Advice for a first-time homebuyer

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razi
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Re: Advice for a first-time homebuyer

Post by razi » Fri Jan 21, 2011 7:06 pm

I'm going to check out some houses tomorrow, and have made a list of stuff to look for. I'll let you know how it goes. :)
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Re: Advice for a first-time homebuyer

Post by riverjoe47 » Fri Jan 21, 2011 7:39 pm

One I forgot . Maybe someone else said it . Payment should not exceed one weeks paycheck .
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Re: Advice for a first-time homebuyer

Post by razi » Sun Jan 23, 2011 5:58 pm

riverjoe47 wrote:One I forgot . Maybe someone else said it . Payment should not exceed one weeks paycheck .
good idea. we're looking for places that the monthly (with insurance and taxes) do not exceed our current rent.

house report: most were unlivable foreclosures. some were cool, most would be cool with 30-50k in repairs, but none were up to snuff. one had a flooded subbasement. I'm guessing the house wasn't winterized, and there was a hole in the basement that was full of water that by my estimates was about 5 feet deep, at least. I'm guessing it was for water access. that same place had black, clumpy insulation in the attic. one had a homeless person living in it (I think), another had mold in the basement. many had asbestos tiles.

fun times!
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Re: Advice for a first-time homebuyer

Post by Stercutus » Sun Jan 23, 2011 11:47 pm

Asbestos tiles in of themselves are not a big disqualifier. Unless you live in an area where you are legally required to hire someone to remove them, in which case it is not worth effort. While they can be dangerous if not removed properly so can a lot of things like insulation for example. You just have to take precautions.

It sounds like you are shopping in the "economy" market. Banks are still holding on to the "good" properties they have in foreclosure and cutting loose the crap, hoping that the market will recover before they are forced to sell the good properties at an even bigger loss. I don't know what your monthly income is but shopping at less than 25% of your monthly pay for a house is more of a rich mans game. I'd at least consider going up to 1/3 with closer to 40% being the norm. You might not be able to afford that. In the past people could justify it as an investment, but with the market so soft that is hard to do these days.

As mentioned any kind of house in foreclosure will likely need a lot of work. I normally won't buy a house in foreclosure because the good deals get bought by people who are more knowledgeable and proactive than me in the market. They do it for a living and even then they get caught short some times. If you do buy just plan on replacing everything.

REO sales look promising but like foreclosures it is an insiders game. Any place that auctions real estate on line is likely a scam. If you dig into their terms of sale you will see what I mean.
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Re: Advice for a first-time homebuyer

Post by Busto963 » Mon Jan 24, 2011 11:12 am

razi wrote:as it says, what sort of advice would you give to a first-time home buyer? Choosing a BIL is a Big Step, and I don't think it's something that's been covered here yet (if I'm wrong, sack the thread and point me in the right direction) that probably should be.

Points of interest that more knowledgeable folks than I might wish to discuss:

Loan information; choosing a lender
Appraising a neighborhood
Appraising a house (and yard)
Home defensibility
Home improvements (what's easy, what's hard, what needs permits, etc)

that sort of stuff. :)
More info please!

There have been a lot of good comments, but what are the specifics of YOUR situation? E.G. how long are you looking to stay in the property, are you planing for children? Are you looking at suburbs, city or rural?

The only general advice for a "novice" (1st time buyer) is buy the home for the comfort and security it brings, not because you expect to expect to profit form buying it.

I know plenty of novices have become wealthy buying real estate, but out of the millions of "home owners" (I use parenthesis to remind people that you do not own squat until you pay the last bill and have the title in hand) in foreclosure or underwater on their mortgages - none planned to loose $$$.

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Re: Advice for a first-time homebuyer

Post by riverjoe47 » Mon Jan 24, 2011 9:06 pm

Blacksmith wrote:Asbestos tiles in of themselves are not a big disqualifier. Unless you live in an area where you are legally required to hire someone to remove them, in which case it is not worth effort. While they can be dangerous if not removed properly so can a lot of things like insulation for example. You just have to take precautions.

