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Condo purchase that wasn't
Old 01-19-2012, 09:44 PM   #1
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Condo purchase that wasn't

Just a short story about our very short search for a condo.

I got to thinking about moving to these kinda townhouse like condos a couple miles from our house. Among other things, our current house has a barking dog problem and a lack of sidewalks nearby. These condos have no yards (no yard work, no outside doggies) and are near a bunch of places we can walk.

I'm thinking; bump up the HELOC on our current house, use it for a down pahyment, do a 3% 5/5 from PenFed, move, paint and stage our current house for sale, sell current house (eventually). Do some Googling and using HELOC for down payment appeared to be somewhat typical. I can handle two (3?) mortgages if need be. Cool.

So, we go to look at a unit in the $160k region. Seems nice, well isolated on the one wall you share with neighbors. Good stuff. Realtor mentions condos aren't eligible for FHA. I'm thinking, no problem I plan to put 20% down with PenFed anyhow.

So next morning call up Schwab to bump up the HELOC. Hmmm... seems the rules have changed and/or they really don't want to do HELOCs anymore. Can only do a minimum $50K and they'll only go 75% LTV. Pfft so I'd have to have a heck a lot of equity in this house to do that. I'm thinking I have about 50K equity. Decide to go ahead with the process anyhow. No cost other than the credit score hit on the pull.

Next, check the details on the PenFed 5/5. What's this? A special condo item in the FAQ? Condo loans will only go 70% LTV. Great so now I have to come up with like 50K instead of approx. 35K.

Call the realtor and tell them financing isn't as cut and dry as I figured, don't need to waste their time looking at more units until financing is more secure.

Last straw was the call with Schwab today. I made it past the preapproval (no surprise, good credit, good job, etc) but things come to a halt when they need me sign an affidavit saying I won't move from current place within the next year. At that point I said for them to just drop it, I can't use the money for a down payment if I can't move.

So, no condo for us until/unless we sell this house or maybe our place in Missouri.

Oh well, no biggie. Dog isn't that loud.
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Old 01-19-2012, 10:01 PM   #2
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Aw! I'm so sorry it didn't work out.

Maybe you can rent a small apartment, sleep there (away from the barking dog), and put your present house on the market. Then use the proceeds of that sale as the down payment on a condo.

Even though it might take a while to sell your present home, the way things have been you will still have a good selection of condos.
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Old 01-20-2012, 12:18 AM   #3
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Golden, this may be a blessing in disguise. You have learned a lot about financing what amounts to a 2nd home. Take time to prepare your home for sale and become an expert in your target condo market. Our learning process was interesting, and in one case really funny. We didn't make an offer on a condo until we had an offer on our home nailed. Because we are so financially conservative we wondered if the 'right' unit would be there when we were ready.. but it was.
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Old 01-20-2012, 07:31 AM   #4
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Sorry it didn't work out for you. But after the mortgage crisis, still plaguing our economy, those changes are necessary and welcome from my perspective.

And you can still proceed with your plans, just need a little more time to build more equity. Real estate prices and interest rates aren't going up anytime soon, so hopefully the delay won't hurt you. The market will continue to improve, resale will get healthier and reduce your exposure to multiple mortgages. Silver lining? Best of luck...
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Old 01-20-2012, 04:10 PM   #5
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A lot of HELOC vendors are putting in closing cost recapture clauses if you sell / move w/i 2 or 3 years. So I am not surprised by what Schwab is up to.

If you are set on this plan, perhaps look for a place that will permit lower downpayment financing and not bother with the HELOC?
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Old 01-20-2012, 04:21 PM   #6
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I haven't had a mortgage in 15 years, but don't you have to come up with a down payment not using borrowed money?
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Old 01-20-2012, 04:33 PM   #7
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Golden, I think you lucked out.
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Old 01-20-2012, 09:59 PM   #8
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Quote:
Originally Posted by W2R View Post
Aw! I'm so sorry it didn't work out.

Maybe you can rent a small apartment, sleep there (away from the barking dog), and put your present house on the market. Then use the proceeds of that sale as the down payment on a condo.

Even though it might take a while to sell your present home, the way things have been you will still have a good selection of condos.
Hehe, we bought this home to get away from loud neighbors at the apartment complex. We treasure our peace and quiet. We don't watch much TV (didn't even own a TV until recently) so we don't have much white noise to drown out outside noises. The cabin... directly in the middle of 45 acres.

Quote:
Originally Posted by grasshopper View Post
I haven't had a mortgage in 15 years, but don't you have to come up with a down payment not using borrowed money?
I'm no expert either but I found a bunch of sites with references to using a HELOC (or a bridge/swing) loan. I think if you do 20%, it matters less where it came from. Maybe that's all in the past. The 5% (FHA loan) for sure can't be a loan.

It's no big deal, I just wanted to relay how wrong you can be, putting a plan together in your head. We'll either sell here first or maybe sell the cabin. Part of me thinks selling the cabin and all the tools and the big truck and all that would be a relief and another part of me says it would be the worst mistake we could make. Such is life.
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Old 01-20-2012, 10:05 PM   #9
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Golden, I think you lucked out.
What makes you say that?
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Old 01-21-2012, 09:26 AM   #10
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Could you do a no cost cash out refi instead of a HELOC and then used the cash out for the down payment and pay off the refi when the house sells? Or a 401k loan (if you have a 401k)?

I just refi'd and only had to sign that we were currently living in the house being refi'd, not anything about staying there (even though we intend to stay here).
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Old 01-21-2012, 09:49 AM   #11
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Could you do a no cost cash out refi instead of a HELOC and then used the cash out for the down payment and pay off the refi when the house sells? Or a 401k loan (if you have a 401k)?

I just refi'd and only had to sign that we were currently living in the house being refi'd, not anything about staying there (even though we intend to stay here).
I probably could. I've got a PenFed 5/5 right now at about 4.5%, but I suspect it would cost more then a bridge/swing loan. Of course it could be that those don't exist in the wild anymore.

I'm tempted to talk to PenFed and see what they would suggest. They've been good to me so far.
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