I’ve been looking at purchasing real estate, looking at houses and condos, and it’s been mostly fun.
My realtor is great, really wonderful. She shows me all kinds of houses and condos, and stays patient with me when I don’t want to go see something she suggests.
The other day, this condo came onto my agent’s radar:
There was a $30,000 price cut from what you see if you click through the picture.
It’s the prettiest most beautiful prettiest beautiful kitchen in my price range.
The rest of the place isn’t bad either! The building looks like an a-frame ski chalet and has six units.
It’s in a cute neighborhood with little houses.
My whole family came to look at this one with me, and we all loved it.
It’s brand new. Built in 2012. I said I didn’t want something built after 2000, but this place changed my mind. There are two bedrooms and two bathrooms, and both bathrooms have giant tubs. One is in the master bedroom and one is in the hall. It’s under 1000 total square feet, but the proportions are right. It looks exactly like something I could live in, not just for a while, but for a decade or two.
My realtor called the builder, and she said it sounded pretty good. She thought we should maybe offer less than the listed price since the building is completely empty. Zero out of six condos have been sold. This didn’t seem out of the ordinary to me, but that’s because I’m 100% new at this whole process.
My realtor called the loan broker, who she works with. This is the same broker that pre-approved me less than a day after I talked to her. I have a distrust for the loan broker industry in general, and this particular broker in particular. Maybe it was the way she said, “I just love first time home buyers!” but I just have not been comfortable with her. It was a gut feeling, which, again, proved right.
We decided to put in an offer. So, the broker sent over paperwork.
And what paperwork that was!
I couldn’t believe it. I’d been pre-approved for 3.6%, 20% down, for a total of $240,000, just weeks ago.
But this? Was a whole bunch of words that I didn’t understand, along with a mortgage with a phrase I thought was phased out with the last mortgage crisis: “5/1 ARM”.
It’s a nonwarrantable loan. Condo buildings can be nonwarrantable for a number of reasons, and a low occupancy rate (under 90%) is just one of them. Nonwarrantable properties do not qualify for normal, legitimate loans from things like banks and credit unions. So instead there are these shark investors who are “willing” to offer a loan that is 4.875% for five years, with the option to increase by an entire percent every year after that, not to exceed 10%.
OH, ten percent? Wow, rates have never been better!
So here’s the gamble:
- I could buy the first unit, and hope every single day that they sell out quickly so I can refinance while the rates are still so low!
- Or just plan to move out before the “low” rate expires.
- Or I could buy the sixth one, and let everyone else deal with these icky mortgages.
I asked the loan broker if she would recommend this kind of loan to her own daughter. She hedged, but the undertone was no, she wouldn’t actually recommend this to a first time homebuyer.
So, that pretty pretty kitchen is still out of reach.
But you know what I don’t want? A 10% mortgage.
Or a swindling loan broker.
For a little while, I was sad, thinking that perhaps what I want just isn’t in my price range, and I’ll have to rent until I find the right something.
But the new me doesn’t settle.
So there.
I don't blame you for being terrified of getting stuck with a mortgage at 10%! That is insane, although my mom always reminds me that their house was on a 16% mortgage at one point many decades ago. Anyway, I'm sure that something perfect will come along eventually!
I'm sorry, it's probably best if you keep looking! Something great will come along.
You did good!
Oh man, that must have been a disappointment. The places is so cute! :( But no matter how cute the place, having money stress isn't worth it.
That rate is insane!!! I'm glad you didn't take it. Something better will come around!
As has been said, I think you made the right decision. That rate is just crazy.
Congrats on not letting your heart get the best of you! That must've been really tough!
Oh ya, 10% is totally a steal, can't believe you didn't jump on it. *sarcasm*!!!!
Good for you for keeping your mind above your heart, you'll be thankful and when the perfect place for you opens up you'll know it! Good luck :)
I think you made the best decision. Keep an eye on the building, though – that kitchen is amazing!
Wow 10% is pretty terrible. Definitely a good idea to pass on this place!
Wow, what a story! I've heard about these, but never actually "heard" from someone who'd been involved in one first-hand. I definitely agree with your decision. What a crock, though!
That stinks to get your hopes all up only to come back with that! At least she was pretty much honest with you when you asked her about her recommendation. A lot of people (especially sales people) wouldn't be.
Wow, 10%? No way. Glad you didn't take that deal.
Sounds like you made a good choice but listening to your gut. I'm sure you'll find something way better and way less scammy sounding.
Good for you for not settling.You can keep watching it while you look at other options. I wouldn't sign up for a possible 10% mortgage either.
So glad you're not settling and aren't going for anything that requires looking cross-eyed to take it in. Keep an eye on the little building, and as it fills up, you may just have another shot at it yet! No reason for you to take on tons of extra risk with weird mortgages just to be the first person to move into the building. Plus wouldn't it be lonely in an empty building all by yourself? =)
It's such an emotional purchase so I am sorry it didn't work out, but I think it's great that you didn't let your heart make the decision and instead let your rationalistic side take over. I have a hard time with that. But wow, that is a BEAUTIFUL kitchen. Hold out until the last one, so you can get a normal rate ;)
That is a gorgeous kitchen! But I think you made the right call. With interest rates as low as they are today, you shouldn't have to settle for something outrageous like 10%!
The key with real estate is always patience. I'm sure something better will turn up for you eventually! I lost a few properties over the past Summer, and the it really bummed me out the first few times. But you soon get over it, and something better always shows up.
Best of luck!
I'd also be running the other way at 10%. Yikes! You have a good head on your shoulders to not get swindled into a bad mortgage – beautiful kitchen or not. I'm sure another property will come up. Good luck in your search!
The good thing about property is that there is ALWAYS another great place just around the corner. Do not get wed to one place. She who cares least, wins! Sam
Kathleen, it sounds like you really fell in love with this place mainly for the cute kitchen? You could probably buy a house that was a little less money and update the kitchen with the cabinetry and finishes that you love for $25k or less. Knocking down walls and totally changing around a room's layout is super expensive, but cabinets are a few thousand at most, as is granite. Then, you do have to pay for labor and usually people upgrade the back splash as well. It can be done in a few weeks! Then, you can have your cute kitchen and eat in it too! ;) Good luck finding the perfect place, Goldilocks!
Great post. This is one of the quirks of the mortgage rules that catches plenty of first home buyers by surprise.
And, if you don't like your mortgage broker, find one you can trust. There are plenty out there.