homeowners claim
I got a check today from my homeowner’s insurance company for the work that has to be done on the bathroom. The pipes that drain water from the fixtures have to be replaced, which requires four days of work that will start next week. My premium isn’t going up, but if I have another claim anytime soon, it probably will. My deductible is $1,000, which I based on both the ability of my emergency fund to handle that amount and my desire to have a lower premium (and thereby lower monthly escrow/mortgage payments). The homeowners doesn’t cover the actual plumbing work – just the demo (of my floor!) and rebuilding, so I have to pay about another $500 out of pocket.
I think I should be bummed, but I’m not. I just want to use my bathroom again without worrying about the room below. I can afford to pay to have the work done, so I’m actually just happy this will all be over soon. Provided I can keep working, I’ll have my e-fund built back up to at least $5,000 soon after the work is done.
shower
Babies are coming like rain comes in the spring. Over the past year no fewer than four people I know were pregnant at once. I know at least six moms who are either pregnant or nursing. This weekend there’s another shower! My other best friend, Sistah Butterfly, is having a shower for her first daughter. Sistah Beginner is coming with me to get a present from the registry tonight. We’re both lower on funds than usual, but we decided to chip in what little we have together to make one bigger gift from her oldest friends. Mama Ant and Mama Beginner also chipped in funds, so we’ll be getting more gifts with that money too. Hopefully, by the next shower, I won’t be counting every penny.
Sistah Beginner is doing okay. But it’s precarious. She needs a new car because her old one belonged to her brother who needed it while she was on maternity leave. Well then it stopped working. He got a new car for himself, but now Sistah Beginner needs one so she can go back to work. Between disability, unemployment, and help from her bf, she’s making it. Barely. With two kids in the house, she’s looking forward to getting her tax refund so she can get on the road again. The sooner she can do that, the sooner she can jumpstart her income and get back into saving and paying down debt.
on the horizon
I’m pretty sure that I overpaid in my tax withholding this year (by accident, because I underestimated how much money I would make last year, based on the fact that a temporary job that was supposed to last four months has gone on for over a year so far). I want my money back.
I also want the loan that they’re giving first time home owners. It’s interest free, and you don’t have to start making the $500 annual payments for the next two years. I plan to claim the money, hold it in an interest bearing account, and take what (little) interest I can get for it over the time that I keep it. It will be a nice little safety net for the emergency fund that I hope I won’t ever have to use. It wasn’t a factor in the timing of buying the house, but it’s nice to be able to claim it.
I don’t quite have all the paperwork I need yet. I’ve got student loan interest statements that I’m still waiting for, and my IRA and ShareBuilder statements are still outstanding. But when it gets here, I’m filing on my own like I did last year and many other years before. I’m looking forward to that money!
mortgage check
I am sending off my very first mortgage check. I’m a grownup!
$529.36 of my monthly mortgage payment is interest. That’s more than half. Wow. Now I see how over the course of a year, it will wind up being more than a standard tax deduction.
I’d like to pay more on the principal, but I’m poor right now. I’ve got to get my groove back, make some house repairs, pay off other debts, get a little more stable, etc.
kindnesses
I live in my house now. All our stuff is there. The move went really well considering some major last minute changes. I haven’t tallied up the total damage to my wallet yet, but the movers took longer than I thought they would and I had to rent an additional truck.
The additional truck was rented at the last minute because I needed it to get free furniture from my friend’s family. As a result, I don’t need any furniture right now. I would like to update the free stuff eventually, but Mister Ant and I have enough to comfortably enjoy the house – every room is furnished, due to the kindness of my friends.
I also haven’t had to eat out or make groceries since at least Thursday. Mister Ant’s mom came with a carload of food that she cooked. So, we’ve been eating for free, due to the kindness of family.
Now. If I could just make friends with a plumber so that I could get some free work on my bathroom. You know, due to the kindness of a plumber.
down and down
I have to raid it. I hate having to do it, but we have to repair the leak, and the two estimates I have so far lead me to believe it’s going to be an expensive job. I think my net worth might be going down for a second straight month, too. Bummer. We’ll see, I guess, but I’m just taking it one day at a time. I knew I’d have to spend money, so there is no surprise here. That doesn’t make spending the money any easier after all I did to save it.