It sounds like you are shopping in the "economy" market. Banks are still holding on to the "good" properties they have in foreclosure and cutting loose the crap, hoping that the market will recover before they are forced to sell the good properties at an even bigger loss. I don't know what your monthly income is but shopping at less than 25% of your monthly pay for a house is more of a rich mans game. I'd at least consider going up to 1/3 with closer to 40% being the norm. You might not be able to afford that. In the past people could justify it as an investment, but with the market so soft that is hard to do these days.

As mentioned any kind of house in foreclosure will likely need a lot of work. I normally won't buy a house in foreclosure because the good deals get bought by people who are more knowledgeable and proactive than me in the market. They do it for a living and even then they get caught short some times. If you do buy just plan on replacing everything.

REO sales look promising but like foreclosures it is an insiders game. Any place that auctions real estate on line is likely a scam. If you dig into their terms of sale you will see what I mean.
I think if you keep your payments and interest down , buy your autos off lease , buy the smallest house in the very nicest neighborhood you can find (preferabley water front ) then some day you'll be playing the "rich mans game".
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Re: Advice for a first-time homebuyer

Post by riverjoe47 » Mon Jan 24, 2011 9:06 pm

Oops
Do not bathe if there is no water.
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Re: Advice for a first-time homebuyer

Post by KnightoftheRoc » Tue Jan 25, 2011 11:58 am

darkaxel wrote:...
Also, find the hot water tank, and open the drain valve at the bottom. The water should be clear. If not, then the municipal water system in the area has been leaving nasty deposits in the pipes and tanks of the house. If nothing comes out, then the tank needs to be replaced, ASAP.
This is not necessarily true. The anode in the tank is SUPPOSED to react with "stuff" in the water, and it WILL leave a sediment on the bottom of the heater tank. Upside to this, is that it protects other things down the line from being reacted on by those same chemicals, the downside is, a layer of sediment will also act as a sort of insulation, cutting down on the efficiency of the water heater. Believe it or not, most water heater replacements could be avoided, if the anode were inspected yearly, and replaced as needed.
Also, in about 30 years as a plumber, I've never yet had a job where the water heater exploded. I'm not saying it CAN'T happen, just that the chances are REALLY slim. And I've seen T/P valves that must have been "weepers", where the owner threaded in a pipe plug to stop the leaking...

When checking the drain water, you want to be seeing clear water with tiny flakes of sediment washing out, ideally. Anything else, and the owner has not been paying attention to it, or he's already flushed it out real good as a way to sell the house. Much like never buying a used car that has already been warmed up before you arrive- the same sort of principle applies here.
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Re: Advice for a first-time homebuyer

Post by razi » Tue Jan 25, 2011 5:08 pm

The reason I'm shopping for the amount I am is that while I've got a good income now, this is only going to last until August, if things go the way I want it (going back to school), and I don't want to over-extend myself, not to mention the student loans need to be paid off first (I can defer them while still in school, which still may or may not happen).

no children (yet), but I understand the point about the school system.

We're going to be at this house for at least about 5-8 years, with a few other variables in the mix (notably local employment). I'm looking for something in the close suburbs or semi-urban, because I won't have the time in the day to make long commutes, and we may still be operating with one car when the fiance and I are both clocking long hours in school. Neither of us like the idea of a long commute anyway, but neither do we want a condo and be packed in like sardines.

I'm not worried about asbestos tile, because well, they're going to be in all of the old houses and I can work around that. If anything, I'm going to use it as a negotiation point to try to lower the cost of the house. :P

we are looking for the small houses in the nice neighborhoods, too. I'm renting a big place in a crappy neighborhood and we're really not happy with the crime problem here.
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Re: Advice for a first-time homebuyer

Post by Tank » Tue Jan 25, 2011 5:18 pm

Timing is everything they say... It's interesting you should ask about purchasing a home, as I've just recently committed myself to being more active in something and that happens to be ZS at the moment. Even more interesting that my wife happens to be very well versed to the ins and outs of finance, real estate dealings, and credit in general and we were looking to become active contributors/members together.

