B&B #8: One Way to Buy a House
What’s the most difficult way to buy a house? How about buying a house as a short sale (the step right before a house is foreclosed), needing to gut renovate it, and doing it all under the Federal Housing Administration (FHA) mortgage process? Yep, all that happened with our home purchase. Hear about how we got through it.
It doesn’t always make sense…. It’s getting to the point too where, in most expensive cities, especially expensive cities where people move in and out of it so often, like New York city where people will spend two or three years here and then be like “Okay, I’m out”…it doesn’t make sense to tie yourself up in a mortgage and tie up all that money for the down payment for a place that you may or may not stay in. So, it’s more of an it depends situation than a check off the list situation, is whether or not you should buy a house.
You basically shouldn’t consider buying a house unless you’re sure you’re going to stay in the same place for 4-5 years, or if you feel comfortable with the idea of renting the place out if you were to move out.
You can put down as little as 3.5% if you’re a first-time home buyer.
Our realtor, when we were working with him, found out about houses before they even…showed up on the market. So that is one big benefit of working with a realtor who really knows your neighborhood and has a lot of connections in your neighborhood.
We basically decided to gut renovate a house, and the way that we were able to do that is: there’s a special kind of renovation loan that the Federal Housing Administration has called a 203k loan, and that is a renovation loan that you can take out that gets rolled into your mortgage so you pay for the house, you get a mortgage for the house, and then you get additional mortgage money basically to renovate the house.
Nobody but you cares about getting your house.
The interesting thing about this whole time that it took to actually renovate the house was, yeah, it took a year but the actual putting up the walls, putting in the plumbing, putting in all the fixtures, probably actually about 3 months of work…everything else was department of buildings, permits, violations, trying to get through [to them].