Have a great weekend! I know I will. I’m moving in, finally! This transition is almost over!
the moving hustle
Dear readers, I apologize for going silent for so many days. This is shaping up to be a most extra-ordinary week. Mister Ant and I have been painting ($100 for paint and supplies), packing ($25 for boxes), and preparing (signing up for a security system monitoring contract) for The Big Move on Saturday.
I have also been on the phone a lot, again, calling plumbers. This leak in my living room ceiling looks like it’s going to require major work [read: cut into my emergency fund by at least a thousand dollars]. I’m getting second and third opinions from plumbers. I’ve also been on the phone with my insurance company to see what they’ll cover. This issue won’t be resolved until the end of the month. I was bummed about it before, but I’m okay now. This. Is. What. Emergency. Funds. Are. For.
One good thing: my best friend and her family offered me some free furniture. I’m going to take a look and see how much money I can save, at least in the short-term, by taking her up on her offer. With any luck, I could get several rooms’ worth.
buying my house
My last post dealt with how I found my house. This post explains how I paid for it. Please note that the links are to explanatory definitions.
Buying My House
I saved over $15,000 for a down payment and closing costs from August of 2007 to about fall 2008 by coming up with (and sticking to) spending plans, increasing my income, taking advantage of windfalls, and reining in unnecessary spending. That wasn’t enough to put 20% down on a house in the price range I could afford mortgage payments for, but it was enough to put down ten percent. I knew this meant that I would have to pay mortgage insurance until I got a sufficient amount of equity in the house, but I was prepared to deal with that. The task before me was to find a mortgage to make up the remaining 90% of the price of a home.
I had been cleaning up my credit for years. At its worst, back when I was still in school, my credit score was in the high 500-s. I have only had one 30-day credit card payment delinquency on my report in my entire history, so over time the score rose without any effort on my part. But it didn’t become near-perfect without effort. There were other problems: I had a judgment against me for taxes once when I was in college and couldn’t afford to pay for my mistake in withholding. I paid the bill eventually, but the mark remains on my report to this day. Also, for years my total balance owed was too high in proportion to my available credit. Paying off all my credit cards fixed that problem. For years I refrained from having any unnecessary requests for credit. I paid my bills on time. I checked and fixed mistakes on my credit reports. It all paid off, and by the time I was shopping for mortgages, I was confident. My own credit checks yielded scores in the low 800-s and high 700-s.
The mortgage lady asked for a month of recent pay stubs, two years’ W-2’s, two months’ bank statements, and information on my pay rate, in addition to how much I wanted to borrow and how much I wanted to put down. At first, I omitted info from those documents that would let her run my credit. I didn’t want her putting a ding on my score until I knew her company was “the one.” Instead, I gave her copies of the credit reports and scores that I had pulled myself. She looked at my information and sent me a good faith estimate. This document listed an estimate of closing costs, an estimate of other items I’d have to pay at closing, and an estimate of what my monthly principal, interest, tax and insurance payments would be. It listed the interest rate, too. This document served as this company’s informal pre-approval. (Actual pre-approvals consisted of a letter on letterhead.)
At this point, I had something to compare other quotes to. I applied for pre-approvals from my credit union, my bank, and at a trusted website where lenders supposedly compete for your business. Among them all, I got a better rate quote from the first place – the one my realtor referred me to. So, I did an official application with this mortgage company. Now the first quotes the mortgage lady gave me were for both conventional and FHA mortgages, so that I could compare the two. But I already knew I wanted a conventional mortgage – I would get a better rate, and pay less over time. In fact, even my monthly payments would be lower. The only drawback to a conventional mortgage was that I wouldn’t be able to get a seller’s assist from my lender for any more than 3% of the purchase price. I could live with that. I had to provide proof of payment of that delinquent tax bill, updated copies of all the documents I initially gave the mortgage lady, and a form signed by my employer, vouching for my employment status and pay rate, in order to finalize my loan approval.
The rate I was quoted was 5.75% for a 30-year fixed conventional mortgage with no points. When I was officially approved, I was given the opportunity to lock the rate, and then I hesitated. The news was all saying that rates were due to fall. There were about three weeks between my approval and my closing date, and rates had been seesawing up and down wildly. Did I want to take the chance of locking high and seeing rates fall by my closing date? Or worse, not locking at all and seeing the interest rates rise? I chose to lock the rate. When I closed, the rates had fallen by three tenths of a point below my rate – but I wasn’t sick about it. (But if it had dipped below five percent, I would have been fit to be tied.)
