Tag Archives: home buying

Homeowner blues (and green)

Last Sunday, Tony noticed a wet spot on the ceiling in the dining room. Oy.

It hadn’t been particularly rainy, but we’d had a little rain that morning, so we assumed it was a roof leak. Roof leaks aren’t covered in our homeowner’s warranty, but the roof passed inspection with no concerns, so we assumed it would be a small leak caused by the crazy storms this season and that would be relatively easy to patch.

Monday morning, I made free estimate appointments with 8 different roofers. I wanted to cover all my bases. During the inspection, we were informed that our garage door’s extension springs weren’t really safe on a door that size, and we had the whole thing converted to a safer torsion spring shortly after we moved in. Estimates ranged between $130 and $500 for the same job, so I learned my lesson about the importance of getting multiple estimates.

The first roofer who came out climbed onto the roof and said he couldn’t see any problems that would be causing a leak. Then he climbed into the attic to see where the water was coming from. I was impressed with his diligence, since we were in the middle of a heatwave, and the attic was probably 150 degrees.

He climbed back down and gave me the bad news. The water on the ceiling wasn’t caused by a roof leak. The water was coming from condensation on an air conditioning duct in the attic. We’d need to call an HVAC specialist. The roofer (who also owns properties and provides remodeling work) referred me to an HVAC specialist he trusts, and didn’t charge me a cent for his time. Thanks, mister!

I called the HVAC specialist, who gave me a few educated guesses over the phone about what could be causing the problem, but said he wouldn’t be able to work in the attic until the temperatures fell back down to normal. It was around 100 degrees here Monday, Tuesday, and Wednesday, so I don’t really blame him. We watched the wet spot on our ceiling get bigger and waited for the temperatures to fall a little.

When a new spot showed up on the ceiling Wednesday morning, I called and asked if there was anything we could do to at least slow the water down before it damaged the drywall or began to leak through. He said he’d come out first thing in the morning before it got too hot.

We discovered a couple things about our house that we didn’t know before. Part of the problem? Our air conditioning system was installed in an extremely unorthodox way. When the house was built in 1970, it probably didn’t have central air conditioning. When someone installed it later, instead of running the air conditioning through the furnace, they installed a separate air handler in the attic. A broken blower in that air handler was somehow causing air flow to run abnormally cold through the ducts, which was creating condensation.

The good news: He was able to stop the condensation and fix the problem for now with a $100 repair to the air handler. The bad news: It’s just a band-aid. The strange installation could eventually lead to a larger problem that can’t be fixed, and since it’s so old, he thinks the whole system will likely need to be replaced in the next 3-5 years. To the tune for $8,000. Gulp.

I asked why this wasn’t caught in the inspection. He said in decades of HVAC experience, he’s never seen anything like it, and it’s likely that the inspector just didn’t know to look for such a strange thing. He said it’s possible even the guy who remodeled the house didn’t realize the HVAC system was set up so strangely. As long as it was working, there was no reason to get up there and investigate inside the ducts.

Well, crap.

I was relieved that he was able to come up with a solution for now that didn’t require us to shell out that kind of cash. Now we have some time to plan and prepare for an $8,000 investment in our heating and cooling system. We’ll also get a second and even third opinion before we do anything to see if an entire system update is really necessary.

After the repair he made yesterday, it seems to be running more efficiently now. With temperatures so hot, the house just wasn’t staying as cool as we wanted, and the air conditioner really seemed to be struggling. After he fixed the problem, it’s much more comfortable in the house.

It’s not a complete shock. We knew the air conditioning unit was pretty old before we closed on the house, and we knew we’d probably have to replace it at some point. An new AC unit is a few thousand dollars, though — an entire system update is going to be close to three times that. Harrumph.

I’m thankful that something minor went wrong first, so at least now we’ll be prepared. If the entire system had died on us suddenly, we would have been shocked at the price tag to fix it. That broken blower saved us from the shock, because now we know what’s going on with it, and we can prepare to make the necessary changes in a few years.

