Monday, September 20, 2010

My Adventures in Buying a House

For today's money sense, I felt like changing it up a bit, so I'm going to share the adventure that was buying our first house.

It all started last December when my husband received a job in a new city. We needed to move out of our house asap. Luckily my FIL lived close enough to this new city that we didn't need to rush into any housing decisions right away. We originally were going to rent because we didn't have much saved and thought we didn't have the income to buy a house, but then we learned that the place we were living was one of the top places in the country to be hit by the housing crisis. We went to a Realtor to look at rentals and quickly realized a mortgage payment with insurance, PMI, and taxes would be cheaper monthly then rent, and we could get a bigger house! 

However, we still didn't think we had enough for a down-payment, but then we learned about an FHA loan which only required 3.5% down, which considering homes this area were in the 60-100k range, made it very do-able along with the help of some relatives. So we decided to do it, and so began a long and stressful process.

First, we had to find a home we loved. That wouldn't be so hard, but when there are easily thousands of homes for the picking it made my head hurt going through the various MLS sheets to narrow down houses we wanted to see. We narrowed it down to six houses we wanted to see. We fell in love with one immediately. We went to get pre-approved for a mortgage, but due to some difficulty getting proof of my husband's job, it took a day or two to get everything squared away. We submitted an offer, and we were rejected. We submitted another offer only to learn that another offer had been accepted. A few months later we learned that it was a cash offer for more then the $69,900 asking price. 

So we moved on, having learned more we realized short-sales were a no-go because we wanted to move in sooner rather than later, so that narrowed our list. Our wonderful Realtor gave us access to an online detailed MLS service, and that helped a lot. We then found six more houses to look at. We found one that we liked (and luckily we could see past the vibrant paint colors). It was priced at $89,900, but we took a risk in making our offer. We asked for $88,900 and 3k in closing costs, and they accepted! Little did I know this was just the beginning of the stressful part.

FHA loans take about 45 days to close, so we scheduled the closing for February 22nd. We had our home inspection and the home inspector only found minor problems like a pipe leaking under the sink, a switch plate missing, filters being changed, trees being trimmed, etc. He actually said it was one of the nicer foreclosures he had seen. The mortgage on the other hand was just a mess. We apparently had the worlds most crazy underwriter, who could not use common sense and required several forms of verification for each thing she needed. For example, to verify my husbands employment she wanted a months worth of pay-stubs, a verbal employment verification, a written employment verification, and his contract (he's a teacher). We had trouble verifying money in our bank account because we had cash deposits (remember we weren't planning on buying a house). The underwriter was adamant about following the purchase contract to the very word. If it said "may" have some kind of inspection (mold or chinese drywall), we had to have it or have the seller (a bank), sign an addendum to remove it. A few weeks before closing they wanted some sort of proof from the seller that the person signing the documents had the authority to do so (did I mention the bank selling the home and the bank we were getting a mortgage company from are the same company?). Then they decided because our home had a septic tank that we needed to have a septic inspection, which would require pumping the tank. Thankfully the appraisal of the house came at the house being worth slightly higher than the purchase price, so at least one thing went right. We also had problems with the money from relatives (did I mention my FIL works overseas?). The underwriter then wanted some form signed by the seller, which was another version of a form he had already signed. For some reason the seller kept missing one spot to initial, and it ended up that we did not get that form back until the Friday before our Monday closing, but our wonderful mortgage person assured us we would be able to close on Monday! Whew! Or so I thought...

We decided to drive up to see the house on Saturday, buy some things we needed and put them in our storage unit, etc. When we went to drive up to the house, my husband noticed right away that our water softener was gone. Someone had cut the pipes and stolen the system, meaning there was no running water to the house! We called our Realtor, who called the selling agent. We discussed just wanting a credit. Well this created all sorts of crazy. We ended up just telling the Realtor it didn't matter we just wanted to close on Monday. Well someone ended up telling our mortgage company, and our loan could not close without running water, and the seller did not want to repair the softener, they wanted to give us a credit (we had since learned the softener was an expensive model). So we could not close on the day we had planned. Eventually we convinced our mortgage company that there was running water, and someone convinced the seller to just replace it and split the cost of the replacement with us. So we closed two days later, and ended up paying only the down payment (remember the 3k closing costs? It ended up being enough for the closing costs + the repair) and we had a nice new water softener (which we weren't sure the old one was working correctly to begin with, the inspection report said it needed to be serviced). We also were able to close in time to get the first time homebuyer's tax credit, so everything worked out great.

If you are thinking about buying a home in the near future, contact a mortgage company and ask what kinds of things need to be in order before you actually start on the task. Check out some books from the library. I recommend: Nolo's Essential Guide to Buying Your First Home or Home Buying For Dummies. Be careful what you do with your money for at least the three months before you plan to apply for a mortgage, and be prepared to document everything! 

The moral of the story: buying a home is stressful, but worth it! 
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