There were some other factors that affected my purchase. The mortgage company requires that my homeowners’ hazard insurance and property taxes be included in escrow. I couldn’t control the taxes, but I could get my own hazard insurance quotes and choose the one that would cost me the least. I did a lot of calling (running up my cell phone minutes) to find the best insurance for the lowest price – it was hard, but I found a good deal. There was some negotiation with the sellers on price that affected the final numbers, bringing down the principal amount borrowed and my actual closing costs. Last minute adjustments, which affected the amount I paid at the table, included settling utility and tax payments which the sellers had made. The house passed through appraisal without a problem, so that didn’t affect my mortgage. Before closing, I was provided with a copy of the Settlement Sheet that explained all the things being paid, and I actually came out better at closing than the good faith estimate projected.
After all is said and done, my mortgage process was clear and everything was on the up and up. The only way for me to have received a better deal would have been to sit out the market, which ah, wasn’t going to happen. So, that’s how I bought my house.
finding my home
It’s about time I started getting into my personal home buying process with you guys. I didn’t blog about it as it was going on, because I didn’t want commentary or input. I was nervous about buying a house in this job market, especially since I’m working through a contract instead of as a direct hire with benefits and job security. I also didn’t blog about it because if for some reason the deal went through, I didn’t want to re-live it on the blog. Now it’s all done, so I feel free to share.
My serious hunt started this fall. I got ready in a hurry when I was told that I would be needed on my project for months to come in late October. I figured that if I was going to be able to get a mortgage by being able to show a steady income and job security, I’d better get in where I could fit in before my project ended. So Mister Ant and I started looking again, with the hope of closing before the end of the year.
I had two or three Philadelphia neighborhoods picked out already, based on what I could afford, the number of homicides in/near the neighborhood, the demographics of the neighborhood, and the availability of public transportation, which I use to commute in lieu of paying for monthly parking in the downtown area. I also had a realtor picked out – I “met” her online on a local forum where people in my city talk about local issues. She seemed very knowledgable and I developed a rapport with her over a year before I was even ready to start house-hunting. It was through this realtor that I connected with my mortgage officer, who was excellent at fielding my questions and guiding me through the process.
There were really two facets to this process for me: the first was hunting for a house, and the second was securing a mortgage. It was easier to get a mortgage than to find a house, in my case. I’ll talk about that in my next post, but for now, let’s talk about the house.
Finding My House
We started hunting in November. I told the realtor my price range, desired amenities, and desired neighborhoods. She e-mailed me listings of houses that seemed to match my requirements. Then, I’d pick which of those houses we would see the next time we’d meet up. The realtor, Mister Ant and I would pile into her car and walk through the houses, and we’d compare notes on pros and cons.
We found a house on our first outing that we put an offer on. It involved meeting with the realtor, reading and signing lots of papers, including a contract for sale, signing a deposit check, and then… waiting. I found out on Thanksgiving evening that someone else had their offer accepted by the seller before ours was received. We bid low, expecting to negotiate upward. Maybe if we’d put in a higher bid… I don’t know. Anyway, it was back to the drawing board. We had to emotionally let go of that first house and open our minds again.
It took a few more outings to find other houses we liked. We had to consider a few things. First, some houses needed more updating than others. Secondly, none of them had EVERYTHING we wanted, so we had to figure out what we were willing to do without. For a couple weeks, all I did was look at listings and look forward to outings with the realtor. Sometimes those were frustrating, because you’d go to see a house, and we couldn’t find the realtor box that would give us access. Or the seller wouldn’t be there to let you in.
Our house was one of those. The seller’s realtor didn’t show for the appointment. We moved on to the next house. But after not finding anything else that stood out, we scheduled another visit, at which we actually got past the front door. I honestly didn’t like the house at first, because we had just come from seeing another house that was prettier – everything was neutral clean and perfect - it was just too small and too far from transportation. This house had new, but dirty appliances, cracks in some of the plaster, dark carpet instead of hardwood, and paint colors I hated. But Mister Ant liked it and kept trying to convince me to look past the cosmetics and think about the house itself.
He was right! It had everything we said we wanted when we first started looking – three bedrooms, a modern kitchen, a finished basement, a garage, central air, gas cooking, heat and hot water, a powder room for guests… it even had things I wanted but didn’t think I’d get, like remodeled bathrooms, southern exposure and a porch! We could clean the appliances, fix the plaster, and put up paint. We put in an offer.
