Thursday, June 6, 2013

Big Purchases and Bad Decisions

As I've mentioned a few times, Kyle and I would like to buy a home at some point in the near future. I want a space I can make ours (read: I want to rip down cabinets, build things into walls, etc.), and we are desperate to have enough outside space for a chicken coop and garden beds so we can grow a good portion of our own food. 

In addition to our 2.6 x 6-foot community garden plot, we're doing a lot of container gardening in the driveway to manage in our little rental house. There's not enough yard to legally keep chickens, and while I'm all about rogue hens, our landlord has only approved the idea of keeping legal livestock — a position I completely understand and respect.

Mentally, we're ready to have our own little piece of land, and to stop throwing away money on rent every month. Yes, there are benefits to renting: if something breaks, it's not our responsibility to fix it, and if one of us gets an amazing job offer in New York or San Francisco, it would be pretty easy for us to pack our bags and go. But for the most part, we really like life in Kansas City. I can't see myself returning to Brooklyn unless we become filthy rich; after four years back in the Midwest, I'm too spoiled by the housing costs per square foot and and the emerging culinary culture. Plus, we both have family here, which will be a huge asset (read: free babysitting) when we do have kids.

Because we didn't have any savings until recently, I dreamed about owning a home, but I thought we weren't financially ready. However, I guess this is as good a time as any to offer full disclosure that not long after I committed to the idea of this project, and had even named it, purchased the domain, designed the header and written the first post, Kyle inherited a bit of money when a relative passed away. I decided it wasn't going to change anything about this project, and it hasn't. That money is not play money (though we did prepay for one somewhat ridiculous trip we're taking to Chicago later this summer, and Kyle finally got a lawn mower so he can stop driving to his friend's house to borrow one every week in the spring and summer).

While we finally paid off what remained of our minimal wedding debt, it's not pay-off-Emily's-credit-card-debt money. It's not even enough to pay off our student loans. And it's not money to live off of every day, or any day. In fact, Kyle put it in his bank account, not our joint account we each contribute to for living expenses. (We don't completely combine our finances, and a lot of that has to do with my spending problem. But that's another post for another day.)

It is buy-a-house money. Not an entire house, of course, or even half of a house, but a percentage of a house, a respectable down payment, at least in the Midwest. Of course, I'd been obsessively watching the market for months, long before we ever knew the inheritance existed. I can't help it; I love real estate, and the older the house, the better (maybe I should have been a real estate agent). Paying off our wedding debt meant Kyle was ready to start looking, too.

So, we applied for pre-approval. We didn't ask for much, but I was still pretty surprised when a lender gave us the greenlight to start looking. My credit isn't great, and Kyle is a public school teacher in Kansas — a state not known for supporting or giving much of a shit about education (don't even get me started on sex education). But we were good to go, or so we thought, and we started looking.

We had a pretty good idea of what we wanted. Sort of. I wanted an old house with a claw-foot tub in the city. Kyle wanted new windows and an open kitchen in a family-friendly neighborhood. We both wanted a double lot.

We looked at about 20 houses. Each had some of what we wanted. None of them felt like home.

Quite by accident, we found the perfect place for us: an old airplane bungalow on a double lot in what is perhaps the most family-friendly neighborhood in Kansas City. It has new windows, a solid foundation, enough bedrooms and bathrooms to comfortably accommodate us plus two rugrats, and plenty of green space for some chickens and a few huge garden beds. It also has a new, insulated garage that could easily house a commercial kitchen someday should Kyle ever start that summer ice cream business.

So, my wonderful husband agreed to give up his open kitchen (for the time being; I'm happy to tear down a wall any old day) and I gave up my claw-foot tub (for the time being; how hard can it be to install one?). It also happens to be owned by a friend who did a lot of work on it, so we knew the guts were in good shape. We also knew about the house before anyone else did, because he hadn't yet put it on the very hot market. We made an offer the night we went to look at it.

