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For the past year, my boyfriend (recently turned fiancée, though, the word sounds strange, so I’ll just call him F) and I have been looking for a house. And not just any house. We’ve been looking for our first home. Even though I’m a first-time homebuyer, I consider myself fairly knowledgeable about the process. I’ve read books and online how-to’s; talked to realtors, mortgage brokers and bankers; and I’ve even put all my research into an online course about buying a home. But like I said, this is my first time actually buying a home- and that makes all the difference.
F and I have similar tastes in houses (something in the country with a little land and room enough for a family). We also are fortunate enough to be able to afford a middle-class mortgage payment. Since houses seem to be aplenty these days in the wake of the housing crisis, we didn’t think finding the home would take too long. Yet, house after house had something wrong. We have a home inspector with an eagle-eye that could find a needle in a haystack, let alone the mold, bad roofs, and structural problems. A few dozen houses later, though, we thought we found our gem: a newer home on five acres that dropped $55,000 in price.
Next we had to find the loan. We didn’t bother to get pre-approved because we never really had a time frame. It might take us another year to find a house and the pre-approval letter would expire, making one more person pull our credit records. So when our contract was accepted, we had a month to get the loan.
In all my research, I knew we should get quotes from a few different lenders. F and I both have nine to five jobs, coinciding perfectly with bankers’ hours. Except banks are open on Saturdays, so we made our rounds early one weekend. We talked to one mortgage loan officer on his cell phone while he was off for the day. The other five banks did not have a mortgage officer on duty so we left our numbers. One person called us back. I resorted to the internet and mortgage brokers to find the best deal.
F and I have a little bit of money saved up, but not quite $20,000, which would equal 20 percent down. In fact, we didn’t want to put any money down. We were willing to pay closing costs and knew we would have to pay reserves (mortgage insurance, homeowner’s insurance and taxes in advance). Since we opted for a no down payment loan we had to pay PMI (private mortgage insurance). (Typically, you pay PMI on anything less than a 20 percent down payment until you build up 20 percent equity in your home.)
F and I revealed to potential lenders our plan along with our income, credit scores, debts, and really everything but the type of undergarments we prefer. In return, we were informed about loan products, rates and closing costs. The loan products were extremely different. They ranged from FHA loans to first-time home buyer loans unique to each bank to the run-of the-mill loans. I tried to wrap my head around the potential closing costs (nothing ever seems to be final and fine print is everywhere), points, and other items that made the loans different. In the end, F and I chose the only bank that we visited on what had seemed an uneventful Saturday. Basically, we met someone we liked and trusted. As soon as we chose the bank and were ready to send the contract over and start the loan process, the mortgage officer quit.
With two holidays occupying normal business days and time running down, we stuck with the bank and began talks with a new mortgage officer- who needed all of our information again. The loan product and rate that the original officer gave us, however, were wrong according to the new officer. The rate was too low and our income was too high for the product. The mortgage officer quoted us a different rate with a higher PMI which added up to an additional $150 a month. Before F and I signed any papers, our realtor gave us the name of yet another loan officer. He gave us a higher interest rate but no PMI that would save us $75 a month. So we gave one more person all of our information.
Remember that inspector with the eagle-eye? Well, after all of this, we had not actually had the house inspected, yet. The house was fairly new, built by the original owner, and F is a novice inspector himself. We had no concerns that the house would pass inspection. Big mistake. F and I scheduled the inspection last Saturday and the appointment to confirm the loan immediately after the inspection. Our inspector found several thousand dollars worth of problems. So we pushed back the loan meeting and discussed the options. After a few hours we decided that throwing money into a house that would already stretch our budget was not a good idea.
We gave our realtor the inspection report and backed away from the contract. And that leaves us back at square one. A little bit wiser this time, but a little less patient. So when the next “gem” comes along, hopefully I’ll be writing about the closing, as well.
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