Financing & Work Update

I had an email this morning from Don, the mortgage broker that got away.  He apologized for not telling me he was leaving the firm.  Well, he gave me a conditional apology – if he didn’t tell me he was leaving, then he apologizes.  I’m not such a fan of that.  I think Don’s been passing the buck and awful lot, and as far as I’m concerned the buck stops with him.  I was/am his client and his responsibility.  He did give me his new contact information, which is a nice start, and said he is committed to seeing this loan get purchased so the contractor feels comfortable enough to start.  Meh.

I heard from Mr. Bigstuff the VP this afternoon, and while he didn’t have an affirmative answer on the loan purchase for me, he thought he’d be able to have one tomorrow.  At least he’s calling me!  I’ll take that, for now.  I know this loan will get purchased, and I will be able to get to take my draw on that money to pay Steve sooner or later, so I’m not too freaked out.  I’m just really disappointed.  I think this is a misunderstanding that could have been entirely avoided if my broker had educated me better.  Actually, I know that it could have been avoided, and, to my mind, it really should have been.

Finally, I met with Steve at the house today.  His painter was there, and I didn’t catch his name, but I appreciate that he was enjoying my choice of radio stations on the little stereo I had in the living room.  But did you catch that?  Painter was there?  Painting is happening!  This requires exclamation points!  The roofing guys are slated to come next week.  There was a slight snafu in the carpet ordering process.  Steve made an error in measuring – not like he read a tape measure wrong, he plumb forget a room existed!  That means that we have less to spend per square foot than we thought.  So I will likely have to go back to the store and figure out another carpeting option.  BIG HOUSE and not-so-big budget.  I do have some wiggle room built into the budget, and I might use some of that for carpeting overages, but I want to see if I can dial back the price and keep a product I like first.  We will figure it out.

I dropped a bomb on Steve that I ordered an over-the-stove microwave, a little detail that I hadn’t mentioned before. I’m glad I thought to tell him today, because he will have to be creative to make it fit in the space we have.  I bet he’s thrilled to have that new problem to solve.  Steve mentioned that I might want to consider replacing the switchplates throughout the house.  YES!  There is a rainbow of switchplates in there now, in shades ranging from hideous to ugly, and they have all got to go.

I’m excited about switchplates, y’all.

Also?  I’m excited that a dumpster will be delivered next week.  A dumpster is Serious Business.  I will definitely photograph the dumpster for posterity.

Oh!  I created a page to collect places on the intertubes I like.  I’m thinking maybe eventually I will corral sources there, or a blogroll, or maybe just pictures of baby animals.  I don’t know.  But you might want to check it out.

Math for the Win

Here is another update from 203(k) land, where the paperwork is plentiful and the math is mandatory.

One of the things i have to do to get this loan approved is get my general contractor’s “scope of work” all written up fancy-like, so the FHA knows what we are doing to the house.  Then an appraiser – who is independent, and who I never meet, see, or talk to – takes that paperwork, and takes a look at the house.  Because of his skill and expertise, and also a little bit of voodoo, he is able to create an appraisal that predicts the value of the house after the work is done.  This lets the FHA know they are underwriting a loan that is actually supported by the value of the property.

Now I’m going to dish the dirt on the money, because I think not talking about money just keeps people in the dark.  I want to demystify the process, so here are my numbers.

Purchase price: $105,000  (getting a little cash back at closing, but forget about that for right now)

Cost of renovations: $35,000 (this price plus the purchase price make up the loan amount)

Total Cost of Elephant Culo: $140,000 (plus shipping and handling).

So for this bad boy to be a go, the house has to appraise for better than $140,000, which makes sense, because that’s what the bank and I are paying for the house.  You with me? 

Good.

Here is where it gets sexy.

If the appraisal says the house is worth more than $140,000, then the bank is happy because if, God forbid, they end up owning this house, they can be fairly confident they’ll be able to get back the money they have in it.  I am happy, because I am sitting on what is known as equity.  Equity is the value of your home less what you owe on your home.  It works for cars, too, except cars don’t generally appreciate over time, and homes can. Having equity in your house is awesome because if you sell your house for more than you owe on it, you keep the difference – you MAKE money.  Nice, right? 

Elephant Culo appraised for $165,000.  Booyah, bitches.  On paper, once I close and the work gets done, I’ll be sitting on an additional $25K in equity over and above my downpayment.  Not bad.  Another way of looking at this is that $35,000 of improvements yields $60,000 in value.  Also not bad. 

