notes on process: getting a mortgage


Posted: July 4th, 2013 | Author: | Filed under: financing | No Comments »


Real talk. Right now we’re (unfortunately) obsessing about the mortgage. We need to get a mortgage for this house. We dreamed up this scheme, together with my parents, in October of 2009: We all fell in love with this big old house, and it seemed like a pretty amazing bargain, a once-in-a-lifetime opportunity, and an exciting fixer-upper-project that we could do together, but the house was in such a state of disrepair that no bank would offer a mortgage for it. The sale was cash-only. So we decided together that they would borrow against the equity on their own home to get the cash, and buy this house in cash. We would do the renovations, and once we got the house fixed up enough to qualify for a mortgage, we would buy it from them, paying them back for the purchase plus whatever we need to borrow for the cost of renovations. So that’s what we need to do now!

Of course it’s turned out a little more complicated than we expected. We had a decent idea about what goes into renovating an old house, but we didn’t know a whole lot about the mortgage market. We are lucky enough to have good credit, and enough income to buy this cruddy old house, so unlike most prospective house-buyers, that’s not the hard part for us. It’s the house! Turns out the bank doesn’t just want to see a decent roof, strong bones, and solid foundation. They want to see neatly finished walls and floors and ceilings, everything freshly painted, all the cracked shingles replaced, all the bumpy floor-boards evened out, trim and molding on everything. No peeling paint or chipped corners. They want everything gussied up and tidied up and cleaned up and neatly squared away.

As best I understand it, the reason the bank wants everything to look tidy and perfect, is because we live in the age of short sales and foreclosures and third-party lenders and secondary mortgage markets. Local banks no longer own mortgages, because it’s a risk they can’t afford to take. Our local bank would give us a mortgage, and then immediately sell the debt to a third-party lender who would “own” that debt until it’s paid off. That third-party lender would probably be a giant national lender with a pretty strict set of requirements for what kind of properties they will or won’t get involved with. So mortgage requirements are pretty much standardized across the nation and not really open to negotiation, no matter how nice and friendly our local bank might be. From here forward, “The Bank” refers to these standards, I don’t think it really matters which bank we talk to, as far as we can tell it’s all the same. (Short political commentary: this whole system is so f*ed that I don’t even know where to begin and I wish I didn’t have to deal with all this foolishness, but I do.) Anyway, The Bank doesn’t really know us and they don’t know whether we’ll honor our mortgage or whether we’ll maybe lose our jobs and go bankrupt or something. Then The Bank would be stuck with ownership of our house, and they’d want to sell it again, ASAP (which is referred to as “the secondary market”), so they want houses that look good and easy to sell and then re-sell again if necessary. If the house doesn’t look like it’s going to be sellable, then they don’t want anything to do with it. (This is a little silly because of course we could always just take out a mortgage and buy a beautiful house and then have a hundred wild parties and wreck everything and then default on our loan and leave them with a ruined house, but that seems to be beside the point.) Banks don’t want to give a mortgage for a house unless it looks neat and tidy and ready to sell to anybody and then re-sell again to anybody else. They are looking for ready-made houses with mass appeal.

I haven’t missed the irony here: If not for the housing crash, we never could’ve found such a cheap house! So we’re grateful for the cheap house, but bummed about how those same circumstances have made it so difficult to get a mortgage.

We’ve heard a lot about construction loans or renovation loans or 230k FHA loans. Those seem like cool mythical things where supposedly a bank would give you money to pay for the renovations that you’re going to do, and then you do the renovations and everyone lives happily ever after. As far as we can tell, those things existed before the 2008 real-estate crash, and they do not exist anymore. If anybody’s gotten one since 2008, let me know how you did it. When we’ve talked to banks about this, they’ve told us that construction loans were a cool idea, but once the homeowners got the loan they didn’t always complete construction, and then they didn’t always pay back the loan. Or they used the funds to hire contractors, and then the contractors took the money and skipped town. Either way, the banks ended up owning houses that were foreclosed, unfinished renovation projects, they couldn’t find buyers who wanted to buy unfinished projects, and then the real estate market crashed and all those unfinished houses were worthless and became financial burdens, and they didn’t like it, and they won’t do that anymore. We get a lot of advice from really well-meaning folks who suggest that we get a construction loan, but we’ve found 0 banks that want to offer us (or anyone!) a construction loan.

And another fun fact about construction loans: you can’t do the work yourself. Even when banks did give construction loans, homeowners weren’t allowed to fix it up themselves; they had to hire licensed contractors to do all the work. Which means that the cost of work is a lot higher, which means that a construction loan, if we could get one, would leave us with greater debt. We’re really happy to hire some experts to help us with some of this work, but luckily we’ve been able to do a bunch of the work ourselves, and we wouldn’t really want it any other way.