She and I have been discussing lately how much of a boon her skills could be to a potential home buyer when navigating the maze of paperwork, contracts, fees, interest rates, etc.. Serendipity I say!
I'll force her to register on the forum later tonight after work and post a dissertation on what you should be on the lookout about.

One thing I DO KNOW is that when you are looking to buy - if you contact a Realtor - DO NOT SIGN ANYTHING YET!!! Read what they give you and don't let them pressure you into signing it on the spot. More often than not, they will have something shady in that contract that says you will be responsible for all sorts of hidden fees. A good friend of mine recently bought a house and his agent had even put in their contract that if he bought a house within 90 days and didn't use him as the buyer agent, then he still got a commission off of whatever they bought and they would have to pay out of pocket. He lined all of that out in the contract and made the Realtor agree to sign it and give up that nonsense though. HA! Buyer Beware!

FYI: We're also looking for a house and would prefer something outside of the city. It's hard to fit our standards though since I really would like to have more then 10 wooded acres and have a house within our price range. We're willing to make an hour commute to find what we're looking for, but so far I can only find crappy houses or crappy land and nothing near what we desire.
I feel the pain of the first time home buyer!
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Re: Advice for a first-time homebuyer

Post by Resolute » Tue Jan 25, 2011 5:24 pm

Great advice so far in here. I'll add something else about HOAs.

Since I want to eventually have animals at my house for meat and wool, I made sure I had the HOA covenants for each place I was considering before I decided to make an offer. Some are so strict as to regulate the color of your front door, what type of fence you can put on your property, the style of your mailbox, what trees you can and can't cut down, etc. (Those restrictions are from my parents' HOA they currently have to deal with).

My neighborhood doesn't really care much though. The fence has to be at least 20 feet from the middle of the road. No permission is needed to put it up, and it could even be concertina wire if you like. I can have up to 12 fowl and 1 grazing animal per acre. That means I can have 5.5 grazing animals on my property, which is enough for me :D Other than that, there's not a whole lot of restrictions. Most people keep their lot half natural and unmowed. The worst thing is that no shooting or hunting is allowed in the neighborhood.

Just do your research if you know specific things you might want to do in the future.

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Re: Advice for a first-time homebuyer

Post by Nightwing » Tue Jan 25, 2011 5:45 pm

Hey Razi,

sent you a pm. I'm a realtor in washington so I can asnwer pretty much any questions you got.
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Re: Advice for a first-time homebuyer

Post by razi » Tue Jan 25, 2011 5:49 pm

Tank wrote:Timing is everything they say... It's interesting you should ask about purchasing a home, as I've just recently committed myself to being more active in something and that happens to be ZS at the moment. Even more interesting that my wife happens to be very well versed to the ins and outs of finance, real estate dealings, and credit in general and we were looking to become active contributors/members together.

She and I have been discussing lately how much of a boon her skills could be to a potential home buyer when navigating the maze of paperwork, contracts, fees, interest rates, etc.. Serendipity I say!
I'll force her to register on the forum later tonight after work and post a dissertation on what you should be on the lookout about.

One thing I DO KNOW is that when you are looking to buy - if you contact a Realtor - DO NOT SIGN ANYTHING YET!!! Read what they give you and don't let them pressure you into signing it on the spot. More often than not, they will have something shady in that contract that says you will be responsible for all sorts of hidden fees. A good friend of mine recently bought a house and his agent had even put in their contract that if he bought a house within 90 days and didn't use him as the buyer agent, then he still got a commission off of whatever they bought and they would have to pay out of pocket. He lined all of that out in the contract and made the Realtor agree to sign it and give up that nonsense though. HA! Buyer Beware!

