First-time home buying questions

OliveJuice4Ever

I will probably post this on the Nest as well, but I noticed many of you discussing home buying in other posts, so I thought I would ask for advice that would help me and possibly others in the home buying process. 

A little background: FI and I just resigned our lease on a month-to-month basis because we are quite eager to buy a home. We both have great credit and rental history with hardly any debts. Our downfall is that we both just graduated so neither of us have a full-time job at this exact moment, although we both work 20-30 hours per week in student jobs. FI got an unofficial offer (I say unofficial until a written contract is signed) for a software engineering position to begin in August. I will be working part-time and in grad school this fall. For what we currently pay in rent, utilities, and other living expenses, we could easily afford a home. We have also been saving for a down payment, though savings are slim. 

Questions: At this point in time, is it benefical for us to begin looking at homes other than online? If you are looking at homes without pre-qualifying first, how do you know what to look for? When should we consider pre-qualifying? Is it bad to see what we can qualify for now and, if it is too low, try to pre-qualify again in six months or so? 

I would appreciate advice from personal experiences and/or general thoughts of the first-time home buying process. 

TIA!

sweetcanadian1979

I would do more than pre-qualify, pre-qualify does NOT mean anything, it means pending review which if they think you do not make enough or have too high debt ration to what you make they WILL deny you. I would go to your bank and ask them to approve you, and what you would be approved for and proceed from there. 

DrPB2b13

I say don't buy right now.  I know it's tempting, but especially right now, I don't think it's terribly common to stay at a "first job" (out of college) for a terribly long time.  Especially as you don't have a job yet, and who knows where you two will be wanting to go in just a couple of years.

Stay renting until you're out of school, have a job, and find somewhere that you know for 95% sure you're going to be staying for at least 7 years.  (I say 95 instead of 100 because catastrophes do happen, people lose jobs suddenly, etc. etc.)  Save up for a very hefty down payment, and plenty on top of that - because there are always unexpected expenses when you buy a house.

doeie04

I would agree with both above posts.

I don't want to bring you down, but when Chad bought his house I learned a lot. If you don't have steady work for at least two years, and no down payment, they will most likely not give you a loan. Well, they might, but it will not be pretty. (For example a double loan, where a balloon payment is due in a few years.)

Owning a home is very expensive. We have only lived in ours for two years, and have put in a few thousand in repairs, and our house was move in ready.

To figure out your price range if you want to check out what is available in your range, first sit down and figure out what a comfortable payment would be. Shoot low, because you have to add in utilities and insurance and taxes. I would suggest having a low enough payment so if one of you loses your job (when you both have one) it can easily be paid. Then find a mortgage payment calculator that lets you put in the current interest rate and play with that until you get your price point.

Have fun looking and going to open houses until you have some savings, you both have jobs and you are ready for that comitment, because it is a big one.

Sarah0335

I agree with everyone else.  We closed on our house on March 1st.  I can tell you owning a home WILL be more expensive than renting.  You have to figure your mortgage, property tax, utilities (which were double what we paid at our apartment) and repairs. 

They are no longer doing interest only mortgages with balloon payments due.  That is what killed the housing market.  Mortgage companies are being very conservative right now.  If you are both first time home buyers and do not have stable jobs it will be extremely difficult for you to get a mortgage.  You will definitely need to put at least 20% down.

It might not be what you were hoping to hear, but I think you should definitely wait.  Take some time and get settled in your careers.  This will also give you more time to save up for the house.

doeie04

They are no longer doing interest only mortgages with balloon payments due.  That is what killed the housing market.  Mortgage companies are being very conservative right now.  If you are both first time home buyers and do not have stable jobs it will be extremely difficult for you to get a mortgage.  You will definitely need to put at least 20% down.

I didn't know this. I am glad to hear it!! My Mom is stuck in one now and she is having a hard time re-financing because her house isn't worth enough due to the crash.

mary9449

Do not buy right now. Wait until you have secure jobs and are making a consecutive income. FI and I bought a house two years ago. I'm still in school, but his income is more than enough for both of us to live. The thought of being pre-qualified is nice, but it comes down to what you can ACTUALLY afford each month. We were pre-qualified for a number much greater than what was realistic for us. Foreclosure is a scarry thing and not something you want to put yourself into. We bought a foreclosed house and our neighbors have told us how the lady that used to own our house lost her job and couldn't pay bills and it's not a situation I wish for anyone. Wait a little bit and it will be worth it...I promise!

DrPB2b13

Good point by PP's about how difficult it is to get mortgages at the moment.  This could possibly become easier in several years as the economy gets better, but at the very least you two will be in a much better position to apply for and handle one.

OliveJuice4Ever

Thank you for your thoughtful responses! It definitely helps put things into perspective. Although it is a very exciting part of future planning, I'd like to think we are pretty rational people, and will wait until timing is right. I agree at least one of us should have a secure job and this will give us time to save for a hefty down payment - It would be nice to avoid PMI. Hopefully, getting a loan approved will be easier in a couple years, but seeing as it's a first-time home buyers market right now it would be nice if prices stayed relatively low. At any rate, we'll still have fun looking for a while!

SSaltzman87

It never hurts to go to open houses and such to figure out what you like and don't like :-) My parents did that for about 3 years before getting their current place.

I would also wait until you and FI have both had stable jobs for at least a couple years, it'll look better on your credit report-hence more likely to get better rates and such for your mortgage.

I bought the condo FI and I live in as joint investment with my dad a few years ago, but FI and I are already growing out of it and we're really unhappy with the neighborhood. So we're looking too! We hope to buy another place sometime after we're married and depending on how the market is by that time, lease or sell our current condo.

julbgordo

In Response to <a href="http://forums.theknot.com/Sites/theknot/Pages/Main.aspx/wedding-club-boards_june-2012-weddings_first-time-home-buying-questions?plckFindPostKey=Cat:Wedding%20Club%20BoardsForum:3ae4d68d-f10a-4dec-8810-da13c14a7b86Discussion:be1e3225-2d4e-4d32-93a4-1188a800fbdePost:1b8a9eed-01e8-4edc-9815-761607e221fd">Re: First-time home buying questions</a>:
[QUOTE]It never hurts to go to <strong>open houses and such to figure out what you like and don't like</strong> :-) My parents did that for about 3 years before getting their current place.
Posted by SSaltzman87[/QUOTE]<div>
</div><div>This is what we're in the process of now too.  This is our second weekend of going to open houses and right now it's a lot of fun.  We aren't looking at stuff out of our expected price range and are using this time to scope out different areas we like and what we can currently get for the money in our area.  It's good to learn as much as you can about the market before investing.

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MMRoberts11

I would agree, go to some open houses to see what you like/don't like but I'd wait before buying.  It will definitely be easier to get a morgage when both of you (or at least one) has a full time job.  Most banks right now own a lot of properties so they wouldn't want to risk getting another because the payments couldn't be made (not saying that you wouldn't, but just thinking on the business perspective).