The moral of the story? Owning a home really is so much more expensive that just your mortgage payment. Thankfully, we have some time to prepare for this investment, but it could have just as easily stopped working overnight and required an $8,000 investment immediately.

If you’re considering buying a house, do not wipe out your savings accounts to do it. An inspection won’t catch every potential problem, and new problems can spring up overnight. As a homeowner, you need a healthy savings account more than ever.

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The real cost of buying a home

If you’re planning to buy a house in the near future, then I’m sure you’ve heard this from a million people already, but I’ll tell you again: it ain’t cheap.

So what does it really cost? Well, you’re probably already saving 5-20% of your purchase price for a down payment and 1-3% for your closing costs. That’s not a small chunk of change. Unfortunately, that’s not all you’re going to need to save. Here are a few of the costs we encountered on our little home buying adventure.

Emergency fund

Up until now, you’ve probably had a landlord. If your heater stops working, you call the landlord, and they send someone to fix it on their dime. Roof leak? Call the landlord. Broken refrigerator? Call the landlord. Now that you’re a homeowner, the landlord is you. Don’t plan on spending every last cent of your savings account to move into your home. As a homeowner, access to an adequate emergency fund is more important than ever. Negotiating a home warranty into your purchase can relieve some of this responsibility for a year or so, but it won’t cover everything. Make sure you have some cash on hand to avoid getting in over your head.

Appliances – $500 and up. The sky is the limit if you want to get fancy Food Network appliances!

These days, the housing market is full of foreclosure properties. Sure, you can get a great house for a low price, but often these homes don’t include appliances like a stove, refrigerator, dishwasher, washer or dryer. Sometimes if you’re buying from a seller instead of a bank, some or all of the kitchen appliances will be included. Sometimes they’re not. We saw several houses that didn’t include some or all of the appliances. In our case, we were lucky to buy a house with a stove and dishwasher. We already own our washer and dryer (bartered from a friend in North Carolina in exchange for moving help). But our home did not include a refrigerator, so we had to purchase one.

Sometimes a good deal can be found at secondhand or consignment shops. However, you are taking a risk that the appliance bought will be missing one or more vital parts. Luckily, no matter what brand — Kenmore, Electrolux, General Electric, Jenn-Air, KitchenAid, and others — it’s usually possible to find replacement parts inexpensively. You may even be able to get an old refrigerator running like new for only a few dollars.

Lawnmower – $200 – $5000

If you’re moving into your first home after living in apartments, you’ve never experienced the joy of yard maintenance. Now instead of cursing the landscapers for kicking up pollen and noisily mowing away outside a few times a month, that will be your job. We have almost an acre of land that’s quickly growing out of control, so we’ll have to buy a mower before we move in.

Window coverings – $200 and up

Some homeowners will leave things like blinds, curtains, or other window coverings that were custom-made for the home. Often they don’t. Because our house was recently remodeled and new windows were installed, there’s nothing covering them. Unless we want to give our neighbors a peep show, we’ve got to invest in some blinds. As much as I love our dramatic, custom windows, I learned the hard way that fancy windows are more expensive to cover. We had to order custom-cut blinds to fit our unique window sizes. If your windows are standard size, mini blinds can be a cheap option to cover your windows until you can save up for something fancier.

Propane – $500 – $1000 depending on the tank size

I’m a city girl, and I assumed that everyone in the world has access to a natural gas line in their homes, and they just receive a heating bill every month. Not so. If you’re moving into a house in the country, you may have a giant propane tank next to your house that needs to be filled. Rates are lower in the summer when demand is lower, and in our case, the first fill has to be paid upfront. After that we can get on a monthly “budget” plan to build a credit and cover the next fill-up.

Optional costs – Prices will vary.


If you hate the colors the previous owner chose or the paint needs a touch-up, be prepared to invest some money and elbow grease into repainting. Our house was completely repainted as part of the remodel. They’re not the colors I would have chosen, but it’s fresh paint and I don’t hate the colors, so we chose to leave the walls as they are for at least a year or two.