FYI: We're also looking for a house and would prefer something outside of the city. It's hard to fit our standards though since I really would like to have more then 10 wooded acres and have a house within our price range. We're willing to make an hour commute to find what we're looking for, but so far I can only find crappy houses or crappy land and nothing near what we desire.
I feel the pain of the first time home buyer!
Sounds like we're gonna have to grab a beer sometime and put our heads together.

by the way, be careful with modular homes, even brand new ones. the manufacturers cut lots of corners (etched plastic pane instead of a glass block window in the bathroom, for example), and the salesmen/owner will call it a modular home, take your money, and then when you discover that it says 'mobile home' on the title (which will fuck the resale value of the house sideways), give you the finger. My dad found this one out the hard way, and though their place is pretty nice and fits their needs, he's really not happy with it.
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Re: Advice for a first-time homebuyer

Post by Nightwing » Tue Jan 25, 2011 6:05 pm

Number 1 is interest rate. 1% raise in rate lowers your buying power 10%. this also works for sellers, 1% raise loses 10% of your buyer pool.

2) go with a LOCAL morgage broker. don't go to a bank! a broker will have access to more loans, and better rates since they work with multiple banks.

3) there are a varity of loans available, from 0% down VA or usda to an fha at 3.5% down and then your standard conventionals at 5%, 10% and 20%. however at 5% and 10% you are responsible for your PMI or primary morgage insuance (can affect your monthly payment)

4) closing costs will affect your contact, make sure to discuse them with your agent.

5) choose a respectable FULLTIME realestate broker. A part time friend of a friend is not a good choice. you want someone who can clearly explain the contracts you are signing in detail. Ask them how many transactions THEY closed last year, a good agent will be 20 or above. Their brokerage does not matter. the brokerage doesn't do anything for you as a buyer or a seller. it's like buying from RRA or Bushmaster.
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Re: Advice for a first-time homebuyer

Post by Nightwing » Tue Jan 25, 2011 6:06 pm

I can go on and on about things you should do and things you shouldnt. if you have a peticular question just pm me.
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Re: Advice for a first-time homebuyer

Post by Nightwing » Tue Jan 25, 2011 6:11 pm

if you use a realtor, they have to explain everything you sign. ( and as to the buddy who signed paperwork saying his realtor earned a commission on anything bought for 90 days, there are so many saftey nets for buyers in contacts it's not funny. we as realtors can not create law (i.e. contracts) we have to use the state drafted forms sent to us from the state's lawyers.) I know exactly which clause this story talked about and it's easy to run a work around on it. It's just a matter of understanding what your rights are. and if a real estate agent can not explain them to you then they are not very good and you shouldn't be working with them in the first place.
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Re: Advice for a first-time homebuyer

Post by Anomic1 » Tue Jan 25, 2011 8:07 pm

Im stuck in a pickle. That 1% rate=10% buying power is the crux of it


My sitiuation is clean 800 credit score and... I dont even care ill post numbers. 5000-5500 monthly gross and 25k cash on hand. Only debt is a 550$ car payment (took short term loan 4years because 2.5% rate and was not plannin on buying this soon). Looks pretty good right?

Looking for 225-275 range single family (no kids no debt and i have a 30% raise in 1 year). So im pushing the general rules of 2.5x yearly or the various debt/income ratios. I was origionally planning on waiting for my (contractual) raise but im really scared rates are going to climb.

So i jumped in and went for a prequal and low and behold they would not document my income! Have 3 years of w2 at this level 6 years at company but the bank claims my 10hrs of weekly OT and bonuses can not be considered? She did say that if i could get my employer to acknowlwedge levels in past and "gurantee" future overtime/bonuses she may be able to look at it??

So im screwed. Save for another year, get my raise and be able to put 20% down but have interest rates jump 1-2 points and eat thay whole year of savings?

Try a broker and see what they can do?

Im planning on staying longterm so the interest paid is a concern for me.

Im lost! Ask glock vs 1911 and i know what im talking about!!

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Re: Advice for a first-time homebuyer

Post by DarkAxel » Tue Jan 25, 2011 9:19 pm

Have you thought about access to public transportation, razi?
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Re: Advice for a first-time homebuyer

Post by Resolute » Tue Jan 25, 2011 9:44 pm

Yeah, the banks are being very... thorough with their loans right now. They really can't consider your OT as part of your yearly salary because it's not considered guaranteed. If they did then they'd risk approving you for more money than you'd be able to pay. I say don't go with someone else for a higher number... If you can, find a house in whatever range they approve you for. Put the rest into savings, into your kid's college fund, into a Roth IRA, or pay down your principal on your mortgage (or car) early.