Then we almost walked away. Their bottom line was thousands away from what we were willing to pay. They were asking too much. But they had a reason. The realtor informed us that we were dealing with a distressed seller – they really “couldn’t afford” to come down on their price. I was annoyed with the seller – what, we were supposed to spend more than we should for a house so that they could move on with their future? What about our future? Their problem did not have to become ours. To buy at their price would have had us paying more than the market value for the property, which is stupid in this market, where home values are falling and may be for some time.
So, though Mister Ant was really disappointed, we ignored their counteroffer and kept looking for other places. I had given up on the house and had emotionally moved on. Then, at the last minute before our offer expired, the seller came back again. Apparently, we’d called their bluff. The sellers were willing to borrow money from friends and family to make this work so they could move on with their lives. They dropped their price by thousands, gave us the maximum allowable seller’s assist, offered to fix things, and their realtor took a hit on her own commission. Mister Ant and I went on one last disappointing outing looking for some other house, and realized when looking at the other houses that if we were going to buy soon, this house was the one. It stood out as being the best fit for us.
We agreed to the second counter offer and bought the house. With the seller’s concessions and assist, we bought the house right.at. market value. We didn’t mind that so much, because we plan to be here for at least five to seven years while we get out of debt, marry and build our family. That’ll give the house’s value time to recover from this economy before we sell. If this were a two year deal, however, we wouldn’t have bought.
The three weeks between contract and closing felt sooooo long! In the meantime, there was the home inspection, finding homeowner’s insurance (that’s another post altogether), getting mail and utilities switched, and lots and lots of impatient waiting. I remember how I felt when we left the closing table. Mister Ant and I left the realtor’s office holding hands and grinning ear-to-ear after wishing everybody and their mama in that office a Happy New Year! Mister Ant literally jumped for joy on the way to the elevator, and I just kept touching the keys in my pocket, shell shocked by what I’d just done. Our realtor’s office is right near Independence Mall, where all the touristy Philadelphia things are – symbols of the American dream. And as we walked away with keys to our new house in our pocket, we were living that dream. Sounds corny ’cause it is, but it’s no less true.
Thinking back, I still feel good about the purchase. I wish we could have forced the seller to do more to the house, like take all their stuff out and clean the appliances, but otherwise, I expected to make some minor repairs or painting and do some maintenance on any house we bought. Rowhouses in Philly are old. LOL!
Next up: a discussion about the money involved.
plan of action
I met with the estate attorney at a free consultation that lasted about half an hour to forty-five minutes. I told her what my concerns were about the mortgage on the house, how to properly designate my life insurance beneficiary, and how to avoid negative tax consequences for my beneficiary. She gave me some good advice, not just about my own situation, but about my parents’, and now I have a plan of action for my will. I also have a plan of action for changing the beneficiary of my life insurance policy, based on the attorney’s advice. I know what I want to do and how I want to do it.
My path will be different from most others’. I can and will draft my own will. There is a [wise] saying among attorneys that a lawyer who represents himself has a fool for a client – my initial intention was to have someone else draft the will for me. However, attorneys help each other out, and the estate attorney I spoke with said that she will be available to me if I have any questions. She has also given me the layout of what my concerns should be as I draft. I have a safety net of quality assurance in the advice of a more experienced attorney. This will get the job done, yet save me some money. Now I know there is information on the internet, and at libraries and bookstores, but I would not suggest that people who are not attorneys attempt to draft their own wills. There are too many things to consider, every person’s situation is different, and there is too much of a chance that a non-professional would fail to make adequate provision for everything as they are drafting the document, which could lead to big problems for beneficiaries after the person’s death. I am a lawyer, I’ve taken a number of courses dealing with estate planning during my professional training, and I STILL desire the counsel of a reputable and experienced estate attorney in my estate planning process, specifically because I know how much could go wrong if I flew blind.
My task now is to get the thing done. I’m setting a deadline for myself – February 28, 2009. I want to have the will drafted and at least ready for signatures for myself and witnesses by that date. I don’t suspect that it will take that long, but I am busy and I have to allow myself time to work on it in the midst of all the other things I have to do. I will also have to make arrangements for safekeeping of the will and other important documents, like my life insurance policy, and among other things, an instruction letter in case I am incapacitated or I pass away.
I will keep you posted!
