want to buy new home

[wadee1958]

we are now going to buy our first home ...do you help us to guide some important points regarding houses , its utility or something which you know that a house needs actually we do not know much more about it so i thought to share with you guys...

used to like new homes but there' s always something comes up wrong after few years once the warranty runs out. i prefer to buy at least 5 years old home. because its all fixed up by then.

[alaskakaren]

good luck.

[kapeh12]

About a year ago, I posted the steps I took when obtaining my house.  That post can be found here (post near the bottom, can't miss that novel  ):

http://www.fusioncash.net/forum.php?topic=38274.0

In addition to those items, if you are just starting to think about a house and are in the stages of determining your budget, here are some tips for that analysis when it comes to planning for a house.

Expenses to save for the purchase process:

1.  Down payment - The magic number for the down payment seems to be 20% of the house purchase price.  If you know of some houses/areas you would like to live, check out how much houses for sale in that area are going for - this will give you a rough estimate of how much you should have saved it you want to avoid extra fees.  In reality, most first time home buyers have a hard time coming up with this, so there are various means of putting down less than 20%.  In the US, there's a federal mortgage program called a FHA mortgage that lets you put 5% down and then you have to pay a mortgage insurance premium (which is calculated as a percentage of your house purchase price) until you've paid of the full 20%.  Other options are to take out a secondary loan to cover the balance.  Do some web searches to find out what options are available and what the minimum down payment is.  Rule of thumb - the more you have saved up as your down payment, the easier your mortgage application will go.  What I did to save mine was to open a money market account, separate from my regular savings account, once I saved up enough for one, and made auto payments into that account.  That account was not touched - ever.  When I went to closing on the house, I closed the account and had the bank cut the check for my closing and the rest went into my regular savings.

2.  Mortgage Fees - there are various fees involved with the mortgage process.  Some of these are appraisal of the house, inspection of the house, escrow payment (this covers property taxes, home insurance, mortgage interest payments, etc), relator commission, and other miscellaneous fees.  Very rough estimate - budget about $2000 USD for these on top of your down payment.  Research mortgage lenders, some may provide a general estimate on how much to expect for this.  For the relator commission, typically this is covered by the seller, but not always - one thing to ask for when searching.

3.  Unexpected home repair and equipment expenses - since this is your first home, once you move in, you'll suddenly find there are a lot of little things you'll need to obtain or hire out for because you didn't need them renting.  When you buy the house, it's important to know if the appliances are coming with the house or not.  When I bought mine, I got all the appliances except the laundry washer/dryer, so I chose to buy those.  Other things are yard equipment - lawn mower, trimming tools, rake, carts/tarps, etc.  Being in Canada, you'll need shovels or snow blowers when winter comes.  General tools for quick repairs around the house - screw drivers, hammer, saw, socket wrenches, ladder (for cleaning out gutters or getting onto the roof).  To keep yourself from going broke - try using garage sales or freecycle sites or craigslist to get second hand equipment to last you the first couple years.  After that, you can look at upgrading what you need as your budget hopefully has stabilized.  Also, just buy what you need - you don't need the whole toolbox at once.

4.  Moving expenses - will you have friends to help you move, or will you need to hire a service

5.  Rental overlap - if you are currently renting, depending on when you close on your house, you might have to sublet your apartment until your lease runs out or you'll have to plan to make your payment to finish off your lease while making your mortgage payment.  I ended up having a one month overlap - not too bad with that timing.


Next, you'll want to have a house budget plan before picking your house:

Determine what your anticipated expenses will be, and ensure you don't buy a house that goes over what you can cover.  General rule of thumb is you don't want your mortgage payment (principle, mortgage interest, escrow payment) to be more than 1/3 of your monthly income (better to get it closer to only 1/4 of your monthly income).  What I did for this planning was created a spreadsheet that listed out every expense I could think of - including any annual memberships and all my "want" items.  I also documented all my sources of income.  Once I had that, when I started looking at houses, I could plug in the numbers from the houses to see whether or not I could afford it without sacrificing too much.  Here are the items on my list and where I obtained some of the information for estimating them:

1.  Mortgage (principle + interest + mortgage insurance + property taxes) - online calculators allow you to enter these in to get a rough estimate of how much your monthly payment will be.  To find the property tax, search for the city or area assessor's site.  That site should allow you to look up a property by the address and it will give you the previous year or two property tax amount.
2.  Insurance payments (house, car, health)
3.  Phone (landline, cell)
4.  Internet
5.  Cable/Satellite
6.  Gas  (check the local utilities - most allow you to look up a property and it will provide you an average cost of the house - you can use this to estimate how much your bill will be)
7.  Electric  (see #6 if this comes from a different company)
8.  Water (city annual expense should be documented someplace - or ask people you know who are home owners, typically this is relatively the same for homes with the same number of people)
9.  Food - estimate what you need to survive for the year too
10.  House maintenance budget - whether or not you use it, eventually it will be needed
11.  Transportation - gas/passes for buses or trains
12.  Miscellaneous expenses - personal entertainment/hobbies you don't want to give up - list them all out, then decide if those "wants" can be kept or you need to let them go

Other items: Charity donations, Savings/Retirement payments, Child expenses (if you have children - I don't), annual memberships, magazine subscriptions, etc

The goal of my spreadsheet was to get a house where I ended up with a few thousand dollars over my projected expenses.

The other thing I learned along the way was to understand our income tax process better.  In the US, if we itemize our deductions, we can get deductions for the interest paid on our mortgage - I had to use online calculators to re-determine how much I should claim on the taxes withheld from my paycheck accounting for that reduction in taxes - this allowed me more take home cash to pay for the mortgage.  You'll want to understand how home ownership will impact any income tax strategy you are bound by - I found I could afford more house than when I first started the process (not that I went wild with that knowledge   ).

Analysis and planning is key.  That way when you do find your house, you shouldn't have that "sticker shock" that you made such a huge purchase as you know you've got everything covered as best you can.