If you don’t repaint — or you choose a color much different from your previous home — you may discover that the decorations you bring no longer match your decor. You can always choose to add decorations a little at a time to reduce the upfront cost. If you don’t have the money to decorate right away, be prepared to live with bare walls for a little while.


The square footage of our new home is almost double that of our apartment. When you suddenly gain that much extra space, you realize just how much furniture it will take to fill it. We’ll have to live with an empty den for a while until we can find a nice used sofa or save enough to upgrade our living room furniture and move the old stuff into the den.

Thankfully, we’ve been saving for the past 5 years, so even though we underestimated the amount of cash we’d need to buy our house, we can afford the extra costs. Be sure you count on some extra costs if you’re planning to buy a home.

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In the past eight years, I’ve lived in seven different apartments in five different cities. Each time I moved, I squirreled away my stash of moving boxes. I stuffed them under the bed, used valuable closet real estate, hid them behind the washing machine. You see, if there’s one thing I hate more than moving, it’s finding moving boxes. Once I found good ones, I didn’t want to let them go, because I always knew the next move was imminent.

For four years of college, I moved every year. Then Tony and I moved to North Carolina — another temporary home that we planned to leave as soon as Tony graduated. When we came back to Indiana, we spent a year in flux. Two weeks in Europe, six weeks at Tony’s parents’ house while he searched for a job, six months in an apartment in northern Indiana where he accepted a temporary teaching job, and now almost four months in an apartment here in southern Indiana after he accepted his full-time position.

I’ve struggled to make connections with people, knowing we’d be moving on soon. I never really felt settled. And through it all, I hung on to those moving boxes, because I knew I’d need them again soon.

After all that, I can’t tell you how good it felt to sign on the dotted line today finally securing our permanent home. Will we live here for the rest of our lives? Probably not. But we’ll be here for the foreseeable future, nestled in our adorable brick ranch on an acre of peaceful land in the country.

We’ll roast turkeys at Thanksgiving and trim Christmas trees in December, grill hot dogs on the back porch and roast marshmallows at backyard bonfires in the summertime. We’ll celebrate Judah’s birthdays, sign him up for Little League, and send him off to kindergarten. Hopefully we’ll find a community that we can call our own. And I’ll finally send my pile of moving boxes to the recycling center.

We are home. Finally.

Final steps for first-time homebuyers

After looking and looking at all the homes on the market, you finally found one that really feels like it could be home. Don’t relax yet, though. The home buying process has just begun! Hopefully you’ll only have to go through this process once, and your dream house will be yours.

I know this is easier said than done, but it’s important not to get too attached to the house until the deal is done. Not only could something interfere on the seller’s side, but you may discover something about the house that makes it less desirable. If that’s the case, you need to be able to walk away, no matter how great the house may seem.

Here are the final steps to closing the deal:

Make an offer.

Once you’ve chosen a house, it’s time to make an offer. Most of the time, you can offer less than the seller’s asking price, but that will depend on the asking price, your market, and how long the house has been available. Generally, if you’re living in a down market (most markets are down right now) and the house has been on the market for longer than a month or two, you can safely assume that you’ll be able to offer less than the asking price. Your buyer’s agent should be familiar enough with the market in your area to give you some insight and guidance on how much to offer. Now is also the time to ask if you want the seller to cover closing costs. Be sure to write in stipulations that allow you to walk away if the inspection uncovers major issues.

From here there are a few things that can happen. Once you make an offer, the seller can either accept your offer or come back with a counter offer. The counter offer may ask for a higher selling price or change the stipulations of your agreement. If you don’t want to pay more than you offered, you can refuse the counter offer.

The other thing that can happen is another buyer could put an offer in. If their offer is higher than yours, then the seller will obviously refuse yours. If you happen to know a house is receiving multiple offers, it’s best to make your offer very competitive or even offer the asking price depending on how much you want the house. Again, your buyer’s agent will be able to give you some insight to make the best possible offer.

Accept the offer.

