Sometimes, it's good for me to write while angry; anger (for me, at least) leads to focus, focus leads to humor and what I consider to be quality writing. It's reasonable to say that I'm more than a bit angry that our progress on buying this house has taken so long. But it's the kind of anger where it's difficult to get up and write about it - it's dull and depressing and it makes me want to go outside, smoke a cigar, and listen to Coldplay.
That said, I should probably explain a bit more. For instance, for an approximately sixteen hour period that occurred two weeks ago, we were under the impression that we would have already closed on the house and had our keys in hand. This was ripped away (due to a myriad of excuses, none of which are likely to be true and none of which matter) by a quick phone call, while I was helping my mom garden at her house. I got pissed off when I heard the news - like, really pissed off - and then I just started working on shit, because nothing beats physical labor when I'm pissed off. My mom's front lawn looks better now, thanks in no small part to a hyper-Type A, anger-filled landscaper.
Here's what's gone down since you were last updated:
Step 5: Applying for a mortgage
This could be a post of its own, but I'll condense it here just to provide the highlights.
The good news for people who are interested in buying a home in 2011 is that, for those with good credit and stable employment histories, interest rates for mortgages are historically low. We chose what's known as a 30-year fixed rate mortgage, which means that we pay a fixed amount each month over thirty years. We want to stay in this home for a good long time, and if you believe that inflation is going to skyrocket over the next ten years like I do, the payments should bite less and less over the years. (As an aside, there are other mortgage types available, such as adjustable rate mortgages, where the interest rate on your loan stays constant for a certain number of years and then varies somewhat after that. These aren't often sold anymore because evil variants of the adjustable rate mortgage [or ARM] are [mistakenly, in my opinion] considered responsible for the housing meltdown that led to the 2008 recession. Holding ARMs responsible for the recession is like holding a specific type of bullet responsible for a rash of shootings, which is a shame because for people who don't want to stay in their home for more than five-to-seven years, they make a lot of sense due to the base interest rate being lower than the 30-year fixed interest rate. Anyway, back to the post.)
The bad news is that it's becoming increasingly difficult these days to actually get approved for a mortgage (again, due to the housing meltdown of 2007 and onward). Credit requirements have skyrocketed and you need to document a metric ton of information in order to get approved. My fiancee and I had to provide three years of tax returns, multiple pay stubs, and bank statements showing more or less our entire cash flow for the past twelve months. The person or persons investigating our mortgage application (these fine folks are known as underwriters) must have been former detectives from "The Wire," because even that wasn't enough for them to approve us as-is.
As but one example, my paycheck spells my first name slightly differently than my mortgage application (which uses my full, legal name). This came up as a red flag on our application. As a result, I had to provide a "Name Affidavit," which is a signed and notarized letter confirming that both names belong to the same person. I now officially have an alias, an a/k/a if you will, which is awesome if I ever were to commit a felony or three.
As another example, my address on my paycheck is still listed as my mother's house, because I've been too lazy over the past two years to ask my boss to change it. Even though the paycheck year-end amount matches my income tax return, bam! Another red flag. To correct this one, I had to provide a "Letter of Explanation" which details the facts, states that I am very deeply sorry for the misinformation, and promises to change the address on my paystub as soon as I move. Seriously, it was like writing a directive on the chalkboard 100 times, a la Bart Simpson.
Another interesting tidbit about the mortgage application process is that mortgage brokers are pretty shady people. They are purely salespeople, in the sense that their job is to get you to fill out the application - once that's done, you're systematically shuffled off to another person (a loan processor) whose job it is to get you approved (or, more often these days, to explain why you were denied). As salespeople, they are genetically engineered to (a) never provide a straight answer and (b) assume that they always have the best product.
Being the master negotiator that I am, I worked five brokers against each other, thought I made an apples-to-apples comparison, and even now I am not 100 percent convinced that we obtained the lowest interest rate possible. That said, our closing costs are quite low (they can vary a great deal across different lenders) and perhaps even more important, we had an easy time getting approved for our mortgage.
