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hmmm.. After making three drafts of this post, I think this about sums it up:

I'm looking into buying a house with a friend (decent housing 'round these parts is over $500K - well beyond what I can afford alone). I'm starting my research on buying a home (this will be my first) & figure that several people on the board know a thing or two about doing such a thing.

I'm looking for suggestions on places to find info (or information itself). Everything from what to look (out) for, to what percentage of my budget should go towards a mortgage, to how to make sure I can still buy the Elise after the home would be much appreciated. ;) Book, magazines, websites, etc.

Thanks guys!
 

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I'm doing the same :)

I started with the bank. Found out roughly what I could afford, then applied for a pre-aproved loan. Not sure if it's the right way of doing things though. It's my first time :)
 

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I would say in LA you can probably spend 35-40% of take home on housing since the market is so crazy.

I would be very careful about buying with a friend and make sure you structure a good contract between the two of you there are so many issues that it is a real pain.

I bought a place with a friend of mine and it is working out well, we have been friends since Kindergarten so that helps, but when it comes time to sell / buyout each other it will probably get a little interesting.

I wanted a nice larger place vs. a dinky 1-bdrm condo, that is why we bought together we got a 3-bdrm condo with a great terrace for ~$450k, what I could have gotten for $250k on my own was really crap. Not to mention we rent out the extra room to cover taxes and our assessment.
 

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Bank is a good place to start. If you want to save some money I would try to become a licensed broker and negotiate/find the place on your own, you can at least get the 2.5% comission and probably will do better on pricing. Even without a license you can come to an agreement and the listing broker will likely give you 25-40% of the dual comission as a "referral" reward.

You may be able to use this cash towards your downpayment as well. The bank is a good place to start. You can go to lending tree and get rough mortgage quotes, and use the what can I afford calculator to get a rough idea of cost.

Cali housing is ridiculous I was considering a move to santa monica but I refuse to rent and I could only afford dumps.
 

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bboersma said:
I would say in LA you can probably spend 35-40% of take home on housing since the market is so crazy.

Or 50-60% I live in metro Atlanta obviously completely different but when I decided to buy a house a few years ago I tried to calculate my earning potential over the next few years. I wanted a house I wouldn't grow out of in 2 years. I decided to spend half of my net income at the time on the house. It hurt for a year or 2 but now I make way more money, and still like my house. As long as the realestate market doesn't crash, which I doubt would happen in a large metro area. You can always sell the house if the burden is to much.

I'm sure the way I did it is completely wrong and probably a little stupid, but it worked for me.
 

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Gromit said:
I'm doing the same :)

I started with the bank. Found out roughly what I could afford, then applied for a pre-aproved loan. Not sure if it's the right way of doing things though. It's my first time :)
Good place to start, but I would suggest looking for a place that is 50-60% of what the bank will give you. It will probably make you a lot happier in the long run, as you'll have a lot more disposable income, and will have less to worry about if unexpected setbacks come up (job loss, etc).

Of course in LA, it may be harder to stay out of the projects than it is around here, but I got a pretty nice place for a little more than 1/2 what the banks wanted me to spend. :)
 

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One thing to think about: What the bank thinks you can afford can often be more than you can realistically pay per month. When I bought my house, I didn't spend the max that they would allow and was glad for that. It would have been grim my first couple of years there with little leftover for maintenance and other stuff.
 

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Feel free to PM me. Let me know how much you were thinking about putting down, how long you plan on keeping it, etc.

I am a mortgage banker here in Seattle...
 

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Start with your budget first. Make a detailed and realistic picture of your monthly income and expenditures (including savings and retirement) and include one's months share of occasional costs, such as insurance, vacations and Christmas. Error on the side of caution and let your estimated costs run high and then add a little more of a buffer. Once you're done you should be able to have a rough estimate of how much you can afford for an overall monthly payment. If you didn't include rough estimates of property taxes, house insurance, energy bills, trash, etcetera, then take that out of the monthly payment. Now you've got the maximum amount you want to spend. You may want to check out

http://www.financenter.com/products/calculators/home/

Banks license the "How much can I borrow?" calculator for their own sites so it'll give you a rough idea of what a traditional bank's limit will be in lending to you. If you're paying less than 20% down, it'll include mortgage insurance in how it calculates affordability. If you have a good credit score you can skip mortgage insurance and use a home equity loan to cover the difference between your down payment and 20% of the house's value. If you can get a good rate, this will significantly improve your buying power. Since the equity rate I was given is nearly the same as the mortgage rate, I just subtract 12 months of mortgage insurance from the field for property tax. These days the calculator doesn't mean much because banks are lowering their standards and significantly raising the percentage of income a person can allot to their house. To me and some experts, this is a little scary because it means the number of defaults is likely to go up in the future and combined with other trends there is some definite risk in the next few years. This is one reason why although I plan to fix up and sell, I want a property I could see myself keeping for a long haul.

There are plenty of places to get loan rates. I personally use Wells Fargo's home loan work bench at https://wellsfargo.com/mortgage/buy/loans/ (click "continue") in part because it also gives a fairly realistic picture of closing costs. For WA state, at least, it gives an over estimate because it includes excise tax in the final closing costs because the buyer is responsible for it if the seller neglects to pay. Costs are itemized so I just subtract the excise tax from the closing costs for a more accurate picture. All banks are required to give a good faith estimate of closing costs but there's flexibility in what they define as closing costs, so I feel better using an estimator that seems to err on the high side because other places' estimates can run very low.

As far as getting a loan, I'd look to your own banking institution and then look to a couple of others. I've researched rates online and so far Wells Fargo has had the best rates for a given number of points. My supervisor found the same and even the mortgage broker I've talked with said that for a normal loan that Wells Fargo will be about the best. A mortgage broker has access to most of the best rates but from what I've found they seem to be better for non-traditional loans. Also, you have to factor in the mortgage broker's extra cost. The best loan he had was a 5 year ARM with 10% down and a 2.25% rate, IIRC. At the time I wasn't looking at 10% down loans but when I close, I'll call both him and Wells and see who gives me the better deal. One thing the broker told me is that if I put some pressure on my loan officer at WF, they'll bring the rates down some more. When it comes time to compare rates, try plugging in the numbers here: http://www.jeacle.ie/mortgage. It's also good for comparing between different types of loans. If you end up wanting to look at current and historical interest rates http://www.federalreserve.gov/releases/h15/update/ has daily rates and the links at the top for the weekly rates and the historical data. Most ARM rates during their adjustable period are based off 1 year constant maturity treasury rates. When I ran an estimate of how long it would take a 30 year loan to outperform a 5 year ARM (not the 2.25% one), it was much longer than I expected. If you want the contact info for the mortgage broker, he's definitely worth a call and we had a good conversation even after we both figured out I probably wasn't going to use him since I wasn't in the market for that 2.25% loan at the time.

Oh, I didn't even talk about what the search is like. Make sure to look at everything and consider your commute, nearby traffic and noise, as well as proximity to groceries, entertainment, etcetera. Definitely get an inspection done on the place ($300-$400) and also make sure you get borrower's title insurance as well as lender's. Finally, think about how you'd really end up using the space of each house. Some places may look impressive but in the end may not be as useful as a more modest house that's been better designed with functionality in mind. Although it was a little basic for me, you might enjoy checking out http://www.notsobighouse.com/ .
 

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My wife is a realtor here in Atlanta, and she recommends the Personal Finance section of http://www.fool.com. When we bought our first house a little over three years ago (before she was a realtor), we were pretty nervous, and overwhelmed with all of the terminology. A good realtor can help answer your questions, and since they get paid by the seller, it's free to you.

Jim
 
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