If your seller accepts your offer as is, or you accept the counter offer, then you’re officially under contract to purchase the house. Once the offer is accepted, another buyer cannot outbid you. Your offer should have included provisions that allow you to break the agreement without penalty if the inspection uncovers problems. Once the offer is accept, you’ll need to put down earnest money. The exact amount will be specified in the offer, and it can range from $500 to $1500. This money goes toward closing costs or your down payment at closing.

Schedule an inspection.

Your buyer’s agent will likely recommend an inspector. It can create a conflict of interest for the agent to recommend an inspector, because the agent doesn’t want the deal to fall through, so he or she may recommend an inspector who isn’t as thorough. Personally, I think in most cases, a buyer’s agent wants to protect your interests. His or her reputation depends on honesty with clients, so in most cases, I think they want you to know if the house is a bad deal. If you want to be safe, though, search for another inspector to make sure you’re getting an honest report on the house.

A good inspection generally costs $300-$400, and you’ll have to pay for it upfront. Do not skimp or skip the inspection! Spending $400 to have an expert thoroughly inspect your home could save you thousands.

Request repairs.

If the house is newer construction, it’s likely that you’ll get a clean inspection report. If that’s the case, then great! You can continue the process without worry. However, if the report uncovers any issues, now is the time to walk away or negotiate. If the issues are minor and can be fixed, you can request the seller to repair them before closing. If they’re extensive (major termite damage, structural issues, etc.), it might be time to walk away. A good inspector can tell you whether the issues are major enough to warrant walking away.

Keep in mind, once an inspection uncovers an issue with the house (such as termites or mold or any number of problems), the seller will have to disclose that issue to potential buyers in the future. That means you have an advantage in negotiations. In most cases, the seller would rather fix the problems and sell to you than put the house back on the market and disclose any problems to other buyers who likely won’t be interested. Most problems can be repaired, so consider asking the seller to repair them before closing or negotiate a lower purchase price to offset the money you’ll have to spend on repairs.

Notify your lender that you’ve found a house.

Once you’re satisfied with the condition of the house, it’s time to notify the lender who preapproved your mortgage. Let your lender know that you’ve found a house, you’re under contract, and you’re ready to move forward.

Schedule an appraisal.

At this point, your lender will want to schedule an appraisal to ensure that the house is worth the purchase price. Depending on your mortgage company, the amount for the appraisal ($300-$400) will either need to be paid upfront or it can be rolled into closing costs and paid at closing. Your lender will be able to let you know.

Choose a provider for your homeowners insurance.

Even though it’s part of your monthly mortgage payment, finding a good deal on homeowners insurance is up to you. Prices for comparable coverage can vary greatly from company to company, so don’t accept the first quote you find. Get several quotes from providers in your area to find the best deal. You can often get a discount for carrying auto insurance through the same provider as your homeowners insurance, so ask what the rate for both would be if you agreed to switch.


Once the appraisal is finished, it will likely take a few weeks to close even under ideal circumstances. Now it’s time to start packing! Your lender will finish processing the loan, and once a closing date is determined, they’ll let you know. If the seller isn’t covering your closing costs, be prepared to pay an additional $2000-$5000 on top of your down payment at closing.

Do you have any tips for first-time homebuyers?

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Next steps for first time homebuyers

Now that you’ve saved up for your down payment and closing costs, cleaned up your credit report, and you’re prequalified (or preapproved) for a mortgage, it’s time to find your home and close the deal. This is the fun part! But it can also be overwhelming. It doesn’t have to be hard, though. Here are some steps to keep it simple.

Narrow down your “must-haves.”

Depending on the size of your market, you may want to start looking at all the houses in your price range. But if you’re living in a large market or open to several different locations, narrowing down your options is essential. How many bedrooms do you need? Is a big kitchen important to you? What kind of neighborhood do you want? You might not be able to find a house with everything you want, but if you prioritize, you should be able to find a house with your “must-haves.”

Search the MLS.

MLS listings are available on many real estate websites. You should be able to search for your criteria in all the homes currently on the market in your area. You or your buyer’s agent can create alert emails that will notify you when houses in your price range with your criteria become available or lower in price.

Weed out the homes that won’t work for you.

