I want to buy a house within the next ten years.

Aside from money and a good credit rating, how do I get there? What do I need, what should I know? Where do I start?

please boost. I know there are others thinking about this now

@brandon Figure out where you want to live, and how much you can afford to spend. There are calculators online for that. Then you find a house agent who will help match you up with properties. And then when you find the right one, they will handle the interaction with the seller's agent and point you in the direction of the processes you have to follow.

@tulpa Thank you for that :)

There are people who will literally just sit around looking for houses for you?

@brandon The house agent (or realtor as we often call them here) makes a commission by splitting with the seller's agent, who takes the cut from the seller's money. So you, as a buyer, don't have to pay them for their services. But since they work on commission, they definitely are motivated to see that you buy something.

Other people that are involved:
- Home inspector, who you hire to go over the place so you don't buy a lemon
- Mortgage company, who loans you lots of money and then sells the debt to a giant bank
- Title company, who files the legal paperwork with local govt that shows you own the property
- Insurance agent, who sells you a homeowner's policy - usually you can get a discount if you buy it from the same agent who insures your car

In my experience, I had to find my own inspector and insurance. But my realtor hooked me up with the mortgage and title people.

Your realtor will ask you what your wants are, and will then get back to you with candidates. And they will take you to the houses and let you look around. (The seller won't be there, but the seller's agent probably will.) When you find the right house, you bring in your inspector to check it out. Then you make an offer by talking with your agent. Then begins haggling over price until you get it worked out. You also get to ask for fixes to the property as part of the contract if you want any. When you come to an agreement, the closing date is set. And you put down a couple thousand just to show you're serious - this is called "hand money" or "earnest money".

The closing is a meeting where you pay your down payment (usually as a cashier's check) and you sign a huge pile of paperwork. They then give you the keys and the house is yours.

Of course, things may be slightly different for you since we're in different countries.

@brandon The sooner the better. Get the shortest note you can afford. Make sure you understand what taxes run and when they're due so you are prepared. Beware of letting your real estate agent chose your loan insurance for you. Shop for your own if it's required. Many lenders require that taxes and loan insurance are paid monthly and stored in an escrow accout until due. Have an emergency fund for unexpected costs. You're the landlord now.

@brandon bare minimum: check the neighborhood, go there at different time of day to get the feeling of living there. some places smell, some are noisy. we crossed out a few places because there was a night breeze bringing awful smell from a steel mill across the border. also, waterfront properties we dreamed off turned out to be a disaster during wind, when lake water is pushed ashore. and then there's a stetch of dead fish once in a few years, and fishflies every year...

@brandon industrial agriculture facilities could be a problem, too: smell and light pollution from greenhouses, dust from tractors developing fields. after marijuana legalization most of the greenhouses here swicthed from tomatoes to mary jane, oh gosh, it stinks like skunk. lol.

@brandon now, check for possible future problems: road widening, commercial and residential developing.

@brandon railroads! and airports. that's noise. train whistling at 3pm outside your windows is no good. almost like a revving jet above your roof.

@brandon be your own agent and inspector. learn about electricity, plumbing. you'll need it later. check and recheck everything yourself, even if you have a hired professional. don't be affraid to ask questions. e.g here in ontario home inspector could not be held accountable if you bought a lemon. so do your due diligence.

@themactep Thank you Paul for all your insight! It'll be very helpful! It's nice to have some advice that is a direct product of house-chasing experience :)

Thankfully the trains that pass by my place don't bother me all that much. That's the me that lives in the city, however, so maybe it's really the juxtaposition that doesn't cause too much irritation :P

@brandon keep in mind that there's a difference of a noise in an already noisy environment and the same noise in a quiet one. the rule is, do not assume, go test it. i used to drive to the neighbourhood of interest at night and wait for a train to pass by. it resulted in that we found the only town in the county without a railway as it blew up a hundred+ years ago.

@brandon Ask a bank to get pre-approved for a loan about the time you are serious about buying. Don't actually buy at their approval limit. They usually allow more than you can really afford.

@52fighters What's the advantage of getting it pre-approved vs getting the loan specifically for the house you're looking for?

@brandon You can present that letter to the seller to move the process along and lock-out other buyers. Approval takes time and if you aren't pre-approved, the sellers are likely to move on to another buyer.

@brandon save as big a down payment as possible.

Over-extend a bit. Mortgages always decrease with time and incomes tend to increase as you age. But still, be ultraconservative in all your estimates to make sure you are not sowing the seeds of financial ruin.

I started with an apartment/condo unit and I think entering the market at a lower price tier was a good move. There is less on the line and you gain familiarity.

Be realistic by observing the market. No place is perfect.

@groovestomp @brandon I would like to provide a counter point to the Save Up as Much as You Can advice. Put down as little as you can. It actually depends on where you live. If inflation is 3% a year, your future house will be $250 per $100k value. So the sooner you buy it the sooner you get that inflation as equity. This also applies to market increases, so it depends on where you live.

@MrDers @groovestomp Here's the issue with that, from what I was told:

Banks front-load interest. If I put down as little as possible, I guarantee a longer period on which payments will occur, which would increase the total cost of the house.

