if deflation kicks in add +% of deflation on top of that.

[Merusk]

Buyer's market and length of time depends entirely on the city.  Cincinnati only has a housing stock of 12 months if nothing more is built and the city keeps growing.  Parts of the country are still building because they've remained relatively untouched. (Houston was mentioned as one place in a recent meeting and I think Dallas and Raleigh and DC  are he only things keeping a local company afloat.) Phoenix and most of Florida, however, are fucked for many, many years.

The real worry in the industry is that Gen X will give up and become a renting generation and that Gen y is already headed that way.  Of course, if they'd build something other than 3500sq ft houses in the $400k+ price range they might find there are buyers out there.  That's an entirely different discussion, though.

Anywho, Grats on the house, Riggs! I've found it to be the 2nd biggest pain in the ass you'll ever enjoy.

[slog]

My advice based on our first house. The crack you will find in the wall next to the mirror in the guest bathroom you never use? NO it does not mean the house is unstable and about to collapse into a sink hole. The vague movement you feel in the floor when you're in that room? No, it does not mean the floor is about to collapse and the house is unstable. And that minor thing thing you're going to get to, but it's a pain and you just haven't done it? Just call someone, you're not going to get to it.

Quoting this because it's important.

Here is my recommendation that I give to everyone that 95% of people ignore but 100% of people agree with me a year later:  Don't buy any furniture, make any improvements, or anything else until you have made 2 mortgage payments.

This advice confuses me.  Is it because after 2 mortgage payments you're suddenly going to realize you can't afford to keep paying them and you're going to have to sell the house?  I think there are better solutions to that problem...

The idea is that it gives folks a chance to adjust to their new cash flow before they dump their remaining savings into a kitchen remodel AND it gives you enough time to make a good list of the stuff you really need, but you didn't know it.

[slog]

You should factor into your decisions 2-4% yearly depreciation, 1-2% yearly upkeep and renovation costs, about 10-15% increase in property taxes over next 5 years and complete inability to sell the house for next 10 years, because it will be buyers market for next gazillion years.

All of this before deflation, if deflation kicks in add +% of deflation on top of that.

I've read somewhere that over the long haul it's 2-4% a year for upkeep.

[Riggswolfe]

Well, for now we're not even considering any kind of home improvement type projects. Any money we set back will be for things like "Uhhh...it's July and the air conditioner just stopped working!"

[sinij]

I am currently renting, and paying fairly hefty rent for gated we-will-wipe-your-ass-for-you-just-call-us upscale complex. I can reduce my monthly payments by buying a house and can afford 20% down-payment for pretty much any house short of can't-see-it-from-the-road estates... yet I am not buying.

Here is why:

1. Shadow inventory of yet-to-be-foreclosed houses. Banks are cooking books and dragging their feet on foreclosing on delinquent mortgages. This can go on for years and keep market down and it can also hit the fan at any moment sending housing markets for sharp correction.
2. Jobs situation - as much as I would like to live off my ill-gotten horde/pensions like baby boomers do, I still have to work. This means that at any moment I might have to pick up and move to greener pastures half across the country.
3. Real estate leeches - cost for purchasing and selling house are outrageous. Where I currently reside these leeches expect 6% of transaction cost. This is outrageously expensive even before you start counting inspection, lawyer, and city fee/taxes.

Yes, I am not happy about this situation, I would rather own a house if it wasn't such a money hole. At this point I have a choice of early retirement or owning a house.

At least one though keeps me happy - these baby boomer fuckers that squandered all that wealth on pointless stuff and raked up dept that *I* will have to pay were largely counting the house values as part of the nest egg. THEY WILL WORK UNTIL THE DAY THEY CROAK, long after *I* retire.

[UnSub]

Skimmed the thread, sounds like a good deal. However...

It's family. That adds complications if things go wrong.

Make sure you have a building inspector go through it. Don't use Uncle Frank - you need a completely separate inspector with no horse in the race. That way, if it turns out your mother's meth lab in the basement has eroded the foundations while giving the termites superpowers, you are warned before you move in.

[Riggswolfe]

Skimmed the thread, sounds like a good deal. However...

It's family. That adds complications if things go wrong.

Make sure you have a building inspector go through it. Don't use Uncle Frank - you need a completely separate inspector with no horse in the race. That way, if it turns out your mother's meth lab in the basement has eroded the foundations while giving the termites superpowers, you are warned before you move in.

The bank is going to have an inspector go through so we're covered there. :)