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Re: Advice for a first-time homebuyer

Post by Anomic1 » Wed Jan 26, 2011 7:19 am

The amount they would qual me for is undoable. I live in a high cost area and anything under ~250 will be in real bad shape requiring a lot of repairs


The issue boiled down is that only 75% of my average income over the last 3years is being considered. And in 1 year with my raise its about 50%. So the mortage payment would be 3-4days pay... And im not willing to live in a dump. BUT im afraid if i wait that rates will jump to the high 5% or maybe 6% and cost me an extra 50k or more in interest! Im in a lose lose situation.

I could find a co-signer but i really prefer to do things on my own and then the house wouldnt be "mine" which is the whole point! Can a cosigner be removed from the loan after a few years or do you need to refinance to eemove them?

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Re: Advice for a first-time homebuyer

Post by razi » Wed Jan 26, 2011 11:14 am

axel- yes. the public transit situation in St. Louis isn't pretty, but it's workable. Luckily they expanded the metrolink to another line, which would go past both of our schools, and this extension is in a decent neighborhood (which is one of the ones we're looking at). thanks for the reminder, though.

the broker we're talking to is a pair of full-time agents. we like them a lot and they're not pushing us, and the mortgage is pre-qualified through a national company whom they work closely with (which they say means a discount on the paperwork and closing costs).

anomic1- if you get a cosigner, you'll have to refinance to get 'em off of the loan. can your wife cosign (does she work)? If you can qualify for self-employment loan, there are less restrictions on income verification and what paperwork you have to give them.

I'd suggest aggressively stashing your bonus cash away into a savings account. If your debt to income is solid, if you tighten your belt and limit your excess spending, you should be able to save up a fair amount before the home purchase and, if you've got a larger down-payment, you may be able to negotiate a better rate. I'd plan to do that and then buy later in the year (like summer time, or early fall). I doubt the rates will jump that high if you're in the position you're in, and a big down payment plus making payments larger than the minimum will reduce the interest paid over the course of the loan, which are good to do anyway.

I've heard talk of making biweekly payments instead of monthly payments, mainly because it creates 2 extra monthly payments a year. anyone have thoughts or experience with that?
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Re: Advice for a first-time homebuyer

Post by Stercutus » Wed Jan 26, 2011 12:09 pm

Anomic1 wrote:Im stuck in a pickle. That 1% rate=10% buying power is the crux of it


My sitiuation is clean 800 credit score and... I dont even care ill post numbers. 5000-5500 monthly gross and 25k cash on hand. Only debt is a 550$ car payment (took short term loan 4years because 2.5% rate and was not plannin on buying this soon). Looks pretty good right?

Looking for 225-275 range single family (no kids no debt and i have a 30% raise in 1 year). So im pushing the general rules of 2.5x yearly or the various debt/income ratios. I was origionally planning on waiting for my (contractual) raise but im really scared rates are going to climb.

So i jumped in and went for a prequal and low and behold they would not document my income! Have 3 years of w2 at this level 6 years at company but the bank claims my 10hrs of weekly OT and bonuses can not be considered? She did say that if i could get my employer to acknowlwedge levels in past and "gurantee" future overtime/bonuses she may be able to look at it??

So im screwed. Save for another year, get my raise and be able to put 20% down but have interest rates jump 1-2 points and eat thay whole year of savings?

Try a broker and see what they can do?

Im planning on staying longterm so the interest paid is a concern for me.

Im lost! Ask glock vs 1911 and i know what im talking about!!
Banks are acting like the town slut who gave everyone a case of the clap and got knocked up. They played fast and loose until the jig was up in 2007-8 and they are still carrying around all the problems related to their overindulgence. Now they are being all prim and proper and pretending that it all never happened and wasn't their fault anyway.

