Get a good inspection, be prepared to walk away.
Btw, a pre-approval is pretty useless. Applying for a mortgage is a real pain involving a lot of paperwork and submitting information that you probably never dreamed you would ever need. Been at the same job for less than two years? That might also hurt you.
I purchased a house less than a year ago. My first house. Here's the major things I learned:
-Do your homework. Research everything on the net. There should not be a single term on any paperwork that you do not understand going in. Understand the difference between discount and origination points.
-Get your HUD1 at least a month before you close. Do not let your mortgage company tell you that your good faith estimate is good enough. Its not. A HUD1 is legally binding, a good faith estimate can be way off.
-Expect to bring at least 5k for closing costs. Some of this can be negotiated onto the seller.
-Your real estate agent is not your friend. They don't work for you, they work for the seller. Even if the seller has an agent, AND you have your own agent,
your agent wants you to spend as much as possible. The more you pay for that house, the more your agent makes. They are a necessary evil to buying a house.
-4 things you need to shop independently for. 1) Mortgage company, get at least 3 good faith estimates. 2) Insurance, homeowners...double-check with the mortgage company that the insurance you are buying is sufficient to what they require for the loan (keep an eye out for exclusions). I ran into this problem and it was a headache, don't assume the loan agent is going to check anything. They just want to make the sale and move on. 3) Title company. Your agent will probably try to get you to use theirs, but shop around and compare how it affects your closing costs. You can save alot at the table and the agent is serving their interests, most of them get kickbacks by referring you to these people, they are not getting the best deal for you. 4) Any estimates/appraisals/inspections...it will cost up to a thousand dollars to decide whether the house is ripe for sale, money that you will not get back if you bail out. Accept it, because you want people working for YOU, not your agent.
-Very few homes are financed with 20% down. With the cost of housing, its not realistic. If you put 5% down or more, you should not be paying PMI.
-Pay for your full credit report NOW, from all 3 agencies, and correct any mistakes before you even start looking. Don't even think of signing up for any more loans, auto, department store, or otherwise. And once you get your loan approved, don't do anything to your credit...including paying off any debts or collections. Once its approved, probably a month before you close, your credit must not change at all or you may end up having to go through the process over again.
-You will have to pay a full year of insurance up front, at closing, remember this when you figure your closing costs. It should all be on the good faith.
-Escrow accounts are fine, but they will cost you more. Many will require you to pay 14 months of taxes, to prevent any kind of shortage. So you will be paying monthly to make up for that amount, but it also keeps you out of trouble come December.
-Don't fall for the scam of splitting your payments into twice monthly. They say it will allow you to pay a 13th month on your mortgage, but often these are accompanied by extra fees. You can easily save it on your own and make your OWN 13th payment without fees (if you dont think you are disciplined enough to do this, you should also be escrowing your ins/taxes).
-This will be one of the hardest things you do. It will be annoying, stressful, and difficult. They will throw things at you that you wont understand. They will do everything to confuse you into accepting 'fees' on your HUD1 that dont belong there. Remember that ALL fees are negotiable, and you should question every single one. If they dont have a satisfactory explanation for any fee, refuse to pay it.
-Don't forget homeowners association dues. We bought our house in December, but they sent out 2006 dues in November 2005, so we never got the bill. Come February we got a letter with a late charge. They were understanding, but this was something we simply overlooked. (after writing thousands of dollars in checks you just want the madness to stop!
)
-Check the neighborhood. Check the police reports and local crime rates. These are all available on the net. Check the sex offender registry in the neighborhood. Look at the local schools. Elementary, Middle, High. What are the test scores like? The demographics? What is the income range of the other residents? Are you buying the most expensive house on the block (not good!)? What did your neighbors house cost?
-Drive around the neighborhood. Look in backyards (discretely from the street! you can see in the slots
)...are they full of junk? Do people leave broken cars outside? Are they yards well tended? Are houses in disrepair? These are things that hint to the future outlook of the community. Are there children playing in the street?
-This may sound silly, but fire up Google Earth and take a look at the house. The photo will be a couple years old, maybe more. Was there a bunch of junk in the yard? That would indicate the house was not well cared for.
-Your credit will determine your negotiating room. Poor credit will have a rough time, because you are a greater risk. Great credit (750+) and you will be looking at some purchasing power. Btw, they will look at all 3 of your scores and average them. But they will also consider your lowest score. Between agencies, your score can vary by 100 points or more! Get that report!
That's all I can think of for now. Good luck! Its a hair-pulling process but once you are in the house and you let yourself make good decisions (rather than emotional decisions) you will be very happy.
PS: Regarding the water heater, if the house has been unoccupied for any length of time you just might have sediment build up in it. You will need to flush the whole thing (hopefully it will be in your garage so you can hose it right down the driveway) several times...brown water in the hot tap just means its dirty. As long as its hot (assuming your heater is on) you just keep flushing until its clean. Took us 2 days and about 6 full flushes to get it completely clear.