Real Estate questions

[Prof_Frink]

Hey all, has anyone recently purchased a condo or house? I live in Boston and will be a first time home buyer, I've heard that this is a good market now that the housing bubble has cooled somewhat. But I still don't want to overpay. It seems to me that the driving force behind this "bubble" is the mortgage lenders which are driving up the home prices.

I don't need to buy right away so I'm going to take my time to find the right condo at the right price. I'm just worried about over-paying now, and then losing the value of the home if for some reason interest rates rise when I'm ready to sell.

Also is it better to take out a fixed mortgage or adjustable rate? I've always thought that fixed was better.

Does anyone have any suggestions? or home-buying stories?

[clayseason1]

Also is it better to take out a fixed mortgage or adjustable rate? I've always thought that fixed was better.
In my opinion, fixed is better unless you are probably going to resell quickly then sometimes an adjustable rate can be beneficial.

Just because you finance a 30 year fixed rate loan today, doesn't mean you can't refinance that loan tomorrow. So if you find the right home, buy it and if a lower interest rate comes along, you can refinance.

Do not fall for the 15 year or twice monthly house payment so you can pay your home off early. Finance at the 30 year fixed (thus locking in the lower payment) and if you want to pay your home off in less time, just make additional principal only payments. There is no penalty for early pay off.

so I'm going to take my time to find the right condo at the right price
Before buying that condo, get a copy of the condo association by laws. The by laws spell out the associations obligations to you and also what your responsibilities are. Make sure you also understand the condo association's commercial insurance policy as it relates to your responsibilities. You can show your insurance agent a copy of the by laws and they can recommend coverage choices.
Some condo association policies cover the unit as it was originally built, leaving you to insure upgrades and additions besides your personal property and liability exposure.
You should also check with the condo association about assessments. For instance, if the building your condo is in needs a new roof because it is old and needs to be replaced, is any or all of that cost going to be assessed each of the unit owners. Many people don't realize that besides the monthly condo fees, there could be special assessments.

I've been hearing that real estate values are going to top out for I-don't-know-how-many-years-now. Generally speaking, if you buy your home in a stable community and maintain the property, you won't lose your investment. And you have the mortgage loan interest to deduct on your income tax which (if never owning a home before) gives you the opportunity to itemize and probably save money on taxes.

Some communities or lenders also have special rates for first time home buyers.
That's all I can think of right now.

eta: Also you should get prequalified for a loan. It's usually better to go to a mortgage company and apply.

[Prof_Frink]

Hey, many thanks! I'm a first time buyer and I checked my bank and they want like 20% down payment - that seems very high. But i want my monthly payments to be as low as possible.

[rottenralf]

Check ebay's real estate listings, so good buys there.

[Prof_Frink]

they say to wait until the Autumn and prices will really drop. Anyone have any suggestions?

[supermodel]

^^^^what clayseason said.

Turns out my condo association is a financial mess, I only found out after the HVAC went out for two weeks last August. They have almost zero reserves thanks to years of mismanagement by the board and assessed us for the repair. I am expecting a few more assessments for some other repairs. Planning to sell before the end of the year.

[Dionysus]

I say check out FEMA and the flood maps.

[Prof_Frink]

Global warming does not exist - Floods are just a natural occurance!

[clayseason1]

Hey, many thanks! I'm a first time buyer and I checked my bank and they want like 20% down payment - that seems very high. But i want my monthly payments to be as low as possible.
I would suggest not going through a bank. Their underwriting is traditionally slow and pretty exhausting. Look for a good mortgage broker and/or talk to some friends and relatives for referrals. Also check with your real estate agent - he/she probably knows several brokers.

You will need 20% down to avoid PMI (Private Mortgage Insurance). Insurance for the mortgage company - basically how it works - If you have less than 20% equity in the property, then the bank can and will require PMI. The premium is part of the monthly house payment and it is not cheap. You reap no benefit from it - only the mortgage company benefits.
There are ways to avoid PMI and a good mortgage broker can help you with that. Here's a link on PMI http://www.bankrate.com/brm/news/mtg/20010601b.asp

I say check out FEMA and the flood maps.
I don't know much about real estate law - but it some states it is mandatory for the seller to disclose whether or not you are in a flood plain that the lender will require flood insurance. If the lender requires it, you can bet the property is in a high risk flood zone, and if it is the flood insurance will be expensive.

[Prof_Frink]

Okay thanks, I did not know that about the 20% or PMI penalty. My broker told me that 20% was high and he could get me mortgage lenders who require lower.

The PMI seems complicated - like i will have to take out more loans on top of the mortgage.

Hopefully my parents can help me with the 20%

[rottenralf]

You insurance agent can tell you if a property is in a flood plain, he just needs the address and usually the answer is right away, but sometimes the address is confusing to the program and FEMA will have to email him the info, usually within a few days, they are good about that. If it isn't in a flood plain you cannot get flood insurance, and if you are most mortgage companies will require it. Washington Mutual are real sticklers about it and other things so avoid them if you can.

[clayseason1]

Okay thanks, I did not know that about the 20% or PMI penalty. My broker told me that 20% was high and he could get me mortgage lenders who require lower.

The PMI seems complicated - like i will have to take out more loans on top of the mortgage.

Hopefully my parents can help me with the 20%
Well don't despair if you do get saddled with PMI. You have something working for you that will help you get rid of it - that's appreciation. In addition, some upgrades or improvement can increase the value of your home. (Ask your real estate agent - once you find your home - if he/she has a pamphlet on simple and inexpensive improvements you can make to increase the value.) You can also make additional principal payments.

[Prof_Frink]

appreciation is going down as the market is decreasing. So it is not wise to sell after only a few years. I would need to hold onto the property for at least 5 years for it to appreciate in value. Is this correct?

