I’ve mentioned that I bought a house. Now, I want to tell you the story.
It all began this summer. As you are probably aware by now, I work for a Mortgage Banker, so – I hear a lot of house talk and mortgage talk. But that isn’t anything new. I’ve been doing marketing in one form or another for folks in the Real Estate market for several years now, and I was never truly tempted to pursue any of this until just a few months ago.
Let’s rewind several years. My mom needed a place to live. She’d split from the guy she’d been with since I was about 16. She had no money, no retirement, no job, no car – and no place to go. I offered and she accepted, to come and live with me. This meant her moving from California to Colorado, which she was willing to do.
At the time, I was in a one bedroom apartment close to downtown Denver. It was tiny; two steps from the kitchen and you were in the living room, two more and you were in the bedroom, another two and you were in the bathroom. I needed a larger place to live if mom was coming. (Hell, I needed a larger place to live PERIOD.)
A 2 bedroom condo seemed the perfect fit. And it was, for a while. It’s a 2 bed, 1 bath, plenty of room, on the second floor. I rented, of course. But the past year or so, mom has had trouble with the stairs and had no problems whatsoever telling me so. I got the hint – we needed to move again.
I hate moving. I told myself that if I ever moved again, it would be into a house that I would own. It’s one of those things you tell yourself when there’s no one else around.
Quietly, I started looking at the market. There were a lot of deals out there, and I started to think that maybe, just maybe, I could make this happen after all.
I decided to talk to a loan officer. Luckily for me, I know many. I chose somebody I’ve known for a very long time and consider a friend. I sat down with him, and we went through some options. When he came back with a number – an amount that I could be approved for on a mortgage, I began looking in earnest.
Again, I chose to work with someone I knew on the real estate side; a Realtor who was a friend and former client of mine. Together, we started looking for houses.
My criteria in the beginning were quite simple; I wanted a single story house (no stairs for mom to deal with), it didn’t have to be huge (though, like most buyers, I wanted the most I could get for my money), and I wanted something that didn’t need a lot of TLC because that’s not who I am (I’m computer guy, not carpenter/plumber/fix it up guy) and lastly, I wanted a basement – a ‘man-cave’, a quiet place where I could setup a desk and my computer and write. I haven’t really had a writing spot for some time, and I feel like my writing has suffered because of that. It’s difficult to focus when you have so many things that can distract you. A man-cave/office, would be the perfect solution.
I started looking on the MLS. The MLS (Multiple Listing Service) is where Realtor’s go and list their houses online. Most of them have some sort of website where folks like you and I can go and search for houses. I know this because I used to be part of a company that put those very websites together for them. Different Realtors offer different options for searching and most of the MLS driven websites only search in your area because each MLS company/branch/whatever they are, exist separate and apart from each other.
My Realtor understood that I wanted the most house I could get for the money, which was why he was started showing me HUD houses. Now, HUD houses (The Department of Housing and Urban Development) are mostly houses that have been foreclosed on. As such, they are ‘as is’ houses, which means that you take them as is. They usually needed some work, but you could also get them for $100 down. Additionally, as a first time home-buyer, I could get CHFA (Colorado Housing and Finance Authority), to pay my closing costs, which meant I wouldn’t need to have a lot of money upfront to purchase a home.
As great a deal as a HUD house could be, though, the ‘as-is’ state of many of them can turn you off almost immediately. He kept showing me these great houses (on the outside) that needed massive amounts of work (on the inside). Some examples: one house had been stripped down to the boards on the interior, another had this massive yard that was overgrown like a forest (I am not green thumb guy either) and yet another had no complete bathrooms (there were 3 in various stages of remodel). Many had carpets with feces and urine ground in (..not all of it was animal, either), causing a smell you would not believe, and I could hardly stand.
Others had holes in walls and doors, exposed wires, mold, flooding issues. Some had been stripped clean of fixtures, outlets, air conditioners, copper pipes – you name it, people did it.
I was not the guy who could fix this stuff over the weekend with my buddies and a six-pack (my buddies might get together over a game with six-sided dice…). Something had to give.
He and I sat down to talk about it. Essentially, we were in the same book, if not on the same page. I reiterated my lack of home improvement skills. What I pressed on him was that I was willing to continue looking at these HUD houses, and I really liked the idea of using these first time home-buyer programs, but that we needed to look at houses that needed much less work done and what DID need to be done, would have to be 203k eligible (gimme a sec, I’ll explain that).
Some HUD homes came with a repair escrow account meant to fix certain things. For example, we looked at a house that needed a new water heater and a new furnace; HUD had an escrow account set aside with some money to fix those things. It wasn’t a lot of money, but it was there. On the other hand, if the house were 203k eligible, someone coming in to buy the place, could do more work and roll the cost into their mortgage.
(See? Now I’ll explain it) The 203k loan is another HUD product; essentially, it is a loan that can be used to effect repairs or remodeling on a home. So, say, if you find a house that is absolutely perfect for your needs, except that the kitchen is 20 years out of date, you could tack a 203k loan on top of your mortgage and have the kitchen redone for about $7 per $1000 of the 203k loan amount. That means, a loan of say, $10,000 would tack an additional $70 per month (estimated) onto your monthly mortgage, which is quite manageable. You could also, as a current homeowner, apply for a 203k loan to make updates or repairs to your existing home. It really is a cool program.
Once he and I were on the same page, things went a little smoother.
We looked at only a handful of MLS listings. This was due to a little thing called ‘cash only’ or ‘short sales’. Whenever a house had those terms on the listing, it essentially eliminated any potential for using the programs we were looking at for first time buyers because the sellers wanted cash only. In most cases, the houses themselves where not FHA eligible, which means you wouldn’t be able to get FHA financing, which meant I couldn’t buy them.
So, we looked at HUD houses. Lots and lots of HUD houses.
In the beginning, I was very particular. I passed on a lot of places due to their conditions. Eventually, though, I started bidding on places. See, there was another program I wanted to take advantage of; the $8000 tax credit.
More on that later…