This is a guest post from my sister JP. She was kind enough to help me out by sending an article for while I am in the hospital. In fact when you read this I will have a new baby, I hope anyway.
When my husband and I found out we were pregnant with our second child, we knew that we would quickly outgrow our small, two-bedroom townhouse. We resolved to make it work for as long as we could…and then Obama offered us $8,000 to buy a house. We didn’t have to pay the money back, and with the housing market and interest rates supposedly in a downward swing, it seemed silly not to take advantage of the deal.
We did our best to be smart about the whole process. We set up a separate bank account and started putting money aside every month towards the 3.5% down payment required by FHA (some banks require as much as 20% down on a traditional loan, and that certainly was not going to happen with two kids and two car payments). Although our lease was not up until mid-August 2009, we decided to start looking in April just to ensure that we had plenty of time to find the perfect house.
And we did find the perfect house. At least, we thought we did.
In August of the previous year, we had started looking at houses and eventually decided that we weren’t ready to buy. At that time, we’d fallen in love with a house – or, more specifically, a neighborhood. By April of the following year, the house had just sold, but there were two more houses for sale in the same neighborhood. One was out of our price range, and the other was a short sale and well within our budget. We looked at the short sale, loved it, but decided it was too soon to put in an offer. In the meantime, we kept looking, and nothing else measured up. In spite of the supposed state of the housing market, it seemed like every house that had the square footage we needed was either out of our price range or a total dump. Granted, our price range was not very high ($150,000 max with closing costs paid), and I insisted on staying in West Knoxville. It still seemed, however, like there should have been more options.
When we found nothing that measured up to the short sale by mid-May, we decided to put in an offer with the stipulation that we couldn’t close until July (to keep our mortgage payments from starting until September). Only then did we find out that not only was the house a short sale, but it was also a living trust. We had officially bid on the most complicated house ever.
Everything seemed to be going well. We came in at $135,000 with $5,000 in closing – over $10,000 lower than the asking price after closing costs. The manager of the living trust countered at $138,500 and $5,000 in closing. We accepted. The manager of the living trust sent the offer to the bank for approval, and the bank approved everything…verbally. We started the mortgage process and ordered the inspection, which went very well. After the house passed inspection, we met the homeowners and went ahead and paid them $150 for their fridge, as it was not included in the sales contract. A few days later, the house underwent and passed the FHA appraisal (by this point, we had $700 invested in the house). We were down to the title work, and after that, all that remained was the underwriting phase.
And then, when I was picking up my kids one afternoon, we received a bombshell.
The homeowners had a judgment against them. The house and all of their belongings were being seized by the bank, and they had conveniently moved to Florida. Because of that, we lost the house.
On a more positive note, because we lost that house, we ended up finding another one. Enough time had passed that the other house in the neighborhood had lowered in price to where it was within reach. We bid, we haggled, and eventually we got the other house for $144,000 with $6,000 in closing costs.
Our trials didn’t end there. In fact, we didn’t officially own a house until July 22nd – 4 months after we started looking. I could go on all day about the crack in the basement foundation of that second house, the structural engineer that had to be called out, and the enormous mess when it came time for the underwriting (caused by the government buying up my husband’s student loans).
Instead, I will close with this: Be careful. Have your title work done first, even if you have to pay for it yourself. And don’t give up – the right house (and, for another few months, $8,000) is out there waiting for you.