Wow. I can’t believe it’s been almost three years since we moved into our current house. Those three years have gone by quickly. I’ve been meaning to write about our experience with the whole house-buying situation, but haven’t done it until now.
We walked through around 50 houses before we finally decided on the one we ended up purchasing, and it was a valuable lesson. We learned a lot about the different quality of houses out there, and what to look for when buying a house. We saw a lot of different types of houses in our price range, and finally found one that we saw ourselves in. We didn’t do everything right, either, and I’d like to share our experience with you.
First of all, we had a house we lived in, but it was too small for us to raise a family. We were planning on having kids in just a few years (which we ended up with 2 in 3 years), so we wanted to find something big enough for all of us before that happened.
I was on a mailing list for houses that fit my criteria from before we bought our old house. I could change the criteria, so I adjusted it as time went on. Every once in a while we’d see a house we wanted to walk through, so we called up the real estate agent to take a look at the house. We told her up front that we weren’t looking (some of the houses we looked at were just a year after we bought our other house), but we were just trying to get an idea of what was out there so we would be better prepared when we eventually decided to move. We also kept an eye out for houses on online sites, such as zillow.com and realtor.com. We weren’t actively looking, but just monitoring the market and seeing what sort of houses we could see ourselves in for the long haul.
So we finally found a house we liked, but weren’t ready to buy yet. Six months went by with us actively looking, and the house was still our favorite (and still available). It was a spec home (one that was built from the builder with what they thought others might like), but it was a slow market. The house had a great flow to the design, was structurally sound, and had some detailed work we didn’t find in the same price range. So after 6 months, we came back to the house and decided we wanted to buy it.
Unfortunately, we didn’t have a down payment saved up. We were planning on selling our house and using the equity for the down payment, but couldn’t sell it in the end. Looking back, we should have put a contingency on the new house, but we were set on that house (another mistake). I ended up not using a real estate agent for the purchase, and did my own competitive analysis from looking at what houses fit the criteria in the area that recently sold. That info is all public knowledge, so it was easy to do. I adjusted things based on the differences between the houses that sold and the house we were purchasing, and ended up with a pretty detailed explanation of facts backing up my negotiating tactics. Based on my research (and lack of the builder needing to pay a buyer’s real estate agent), we got a great deal on it. We couldn’t have built it at the price we bought it, so we wanted to move forward.
We found out we could do an FHA that would have good rates, and we would only have to put down 3.5% of the loan amount. So we went that route. I looked on a reputable site (bankrate.com) to find the cheapest loan agent I could find, and went with them. Since we found renters to move into our place, I told them my #1 priority was that they close on a specific date. They told me that would be no problem.
The company was Interbank Lending. I’ll keep it short and say to stay away from them at all costs. They were unethical, lied to me, and couldn’t end up hitting the date because they dragged their feet throughout the whole process. Two days before my closing date, they told me everything was going to be fine, and they would have no problem closing on that date. The morning of my closing, I had three trailers all loaded up and ready to go after we go sign the paperwork, and they called me up to tell me they wouldn’t be able to close that day, and they had no idea when they would be able to get the paperwork ready to close. They weren’t sure if it would be a few days, or a few weeks, or even over a month! Oh, and now they were telling me I needed 10% down because it’s new construction (which I told them in the very beginning it was). Ugh!
Ok, that’s the short version. I won’t go into all the detail about how terrible of a company they are. Luckily, I have had some great experiences with a local mortgage broker. Throughout this process, I told him I was going to try the other company out because their rates were cheaper. I called him up on the day of my closing, and explained the situation to him. He said there is a mandatory 10 day waiting period to transfer an existing loan from one company to another, but he could close in those 10 days. The builder of the house was awesome, and said we could rent it out from him for those 10 days, so we’d have a place to stay. So I told the mortgage broker I trusted to take over the loan.
So we moved into the house before we actually bought it. It all ended up working out in the end, with the exception of us not having 20% down for the down payment. Now I’m kicking myself for that because our monthly mortgage payment on a 15 year fixed loan (you should never go with anything higher than 15 years, and ALWAYS do a fixed loan) is much higher than it should be.
We should have saved up the 20% on our own, put a contingency on our old house, and gone with a conventional 15 year fixed rate. Even if you are only planning on staying at a house for 5 years, still get a fixed rate. You never know how your situation can change as time goes on, and an adjustable rate (or ARM) can really move upwards after the fixed period expires. For more details on buying a house, read my previous series about it.
It all worked out in the end, but we are paying more per month for 15 years than we should be paying. It’ll be fine in the long run though. I hope you can learn from our experience, and hopefully yours will be better than ours.