I Lost It Today - Warning! Long post (er, rant)

[Koolau]

Debated about putting this in the "WHAT DID YOU DO TODAY" but realized it was more about being FI than anything else.


DW and I have been looking for a new place for over a year. Conservatively, we've looked at 100 properties if you count all the Sunday open houses and Thursday realtor open houses we've attended. We went so far as to put in a bid on a place late last year, but still no luck - until last week. Found the "perfect" place at the right price. Signed a contract with the seller and (though we have an "escape clause" for financing) we have every intention of purchasing this property.

Went to the bank today to get financing. Standard questions: How much do you make, what do you owe, what are your HOA fees and taxes on your current and proposed property, etc. Now, we had no illusions that we would qualify on the basis of our "official" income alone, as we only get a modest pension and DW's even more modest SS.

So we figured the bank would be impressed with our credit score of 8 freaking 20 and our invested assets (NOT including our paid off current residence) and no debt. Conservatively, we have 4 times the invested assets as the property costs. And, we offered to put 25% down in cash.

WELL! Because of the recent "unpleasantness", it seems income is MUCH more important than assets. In fact the banker asked why we didn't just liquidate some assets and buy with cash. We had actually considered that, but (long-story-longer) our assets are made up of (in order of highest to lowest dollar amount) 401(k)/Traditional IRAs, Roth IRAs, I-Bonds, CDs/cash.

Cashing in tax deferred accounts would be "taxable" events and would push us into ever higher tax brackets. We've actually been converting to Roths for a few years, but carefully managing the taxes while doing so. While we were quite prepared to use some IRA or 401(k) funds for our 25% down, we didn't want to use all tax deferred money for reasons mentioned above.

Next, we've worked long and hard (Beevis and Butthead - give us a "heh, heh, - heh, heh, heh" here, please) to convert to Roths, so, even though we could use our Roth money, tax free, we didn't want to disturb our Roths as we hope to make Roth IRAs the bulk of our retirement funds at some future date - assuming we can convert to them without paying too much in taxes.

We don't really want to cash in our I-bonds because they are difficult to come by (we used to be able to buy $60K/year and now only $10K.) These bonds have some unique advantages which we don't want to lose.

So, bottom line, while we COULD pay cash, we don't want to and are more than willing to take on a no-points mortgage at about 5% in order to preserve our retirement savings vehicles and manage taxes. Also, since we already own a property which is paid off and is worth nearly as much as the new property, our plan is to buy the new property, sell the old property and then pay off the mortgage - all in less than a year. So, a no-points mortgage at 5% is a pretty cheap way to accomplish our other retirement goals, we think.

BUT, the bank is STILL more interested in income (minus expenses) than assets. In fact, they count the HOA fees and taxes of the old place AS WELL AS those of the new place against us at the same time - unless we have a signed lease for a renter of the old place. I asked the banker, do you REALLY think that after we buy the new property we will just keep the old one for the next 30 years, let it sit empty and pay the HOA and taxes?? Don't you think we might sell it or perhaps rent it out? She could see our logic, but her algorithm doesn't allow for logical assumptions (just the facts, ma'am). So bottom line, after giving us SOME credit for our assets, we would need to put 40% to 50% down on the mortgage to qualify. While we could do that, for reasons mentioned above, we don't want to.

I told the banker I needed to step outside to cool down - actually, I told her I needed to step outside to warm up. This bank that couldn't afford to give us a mortgage had their AC cranked to about 64 degrees (I'm serious!) and were cooling a 2-story atrium, surrounded by all glass, in direct sunlight at 30 cents per KWH. The banker, poor thing, had to rub her hands together to warm them up enough to use her keyboard (I'm still serious!).

So, I'm outside, stewing about whether to agree to 40% to 50% down or whether to just forget the whole thing - or maybe try another bank. I head back inside and there - there on the glass bank door, there on the glass bank door with the 1 inch gap, letting the AC out, there (there on the Group W bench, eh, Arlo?) was a sign.

POOR CREDT? WE CAN QUALIFY YOU FOR A LOAN! ASK US HOW.

That's when I lost it. I went back in and told the poor banker what I thought of her bank and where they could put their money and how I blamed them for getting us into this financial mess in the first place and how I didn't vote for the clowns who wanted to let everyone own a home and how I sure didn't vote for the clowns who were now making the problem worse by not letting people who made bad decisions take the consequences and how, and how... and how... well. Uh, sorry, lady. Didn't mean to take it out on you. Uh, I'll give you call... soon. Bye.