So anyway, it seems like the reality of the situation is that we need to turn this house into a very neat and tidy house with mass appeal for the secondary mortgage market. Which sounds great, but it’s a stricter set of standards than we had imagined, and it’s different from our personal priorities, so it’s honestly more work than we expected, on a tighter timeline, and it kind of changes the nature of the project.

Personally, I would love to focus on some purely functional stuff, like improving our heating system and insulation. I don’t want this whole entire huge house to be warm and toasty through the winter (that would be wasteful!), but I would like to isolate a core zone of kitchen and livingroom and bathroom, add some brand-new radiators, and tighten up and insulate these rooms enough that we can easily keep them toasty warm with a minimal amount of fuel.

I would like to focus on a few rooms of the house and make them nice and comfy and beautiful, and then maybe move on to gardening and landscaping. I would happily leave the rest of the house looking shabby for a while. I don’t mind renovating the rest of the house one room at a time and spreading it out over the next 10 years. Gut each room to the studs and clean out all the crud inside the walls and insulate it properly and thoroughly, update the heating system one room at a time, and do the whole job at a relaxed pace, and do it properly and thoroughly. That’s what I would love to do.

But we’d planned to buy back the house from my parents within a few years, so that’s what we want to do, even though it means we’re swapping The Bank’s renovation priorities for our own. My parents are super nice and not breathing down our neck about the deadline but we want to honor that commitment. Also, we feel like once we get the mortgage out of the way, then we will be able to do this project at our own pace, on our own terms, and that’s what we want.

So instead of doing everything perfectly and lovingly and slowly, we’ve kind of switched over to doing the work as fast as we can, a bit more superficially, and just trying to make everything look as neat and tidy as possible.

We’re still thinking of this as a long-term project. But we’ve got a short-term goal. Maybe it means that we’ll end up doing some of the work now, quickly, and then re-doing it later, properly.

The positive side is that we’ll end up with a nice-looking house, a fresh coat of paint on everything, and honestly a pressing deadline is a great motivation to get a lot of important work done fast. So this year we’re trying to set aside distractions, make some compromises when it comes to all the other parts of our lives, and just focus on getting a lot of the house stuff finished up.


more house news


Posted: October 25th, 2009 | Author: | Filed under: excitement, financing | Tags: , , , | No Comments »


OK, we’re totally obsessed with this house and absolutely overflowing with excitement and anxiety to find out whether the whole deal is going to go through! Today we got some positive news, our offer has formally been accepted by the bank, on paper. Looks like it’s a go!!!!! Thursday is supposed to be our official closing date. So, we’ll be able to really say it’s our house by the end of the week, hopefully! My mom went in to the town office and did a bit of research, and learned that this property & house were last assessed in 2003, at that time they were valued at around 400% the price we’re going to pay! WOW. Perhaps that was before the barn collapsed and before the ell roof fell apart.

house in limington

Meanwhile, we’ve been doing lots of research about the place. Because the house has a historic plaque on the porch, Mike started researching the history and has been corresponding with the Limington Historical Society, he’s found some colorful stories about the history of the town but hasn’t found anything specific about our house yet.

historical plaque - the house in Limington

historical plaque on the porch

We read all about the Francis Small nature preserve, hiking on Sawyer Mountain, and swimming at Pequawket Beach on Horne Pond, just down the road from our house! (Of course there’s also the Limington Rips, where I remember splashing around as a kid.)

Anyway, I’ve got some more pictures of the place! Here is the exterior:

complicated roofline

complicated roofline (front side of the house)

In back of the house is the ell, which is in terrible condition:

side view of house

side view of the house and ell

side view of house

I think this is currently the main entrance (on the side of the house)

ell and junk

trashy looking junk piled up beside the ell

Ell interior

The ell is filled with junk. My mom found a fridge in there, still filled with food! yuck.

the house in Limington

there is also an “in-law apartment” in the ell, but it’s badly damaged by water from the leaky roof so it’ll have to be all torn out and… maybe we’ll even have to demolish the whole ell. or maybe we can save it. who knows.