Once you have a list of all the homes in your market that loosely fit your needs (3 bedroom, 2 bathroom homes in your price range, for example), start looking at them more closely. View the address on a map. Is it in a desirable area? Is there a highway in the back yard? (That was the case for a surprising number of the homes in my search.) It’s not a bad idea to drive through some neighborhoods if there are multiple homes on the market in a specific area. I found that many of the homes looked really nice in pictures, but not so great in person. Take those homes off your list before you start scheduling viewings to keep things as simple as possible.

Schedule viewings.

Now is the time when a buyer’s agent comes in handy. Your agent will typically need to give 24 hours’ notice to the seller before a viewing. Make a list of 5-10 houses that fit your requirements.

If you’ve found a large number of houses that you’re interested in viewing, start with the homes on the lower end of the price range. If a less expensive home will work for your family, there’s no need to look at fancier houses. You may discover that these homes won’t actually work for you, and if that happens, you can always schedule viewings for more expensive homes later. Try to keep the number of homes you view in a single day under 10 to avoid overwhelming yourself.

Take notes and pictures.

When you start touring houses, it helps to make note of everything that strikes you. Note the pros and the cons of each home, and start with a fresh sheet of paper at every house to stay organized. Chances are the real estate listing page will have plenty of photos to jog your memory, but it can’t hurt to bring a small digital camera for some snapshots. It also helps me to write down pertinent information from the listings on my own notepad (such as price, square footage, and other information) for easy comparison.

Assess and repeat.

Now it’s time to look at your options and decide if any of these homes are right for you. This can be a very difficult balance. On the one hand, you may be absolutely in love with a home, but you’re hesitant to make an offer because you want to know what else is out there. On the other hand, maybe you’re not thrilled about any of the houses, but you feel like this is all that’s available and you feel pressured to settle. Don’t let either of these mindsets sabotage your home search!

If you find a house that you love in your price range, don’t feel like you should wait! Even in a slow market, a great house can be sold right out from under you. If you love it and you can afford it, then it’s time to make an offer. Take a night to sleep on it, but if you’re still feeling strongly about that home in the morning, chances are you won’t regret making an offer.

But remember, you still have options if you don’t love anything that you’ve seen. Even if you don’t have a long list of houses you still want to view, you could always expand your search to nearby cities or wait a little while for something else to come on the market. It’s better to keep renting for a little while longer than purchase a home that you don’t love. If you haven’t found the house, then repeat these steps and keep looking until you do.

Next time we’ll discuss the final steps of the homebuying process.

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First steps for first-time homebuyers

After the dust had settled from our move to southern Indiana in January, I dramatically said I was never moving again. “My grandchildren will visit me in this apartment!” I said.

The truth is, I was just sick of packing up and moving after doing it 3 times in 9 months. Now that we’ve had a chance to settle down and get to know our new area, I’m starting to feel the house hunting itch again.

Obviously, when it comes to homebuying, the more cash you have on hand, the better. Our original plan to stay in this apartment for two years would allow us to amass a larger down payment — possibly even 20%. On the other hand, interest rates are starting to creep up again as the economy rebounds. Buying sooner rather than later would allow us to lock in a sub-5% interest rate for the life of our mortgage, which could net us big money in the long run. There are also many bank-owned houses on the market right now selling for far cheaper than they’re worth.

Even without a full 20% down payment, we could easily find a really nice house and end up paying less per month than rent.

I’ve said before, though, that alone is not a good reason to buy a house. Just because your mortgage could be lower than your rent doesn’t mean you should buy. We’ve been happy renters for the past few years for a number of reasons. Now that we’re ready to settle down in this area for the next 5-10 years (at least), we’re ready to consider buying a home. The question is whether it will be in 2012 or 2013.

We have another 9 months left on our current lease, so I’m preparing now to begin the process. Here are the first steps we’re taking:

Learn about the costs of homebuying, and save save save!

