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.