[Prof_Frink]

How much is too low for an offer? I saw a nice condo for $250,000 but its been on the market for at least 3 months and the best I can realistically afford is $215 maybe $225.

Do u guys think that is too low to offer? What is the standard offer time - 7 days?

[brdmom]

Are you working with a realtor? S/he should be able to answer some of your questions although you should remember that unless you have a buyer's broker, the realtor is working for the seller.
In terms of an offer, you can offer whatever you want. This is not a personal relationship, so don't feel like you are going to "insult" someone. (but don't waste people's time with something completely ridiculous like half the asking price). Offer what you feel is reasonable and that you would be willing to pay. The worst that happens is they turn you down. Then you can either look elsewhere, or make a counter offer.
It would be money well spent to have a real estate attorney review the condo documents and financials before you sign the p and s. You can make your offer contingent on a satisfactory home inspection and a satisfactory review of the condo documents (both sensible and reasonable contingencies.)

Good luck!

[marshall2u]

Hey, you can offer anything. My current home was a foreclosure and my agent thought I was offering too low. We got into an argument, and she left crying. Bottom line is....I got the house very near my low ball offer. Rule of thumb: you can always increase your offer, but hard to lower it! Don't be afraid to offer something low. As someone else already said, it's not personal.

As far as PMI goes, it's nice to NOT have to pay it. I've paid it in the past and hated every minute. Its a BS thing, but it's real, and if you don't have 20% equity, you will pay it. And, it IS substantial. Unfortunately, many young, first time home buyers will have to pay it. If you can get the 20% to avoid it, great. If not, as someone mentioned, get a new evaluation of value when you're sure it's where you want it to be. It will cost you, but the money you save will make it worthwhile.

The last bit of wisdom I have is based on the question about future values. This is strictly speculative. A house in LA might be worth a million, while the exact same house in rural NC might be worth $90K. Location, location, location. Its really that simple (and that complicated). Learn your location and make your best educated guess as to where it will be when you're ready to sell. There is no certain formula. Its a crap shoot, but an educated one.

[BujuPhunk]

Hi - I am a mortgage underwriter - I am in the subprime market...basically that means we lend money on homes, but do not have to use the current market "prime rate" or guidelines (ie - 20% down, PMI, ect) - we use investors, they make the guidelines on what risk they are willing to take and we manually underwrite every borrower. Some people will tell you that if you go with a subprime lender, you will pay higher rates, etc. That is not always the case and if you need the flexability of not putting as much down and perhaps, as most of us, have had a rocky credit history, subprime lending can really be the way to go. You dont always need to go to high interest companies like Household either...both Wells Fargo and Countrywide have a subprime "dept" - I have to correct one thing you said in your orginal post that it is the lenders driving up your "bubble". It isnt the lenders at all - trust me, we dont want to end up upside down on a mortgage when the property doesnt actually value out at what it was appraised for and then be left holding the mortgage because the borrower couldnt handle responsibilities and we have to foreclose. We do due diligence upon due diligence to make sure the value is strong before we approve it. I cut value all the time because an appraiser pushes it too hard. Its the investors and developers that drive up your market. The realtors and brokers that are in bed with the appraiser and they drive up the value to make a higher commision on the sale. Boston is a tricky area. There are really good sides and really bad ones. You really need to have a knowledgeable realtor that can help you. Alot of times you can get into a purchase contract with a realtor, as the buyer, and you dont have to pay any commisions to them, because they listed the house for the seller and basically are out selling it...to you. And even better, if you can get a seller that really needs to sell, and has been in his house for a while and will be getting back plenty of his equity, you can get them to throw you up to 6% sellers concessions - which is basically his equity paying all of your closing costs. You could apply for an 80/20 - 1st and 2nd combo 100% financing and have the seller agree to paying for pretty much all the closing costs - and if you are real savy and ask that he also pay for the home inspection - which you should ALWAYS have - and the appraisal - all you end up paying is the insurance and taxes. Listen, dont try to understand insurance. If you are in a Flood Zone, you will be required by your lender to have flood coverage and you really cant do anything about that. Try not to be in a flood zone if you can help it...your realtor will know if you are in one. Its on the appraisal if they try to tell you they dont know. Uhm - I guess thats all I have to say. I have been underwriting both prime and subprime for seven years and I lend nationwide, so I am familiar with Boston. PM me if you really have some questions - even throughout the process - they can use all kind of intimidating words and lingo, just to stay in control of you - if you wanna know if you are getting a good deal from a lender or broker, hit me up...I do this all day long.

[Prof_Frink]

Awesome thanks! Some prices in my area are dropping. I think I'll buy sometime in Nov or Dec because I'm in a lease right now and it'll be tricky for me to get out of it now.

[LostVoyeur]

BEWARE !!!!! get a real estate lawyer !!! I wish I had. Being a first time home buyer I got, for lack of a better word SCREWED.

[marshall2u]

BEWARE !!!!! get a real estate lawyer !!! I wish I had. Being a first time home buyer I got, for lack of a better word SCREWED.

Well, if you're new, that might be a good idea. If you are seasoned, you might not need one. Well, only for the closing, but I think that's different from what LV is saying.

Anyway, if you know what you are doing, you shouldn't need one, but if you are new, might be a good investment.

[Unlocke Locke]

Being a Realtor myself for the past 20 years, I can tell you that everything Clayseason is saying is right on! Good job, Clayseason.

But I also want to add that you didn't want to overpay. If you have a Realtor he or she can do a market analysis for you on the condo so that you can make an educated offer. Remember, true value is what an informed buyer will pay and what a seller will agree to.

Good luck on your purchase!