I’ve spent a lot of time learning about the homebuying process to determine the real cost of buying a house. First-time homebuyers often qualify for FHA loans with attractive interest rates and a paltry minimum down payment of 3.5%. Even conventional loans only require a 5% down payment. It can be easy to assume that all you need to buy a home is a good credit score and a few thousand dollars. Not true.

There are a ton of additional costs, including closing costs (which can range from $1,000-$5,000 or more), points if you want to lower your interest rate, inspection fees, and other miscellaneous costs. A good rule of thumb is to assume you’ll need at least $5,000 in addition to your down payment to close the deal. This guide to homebuying taught me a lot about the associated costs and process in really simple language.

Obtain your credit reports and credit scores to clean up errors and fix problems.

We already use Credit Karma to monitor our credit scores throughout the year (it’s free, but not 100% accurate, so we’ll probably end up paying for credit scores from one of the credit reporting agencies). We also check our credit reports every year using annualcreditreport.com. You’re entitled to a free copy of your credit report once each calendar year. Our scores are both in the mid-700s, and everything looks as it should on our credit reports, so we shouldn’t have any problems there.

Get prequalified for a loan to determine a realistic price range.

Some people recommend that this step come later, but I think it’s important to do it in the early stages. You need to know what you can afford right now with your current salary and cash on hand. Once you’ve got a range, you can do some preliminary price checking. If it doesn’t look like you can afford the type of house you want, it’s best to wait and save for a higher down payment.

Don’t settle for a cheaper house just because you can afford it now! Buying a house is one of the biggest commitments you will make (especially in this market). It’s better to wait and get what you really want than be unhappy in a house you don’t love just for the sake of owning one.

There’s a big difference between being preapproved for a loan and being prequalified. When you’re prequalified, a bank gives you an estimate of how much they’d be willing to loan you based on your credit history, salary, and cash on hand. They take your word for it, and do not verify any information at this point, so it’s best to be completely honest to get an accurate estimate of your borrowing power. Don’t forget to factor in property tax rates, home owner’s insurance, and PMI (if you aren’t putting a full 20% down) when estimating your monthly payment.

Preapproval is a more official step that you’ll take when you’re ready to start house hunting. The bank will verify your financial information, and make an official offer. A preapproval letter is often necessary when making a bid on a house, because it shows the owners that you’re a serious buyer and you can afford the home. Most preapprovals carry deadlines with them, so it’s best to wait until you’re ready to buy before taking that step.

Over the weekend, I used Lending Tree and Mortgage Match to get prequalifications. This confirmed that we qualify for the price range I’d already estimated based on online calculators. I won’t be finding a lender online when it’s time for preapproval, but now I have an estimate of my price range.

Do preliminary research on houses (and neighborhoods!) in your range.

We’re not 100% sure we’ll be buying in 9 months, and even if we were we wouldn’t start searching for another few months, but we spent some time this weekend driving around looking at houses that are on the market in our price range. It’s unlikely that any of these houses will be available when we’re ready to buy, but window shopping will give you a feel for the market.

It is really surprising how deceptive listing photos can be! Several houses looked really nice in pictures, but weren’t so nice up close. Or they were in sort of a scuzzy neighborhood. Again, if you start looking at houses in your price range, and they don’t look like houses you’d actually want to buy in desirable neighborhoods, it might be best to wait and save some more.

Find a buyer’s agent.

This step can actually come first if you want. A buyer’s agent can help you wade through the details, find listings in your price range, take care of the dirty work, and advise you when it’s time to make an offer. It won’t cost you a penny, because their commission is paid by the seller after the deal is done. So there’s no reason not to use an agent! Just be aware that they are salespeople, and they can be pushy. If you’re not seriously ready to start looking, you might want to wait to contact an agent to avoid the barrage of emails and phone calls pushing you to “BUY NOW!”

We’ve now taken all of these steps, and things are looking pretty good that we might actually be able to buy a home at the end of this year. We have the money to cover the down payment and most of the closing costs now. All that’s left is to ramp up our savings so we can pad our emergency fund so buying a house won’t completely clean us out.

Our plan now is to start seriously looking at houses at the end of this summer. I’ll keep you posted!

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