If there's something I'm missing, let me know

@brandon @MrDers @groovestomp Generally, the loans on houses are really low interest. You probably don't know it, but you are probably wasting more money per-day on credit cards. Some financial advisors will tell you to pay off your house, and while have that extra disposable income every month is nice, you basically just gave up all the interest you could have made on that $.

Very dirty math here:
Say you got a 4% interest home loan. Let's say that inflation is 3%. You are paying 15% on a credit card. Now these aren't all apples to apples here, it all depends on how interest is calculated, but if you pay off that credit card, and then invest what remains, and get a rather conservative %10 year over year, you are beating out the interest on the home loan and the inflation rate. So, long-term, you will have more $ by making the bank hold more of the loan. You'll have to work this out more exactly with your own numbers to find the sweet spot.

So if you want to optimize for cost of ownership, that's fine, but be aware what you are giving up as well.

If you want to optimize for disposal income at a sooner future date, thats fine. It all has opportunity cost.

@charims @brandon @MrDers Totally agreed.
Interest rates for mortgages have been so low for so long that I'm okay with just floating that for a long time.

I also do passive investing in index funds and averaged returns over the long term there are 4-7%; which is a lot higher than the interest of the mortgage.

Before we bought our house (twice the price of our condo!) we paid off our car and did everything to reduce our monthly expenses.

@groovestomp @charims @brandon It's funny how the monthly payment vs total cost thing feels different for different people. My dad always says "you will always have a car payment". Either it's a real payment, then it's saving for the next car, then your car is old and maintenane and upkeep get to be a payment itself. Makes sense, but I am currently not saving for the next one

@MrDers @charims @brandon I have never owned a car for myself.
My wife and I bought a new car together in 2017 I think because we had a our second child and just felt that we needed the space. The car we had was still fine; we were just planning for the future.

At this point I would *like* to have a secondary vehicle because we will be ferrying the kids to different places as they participate in more extra-curriculars; but the pandemic has certainly postponed that.

@MrDers @charims @brandon Even then I'm looking at cheap used. Like <$4000 CAD. Probably won't action this for a while. Still some other financial things to sort...

We have a private family loan to look at and I want to drop our monthly expenses further.

What you dad said applies broadly, though; maybe it's not a car payment specifically. It was definitely an adjustment to get used to the idea of maintaining a constant "stream" of debt. 🙂

@groovestomp The pandemic really changes the calculations. We have always had two cars, one big one and one commuter. But now I'm home with the kids and use it on occation. Once school gets back in I'll use it every day, if only for a few minutes. Technically transit in the Seattle are works but the amount of time getting places doesn't work for most people. I also like the idea of living near work, but I was sick of living deep in the city

@MrDers oh man, I understand this.
We are lucky to live relatively close to our obligations. I'm a half hour public transit commute from the office and we're ~10mins from daycare and my wife's work by car.

But I want to move out of the city. Ever since I moved into the city I wanted to move out. My wife has only ever lived in *this* city, though. The never-ending tension. :-D

@charims @brandon @groovestomp I love this advice. But it reminds me that different people need to live their lives different ways and be happy. Just do it responsibly. For example, I'd be happy never eating out and buying nothing and sitting in a cold house to save money on heat. My partner, not so much. 😀

@brandon @MrDers That's true; but for gigantic debt like this I deal with it differently than smaller debts.

My primary goal is to get the monthly expense ratio as comfortable as possible' so I am okay with paying higher interest as long as it means overall monthly expenditures are lower.

Every year we make additional payments on the principal and then push out the amortization to the maximum available.
Doing this we've reduced monthly expenses to 66% of their starting amounts.

@brandon @MrDers @groovestomp

An important point is that interest rate are so low, that having a long loan is very cheap. If you invest the money you saved by not putting it as a down payment, you will actually make more money than you lose on the mortgage interest.

(Also, the length of time to repay is generally a set thing no matter how much you borrow. Typically 15 or 30 years. If you go with a shorter loan, the bank gives you a discount on interest.)

@MrDers @brandon I guess it depends on your income and how financially conservative you are; and also how much you happened to have saved up to this point.

We did 35% down, but we're in Vancouver, BC, Canada; which is one of the most expensive cities to buy in. Definitely the most expensive in Canada.

If neither my wife nor I were as frugal as we were, having that kind of down payment wouldn't have made sense.

In Canada if you have less than 20% down you also have to pay CMHC insurance.

@groovestomp @brandon 35% in Vancouver!?! That's bananas. Saving up money was hard living in Seattle when an apartment costs $2000k a month and you make less than $100k. And your friend group is all about eating out and travelling. That was my 20s.

Brandon should be seeing now that it depends. I bought a house with 5% down and PMI.
In 1 year refinanced the PMI away because the value increased enough. But that might have just been the right place at the right time.

Three most important factors 

@brandon location, location, location 😋

Where should you start? Where. Exactly.

@brandon Lenders will likely want to see stable income. Bank statements paychecks etc. I’ve heard that freelancers have a hard time convincing. So don’t switch jobs before you go to buy.

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