First time home buyer - New vs. Preowned vs. build vs. buy property

jillybeansisme answered 3 weeks ago …

First of all, it is a shame that your home isn't already purchased in order to take advantage of the first time buyer tax credit of up to $8,000. I believe the transaction must be completed before the end of November to get this credit (dollar for dollar reduction of your taxes). Find out right away about that!

If you are still able to get the tax credit, you would not have the time to buy new construction that isn't already existing. You could still buy new construction, but it would be a spec home (one the builder already has built hoping someone will buy) and probably couldn't choose any of your options. That's okay, because unless you are custom building a home, the builder marks up the options way too high. Any spec home will probably have quite a few anyway.

A preowned home is a great buy right now because too many people are out of work and can no longer afford their mortgages. You can buy alot of house right now for almost nothing compared to 3 years ago. It is important that you buy in a neighborhood that will appreciate.

Just because you are approved for a $250,000 mortgage does NOT mean you can comfortably afford it nor does it mean it is wise. There are alot of expenses with a home, such as taxes, insurance, sewer, water, gas, electric, cable, phone, all the stuff you need for the house maintenance such as lawn mower, hoses, hammer, vacuum cleaner, etc. Whatever you think your monthly expenses are -- well, add 15% to that figure (you also need to fund an emergency account).

How much money do you have to put down? When you make an offer on a purchase, you have to include "Earnest Money." That is usually $1,000. This is money you will lose if you do not complete the transaction. This money is included as part of your down payment. The rest of your down payment is due at closing. If you do not put 20% of the purchase price down on the property, then you will have to pay PMI (private mortgage insurance) every month in addition to homeowners insurance.

When you do get to closing, you need to bring an extra $100 for unexpected expenses -- sometimes those happen and you won't want your closing to not take place because you don't have them covered. When you do close, it will then take a day or two to get the closing recorded and for you to get your keys (don't plan on moving in the minute you sign the dotted line).

Unless it is NY City, most condominiums do not appreciate in value nearly as much or as quickly as single family homes. The same goes for townhouses, although those appreciate better than condos. You are better off with a little 2 bedroom starter home than a condo.

Any house you buy, you will need to do stuff to -- most importantly MAKE AN OFFER TO PURCHASE SUBJECT TO AN ENGINEERING INSPECTION. You'll want an inspector to check for termite damage, water damage, asbestos (if an old house), electrical issues, pipe issues, furnace and air conditioning issues, etc. These are things that could be extremely expensive to fix and unless you have it checked by a professional, it could easily be overlooked. If you are buying a fixer-upper, make sure you have the time and ability to do the fixing up!

Just about any home you buy should get more insulation in the attic. It could save you hundreds of dollars every month!

Buying land and sitting on it isn't a good idea for such a short term (3-5 years) because it probably won't appreciate as much as a single family home. And if you're looking at it for financial gain vs. living in the rest of your life, you want to be able to turn it over. Land doesn't sell that easily.

If you buy a 3 bedroom 2.5 bath house, you could get roommates and then they are basically paying your mortgage. Any house you buy, try to look at it from a family-oriented point of view rather than a 26 y.o. single guy party house. You want a kitchen that works -- look for counter space, a work triangle, hopefully alot of storage. There should be a good amount of closet space in the bedrooms. Think storage storage storage! You want a good "walk print" so that the house makes sense (you don't want the bathroom opening to the kitchen or a bedroom closet that could only fit 2 shirts and a pair of pants). How far away is the grocery store, the gas station, the convenience store, and the bank?

Don't worry that there is orange shag carpet with lime green walls. Look at the guts of the place and envision what it can be. When you do make an offer, offer 15% less than the asking price and make it contingent on a closing prior to end of November, inspections, and anything you want left in the house. Everything is negotiable; however, if you don't offer full price then the buyer can turn you down.

Hope this helps. Best of luck!