I was very foolish. Let me tell you what I did. I assumed that because I have all my money ducks in a row (so to speak), have credit scores of 800+ and am very familiar with how the lending industry works, that getting a mortgage would be a snap. I figured I'd walk into the bank, slap down all my paperwork, they'd put in the loan application and boom! Three days later I'm approved and its smooth sailing until closing.
Ladies and gentlemen, I am an idiot.
I am about to tell you a horrifying story. I may even need to split this into sections, but let this tale be a warning to anyone who finds their dream home and tries to...::gasp!:: buy it.
Locating the house was no simple task. It took me three years to find the home I wanted. It's not that I'm overly picky and required certain features, like a pool or a big backyard. What I was looking for was a foreclosed home in an excellent school district that sported only cosmetic damage and was worth at least $100k more than the asking price. That's a tough thing to find. My goal, of course, was to buy the house, make it pretty, live in it for two years (to avoid the capital gains tax) and then sell it and make a profit.
I was searching over a pretty large area that consisted of about 15 different towns. I didn't enlist the aid of an agent because I knew this was going to be time consuming. I figured I'd get the agent after I found the house. And at long last I did find the house. The agent who showed me the home had 20 years experience and excellent reviews from other consumers. Her name is Linda, and without Linda I'd be in big trouble right now.
The house was a Fannie Mae property. I put an offer in on the home and it was accepted. Linda informed me that another offer was pending on the property, but that it was an investor and his offer was roughly half of what ours was. We put the investor out of our minds and got the contract.
The next step was to get the loan. I did my rate shopping and ultimately ended up at Wells Fargo. After what I have been through for the past four months, I now believe its best to take out all of your loans with the smallest small-town bank you can find. That small-town bank has a far better grasp on what's going on with its loan officers than a large conglomerate.
For simplicity's sake, we're going to call my loan officer Lucifer.
At first, Lucifer was perfectly kind. He went over all of my paperwork, said everything looked good and put in the loan application. He was pushing, however, for a fixed-rate loan that I did not want. Although I know that adjustable-rate loans are a bad idea in most situations, it was perfect for me. The home was worth over twice what I was paying for it, and that's without any repair work. Selling it for enough money to cover the mortgage wouldn't have been a problem even in a terrible market. Plus, I'd never, ever be upside down on the home. I planned to move in two years, and the loan didn't adjust until five years were up. It also had a rate cap.
I did my homework. I wanted the ARM. Lucifer, however, kept pushing me to take the fixed-rate mortgage. I made it clear that the fixed-rate loan did not suit my needs and I wanted the ARM. He then ran the numbers and gave me my projected closing costs. Because closing costs include escrow costs, I brought the property tax and insurance costs with me. I wanted an accurate closing costs estimation from the beginning. He assured me that he had factored these costs in and that my closing costs came to roughly $4500. The seller's contribution was almost 5k, so that suited me fine. I asked twice, "Am I going to be responsible for anything at closing?" Lucifer said no.
A week later my loan approval paperwork came in the mail. Instead of glancing at it and putting it in a safe place, I went through it with a fine-tooth comb. Lo and behold, Lucifer put me down for the fixed-rate loan that I'd told him repeatedly I did not want.
I called Lucifer at his office and told him that I did not want the fixed-rate loan. He assured me he would change the loan and send me a new approval letter. The new approval letter arrived and it was still an approval for the same fixed-rate loan. We went through the "fix this loan please" telephone call again and again, I got an approval letter for the fixed-rate loan I did not want.
This is when I should have gone to a different bank. I should have, but I didn't. I figured we were only two weeks away from closing and I didn't want to push closing back. I wanted to move into my new house and be done with the whole mess. Linda, my realtor, already had a bad feeling about Lucifer. She'd never worked with him before, but the whole thing just rubbed her the wrong way. I am now kicking myself for not listening to her women's intuition.
The bank needed an appraisal, of course, so I wrote out a $500 check and waited for the appraisal to take place. I had no doubt that the appraisal would come through fine. After all, this house was worth far more than I was paying.
In case you don't know, utilities don't always stay on in foreclosed homes. What normally happens is that prior to the appraisal, the selling agent will ensure that the utilities are on, but that the breaker to the house is cut off. The appraiser then goes inside, flips the breaker, checks what he needs to check, turns the breaker back off and leaves.
The appraiser did not, however, do this. He wrote down that the utilities were not on and that he could not conduct an appraisal. He had no trouble at all cashing that $500 check though. I called Lucifer and he said the utilities were not on, it was the selling agent's fault and that I'd have to pay for another appraisal.
I don't think so, little buddy.
I called Linda and I was livid. After all, none of this was my fault but they expected me to pay to fix it. She emailed the selling agent, we'll call him Bob, and told him that the utilities were not on. Bob said they were on, the appraiser just didn't do his job. And then Linda's ingenious email system caused Lucifer's horns and pitchfork to start really showing...