Getting to the Closing Table
I finally found a place. It was 3/2 HUD foreclosure that needed little rehab ( Find more info at HudHomestore.gov). The property was listed for 95K and to put an offer in I had to put in a bid the property. My agent walks me through the process to putting a bid in on the place. With HUD foreclosure owner occupants get exclusive rights to bid on the properties before it is open up for investors to bid. I put in an offer of $95,500 and it was accepted.
I am finally under contract on my first home. Now what? I don’t have enough cash to pay for the house out right. This means I need financing. I need to find someone to give me a loan. Well as previously mentioned I had a preapproval, so that has been taken care of, right? Well really not really. First you should shop to find the best deal. Then if I do get a mortgage, I need a down payment. Traditionally you need to have 20% down. Well, where am I going to get that from? I don’t have that in my savings. I can’t go to the bank of Mom and Pops. Hmm? Well, if there is a will there is a way. I began researching low and no money down programs and found FHA programs that allowed down payments as low 3.5 down. Also I found out about 203B and 203H programs that are offered under FHA so that could potentially cover the cost of the rehab the property. I applied for one of these loans with one of the local banks and was approved for the property in its current condition with a 203B loan to cover the repairs. Now in the clear so I thought, I had a house and I know how I am going finance it. Now just an inspection and we are clear.
After a day or two I calmed down and thought about the good in the situation. I realized that the house does have a water heater so I do not have to pay for one, I just have to fix the leak once I take possession of the property. I did have one concern about the overall water pressure in the house because it would cost a ton to fix the water pressure in a house built on a slab. To placate my concerns I jerry rigged the hole in the water line to fix the unit so I could test the water pressure since I was not able to make any repairs to the house before moving into the unit.
We have now passed inspection and the next step was getting to the closing table. This wasn’t a terrible process just that we had I to sign the most document that I have ever signed, TWICE. At the closing table I signed documents stating that I would agree to pay 95,500 for a property valued at 125000 over thirty years at a 3.25 interest rate. That was with $100 down payment. But wait there is this called mortgage insurance for “risky” mortgages meaning mortgages where the individual doesn’t have that much skin in the game. FHA called mortgage premium insurance which cost. At the end of closing HUD got there funds, the bank got the their closing fee’s and FHA insured mortgage that they could turn around sell to a bigger bank, the agents got their commissions, and I am became a homeowner paying only $1900 out of pocket.