>Note: Comments are moderated. I’m rejecting unrelated real estate agent or broker comments defending themselves, or spams to their websites. Everything below is documented and truthful to our situation.

My family has been seriously looking to buy our first home since June. I have decided to post all the nightmares of home buying here for anyone considering the same. To read all posts related to this subject, look on the left hand column, in the LABELS area and click on FIRST TIME HOME BUYER.

I have never had the income, credit, or living stability to buy a home. My radio career moved me around too much to even think about staying long enough to build equity and frankly, I didn’t want to be tied down to that commitment.

But now that I’m married again, out of the radio business since 2000, it was time to try. Plus the headlines back in June – “NOW IS THE TIME TO BUY”. Of course, the Clinton administration was very instrumental in getting FHA loan requirements lowered so anyone could buy a home but I wasn’t interested in those days… plus lenders kept it under wraps because they wanted most of to pay the standard 20% down in case of loan default… the lenders would have some equity in their favor.

In my insurance business, I sell policies to working people… lower-middle class if they’re such a thing. Typical cost of our products through their company is about $60 per month. A very good investment, if you have the foresight to protect your future earnings and your family. But the average take home pay is about $15K per year or less.

What I started to realize when I was writing their applications is that most of them OWNED A HOME. I’d ask “is there an apartment number?”. No, it’s a house. “Your wife rich?” No, got it through the government. “Oh, you were in the military?” Nope. It’s a government loan. “May I ask, just out of curiosity because I’m renting right now… what’s your house payment?” Right now, it’s $700 per month. Hmmm, I thought, must be an old, small house.

Then a realtor friend of mine at a party told me, “if you’re renting right now, then you’re missing out, this is the best time since I got into the business to buy a home. FHA loans are giving all kinds of incentives, lenders are being generous, and builders are gifting back closing costs, down payments, or buying down interest points”.

I told my wife Katelynn, “we should at least look into this”. The nightmare begins.

There’s an order to this and no one NO WHERE tells you this. So I will. First of all, RIGHT NOW, TODAY, in spite of the headlines, IT’S A BUYERS MARKET. So if you’re renting and have an income, you CAN BUY A HOME!

If you have a prove-able income over the last two years, a bank account, tax returns, then you’re probably in good shape. We were. Our income has grown steadily since 2003. We file our taxes on time. Have a few credit cards (not used except for emergencies, car rentals, plane tickets, etc—and we pay them off each month). So we tried.

Went to the bank and here’s what they told us: “Go find the house that you want and we’ll get started.” Really? How much can we spend? “We won’t know until you find the home you want and then we’ll try and make it work.”

We found THAT DAY the home we wanted. Foreclosure, brand new, in a high dollar neighborhood. Flawless. 2400 square foot ranch, brand new everything, lots of room, lots of cool appliances, fireplace, walk-in closets everywhere, whirlpool tub… that’s the home we want.

How much? $218,000. We can probably talk ’em down some since it’s a foreclosure.

We went back to the bank. We gave him our banking statements, proof of income sources, and tax returns. “I’ll have an answer for you in the morning.”

We were so excited! Called everyone we knew and said “Hey, we’re gonna be moving to ….” Next day we got the news: “With your debt/income ratio, and an FHA loan… you’re first time home buyers, I’d go with FHA, you can buy this home! WOO-HOO! I started singing that theme song from THE JEFFERSONS, “We’re movin‘ on up… to the east side…”

Oh, wait, how much. Your total payments will come to just over $1900 per month.

Dead silence.

“Um, what makes you honestly think I can pay that or that I would?”

“You and your wife CAN afford this home.”

“Perhaps we can, but I can’t imagine how wonderful it would be with no phones, TV, Internet, electricity, water, food, insurance, gasoline, savings, investments, or clothing.”

“Most people spend about 1/4th of their income on their homes”, the banker said.

“Oh well, that was fun while it lasted… no thanks, really, that is impossible.”

“WAIT, why not look at a lower priced home?… what do you want to spend?… don’t leave yet.”

I had to shout, “Don’t you read the headlines? This is why America is in the bad shape we’re in… people who can’t buy a new DVD player on credit are buying homes they can’t afford!”