Here’s the back yard:

the house in Limington

i’m pretty sure that’s one of three apple trees growing in our back yard!

the house in Limington

too bad about the barn

the house in Limington

squash growing in the back yard

the house in Limington

basketball hoop behind the barn

the house in Limington

richard and backyard

the house in Limington

backside of barn

looking towards the house from the barn

back side of the ell – looking towards the house from the barn

inside the house!

our new house in Limington!

nice wood floors and windows. first floor, front room (this is inside one of the front turrets)

downstairs

downstairs

our new house in Limington!

kitchen

nice bannister, missing plaster

nice bannister, missing plaster

upstairs, turret bedroom

upstairs, turret bedroom

missing plaster, upstairs bedroom

more missing plaster, upstairs bedroom

granite slab & boulder foundation

in the cellar – the granite slab & boulder foundation

front porch & front yard:

the front porch

the front porch

barn view from porch

barn view from porch

retaining wall, street view from downhill

retaining wall, street view from downhill

hydrangea

hydrangea bush

pampas grass

pampas grasses

hitching post

here’s the hitching post where visitors used to tie up their horses

it looks like there are lots of other pretty old houses in the neighborhood! here’s a video of my sister and brother-in-law driving around getting lost in the neighborhood:


a house in maine


Posted: October 19th, 2009 | Author: | Filed under: dreams, excitement, financing | Tags: , , , | 1 Comment »


i thought i’d try to wait on this but I’M SO EXCITED I CAN’T KEEP IT UNDER MY HAT! we are suddenly, kinda out-of-the blue, (hopefully) about to start work on repairing and renovating OUR NEW HOUSE! Probably. the whole deal hasn’t gone through 100% yet but it seems like everything’s set to go and by October 29th it should be finalized IF all goes well!

house in limington

Both Mike and I always said we’d love to get a house someday, we’d love to renovate an old place and learn all about carpentry and plumbing and have a garden and live in the country and all that good stuff, and we’re starting to save money, but we don’t have enough savings to seriously look at buying a house yet. So it was like a “someday down the road” kind of idea. Still, Mike sometimes likes to browse through craigslist and look at houses for sale, just for kicks. Just window-shopping. He came across this place a few months ago, thought it looked interesting and sent me the listing. I thought it looked cool too, and it’s nice because the location is right between my parents’ house in Gorham and our beloved summer cabin in the White Mountains in New Hampshire.

It’s a five-bedroom farmhouse with a wrap-around porch on the front and side, an ell in the back and two acres of land, with a collapsed barn off to one side. It has Victorian-style turrets in the front, which were probably added in the late 1800′s, but the rest of the structure probably dates back to the early 1800′s.

the property in limington

The price had already been reduced a lot, and the place obviously needs lots of repairs – which made it even more intriguing. We got a little infatuated with this place and our fantasy about living in it and restoring it.

So every few weeks we would go back and look at the website, scroll through the pictures and think “gee, that would be fun… if only…” So, when the price dropped again, we sent the listing to my parents and asked if they might want to swing by the place and look at it, next time they were driving past, just for kicks. We just wanted to hear what it looked like in real life. Since it’s right on their way over to New Hampshire. They did stop by and were also intrigued! Eventually they decided to call up the realtor, just out of curiosity, and make an appointment, just to get a peek inside. When they spoke to the realtor she mentioned that the price had just been dropped again, to ONE THIRD of the original price!

the house in limington

So they went on over and scoped it out in great detail. The property is now held by a property liquidation company, and they are in a big hurry to get rid of it before the winter freeze comes on and the pipes all freeze and winter storms cause even more damage to the section of the house that has a broken roof. The house is so badly damaged and the bank is in such a hurry to get rid of it, the whole property is now being sold for the price of the land. So basically you buy the land, you get this hulking wreck of a house for free! The house looks pretty decent from the street but inside it’s all messed up. The furnace is broken, the plumbing is all crazy, the electricity is so faulty that most of the house has been disconnected. Up until two months ago, there were 11 people!!!!! living in this house, and not doing any maintenance whatsoever. In the main house, the interior walls have spots of missing plaster, where the original lath shows through. There is a rotted sill above the foundation, under the kitchen. The interior looks like a total disaster. In the back, there is an additional structure (the ell, for those who are familiar with traditional farmhouses) with an “in-law apartment” and garage space, but the roof over the ell is badly damaged, there are blue plastic tarps covering it but there’s extensive water damage in the interior of the ell, where the roof is missing. That area is badly rotted and strewn with debris. So overall, it’s all in really bad shape.

But the original structure of the house dates from the early 1800′s, the foundation is made of boulders and granite and is still completely sound. Most of the main structure is solid and the main roof is new-ish, with only one small leaky spot. The house comes with two acres of land, which really can’t depreciate in value – regardless of what happens to the house. My parents had bought a house in similar condition back in 1973, and they nursed it back to health and still live in it happily today. So they’re pretty knowledgeable about restoring old damaged farmhouses, and they felt that despite the extensive problems, it was still a great bargain, and basically they felt that this was a once-in-a-lifetime opportunity, a result of the crazy economy and messed-up real estate market. Of course we could find other cheap houses to restore, but we’d never find another one this cheap.

