Buying a house

By Morf Morford

Tacoma Daily Index

On the long and ever-growing list of how things have changed in the past couple years, put real estate at the top of that list.

As with every market, from cars to breakfast cereal, supply chain problems, resource costs, labor shortages and shifting consumer demand have pushed and pulled at what had been, for decades, a remarkably stable economic landscape.

Housing, for most of us our largest single investment, has shifted, if not contorted along with the rest of the economy – if not more.

My wife and I have sold two houses and bought three without a realtor.

For the most part, those transactions worked out, but in the intense, if not convoluted, real estate market of the early 2020s, I would not recommend it.

Some aspects of home buying have not changed, but some have – radically.

Find a reliable guide

Professional guidance is essential through these uncharted waters.

So that would be my first rule – find a reliable, trustworthy realtor.

Get referrals from family members, friends or anyone you work with or know.

My second rule would be to pencil out your finances.

Interest rates are at record lows – but so are inventories.

Even when the many variables of home buying are stable – like zoning, interest rates, contractor availability and a hundred others, once you start factoring in changes in any, if not all of those areas, it can get far more complicated than you are prepared for.

Figure out how much you can afford

Know your debt-to-income ratio (DTI) – that is, what you owe each month as a percentage of what you earn. Most lenders recommend your DTI should be no higher than 43%. Around 30% would be far better.

Determine your down payment. Putting down 20% of the home’s price will exempt you from having to pay an extra monthly fee for private mortgage insurance (PMI).

Use an online housing affordability calculator, which takes into account your annual income, monthly debt, down payment, credit score, location, and much more.

Your projected house payments won’t be all you will be paying for that new house – be sure to factor in the extra costs of home ownership like property taxes, maintenance costs, homeowners association or condo fees, homeowner’s insurance, and, of course closing costs.

Focus on what you want

Keep your eye on your preferred location and neighborhood.

Make a list of home features that are must-haves, as well as a wish list of those you’d like.

And how you’ll pay for it

Long before you start seriously looking, be sure to get a mortgage pre-approval.

This will allow you to move (relatively) quickly once larger aspects of your search begin to come together.

Your lender will run a credit check and will request documents to verify your income, employment, assets, and debts.

Get that paperwork in place before you need it!

Get looking!

Looking at a home to purchase is not for the faint of heart.

Searching for a home is like no other experience; the stakes are high and the prospects for disappointment and discouragement are great.

As exhausting (and exhilarating) as the home search might be, there is no substitute for it.

Be flexible

You never know what you might see, or run into, or learn.

On a recent home search for example, I ran into a guy (with a lot more capital than I had) who was preparing to buy a home sight-unseen – for cash.

He invited me to check out his intended purchase.

The crawl space under the house had been a home for raccoons (and probably other creatures) for quite some time. It had been a rental but had been vacant for several months.

The agent asked if he wanted to look under the house to check out the flooring joists and insulation.

The buyer didn’t even want to see it. His philosophy was to assume the worst, and pay to have it fixed or rebuilt no matter what it looked like.

Besides, he told me later, he’d probably have the house jacked up five or six feet and add either a full-sized living space or parking spaces.

I mention this because in this housing market, part of the feeding frenzy is hedge-fund investors, others are buyers looking for a second (or third) home.

Holding up the end of the line are the traditional first-time buyers.

Each one of these categories of buyers drives up the prices.

And each category has its own set of issues; some might be on a tight time frame, others are looking for immediate occupation, others see it as a long term investment. Each one has different concerns, priorities and deal-breakers.

Expect the unexpectable

In this seller’s market, sellers can set the rules – or change them.

Some sellers are requesting (or allowing) potential buyers to write a letter detailing how they would use, appreciate or make improvements on the house.

To say that this gets into sticky legal territory would be an understatement.

Appraisal and home inspection

Don’t neglect the appraisal and a home inspection!

Carpets and slick marketing can hide a multitude of problems.

Buying a home is an emotional, analytical and financial experience. Tread carefully as you make your way through each of these new and challenging areas.