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Home ownership on a tight budget. Do's and Dont's?


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After my fiance and I are married we'd like to buy a place of our own. Currently we both rent.

After talking with the bank they will loan us $70K to buy a home. Putting our payments at around $545 a month on a 15 year note. That's a lot of money for us to spend every month and I'd like to hear from some inspectors what to look for, what mistakes they've seen other buyers make, and some lessons they've learned.

In this area we basically have 2 options.

First is to buy some land and a new single wide trailer to put on it. The advantage of this is that we would have something new and in good shape. Problem is single wide trailers don't hold their value real well and are limited in what I could do with one. As far as expanding and so forth. We're planning on having a large family.

Second option is to buy a 100+ year old stick home in fair condition. Liveable, but in need of repairs. Realistically we could spend $200, maybe $250 a month on improvements. Renovate the house one small piece at a time until it's in good shape. I'm pretty good with fixing houses, and what I don't know I research until I know how to do it properly.

I know we're not rich, but we'd like to get out of the renting game. That's money we could be spending on owning something, building equity.

What's the best path to go and why?

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First off, congratulations and good luck with your future marriage and family. As far as your questions, a lot of it really depends on what you want, and the following is just strictly my opinion on costs and things to think about.

For the trailer, besides the initial cost you should consider the following:

-Have cost of septic installation or sewer connection if available

-Cost of new water meter/line and electrical service installation

-Cost of driveway installation

-If you are in a tornado prone area, won't have a basement

-Rapid fire spread risk in the event of a fire

-May have higher heating and cooling costs (may not compared to 100+ year home, depending on updates)

-On a plus, have much less routine maintenance and associated costs

For the 100+ year old home, you could have a great home with character or a real money pit. If you go the home route DO NOT skimp on the inspection. Make sure you research and find a good reputable inspector familiar with old homes, don't look for low cost. Saving a few hundred dollars on the inspection can cost you thousands. Also, find out all the history you can on it regarding remodels, upgrades, etc. Just because the lights turn on and the water turns on does not mean you don't have $1000s worth of electrical or plumbing problems or portions needing repair/replacement. Too many possibilities to list, so you HAVE to really get a good, thorough inspection.

You've already mentioned the future value consideration, you just have to take all the possibilities and decide what will work best for you and your family.

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Potlatch Idaho is where we'd like to live. Team Idaho real estate has some listings for this area. A lot of the ones we looked at are for sale by owner though. Those seem to be less expensive.

Nothing wrong with buying a house without a realtor.

Buy the worst house in the best neighborhood you can afford.

- Jim Katen, Oregon

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If you want to build equity, don't buy a trailer. (sorry Mike, I still call them trailers). Call them whatever you want, they are garbage with a limited life and depreciate rather than appreciate. I have inspected hundreds of "manufactured homes" and my opinion only gets worse. You are much better buying a site built home no matter how much work it needs.

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A realtor brings nothing to the table except their desire to make a commission. Most of them lie, and if they don't lie, they talk confidently about things they know nothing about, which is almost lying.

That said, I wouldn't necessarily trust a seller either.

Find a really good home inspector. Usually, they're the one's the realtors all hate. Hire them, pay them to tell you what's going on, and pay close attention. Ask lots of questions.

One really good home inspection will show you what to look for, and you can (sort of) wing it after that if the first house isn't what you want. This advice is based on your statement of "being pretty good at fixing up houses and researching what you don't know".

Renting sucks. Owning your own piece of dirt is one of the defining aspects of living in America. Go for it, and do what Jim said.

Buy the crappiest house in the nicest area you can afford.

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If you choose the 'old home' route, there is no better investment that you can make at this time than to hire the best home inspector. Forget the fee, get the best one, the one that Realtors hire when they are buying for themselves. He can lead you to the 'old home' in the best of condition which often means the one that hasn't already been updated by an over-confident do it yourselfer. So many homeowners (and some contractors) today do their own work and insult the original builders of the house. My own next home will likely be at least 100 years old because the quality of that old growth wood is far superior to today's natural woods and hasn't been available for several decades.

If you choose the manufactured home route, choose modular, not HUD code. HUD code (built to the federal 1976 standards) are the ones that devalue so quickly. Modulars are solidly built dwellings. The two look alike on the outside except that only HUD code 'mobile homes' have that characteristic red tag attached to the exterior wall.

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Marc

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This is great information. In addition to a home inspector there's an electrician, plumber, roofer, and HVAC contractor who are members of our church who would appreciate the opportunity to look at any home before we purchase. Anything we get would be heavily inspected by folks that want the best for us. I'd call that a blessing!

I'll give you guys an honest review of my abilities.

Carpentry, well I'd say I'm a fair carpenter. What I struggle with is the trim carpentry and the fine detailed stuff. Too often I get the math mixed up and cut a baseboard a few degrees off and leave a gap. Or I cut it a sixteenth too short. As far as framing and rough carpentry goes I'm good at that. Slow, but that's because I measure too many times before committing to the cut. Probably a confidence issue. With money being tight every board counts. I get frustrated if I cut a board wrong.

