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Monday, January 12, 2009

The House That Mongo Bought: Grumble Beginnings

This is going to be a multi part series detailing the trials and tribulations of first time home ownership. Call it an anecdote, long winded trip down memory lane, or a cautionary guide to those heading out on their own. The choice is yours.

Part One: Rent, Rent, Rent, BUY!
In 1999 I moved into a two bed/one bath house on a quiet street in an older part of a burgeoning city. It was built by the owners and for half of $375 a month, plus utilities, I made my first foray into living on my own. I had no furniture that didn’t belong to my parents and jumped feet first into this venture on the advice of a friend who had been bunking on another friend’s couch for two months after his apartment was gutted by fire due to a faulty clock radio.

The most important tip my parents gave me about buying furniture was, be frugal but be smart. It is better to spend good money on a quality bed than it is on a big screen television or game system. So, I did. I bought a mattress and box spring and that was it. The accompanying frame was the only hardware that I used with the bed. Now, because my friend had been out on his own for awhile, he had all the furniture we needed outside of my newly purchased bed. I supplied a $5 microwave I bought from someone and that was about it. We had a pretty decent setup but things soon spiraled into madness about six months into our first year as roommates. Not going into details, let’s just say I moved out and into my own apartment. My reservations against living with someone else have now become hindsight and I caution anyone on moving in with a good friend because you will be tested.

In 2000, I leased my first apartment for roughly $360 a month. It was a one bed/one bath 2nd floor unit with basement storage in what looked like the kennels from John Carpenter’s The Thing. By now, I had accumulated an entertainment center from Ames and a bedroom suit including head and foot boards, chest of drawers, and dresser with a mirror all finished with dental style molding which I inherited from a deceased relative. (I still have the bedroom suit) My then girlfriend introduced me to the magic that is the dollar store and I soon had a kitchen full of utensils for cooking and eating. The Goodwill store provided a nice set of ceramic dishes and I now had the full use of my surroundings.

I spent two happy years in that apartment and only moved due to a rise in rent and a depreciation in the quality of the environment. The Realtors claim that the carpets were new but there were troughs in the carpet where the padding had been trampled time after time. My longest residing neighbor was a nice elderly lady who lived next door but the surrounding apartments began to be occupied by unsavory characters. We used to joke about the apartments further up the hill being considered “Crack Row” but now, the denizens of those places were filtering down into the nicer apartment buildings. It was time to move. Usually in these types of situations you will lose money on moving because the “security deposit” will most likely be added to the owner’s wallet instead of the apartment in terms of renovation for the next resident. However, because I took great care of the place and cleaned it up before I left, I got a full refund on my deposit.

I managed to snag a choice end unit townhouse in 2002 off the main highway. For a $100 more, I gained a second bedroom, garage, personal laundry hookups, and a quiet back patio with grass and wildlife. I could now use my grill and park my car off the street during the colder weather. Again, for two years I had a great run. But it took some doing. First off, from the moment I moved in I saw problems. The leasing company did not show me the actual townhouse I’d be renting but a model in their office. I made sure to ask them questions that more or less guaranteed that they would be responsible for issues that I felt they needed to take care of upon my occupancy. For instance, the floor in the bathroom had considerable water damage and had even curled up around the edges of the walls, shower, toilet, and vanity. Not more than five minutes into my residency I had them on the phone making plans to replace it. Their initial solution was to come out and glue it down. I said that was impossible as the flooring had become so brittle it would crack before it bended. Also, the kitchen tile was that commercial style flooring you find in schools but olive green. Now, the model had a neutral color to it which prompted me to buy towels and other items in a particular color, blue. The aesthetic deficiencies were not enough for them to replace what was considered good condition flooring so I took it upon myself to spend $50 on self stick tiles and replaced it myself.

