Saturday, October 16, 2010

How To Buy a House

It took me about two years to finally get this house. At the end of the summer of 2008, I got a home equity line of credit using my condo. That money was supposed to be the down payment on a new house. I was also preapproved for $300,000. At the time, houses were just dipping down to that level, so it was a good amount.  Little did I know that the rules were about to change.

I procrastinated for a few weeks before finally contacting my new agent, Jeannie-Marie. We started looking at a couple houses. I soon discovered that while there were plenty of houses below $300,000, there were few worth looking at.  After seeing a few houses, we took another look at the loan approval, as it was about to expire. I contacted my credit union for an update. They let me know that the rules had changed and I was now approved for $270,000.

We went from not much worth seeing to just about nothing. I found out that my credit union was going to be limited in the types of loans I would be eligible for, so I also went with one of Jeannie’s people.  We were looking at around the same amount. And luckily, I found a place that I was interested in.  This place was a two bedroom house. The garage had been converted into another room, so there was plenty of space. However, it was a short sale.

We were accepted quickly by the owners of the house for $260,000. This was November 2008. Then we turned to the owner’s bank for approval. Time passed.  Then more time. Then more time. And as the new year came into place, the rules for mortgages changed again, making things more difficult. However, we worked through them since we weren’t doing anything other than waiting. And more time passed. Jeannie and I decided to look at a few more places. A couple looked OK, but nothing better for the same price. We decided to wait some more. And more time passed. And more.

We looked again in March of 2009. One of the places we had seen before had dropped dramatically in price down to under $200,000. It looked good.  It was in good shape and had four bedrooms and a garage. It was a MUCH better deal than the house I was waiting for. And then about the same time, the wait ended. The bank finally approved the short sale. So I had to decide whether to take the first house or move on to the second. Since so much time had passed, the first house at $260,000, being as small as it was, wasn’t a good deal anymore.  I decided to drop the first and go for the second, even if I had to offer more money. I was accepted by the owner for $205,000. But this too was a short sale. The wait began.

Allow me to offer a spoiler – this wait was longer. Every once in a while, I would take a look to see what was out there, and there were no better deals. Or any reasonable deals, either. All of the houses were either too crappy or too expensive. So I waited. And time passed. Then more time. Then more time.  Summer of 2009, I traveled to Scandinavia. It was a pretty epic trip. I was really hoping that I would return home to some news on the house. But when I returned, I waited.

At the end of the summer, we finally heard from the bank. As it turned out, we heard from the FIRST bank. They approved the sale. It then went to the second bank. I was told that this would be much faster, since if there was more than one loan on a home, the second would often follow the first.  So I waited. And time passed. And then, a couple months later, an answer.

They didn’t approve the sale as it was. They wanted the seller to pay an additional $30,000. This still doesn’t make any sense, since the reason for the short sale is that the seller doesn’t have the money to make payments. So the bank and the seller began negotiations. The guy in charge of the negotiations was called Heman. I saw this as a sign that the Masters of the Universe were on my side. I should have remembered that there was no such thing as a sign.

Negotiations continued, and I waited into the new year. And waited. And time passed. Every once in a while we would find out that something was happening in the negotiations. But no results. So we made a new offer. We contacted Heman to ask if we could pay part of the $30,000.  I was still going to pay much less than I would have on the first place. So we waited once again. Finally we got an answer from the bank. It was a counter offer. They wanted $300,000.

Yeah. Not helpful.

So a new search began. However, this was a year after Jeannie and I had gone out physically looking for a house. Things were different. There were more options that I could afford.  Well, that I thought I could afford. In the previous year, the rules for mortgages had changed again. Luckily, I had also spent the previous year paying off my car and saving money. More on that soon.

We found two houses. As it turned out, I only had one option, but I didn’t know that yet. One of the houses was closer to work. It was a foreclosure, but it really nice shape compared with many others I had seen. Two stories. Three bedrooms, two baths. But it was going to need a little work, and it cost more than the other. If I got that house, I wasn’t going to have any money at all to fix it for quite some time. And as it turned out, the rules for mortgages had changed enough in the previous year so I wouldn’t have been able to afford it. But not knowing that at the time, I put in an offer for that house, knowing that I had a second option. Jeannie quickly found out that I was already being outbid, and the other person had bid above any price I could afford.

So I placed an offer on the second house. The house where I’m writing this. We offered $265,000. They countered with $279,000.  We countered with $270,000.  Done. No short sale. No foreclosure. Just a 45 day close. Yeah, things happened in those 45 days. But those were pretty standard home sale problems.  After waiting almost two years for the house those things were nothing. There was only one problem that made things tough.

Remember all those rule changes? Those meant that I was no longer approved for what I once was. So to afford the $270,000, I was going to have to take even more out of my pocket for the down payment. Teachers only get paid for 10 months a year. That means I take money every month and put it into savings so that I can pay myself over the summer. I had to use that money for the down payment. Just about every penny. I got paid on June 30th. I got the keys on June 30th.  I didn’t get paid again until September 30th. It’s a long summer when you have a new house and no income.