I was giddy. Unlike me, Kyle doesn't make any decision quickly. Seriously. Standing with him in a grocery store aisle while he decides which cheese is best for whatever he has planned that evening can be torturous. Then there's the trouble of deciding what beer will go best with that cheese. He's great at pairings, but those aren't decisions he makes lightly, so imagine what it took for him to decide to commit to a 30-year mortgage on not one, but two plots of land (double lot). His exhaustive examination of the pros and cons of any possibility is a good antidote to my spontaneous spending style. But that night, we were on the exact same page. Everything about that house felt right, even though the kitchen is slightly cramped and the tub has jets (ick).

We had found our home, a modest place where our little family could grow, and even grow some of our own food.

Because our friend was willing to work with our offer that was slightly lower than his asking price, we agreed to do this thing for sale by owner (as much as we loved our agent). We trust him, and luckily, one of my best friends in the world works for a title company, so she was able to provide us with a contract and some guidance on making the whole thing official. We're still planning to do the appraisal, inspection, etc. of course.

While I was working on what seemed like a very complicated contract last Thursday, we were given a strong suggestion from another friend who is pretty knowledgeable about real estate, too, to go with a different lender. Apparently, he hadn't had the best experience with the lender who pre-approved us. The approval process is pretty much the same, he told us, it's the customer service that matters most with a lender.

So, the we reached out to a mortgage consultant at a very well-respected lender, who came very highly recommended. When I tried to send her only the signed contract and receipt of earnest money paid to the title company, she told us everything else she'd need before she could even process our pre-approval application.

Oh. My. God. 

As she explained it to us, the first lender most likely only ran our credit scores and salaries — which were good enough to get us pre-approved, which is a good sign — but not our credit histories. He would have required all the same stuff at closing, she said, and and the result will probably be the same ether way, with either lender. The first thing she did was get a full credit report.

Based on our, well my, credit history (not just our scores), she thinks our chances of actually getting approved are 50/50. Kyle has better credit than I do, but he doesn't have much credit, and his teacher's salary alone isn't enough to carry the loan amount on paper.

I doubt I have enough of an audience yet for anyone to notice that there was a week-long lag between my silver post and my smoothie post. But there was. That's because I spent the last week compiling documentation on every paycheck either of us has received in the last two years, every rent check we've written in the last two years, verification of the inheritance, and how the earnest money went from one bank account to the other (that required a trip to the bank, and a signed letter from the branch manager). To back all of that up, we needed two years worth of tax returns, W2s, and bank statements, and a verification of two years of rent history, signed by our landlord. Though I've paid everything on time for the last two years, I had to explain every credit inquiry on my report, and write a letter of appeal to the loan underwriter, letting him or her know why we should be considered credit worthy. It was really more of a restrained plea. I hope our mortgage counselor was kidding, at least a little, when she said my letter might have moved the needle to 50.5/49.5. Those aren't terrible odds for some things, but when it comes to a home loan, they're not very promising.

Two days ago, she finally had everything she needed to submit the application. Whatever happens, I'm glad we took care of all of the documentation on the early end, and are getting a true approval (or not) now, and not just when we think we're about to close on a house.

So, now we just wait and see. I'm not very good at that. I never have been. I'm already concocting alternative financing solutions in my head, and even shared one of them with our friend selling the house via email earlier today; subject line: "Because I'm a crazy lady."

I hate that the financial mistakes I've made have given us such terrible chances of getting a home right now, even though we're more than capable of making the monthly payments, and have a bigger down payment than most first-time homebuyers. I wish that someone would have taught me the importance of establishing good credit, or at least of not abusing credit, before I got my first credit card application in the mail at 17. Instead, like most things in life, I had to learn it the hard way.

I made a lot of bad decisions in my late teens and early twenties. I put myself in some pretty dangerous situations — physically, emotionally and financially. It’s part of being young, I guess. I consider myself lucky that I’m not paying for the physical or emotional bad decisions today (unless you count my slow-as-molasses metabolism). Unfortunately, the same can’t be said for the bad financial decisions I made. I pay for them every day with the high interest rate on my car payment and the secure card I got to try and re-establish good credit. Now I'm facing the possibility that I've jeopardized my little family’s chance to get a home while interest rates are still so low.

I hope that whatever underwriter gets our file can see that I'm getting better, smarter and more responsible every day. I hope next week, I'm back with really great news (in the meantime I plan to tell you all about preserving a surplus of spinach). And I hope I haven't bored you to tears with this rambling post.

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