Sure we can pay that. Man it would be tight because every penny we make is accounted for. We’re self employed and have to pay our taxes every quarter BASED ON LAST YEAR’S INCOME. And if business is slower than usual, the IRS still wants their money. Oh well. Sigh.

But we got our hopes up. We had to try again. Let’s look for a cheaper home. Like a car, the first one can’t always be what we want, but what we want to afford.

Make sense, right? Every listing realtor we spoke with kept trying to sell us a home that was at the “standard maximum”. I understand commission sales, I’m in that boat, too. But c’mon! This is supposedly a 30 year commitment… can you please try and SEE OUR SIDE?

When we put our foot down, then the “call backs” stopped.

I do NOT want to take this entire page up with the specific details of our home search and offers since June, but I will add posts with things that need to be shared with you, if you’re considering a new home purchase IN THIS TIME of economic crisis.

As of tomorrow, I think we have an accepted offer on a $115K home, with payments around $1150 per month. Unfortunately, with the way interest rates work, you will NOT know what your payments will be until you see the loan application papers. When the lenders draw up your papers, they will call THEIR LENDER first to get the interest rates.

The first thing we should have done, but no one told us (although I saw a special on HGTV about THE TOP 25 MISTAKES made in real estate… and the number one mistake is:


So, take it from this real life, first time home buyer… he’s what you’ll need to do, need to keep in mind, and be ready to spend before you can even make an offer:

Be honest with yourself first. Can you afford to move? Can you afford a rental truck and fuel? Can you afford to move your services: cable, Internet, phones, water, electricity… if you’ve been behind in your utility payments, they will required deposits to start “new” services elsewhere. Can you afford the new travel costs to your kid’s schools, jobs, shopping? How do your kids feel about leaving their friends and school activities behind? What’s the cost “of living” in the new area? Do the roads and sidewalks need repair (homeowners have to share in the cost of those city repairs)? What are the property TAXES in that area?

If you’re ready….

1. Take all the above paperwork to a bank or mortgage company. ASK AROUND to other home buyers you know. Where’d you go? What agent did you use? GET REFERRALS!

2. Get a pre-approval letter to take with you. Although it’s very time sensitive and WILL CHANGE, at least the sellers and the agent(s) will know that you’re serious!

3. Do you have $500 ready to spend? You’ll need it for earnest money in case you back out of an offer for no reason (more on that later).

4. Do you have about $400 to pay for a home inspection? Yep, you’ll need to do that before you buy the home. People will lie on the HOME CONDITION REPORTS. If you’re not willing to do a home inspection before you close… stop reading this post. And seek a qualified therapist. I’m serious. We almost were stuck with a PEACE OF FECES, 100 year old, falling apart home that was AMAZINGLY, fixed up cosmetically, to look brand-spanking-newly-updated inside and out. And OUR AGENT screwed us by allowing the seller the option to “cure any defects” we found regardless of inspection recommendations. THANK GOD the lender said it wouldn’t pass FHA requirements, THANK GOD the sellers agent backed out of their contract with the seller… we were already talking to an attorney about suing all the agents, brokers, and seller. Which would keep us off the buying market for probably a year not to mention legal fees would have to pay up front.

Look for an upcoming post called SOUTH WILLOW SCAM with more details on this transaction.

Oh, the home inspector had about 13 pages of things UN-FIXABLE in that home and his exact words were “I didn’t walk from that house, I ran!” The seller could care less about my family’s safety or well-being, she was a flat out LIAR. I’m sure she’ll burn it to the ground (hell, it’ll do it on its own anyway) and collect the insurance… there’s NO danger of her selling that home to anyone sane. PAY FOR A HOME INSPECTION AND MAKE SURE YOU OFFER LETS YOU OUT if you FEEL the home repairs will be too costly or plain UNSAFE!

IMPORTANT: If the seller shows you a recent home inspection report that THEY had done, tell them thanks, but you want to hire your own inspector. I’ve been told that home inspections for the SELLER can be favorable TO THE SELLER. I don’t know how the inspector could get away with lying, but it’s possible they can “down play” the trouble areas somehow. Pay someone that will be ON YOUR SIDE!