But it’s not like I’ll have an extra pile of cash in my house.  That value is just on paper, and it’s only this appraiser’s opinion.  It is his opinion based upon his knowledge and the relevant comparable homes in the area, but in reality, the house is worth whatever the next buyer will pay for it.  Still, it’s nice to know that this big ol’ risk is likely to have an immediate payoff, even if it is just a payoff on paper.

Interviewing Contractors

I’m meeting the first contractor today.  Well, I should back up.  After a week of worrying, I got word that the HUD inspector had come up with a list of must-dos that he thought would work in my budget.  And I think I can live with his list, so we are on track.

My mortgage broker explained to me what conditionally approved means – it means I’m as approved as I’m going to get at this stage in the game, which is great news!  Obviously, some stuff is still pending – I haven’t gotten homeowner’s insurance yet, and I haven’t had an appraisal yet because that depends upon the contractor’s statement of work — but that stuff is all supposed to be pending right now.  Hooray.

I have been trying to get in touch with contractors who have experience with 203(k) projects and work in Raleigh and have been recommended to me in some way.  Some folks have great recommendations, but won’t travel here for a project as small as mine.  That makes sense to me, even though, to me, this project is megabucks.  Some are here, but aren’t interested in my small potatoes, and one I emailed with said he didn’t think he could work in my budget.  I have champagne tastes, even in my contractors!  But I have interviews with two men lined up, and I’d like to interview at least one more.  [Where my lady general contractors at?]  That would yield three estimates.  That is a lot of my time, and a lot of my long suffering broker’s time (she has to be there at the house for the estimate, too), but, again, too me, it’s a lot of moolah!!

So wish me luck.  Here’s a shot of my inspiration for the exterior redesign.

From 1970s split to The Biltmore, on less than $40K! KIDDING!

Mortgage Conditionally Approved

Whatever that means. These updates are incomprehensible – they are purposefully written in legalese with exceptions a plenty. Oh well. still moving!

“Your loan has been approved with contingencies.* The mortgage underwriters decide whether or not to approve mortgage loans based on information provided in the loan application. The underwriter will verify income and employment information, review credit history and calculate the value of a borrower’s collateral and assets. They also ensure the property specification and loan terms meet financial institution requirements and government regulations. After reviewing your application the underwriter has approved your file contingent upon the receipt and satisfactory review of additional documentation or clarification of documentation currently in your file. * Based on the information submitted to Allen Tate Mortgage for review, additional documentation may be requested throughout the processing and underwriting of your loan application. *Your credit will be re-pulled prior to closing. Any additional debt, new accounts, or late payments may affect your loan resulting in either a delay in closing or denial of your loan application. It is very important not to open or incur any additional debt during your application process.”

My loan is chugging along.

Yesterday my loan was sent to processing.  This is what the powers that be tell me about that:

Your loan application has been sent to processing.* The mortgage loan processor works to complete your loan application before sending to the underwriter for a decision. This involves collecting and verifying employment and financial data, including your assets, current debts and monthly expenses. * Based on the information submitted to Allen Tate Mortgage for review, additional documentation may be requested throughout the processing and underwriting of your loan application. *Your credit will be re-pulled prior to closing. Any additional debt, new accounts, or late payments may affect your loan resulting in either a delay in closing or denial of your loan application. It is very important not to open or incur any additional debt during your application process.

Today it has been submitted to underwriting. And this is what the powers that be tell me about this:

All the required documentation has been gathered. The mortgage underwriters decide whether or not to approve mortgage loans based on information provided in the loan application. The underwriter will verify income and employment information, review credit history and calculate the value of a borrower’s collateral and assets. They also ensure the property specification and loan terms meet financial institution requirements and government regulations. After the review an underwriter will render one of the following decisions: Approve the loan as it is, ask for additional documentation/clarifications, or deny the loan. * Based on the information submitted to Allen Tate Mortgage for review, additional documentation may be requested throughout the processing and underwriting of your loan application. *Your credit will be re-pulled prior to closing. Any additional debt, new accounts, or late payments may affect your loan resulting in either a delay in closing or denial of your loan application. It is very important not to open or incur any additional debt during your application process.

I think this means I keep waiting, fingers crossed, holding my breath ever so slightly.