Let’s Stop

I thought I was moving pretty quickly.  I saw the house, liked it, got the mortgage pre-approval the next day, then that night… blink.  The house went to pending status.  Someone else was faster than me.  The house was on the market for 10 days.

Can I blame my agent?  After all, I initially contacted her just over a week ago and didn’t get any response until just a couple days ago.  But no, the blame game is pointless.  It’s best just to not get emotionally involved.

It’s something I’m getting quite used to.  The first prospect (you always remember your first?) was vetoed by the GF.  The second I had high hopes for until I saw its actual condition.  Way too much work in things I didn’t understand, so I gave up on that.  Then a period of mourning and half-heartedly looking here and there.

I likened it to dating.  Some people, after they break up or have a bad date, jump right back in and go for the next one.  Some people, like me, have to nurse their wounds and start up more slowly.

So, what have I learned so far? 

  • Speed is important. 
  • You have to get a mortgage preapproval letter before you make an offer.  This is good for 60 days and won’t initially cost much, but could cost a lot when the application is finally created.
  • You need to have insurance lined up, and you take out the policy when you have a closing date.
  • Don’t get your hopes up.

I wonder if this is going to be similar to how I do hiking.  When I’m starting to hike in a new area, I hike a short distance, then go back.  Each time, I hike a little further and go back.  By doing this, I develop a real familiarity with how the trail looks (from both directions), so I am more likely to recognize where I’m at if I somehow get lost.  So the next time around, these first couple steps are going to be more familiar to me.

And, just as importantly, “the war chest” continue to grow each month, so things will get easier and more options may become available.

The Insurance Step

Today, I need to start looking into insurance.  The property was built in 1962.  I was able to find a website to look up construction permits and discovered that the roof was last updated in 1994.  Ohhhhhhh.  Being in Florida, I am amazed the roof made it unscathed through the 2005 hurricane onslaught.  Thanks to my own insurance debacles on the first house, I know what the insurance company wants. 

Most importantly, you need to have “wind mitigation” features on your roof.  This is interesting stuff.  Did you know roofs were just set down on top of structures?  I mean, they were unattached.  So having your roof blown off in a hurricane?  Completely possible.  One wind mitigation feature is having metal straps physically hold the roof to the rest of the building.  The other feature is that the nailing pattern of the shingles is something like less than 4 inches.  If your roof was done after 2001, you have these features because it was a part of the building code.  This roof from 1994?  Not so likely.

Knowing this, what’s going to happen?  I can’t buy the house unless it’s insured.  I can’t insure the house unless the roof is replaced.  I can’t replace the roof until I own the house.  This is probably going to be my major question to the insurance company.

Well, I didn’t ask about that.  I just got a quote.  They took the property address and said insurance would be in the range of $771-1050/yr.  Once I get the closing date, I will need to call them back and actually create the policy.

Regardless, I did spot what seemed to be a water/mold spot in the ceiling of one room, so the roof is going to have to be redone anyway.  The inspection will determine how badly.  If I remember correctly, after the sales contract is accepted, I have 10 days to have an inspection done.  Since this is a foreclosure, the outcome of the inspection won’t have any bearing on the sale.  Well, I mean I can still pull out if the inspection is disastrous, but it’s not like I can tell the bank:  you need to fix this as a condition of the sale.  That will result in a big, bank-sized middle finger stuffed in my face.

The Money Step

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.

Let’s Start

It’s been a little while since I decided to get another house – a second house.  The reasons are personal and not relevant to the end results.  But, here’s where I will be logging whatever I can as a reminder of what I went through to get where I am today (today as in future-today).

I’ve been searching for a cheap property to call my own for a couple months on and off.  My initial search was focused on tiny houses, like Ikea small, like <600 sqft.  Those houses are few and far between, and because it’s no longer “the way” to build small houses, you can’t find newer small houses.  I suppose that’s because of efficiencies of scale.  The ones I found were around 100 years old.  A house that old sort of introduces problems of its own.

Just this week, I’ve found a slightly newer, but larger, property.  It’s gutted, but I can live with that.  It’s about 10k more than what I was previously looking for, but the value is still good.  I looked it over yesterday and decided to move on it.

The first step is getting the financing for it.  I have enough in savings to cover 50% of the purchase price, but obviously I don’t want to blow it all.  After all, I have no cabinets, appliances, or even a water heater.  I also need to replace one pane of glass in a room.  The other stuff isn’t critical to moving in.  Well, maybe a working shower is needed.  Hot water first, though!

The property itself has many quirky qualities.  The garage was converted to the master bedroom, but the driveway wasn’t removed, so the driveway goes right up to the master bedroom windows.  There is a detached garage, but no driveway to it.  Past the garage is a large paved pad that looks like a place to park an RV.  In the back yard, there’s a cement block shed, another aluminum shed and an empty concrete pad for maybe another shed?  Craziness.

The interior is screaming to tell stories, but the walls can’t speak.  It seems someone was in the process of renovating the property and gave up or ran out of money or something.  Some walls are painted with a faux finish, some walls are partially torn out, bathrooms are partially plumbed.  The only cabinet in the whole place looks like a new vanity in the 2nd bathroom.  I have no idea why the previous owner stopped.  Did someone steal all the new cabinets and the water heater?

So, I’ll have to get cracking on the next step.  It’s been 10 years since I dealt with mortgages.  I have no idea what I’m doing.