HVAC. Well i take college courses as I can afford them. Working towards a degree so I can be an HVAC tech and make more money to support my future family. What I'm best with is oil furnaces, probably because I've worked on those the most. Weakest would be electric furnaces. Not much experience with those. Air conditioning is pretty straightforward and I haven't hit a system yet I couldn't figure out. Same with natural gas furnaces. Some of the electronic controls can be exasperating to figure out.

Electrical. Sometimes the NEC can be clear as mud. When I run into an issue I call a member of my church who's an electrical contractor for an interpretation. Since I don't have much real world experience I default to what the NEC says. I don't know all the short cuts and tricks.

Plumbing. My weakest area. Other than straight replacing a fixture I haven't done any real plumbing work. If there's a good code book I'd buy that before I did anything.

Mostly I can look at something and say "That doesn't look quite right". Then it sticks in my mind and I research it, ask knowledgeable people, whatever it takes to get an answer.

My day job is a satellite technician. Installing satellite TV and internet. So I'm in, around, on top of, and under all kinds of houses and commercial buildings. I see a lot of different types of construction techniques and materials.

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Ok, here's another idea. It's a bit adventurous, but it sounds like you might be up for it.

The best deals out there are the houses that aren't for sale. As you drive around town installing dishes, keep your eyes peeled for houses that look like they were once really nice, but that have fallen into disrepair. What you're looking for is a house owned by an old widow who's having a hard time keeping up with the maintenance. When you find one, put on a clean shirt, comb your hair, walk up to the front door and ask if she's interested in selling. Tell her your situation just as you've explained it here. Explain that, by selling to you, she won't have to go through the hassle of finding an agent, fixing up the house, living with the disruption of open houses, strangers tromping through the house, and tedious negotiations. Best of all, tell her that she can take whatever she wants with her, sell whatever she wants to sell, and simply leave behind whatever else she wants -- including any trash & debris. Insist that she talk with her lawyer before entering into the agreement.

This kind of offer can have tremendous appeal to someone who doesn't have the energy to do what's necessary to bring the house up to top-dollar condition, particularly if she paid off her mortgage 20 years ago and owes nothing on the house. While you might have to do this 5 or 10 times before finding someone willing to sell, you can get a heck of a deal this way. A bonus is that the person who's willing to sell cheaply has probably lived there for the last 40 years; if so, the house probably doesn't have anything seriously wrong with it, even if it's covered in grime that's accumulated over the last 10 years.

Don't forget to play up the getting married, just starting out thing. She might be more inclined to give you a good deal just out of sentimentality.

- Jim Katen, Oregon

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Hi,

Along the lines of Jim's last post; go to city hall and find out who's arrears in their tax payments. Offering to pay off the back taxes as part of the transaction can be a pretty strong motivator for some folks to sell.

Then there are some of the national sites. Here's a list of Fannie Mae homes for Idaho:

http://www.homepath.com/search.html?st= ... &x=60&y=15

Go here and choose ID for Idaho homes:

http://www.homesteps.com/hm01_1featuresearch.htm

Go here and pick Idaho for Hud homes:

http://portal.hud.gov/portal/page/porta ... /hud_homes

Go here for lists of bank-owned properties:

http://www.thedirectoriescompany.com/reos.htm

ONE TEAM - ONE FIGHT!!!

Mike

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I like Jim and Mike's ideas, but I think you should also look into an FHA 203k rehab loan. That's how I bought my house and it worked out very well for me. I purchased a basically abandoned property for cheap, had $20k in rehab money to work with putting the place back together, and a mortgage payment 1/3 less than I could rent for.

Look into it, it might make sense for you too. The only down side is the short time frame you get to complete your repairs, 6 months is enough time to finish a lot of work or get yourself in way over your head.

Good luck whichever route you take.

Tom

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Hi,

Good point, Tom. BobL, when you look at the third link I posted and you bring up your lists of Idaho homes, you'll find that some of them will state specifically on the information that the home is eligible for a HUD 203K loan with up to $35,000 in improvements.

Jeez, I can't believe the difference in prices between prices in Idaho and Puget Sound. I'm seeing houses there selling for $35K to $45K that would bring $200K to $220K here. What the hell?!!!

ONE TEAM - ONE FIGHT!!!

Mike

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One thing you have to remember about north Idaho vs. Puget Sound is there aren't very many jobs here. What jobs there are aren't very high paying. It's tough out here.

Right now as a sat tech I make right at $28K a year with overtime. That's considered a good paying job out here.

In the future as an HVAC tech I can likely make about $33K a year. Still not a lot of money.

It's all a matter of perspective. Yeah we could move somewhere else and make more money, but the cost of living goes up. This is a fine place to raise a family. We plan on having at least 7 kids and I can't think of any place I'd rather raise them.