So they offered us… if we were interested… to BUY the place and we could throw ourselves into restoring it and pay them back.

!!!!!!!!!!!!!!

Judy, of course, was completely infatuated with the place too, and overflowing with ideas and excitement! Richard was cautious and warned that we had better understand what a huge project we’d be getting into.

When we originally showed them the pictures and asked them if they wanted to stop by and visit the house, we had expected that they would visit the place and say “Oh, gosh, it’s so sad but that house is a total disaster and there’s no way it could be saved.” I really didn’t expect anything to come from their visit – I just figured it would be an interesting learning experience for everyone. And of course I never would’ve imagined that they would offer to buy it themselves! So we were REALLY surprised to hear their offer! We spent the whole weekend talking it over, alternating between giddy excitement and thinking “this is such a crazy idea, we can’t even seriously consider it.” We talked a lot with my parents about the unbelievably huge amount of back-breaking work, endless time, blood sweat and tears, and money that it would cost to get the house up to basic living standards. We talked about the fact that buying this house would mean we wouldn’t have time or money to travel again for five or ten years, we might never get to Thailand or Japan, we’d be basically camping out in this shell of a house for the first few months (or years?) and we’d be isolated and completely swamped with work for at least five or ten years.

But we also talked about how we’d always dreamed of this, we talked about growing a big garden and making jams and pickles at the end of the summer, having goats and chickens one day, having a giant yard for our dogs to run free. We looked at prices for those underground dog fences and we looked at prices for used cars and new furnaces. We talked about all the amazing things we could do with so much space. How we hoped friends would come visit us in the summer and keep us company!

Yesterday everyone was headed over to Intervale so they stopped by the house again and Amy was kind enough to bring her video camera and tape some footage of the neighborhood and walking around the house, both inside and out. It’s been amazing to watch her videos, it’s the closest thing to being there. The whole place feels like one of those places that I’d drive past and think “wow, how can that place be so abandoned? what’s the story there?” I always used to notice places like this and want to stop and explore, poke around, try the door and go inside. I love to sneak in to abandoned places and imagine the history of the place, imagine myself camping out in there, cleaning it up and making it my own. I’m pretty sure that no house is as compelling and enticing to me as an interesting abandoned place.

Thanks to Google Maps, we’ve studied pictures of the house from the street and aerial photos of the property from above, as well as street-views of the entire neighborhood and some aerial perspective on where it’s located in the state.

The State of Maine

The location is in southern Maine, near the border with New Hampshire. About 30 minutes from my parents’ house in Gorham; one hour from Portland; 45 minutes from the ocean at Old Orchard beach; 1 hour from our family cabin in the white mountains; 2.5 hours from Boston; 6 hours from New York (probably more with traffic).

The road to Limington

The road to Limington

So… of course, after heavy deliberations we decided to go for it! Mike was completely convinced pretty early on, but it took me a whole weekend of heavy thinking before I decided we should go for it! Nothing ventured, nothing gained, right? We had to act fast because we knew that at the super-cheap price, there were lots of other interested buyers scoping the place out. I can’t believe we just made such a huge decision. It was kind of the same when we moved to Argentina – very sudden! But this feels even bigger, and even more sudden. The craziest thing is that I CAN’T GO SEE THE HOUSE! I won’t be able to see it for another 4 months! Judy and Richard will be looking after the place over the winter, draining the pipes, stretching new tarps over the broken roof, and getting an electrician in to get some basic wiring set up. They honestly sound really excited about this, just as excited as we are! We won’t be able to see the place until March. We’re thinking if all goes ahead as planned, we’ll move in with Judy and Richard at first and stay with them while looking for work and going over to Limington to work on the house whenever we can. By the beginning of June we’re hoping to have at least a few rooms habitable so we can move in. We’ll hope to get a furnace installed over the summer so we’ll be ready when the fall comes. We’ll plan to close off a few core rooms on the first floor and live in just those few rooms for the first winter, so we don’t have to heat the whole house. It’s so unbelievable that now we’re not just moving back to Maine, we’re moving back to our new house and this crazy epic construction project. What a lot of changes. I can’t believe this is all going on – I can’t sleep at night, I’m lying awake imagining our new house! And imagining all the work this is going to take, yikes. And wondering if it will even go through – these things often seem to go awry at the very last minute. So… we’ll see!


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