The only other drawbacks to the townhouse was that the garage was partially below ground and on occasions of heavy rain, the concrete blocks leaked water into the garage/basement. It also washed away grass from the side of the driveway leaving unsightly clumped dirt at my curb and back patio. On a tip from a former resident, I put items in the back of the garage up on palates to guard against water damage. I also took some time to do a little landscaping for another $50. I bought lava rock, a PVC drainage pipe, and stone pavers and did the work myself. I dug a hole alongside the driveway and placed the pipe inside. Covered it with the lava rock and landscaped it down to the curb. The holes within the pipe allowed for rain runoff to seep through the lava rock and be carried away to the street instead of running down on the surface wearing away the turf. Newly planted grass grew in and erased the blight. The overgrown rock garden that served as a divider between mine and my neighbor’s units was unsightly, so we I dumped the rest of the lava rock on top of it and created used three pavers to hold planters. The back patio was more for aesthetics as I wanted a larger area in which to hold my grill and some chairs. I dug around the slab and placed pavers along the perimeter. Filled in with matching sand and soon I had increased the size of my patio by a two square feet. My, now, fiancée supplied me with flowers and plants to spruce up the joint.

In late 2003, I felt the walls closing in on me but still enjoyed my surroundings. It was pretty quiet and there were no bad elements around. The leasing company was a little more selective in who they allowed to rent then the near Section 8 housing conditions I faced at the apartment. A friend of my fiancée was close with a real estate agent who wondered if she was looking to buy a house. She referred her to us since we were engaged to be married and thinking about the future. I was quickly heading towards $500 in rent and thought that maybe a mortgage would be smarter than a lease. Also, since our wedding was in late 2004, having a house before the ceremony meant less to move in the way of wedding gifts. I was already at max capacity for storage at the townhouse as it was. For Christmas, in order to use my $70 tree that I bought three years ago, I had to move my love seat out of the living room and into the dining room, blocking my sliding glass door. It wasn’t such an issue as I wouldn’t have been using the patio anyway, with the cold weather.

What started out as a whim to satisfy a favor became a full blown search for a great deal on a house. We toured seven or eight houses and searched dozens of others online over the course of three months and finally settled on the third one we looked at. We kept it as a comparison by which all others had to compete. It was a three bedroom ranch with a big yard and huge trees. Hardwood floors sprawled throughout the upstairs while brown late 70’s/early 80’s style carpeting furnished the finished basement that came complete with a wood burning insert nestled among a huge bricked in hearth and mantle, and a full length wet bar complete with wall tap. I was sold on the place. There was one other house we would have jumped at but the monthly payment with taxes would have put us at nearly $1000.

The housing bubble was just reaching its end and we could have been tempted to buy above our means but our grounded upbringing kept us from putting us into a bad situation. The sellers were looking to unload the house as they had built another one in a rural setting just outside the suburbs. Knowing a little history about the house helped in haggling over price. Since the house was built by his parents, we knew that he didn’t have a huge mortgage to unload as he inherited from his uncle who inherited it from the uncle’s brother. Any renovations done to the house were at least 10 years old and, while pretty nice, were done half-assed. Our agent suggested doing a FHA loan which meant a interest rate at a higher amount of scrutiny by the lending company. It was a fixed rate at 4.55% and would be owned by the state which meant we wouldn’t be affected by the credit crunch still unforeseen at the time.

Next to an audit, I suspect there is no more exhausting process than this type of loan. The lending company required so many minute details and it really makes you reevaluate your practice of filing bills/paychecks/etc. I had to account for nearly every nickel of my past as did my fiancée. Paychecks, bank statements, bills, everything was examined under a microscope. In hindsight, I recommend the process as a way to ensure a solid loan for first time home buyers. The stress is worth not worrying about foreclosure. The only issue is that you are at the mercy of their system and in this particular situation, I had already made arrangements with my leasing company to get out of my lease, penalty free at the end of January 2004. On the word of the mortgage company, I was told that the closing date would be the middle of January. That would give me two weeks to move. Due to clerical errors and miscommunication, the closing got pushed back to the end and I now had three days in which to move my entire world and still go to work all three days.

With everything finalized we also managed to get some upgrades to the house and lowered the offer from the listing price. So, in January of 2004, I became a home owner of a house that was listed at $114,000 for which I paid $103,500. With 20% down thanks to a generous donation by my parents in the form of $22k spread over the course of two payments in December and January, I managed to get my monthly payment to $454 plus $149 for taxes and insurance. And because of the improvements to the kitchen and yard of my townhouse, along with a good job at cleaning and filling in the holes on the walls, I got my entire security deposit back. That’s even with ducking out of my lease 6 months early. I made the important 13th payment right off the bat.

Coming up in Part Two, I’ll delve into the joys and annoys of buying a home versus building.

Useful Links
Where do I start
Mortgage Calculator with extra payment options.
How effective is a 13th mortgag payment?

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