Sunday, April 29, 2007

for sale . . . sold!

so, after months and months, we have finally built, sold, and closed on our new, old, and our new and old homes, respectively. it was a very harrowing ordeal that came down to the last few minutes, but so far, we are really enjoying it.

the process started off easily enough: we decided to move to a house that was more suitable for us and our growing family. when we found the 'perfect' house, we decided to build it and sell our old house. since the build process takes a while (about 7 months for us), we thought we would have plenty of time to sell our old house. well, 6 months in, we still hadn't sold our house and decided to switch realtors . . . all the while, the progress on our new home was moving along. fortunately for us, our builder really worked with us and didn't even pressure us for more down or anything -- the contract called for a considerable deposit at the time it went to dry-wall. a day after we switched realtors, we got an offer and they wanted to move in quick -- in about 4 weeks. wow!

lo and behold, a call into our builder revealed that our new house would be done the exact same day that the buyers wanted to close on our old house! talk about coincidence!

we were getting very excited as we got close to our closing date (both the old and new on the same day) . . . the day before we were scheduled to close, with movers and an assortment of services scheduled, we got some uncomfortable news. our buyers had to move their close date out because they had changed lenders at the last minute and were scrambling around to get all their paperwork in place. well, we were supposed to use the proceeds of that sale towards the down payment on our new home. what were we going to do?

i called the title company and found out that it was perfectly acceptable for us to go ahead and close but the keys wouldn't be released to us until the loan was funded. not an issue with me. we had a day of buffer built into the whole process. but wait, there's more! at our final walk through with our builder, we found out that he had to push out the closing due to some small items that needed his attention. so, now, we were back to closing on the same day -- a friday. we'd close on the purchase in the am and as soon as the closing on the sale was done, the magic of wire transfers would make everything okay.

we found out that we were going to close on the sale at 3pm on friday. that gave us 2 hours for everything to get signed off on before the banks closed for the weekend. when we showed up, the buyers were still signing. at around 3:30pm, we got in, signed the HUD settlement statement, which got faxed over to the other title company while we continued to sign. about half an hour later, at 4, we finished and i called the other title company to make sure everything was okay. they just picked up the settlement statement and faxed it over to our lender, who was waiting on it. driving home, i got a phone call from the title company saying they were waiting for another document. what?! it was 4:30 and we were running out of time. i was calling the title company that we just left to find out what was going on when another call came in -- we were funded and everything was done!


i thought i'd pass on this story because i never had a real appreciation for how closings happen and what order things can happen in. basically, what it comes down to is this: you can more or less sign in any order you like, but nothing will be done until all the money moves around and all the docs are likewise passed around.

Tuesday, April 17, 2007

credit score

well, i've been pretty busy lately with the new house move and haven't had much time to post, but i finally found some time today, and i thought i'd share some interesting information. i've created a lot of stress by changing lenders at the last minute, but i am saving about 1/4 of a point.

anyway, during the loan process, my lender pulled my credit report and while my credit is okay, something very interesting came up -- a collection filed against me.

well, i have hardly ever been late on a payment in my life, so i was very surprised to see that i had a balance so old that it was kicked over into collections. it turns out that after i moved out of a place i was sharing with my brother, i never filed the appropriate change of responsibility forms so that he would take over the utilities, etc. it turns out that after he moved out, he didn't pay the last bill, so there is a mark on my credit for collections on a $119 light bill.

i don't know what to really do about it. the collection agency has never contacted me and the debt really isn't mine. should i really bother about a 6 year old collection? from my limited research, paying off the collection won't erase it from my report -- it'll stay on there for 7 years!

it hasn't impacted my life or my ability to acquire credit. either way, let it be a lesson to you -- these little things can have side effects that you have no idea about.

Friday, April 6, 2007

point of interest

we are currently securing a loan for a new house purchase. mortgage rates are pretty low these days and some of our lenders are offering to let us buy points to lower them even more. these so called discount points cost 1% of the loan amount and bring down the interest rate 0.125%. so, i started thinking about the merits of buying discount points. it's not nearly as straightforward as i thought, but it feels like a sucker bet to me.

there are a lot of components:

0. your interest rate will change, causing your
1. your monthly payment to change slightly, resulting in
2. your overall cost of the loan changing, and
3. you lose any flexibility that you would have with that money

now, i haven't done any calculations, but the overall savings on 0.125% seems pretty slight to me. that is, i think you could do far better by taking the money and investing it elsewhere.

let's look at a tangible example. let's say you're looking at a $475,000 home, where you need to borrow about $380,000. if you are looking at a 30 year note @ 5.875% where principal and interest comes to $2,250, you'll end up paying $810,000 over the course of the note. if, however, you decide to buy that down, paying 3% of your home cost ($14,000), to 5.25%, you'll end up paying about $2,100 monthly, or $756,000 over 30 years. that comes out to a $54,000 savings. sounds like a lot, huh? well, depending on what you can make on that $14,000, i'd say you'd be better off not buying it down. if you could get about 10% on your money, you're likely to see about 3 triples, or a return around $100,000 on your money!

and anyway you look at it $100,000 > $54,000. so, stay away from the sucker bet, and stash your cash somewhere else.