(In case you were super curious, another issue that is currently plaguing the home buying process for many individuals is that homes don't appraise high enough anymore. In order for a bank to approve your mortgage, the house needs to independently appraise at a value equal to or higher than what you offered in your contract. Due to an odd quirk and an awesome house, we offered to pay a few thousand dollars higher than list price for the home we are buying. As a result, we were on pins and needles for a few days waiting for the appraised value of the house, because there was at least some chance that the house would be valuated at a lower price than what we paid. This didn't happen to us, but apparently it happens sometimes to others.)
The mortgage application process takes only about eleven business days, in which you'll be asked to provide lots of additional documentation (see above) and engage in lots of back and forth with the loan processor. Ours was very responsive and very nice, thankfully, and the mortgage application process, which had cost us a considerable number of sleepless nights in anticipation, turned out to be not so bad in practice.
Step 6: Inspect Your New Home
At the same time as your mortgage is being processed, you should also schedule an inspection of your new home. Some homeowners who are particularly handy individuals like to go in themselves and inspect. I am not a handy individual (as you may have guessed), so we hired this out to a very nice man named Al.
Al spent two hours with us walking through the new house, inspecting each nook and cranny (inside and out), taking photographs and detailed notes where appropriate, in order to prepare a fairly detailed report for us. This report is a cool thing to view, because it more or less tells you everything that is right and everything that is wrong about the house you're about to purchase.
The house we're buying has a 20+ year old central air conditioning unit, a 28 year old boiler and a 23 year old hot water heater. Without going out on too much of a limb, I'm willing to wager anyone who wants to wager with me, at any odds they'll lay me, that these items will all need to be replaced within the next five years. There was also some amateur electrical and gas pipe work in the basement that needed to be fixed before we buy the house. These are fairly minor flaws in an otherwise rosy picture - the home has "good bones," it's well-sealed, has a newer roof and windows, and there were no obvious signs of decline or decay.
(So that's what people mean when they tell you that home ownership is a money pit; replacing those three items I just mentioned is going to cost us at least six thousand dollars over the next five years. That's on top of our mortgage payment and property taxes (the property taxes alone are almost seven thousand dollars a year)).
Step 7: Get Homeowners Insurance
There's not a ton to say here, but I do have a couple of minor points:
- Quality homeowners' insurance can be quite inexpensive, assuming you purchase it from the same company that handles your automobile insurance. The discount for having multiple insurance products from the same insurer is significant, though it may only appear on one of the two policies.
- Most homeowners choose to make what's known as a "PITI" mortgage payment. This is an acronym; it stands for Principal, Interest, Taxes, and Insurance. It means that you're paying each month, in one lump sum, your mortgage payment (principal and interest), your property taxes, and your homeowners' insurance. For some people, this is a nice thing to do because buying a home is insanely complicated and it helps to only have one bill to pay at the end of the month, for everything.
In theory, a closing is where you go to your attorney's office, sign tons of documents confirming that the house is indeed yours and that you're going to pay your bills on time for the next one-third of your life span, receive your new keys and drive away.
In practice, it's a mythical, Dark Tower-like place that can only be reached by accomplishing dozens of preliminary tasks and by somehow convincing a half-dozen people with ulterior motives to confirm a date and time and to actually attend. That's my vision of the closing, because it hasn't happened yet for us.
I imagine when it does it'll be fairly anti-climactic, but for now, the closing is on a serious pedestal. We're convinced that we're Charlie Brown running to kick the football, and that somehow, mere hours before the closing, Lucy is going to lift the football and we're going to whiff. Lucy, in this case, represents the people we're buying a house from... or the people they're buying their new home from... or the attorneys... or some nameless schmo at the title search company that broke his ankle playing softball, missed a week of work, and consequently didn't process our paperwork on time for the closing. Lucy can be anyone, and it's going to take a bunch of luck to get this right, and to get this done "on time" (whatever that means).
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I wrote a bunch of detailed, technical stuff above, and I want to conclude by mentioning that this is all just my opinion. I'm a market researcher, not a mortgage or financial consultant, and for all I know, some of the things that I wrote above are undeniably false. Just, um, covering my legal bases here. :-)
Once we're on the other side of this, and once we're home, I'll post again about the process in retrospect. I'll be in a better mood then.
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