As long as I work hard and have faith God will provide the rest.

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If you can afford $250 a month for repairs why not buy a house in better shape that does not need repairs?

Bank won't loan me more than $70K. That's as much risk as they're willing to take. Low income and very little credit history. I only have one credit card with a $250 limit. Never took out a car loan or anything like that.

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Originally posted by Richard Saunders

If you want to build equity, don't buy a trailer. (sorry Mike, I still call them trailers). Call them whatever you want, they are garbage with a limited life and depreciate rather than appreciate. I have inspected hundreds of "manufactured homes" and my opinion only gets worse. You are much better buying a site built home no matter how much work it needs]

Sorry to disagree, but today's modern HUD code home is durable, and when properly installed (and maintained) on a well designed foundation will remain serviceable as long as stick built. I have installed, serviced and inspected 1,000's of HUD code homes over the past 20 years, and in my opinion see them as a fine alternative-especially for the budget "challenged". I live in the heart of NY Finger Lakes area and inspect lake side homes costing $1,000,000 plus, as well as HUD codes in the $75,000 range--both have their place in the housing market. I see HUD code units selling with appreciated prices routinely.

As far as calling them "trailers"--that's a lot like calling CMU's cinder blocks--folks do it, but it's clearly not correct.

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Especially if your a first time buyer, go to the store and buy 20 books about buying a house. Then go to the library and check out 20 more. Then borrow some from friends and family. Just get as many as you can. The point is, 85% of the information in those books may be useless to you, but that 10-15% that applies could save you $1000's. And cover the spectrum, learn about loans, insurance, flood zones economic areas, taxes, upgrading green and so on.

I think I spent $800 on books the year leading up to my first purchase but I am confident it saved me over $10,000. The big one for me was completely understanding all the load jargon.

Good Luck

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Hi,

Good point, Tom. BobL, when you look at the third link I posted and you bring up your lists of Idaho homes, you'll find that some of them will state specifically on the information that the home is eligible for a HUD 203K loan with up to $35,000 in improvements.

Jeez, I can't believe the difference in prices between prices in Idaho and Puget Sound. I'm seeing houses there selling for $35K to $45K that would bring $200K to $220K here. What the hell?!!!

ONE TEAM - ONE FIGHT!!!

Mike

Housing costs are crazy here too.

I am glad I bought my house 15 years ago because I could not afford to buy my own house now.

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If you can afford $250 a month for repairs why not buy a house in better shape that does not need repairs?

Yeah, I've often thought it would have been easier to have purchased a $70k house that need $25k in work than the $25k house I own that I have $60k into so far, and another $16k going into it this year. But, the 203k gave me a big head start and my house is now worth more than 4 times what I paid for it. The only thing I did wrong was to dump the FHA loan the last time I refinanced, a streamline would have been easier then, and lots easier now.

Tom

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  • 2 weeks later...

A realtor brings nothing to the table except their desire to make a commission. Most of them lie, and if they don't lie, they talk confidently about things they know nothing about, which is almost lying.

That said, I wouldn't necessarily trust a seller either.

Find a really good home inspector. Usually, they're the one's the realtors all hate. Hire them, pay them to tell you what's going on, and pay close attention. Ask lots of questions.

One really good home inspection will show you what to look for, and you can (sort of) wing it after that if the first house isn't what you want. This advice is based on your statement of "being pretty good at fixing up houses and researching what you don't know".

Renting sucks. Owning your own piece of dirt is one of the defining aspects of living in America. Go for it, and do what Jim said.

Buy the crappiest house in the nicest area you can afford.

Wow Kurt, that is quite the disparaging remark. I'm a Realtor (I'm also a broker that owns his very own real estate company). I have neither lied nor spoke to something without having the knowledge to back it up. My clients, in fact, feel better prepared for a real estate transaction knowing their agent had professionally inspected over 4,000 homes. When I discuss the home buying process with my family, friends and referrals, I offer polished negotiating skills, a broad knowledge of the immediate market and a tireless representative who has THEIR best interests at heart. Earning a commission is only the manner in which I get paid for my expertise - just like you get paid for yours. Check your anger at the door dude...

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slinger,

I remember your posts a few yrs back when you were way swamped by workload.

I guess there's more buck in the sales end.

Regarding your trade now, a friend of mine who wore the agent's hat for a while told me, "You don't have to be a shark to be a realtor, but you do have to swim in the same tank with them."

I share Kurt's general disdain for the aggregate in that field.

My most memorable encounter was when a builder and a realtor ganged up on a recently widowed client. The builder's house had lots of serious problems, the realtor sat in the kitchen holding the widow's hand, and they sold an identical house down the street to a good looking young lady for 40K less than the price for the pitiful widow. As for the inspection, all three of them got mad at me when I issued the report, and not one item got fixed.

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