Ok. So here’s the deal. This property I’m looking to buy is a foreclosure. It’s a 3/2 being listed at $47,500. But it’s gutted and far from move-in ready. I have $24k in “the war chest” to handle this. I plan on doing 20% down and would expect to have to do so because of the state of the property and it being a second house. So, who’s going to give me the extra $38k? It should be a breeze. That’s pocket change to a bank – a rounding error.
I make my first call to a local mortgage broker. When I explain what I wanted, he said ok. I stated I hadn’t done anything with mortgages in over ten years. He replied, good, because it’s all different now. So I ask, where do we start? Then he told me, “whatever you do, do not tell me the address.” That’s kind of weird. If I had to guess why, based on the current political climate, it probably had to do with preferential treatment of certain neighborhoods. Sad.
Anyway, we discussed my current situation and he asked how much the property was selling for. That’s when progress stopped. He told me that he had no lenders that would lend that little. What? Nope, because of some regulations or blah blah blah, the least they will lend is $60k. Even though he couldn’t help me, he did give me some more good info for what I would be facing in the financing process. Nice guy. I wish I could remember what he said.
So, I was pretty shot down by that experience. The one thing I did remember to write down from the conversation is that the only banks who would lend small amounts were “the big four”: Citi, Wells Fargo, Bank of America, and Chase. He also suggested my local credit union. So I called the credit union with which I have an account. The first person I tried calling was on vacation and the next one went to voice mail. So I left a message for them to call me back.
In the meantime, I did some research online about this “regulation”. I didn’t find anything, but I did find articles saying that lenders didn’t want to lend small amounts because it’s not profitable for them. Well, that’s as good an explanation as any. I recall how many times my mortgages were sold on the first house. Everybody wants a cut.
So, which of the majors would I try? I might as well go with Citi, since they have my mortgage for the first house. I call them up and spoke with Josh. He collected some info and then… said yes. The APR would be 4%. That’s as good as most all other places I’ve seen and I had been reading that a mortgage on a second house would be higher. And that a small value mortgage would be higher still. So, great! He estimated my monthly payments at $181/mo. for 30 years. 30 years! No doubt I’m going to be paying extra on that loan. I jumped on it. Yeah, I could have called all the others and haggled or compared or whatever, but the numbers were good enough for me. Convenience wins out. I can probably manage both mortgages with the same website login.
I’m not sure it was because of my history with them or because of my awesome finances and credit score that I was approved so easily. Doesn’t matter. They’re sending a preapproval letter via email.
From there, I get a sales contract and return it to them. Then a bunch of other stuff happens, I wish I could remember it all. The next independent step I need to accomplish is securing insurance. I’ll need that to close. I also need something like $3,000 for all the closing costs.
For the initial application, I had to give a credit card number. They would charge me $2.25 (odd, huh?) now, and when I get the contract back to them, we do the full application and I’ll be charged the full application fee. It’s a real zinger: $470.
Still no call back from my credit union.
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