I’ve now been living in my (really my mom’s) new house for a little over a week. The house buying process was not without a few bumps in the road. We’ll be dealing with some of those bumps for a while.
Just three days before the original closing date the mortgage company did my employment verification and since I wasn’t employed with my employer at that time, my name had to be taken off the mortgage and closing was pushed back a week. That was a bummer for me. I ended up being rehired just one day after closing. The timing didn’t quite work out for me there.
We will add my name to the title once the mortgage has been paid off. Alternatively, we’ll add my name to the title if we’re able to refinance and add my name to the mortgage. It seems unlikely that a refinance will make sense though. We have a 3.375% APR. We were told we didn’t qualify for a lower interest rate due to the small ($50k) size of the mortgage. The small mortgage means it probably won’t be worth paying the required fees to refinance the mortgage.
Although my name isn’t on the mortgage I will be paying it. The payments are only $357 a month for 15 years which makes it cheap rent for me. We hope to have the mortgage paid off well before the 15 years are up. My mom will be paying the property taxes and insurance which are a little less than $175 a month. My mom volunteered to also pay the utilities if I match that payment with an extra mortgage payment.
The house looks pretty nice from the front. However, when we moved in the inside was filthy and the backyard was a mess and full of junk. It was in the purchase contract that the seller had to remove the junk in the backyard, but he just didn’t do it. He also refused to make a financial concession for failing to fulfill his contractual duty to clear the back yard. The realtors didn’t want to lose the sale and they hired and paid for a cleaning lady to do a quick clean of the house and for someone to haul off the junk from the back yard. That improved things a lot, but we still had a lot of work to do to get things to what we consider an acceptable level. We’ll have projects for months to get things how we would like them.
For now buying the house gives me a permanent home and cheap rent. Sometime in the future it will provide me with a bit of a financial windfall. Even with the bumps in the road I think buying the house with my mom was a good idea and will benefit both of us.
Wow, Congrats! The curb appeal on the new place is really nice. Too bad about the mortgage and employment situation though. It seems almost no real estate closing goes exactly as planned. Personally, I think leveraged real estate is going to be a great investment in the coming decade. Of course real estate is also hyperlocal, so hopefully you’re in an area demand stays steady. I’d love to get into something myself, but it just isn’t conducive to my lifestyle, plus I’m in a much-below market rent situation as well, so that makes it even harder to pull the trigger.
Do you have any siblings or other who may make a claim on your mom’s property? I know you’re a lawyer, but sometimes personal situations can cloud your vision. Make sure your investment in the property satys safe and keep a record of all the mortgage payments you make since it’s not in your name.
Thanks. I do have a couple of siblings. Right now I’d only get a 1/3 of the house if my mom died. That would be ok since I don’t have much money into the house yet and the mortgage payments are cheaper than rent. Also, I’d get 1/3 of the cash inheritance if my mom died now. We’ll eventually draw up a will stating that I get the house and reducing my portion of the cash inheritance accordingly. There is no rush to do that since I think we’d all still get our fair share without the will right now.
Congratulations, Andy! The house looks great from the front. Over time I’m sure you can make the inside look nice as well. The underwriting process to buy or refinance a home is broken. They look at the wrong things and ignore the important stuff.
Thanks. Yes, the underwriting process didn’t seem to make a lot of sense. I can easily make the $350 mortgage payment with basically any job. Plus, they were only lending $50k on a $170k house so there wasn’t much risk for them.