Homebuying Questions

[merithyn]

I am in the process of house shopping, with the intent to start looking seriously in the January - March window. Having only bought one house in my life - and this was during the Great Housing Cock-Up known as the 2008 housing bust - I'm coming at this mostly blind. So I come to you, my wise and brilliant friends. (Yes, you as a group really are the wisest and smartest people I know. Yes, I need to get out more.)

Since last year, I've been working my butt off to improve my credit score so that I can get the best deal available. Due to a number of back-to-back medical issues that came up, I was at one time something like $20k in medical debt. I am now down to $2400 in debt, and that will be paid off by February. My credit still isn't great, but it's much better, and I definitely qualify for an FHA loan. I got the name of a lender from a friend and sent him an email last night. He suggested that I go ahead and get pre-approved, even though I'm not planning to buy until a little later. He said that it will give me some flexibility now, and I can see where to make changes to get the best deals when I am ready.

Given my first experience buying a house, I'm leery. I've done a budget, and I know what I won't go over. But will applying to be pre-approved this early do something to my credit? Is that really the best way to do it? What does that mean, anyway, being pre-approved? I know it means that on a high level I qualify for $X for a mortgage, but what else? How will it give me flexibility?

Help a girl out, please.

[PDH]

Don't buy in Santa Cruz.  That is my advice.

[merithyn]

Don't buy in Santa Cruz.  That is my advice.

*takes notes*

[Tonitrus]

I have no helpful advice...but I was on Zillow looking at floating homes in the Portland area just now. 

[katmai]

Well first figure out where you want to live, last I heard you want to move to the disgusting, vile, area known as the east coast

[viper37]

Given my first experience buying a house, I'm leery. I've done a budget, and I know what I won't go over. But will applying to be pre-approved this early do something to my credit? Is that really the best way to do it? What does that mean, anyway, being pre-approved? I know it means that on a high level I qualify for $X for a mortgage, but what else? How will it give me flexibility?

Help a girl out, please.

getting pre-approved means you can buy the house right away, no need to be conditional about it.  It expedites the process, and could help you get a lower price, if the seller is inclined to negotiate.

It won't impact your credit score.  However... If you don't plan on buying until 6 months from now, it won't do much...  You credit score could change for better or for worst and that will be impacted in the amount you can borrow.  Being pre-approved is usually done a couple of months before you start looking.

Go ahead, if you find the right deal soon, you'll have your loan at the ready.  If not re-qualify later.

[Valmy]

Have a great mortgage broker and a fierce realtor who really knows the area. I shopped for both of those before I shopped for a house and it really helped a ton.

There is really no substitute for experienced professionals on your side for something like this.

Also: a good home inspector. Preferably a former contractor.

[Grey Fox]

Pre approval for me, it does 2 things.

1. You find out how much the bank thinks you can spend, you should spend less.

2. Tells your prospective seller that you are in the right market and did not just offer 500k on a 250k pre-approval.

[Barrister]

getting pre-approved means you can buy the house right away, no need to be conditional about it.

I'll try to come back later with more extensive advice, but the above is bad advice.  Even if you're pre-approved, you need to make the sale conditional on financing. Pre-approval doesn't mean anything is guaranteed.  If you are pre-approved though that means you can put a much tighter window on the financing condition (just a few days instead of a few weeks).

[merithyn]

I have no helpful advice...but I was on Zillow looking at floating homes in the Portland area just now. 

I'm looking.... elsewhere. 

Well first figure out where you want to live, last I heard you want to move to the disgusting, vile, area known as the east coast

Probably east but not that far east.

[merithyn]

Have a great mortgage broker and a fierce realtor who really knows the area. I shopped for both of those before I shopped for a house and it really helped a ton.

There is really no substitute for experienced professionals on your side for something like this.

Also: a good home inspector. Preferably a former contractor.

How did you shop for them?

[Valmy]

Have a great mortgage broker and a fierce realtor who really knows the area. I shopped for both of those before I shopped for a house and it really helped a ton.

There is really no substitute for experienced professionals on your side for something like this.

Also: a good home inspector. Preferably a former contractor.

How did you shop for them?

In my case I asked around for recommendations. But I think websites like zillow have reviews for your local area of realtors. You might ask around your office that is how we found some good people.

Edit: Oops you are going out of area. You probably need to search online then unless you just happen to know people where you are going.

[Barrister]

Okay, so let's see...  I'm hardly a professional, but I'm on my third house plus worked for some residential RE lawyers in my pre-Crown days.

The old joke is true: the three important things in buying a house are location, location, and location.  Mrs B and I put in a couple offers on a very nice house in Edmonton, but later realized (after the deal didn't go through) it was in a terrible location - we're much happier in our current neighbourhood.  That's tough if you're moving to anew area.  As much as you're probably excited to buy, if you're moving I would strongly recommend renting to start just so you get a sense for which neighbourhoods you're interested in.  This is what we did moving to Yukon - rented for the first year.

By all means get pre-approved, but as I suggested being pre-approved doesn't necessarily mean that much.  It does mean the bank won't laugh at you if you apply for a mortgage, but they will still want to appraise your new home to make sure it's worth what you're paying for.  And by all means do not borrow as much as they will offer to lend you!

Of course go in with an agent.  Try to find someone you can trust.  Again, hard to do from afar which is why renting for a short period of time makes sense.

There's not much I can say about looking at houses themselves - you'll know what you like much more than I will.  Do try to not be taken in by the house that presents well - try to look at the "bones" of the house as much as possible.  Walls can be painted, dirt can be cleaned.

[Admiral Yi]

Of course go in with an agent.

Why of course?  What are you getting for 6% of the sale price?

[merithyn]

For the record, I'm looking at moving to a place I know with friends in the city. So I'm not going into a place blind. I know the area well enough, so while I could rent for a year, I'd rather not. It may be stupid, but I've wanted my own house for a very long time. I just want to see what my options are. I didn't know if the pre-approval process is a good indicator, or if it would be a mark against my credit, making things harder later.