But back to your problem. Four years ago if you had wrote down a number on piece of paper and said "this is what I make"... they would have gone for it. But these days it just is not going to happen. Hourly wage workers suffer a bit in comparison to salaried workers because the amount is pretty regular and certain. Whatever your real situation the bank sees it as a risk that your hours go from 50 a week to 33.
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Re: Advice for a first-time homebuyer

Post by orion » Wed Jan 26, 2011 8:00 pm

Nightwing wrote:2) go with a LOCAL morgage broker. don't go to a bank! a broker will have access to more loans, and better rates since they work with multiple banks.
I'd add a caveat to this line of thinking--if you have excellent credit (no one's going to decline you and you're likely to qualify at or better than the advertised rates) you may still be better off checking published rates yourself and dealing directly with a bank. A broker does have access to more than one and may be able to get you a better rate, but you're likely going to see higher closing costs going the broker route. I'd also worry that the "best" option brought back may not have been quite the lowest rate they were able to find but paid a better commission. However, I freely admit I am speaking out of paranoia/distrust there and have no experience or evidence to back up the second of my statements.

I did, however, refinance with a broker (before the bubble burst) and later directly with a bank (after the bubble burst) and I can assure you my closing costs (and interest rate) were a hell of a lot lower going the direct route. The negative there is that no one--broker or bank--will usually commit to a rate until you've gone through enough of the application process to have at least had a credit report run, so you're kind of forced to pick someone based off of advertised rates or not-quite-complete information.
razi wrote:I've heard talk of making biweekly payments instead of monthly payments, mainly because it creates 2 extra monthly payments a year. anyone have thoughts or experience with that?
I've done it both ways, though right now I am sticking with monthly payments. The conflicting schools of thought there are between "you'll build equity and pay off the loan faster" which is true and "your mortgage, especially at current rates, is going to be the lowest-cost debt you hold, and if you have any other debt at all you're better off putting any 'extra' money toward the more expensive debt." (Also true.) I don't have any debt outside my mortgage right now, but I'm back in school and trying to do that without adding any new debt (so far, so good) so all my extra money's going into savings to be used for future tuition.

Also, I'm paid only once a month and so run the rest of my budget on that cycle. Those months where there were 3 bi-weekly payments were always tough to work around. If you're paid bi-weekly, though, that wouldn't apply to you.

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Re: Advice for a first-time homebuyer

Post by riverjoe47 » Wed Jan 26, 2011 8:50 pm

razi wrote:axel- yes. the public transit situation in St. Louis isn't pretty, but it's workable. Luckily they expanded the metrolink to another line, which would go past both of our schools, and this extension is in a decent neighborhood (which is one of the ones we're looking at). thanks for the reminder, though.

the broker we're talking to is a pair of full-time agents. we like them a lot and they're not pushing us, and the mortgage is pre-qualified through a national company whom they work closely with (which they say means a discount on the paperwork and closing costs).

anomic1- if you get a cosigner, you'll have to refinance to get 'em off of the loan. can your wife cosign (does she work)? If you can qualify for self-employment loan, there are less restrictions on income verification and what paperwork you have to give them.

I'd suggest aggressively stashing your bonus cash away into a savings account. If your debt to income is solid, if you tighten your belt and limit your excess spending, you should be able to save up a fair amount before the home purchase and, if you've got a larger down-payment, you may be able to negotiate a better rate. I'd plan to do that and then buy later in the year (like summer time, or early fall). I doubt the rates will jump that high if you're in the position you're in, and a big down payment plus making payments larger than the minimum will reduce the interest paid over the course of the loan, which are good to do anyway.

I've heard talk of making biweekly payments instead of monthly payments, mainly because it creates 2 extra monthly payments a year. anyone have thoughts or experience with that?
Anecdotal info . It seems to really build equity , which you could also do by throwing a wad of cash at your mortgage once a year or so . We didn't really notice any hardship until we went on a monthly pay schedule so a couple of times we had to rush to the bank to cover an auto withdrawal . As far as paying down your loan in lump sum payments we always seemed to find something more important to spend on like a boat or new furniture etc .
Do not bathe if there is no water.
Chinese, Shan proverb

I never gave a damn about a man who could only spell a word one way .
Mark Twain

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