5. Find an agent that will work FOR YOUR GOOD. Again get referrals. Tell him/her exactly what you want in the home, what your payment range is (not your purchase price range) and if they send you ANY HOME that doesn’t fit your criteria, you will immediately end the relationship and go to someone else. YOU DO NOT PAY OR SIGN ANY CONTRACTS with the agent that is helping you. NEVER. If they require it, tell them you attorney said that’s illegal and ask them for their card. It’ll be fun just to see the look on their face. THEIR PAYMENT comes when the deal is closed. And they’ll pocket several thousand dollars for THEIR efforts, so don’t worry about “over working” them.

6. Make sure you ask your lender what your closing costs and prepaids will be. Insurances up front, property taxes up front, private mortgage insurance, home owners insurance, FHA fees, assessment fees, whatever… find out what that is so you can include it in your offer: MAKE THE SELLER PAY THEM!

7. Bring a digital camera. Take a thousand pictures. Take pictures across the street, of the neighbors, the front, the side, the back, the yards, the roof, the porch, the garage, the sidewalk, every wall in the house, all the floors, all the ceilings, under the sinks, inside the closets–everything! So when you get back home, you can download the photos to show others you trust and get some feedback… plus you may find something you overlooked or really like.

8. When you find the house you want and love, you’ll know it. Make sure your agent has the paperwork with them to MAKE AN OFFER TO PURCHASE right now and tell them to call the listing agent (if it’s not the agent you’re working with) to be sure THERE’S NOT an accepted offer on the home already. NO WAIT! Check THAT first before you even look at the home. We looked at about three homes we liked only to find out when we called the listing agent or seller, there was already AN ACCEPTED OFFER. A complete waste of time. And we “fired” that agent for not knowing that first. Yes, so far we’ve been through 6 AGENTS supposedly working on OUR behalf… they weren’t. Agents are friends with other agents and apparently they work deals together. I hate to generalize here, but THIS HAS BEEN OUR REAL LIFE EXPERIENCE.

Make sure that the seller doesn’t get to wait for too long to respond to your offer, some shady seller’s agents will try to call other buyers who looked at the home and reconsider an offer or raise an offer that was turned down. It’s unethical to do that, but I’ve even seem them do it on PROPERTY VIRGINS on HGTV.

We have to be FULL DISCLOSURE in the health insurance industry, I don’t know why real estate agents can get away with not being completely honest and UP FRONT. How many times have we heard “That’s never happened before… that’s news to me… I thought you knew…. your banker should have told you…” THEY DON’T TEACH HOME BUYING IN HIGH SCHOOL, we are having to trust YOU to tell us these things!

Also make sure your OFFER TO PURCHASE has an interest rate cap in the FINANCING section on that paperwork. We had to take back an offer because the interest rate jumped to 7.5% which would have made our payments jump to $1,300 per month. Our agent put a cap of 6.75% on our offer, which gave us an out. And let me say here that it was a FOR SALE BY OWNER home and the very caring sellers called our agent FIRST and asked “The interest rate shot up today, can this family still afford our home, if not, we understand.” Yes, there are still some caring people out there. But you have to keep looking.

9. Make sure you have the funds to pay for overnight shipping if you’re required to send payments or paperwork out-of-town. The NEW lender we’re working with is up in Wisconsin. We went with the bank where our family keeps most of our/their investments.

10. If you’re impatient, then keep in mind (I’ve heard) over half of the deals fall apart at the closing table because the BUYERS are just plain overwhelmed and worn out with all the paperwork. We haven’t made it that far yet, but I promise I’ll keep you updated.

October 11 Update: Realtor and lender have advised us to hold off purchasing a home right now. With the market, interest rates, economy, etc. being so volatile… they are recommending we hold until spring… save more money for a higher down payment, and freeze any credit purchases, applying for any new credit, and clean up some blemishes remaining on our credit reports (that weren’t a big concern before, but most likely will be in the months ahead).

It’s definitely a good time to be an investment property owner. Almost squeaked through… but no cigar.